Customer Development 4: Customer Discovery Part 1

1

Customer Developmentin the High Tech Enterprise

MBA 295-F/EMBA 295-F

Customer Discovery: Part 1

Steve [email protected]

MBA295-F Customer Development in the High-Tech Enterprise Spring 2009

Agenda

Case: WebVan Startup Hypothesis Testing the Problem Customer Development Team Testing the Product Concept

3

Webvan Case


Customer Discovery: Step 1

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

Existing Market: 1 Month – 1 Year

Resegmenting a Market: 6 Months – 3 Years

New Market: 1 Year – 3 Years



Existing : 1-6 Months

Resegmenting: 3-12 Months

New: 1-2 Years

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation


Methodology

Customer Development can take months or years Each Step has a set of phases Plan what you need to learn in writing so everyone knows:

what they should be doing when they should do it If they succeeded If they need to do more

These are checklists, not the inviolable commandments


Before You Start

Board and Management Buy-In Learning and discovery not execution

Customer Development Team Not traditional hires

Sufficient funding for 2-3 passes


Modify the Process forYour Company

Text Example = Enterprise Software Co. You need to develop your ownyour own

Specifically for your company/market Don’t quibble about details but understand there is a

process


Discovery = Hypothesis Testing

What are Hypothesis? Where do Hypothesis come from? Why Test them? How do you test them?


Stop selling, start listening

Test your hypotheses Two are fundamental: problem and product concept


CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation


Customer Discovery

CustomerDiscovery

Phase 1Author

HypothesisPhase 2

TestProblem

Hypothesis

Phase 4Verify, Iterate &

Expand

Phase 3Test

ProductHypothesis

To Validation


Test “Problem” Hypothesis

Customer Discovery

Demand Creation

Hypothesis

Market TypeHypothesis

Product Hypothesis

Customer& ProblemHypothesis

Distribution & Pricing

Hypothesis

CompetitiveHypothesis

Hypotheses

MarketKnowledge

FriendlyFirst Contacts

“Problem”Presentation

CustomerUnderstanding

SecondReality Check

First RealityCheck

“Product”Presentation

Yet MoreCustomer

Visits

Test “Product” Hypothesis

Iterate orExit

Verify the Product

Verify theProblem

Verify theBusiness

Model

Verify


Test “Problem”Hypothesis

Customer Discovery

Demand Creation

Hypothesis


Product Hypothesis



Hypothesis


Hypotheses

MarketKnowledge

FriendlyFirst Contacts

“Problem”Presentation

CustomerUnderstanding

SecondReality Check

First RealityCheck

“Product”Presentation

Yet MoreCustomer

Visits

Test “Product” Hypothesis

Iterate orExit

Verify the Product

Verify theProblem

Verify theBusiness

Model

Verify

Inside the Building

Outside the Building


Phase 1: Author Hypothesis

One-time writing exercise All other time spent in

front of customers Assumes you’re smart but

guessingPhase 1Author

Hypothesis

Phase 2Test

ProblemHypothesis

Phase 4Iterate &

Expand

Phase 3ProductConceptTesting


Hypothesis

Product Customer/Problem Distribution/Pricing Demand Creation Market Type Competition

Demand Creation

Hypothesis


Product Hypothesis



Hypothesis



Product Hypotheses

Features Benefits Product Delivery Schedule Intellectual Property Total Cost of Ownership Dependency Analysis

17

Intermission

The Customer Development Team


Traditional organizationsand titles Fail

CEO

VP Engineering VP Marketing VP Sales VP Business Dev

Typical Startup

People equate their titles with their functions But standard titles describe execution functions We need new titles = learning & discovery functions


Customer Development TeamTasks Not Titles

CEO

VP Product Dev Technical Visionary Business Visionary Business Execution

Customer DevelopmentDriven Startup

In Front of Customers

20

End of Intermission


Customer/Problem Hypotheses

Types of Customers/Archetypes Magnitude of the problem Visionaries A Day in the Life of a customer Organizational impact ROI Justification Problem Recognition Minimum Feature Set


Distribution/ Pricing Hypotheses

Distribution Model Distribution Diagram Sales Cycle/Ramp Channel strategy Pricing (ASP, LTV) Customer Organization Map Demand Creation


Demand Creation Hypotheses

How do competitors create demand? How will you?

Dave McClure’s AARGH model Who are influencers/recommendors? Key trade shows? Key trends? Start assembling advisory board


Type of Market Hypotheses

Positioning and Differentiation Existing Market

The product is the basis of competition New Market

Creating the market is the basis of competition Redefine Existing Market

Resegment the existing market is the basis ofcompetition


Competition Hypotheses

Who is out there? Why are they important? How do customers use them today? What don’t customers like about them?


Next Week: Discovery Part 2

Read Christensen

Discovering What Has Already Been Discovered Note on Lead User Research

Blank Four Steps to the E.piphany – Chapter 3


XP (Extreme Programming) Phases

XP by far most common agile method Exploration

customers write story cards Project team becomes familiar with tools, technology and practices

Planning set priority of stories & contents first release

Iterations to Release iterations before releases

Productionizing extra testing & checking before release to customer

Maintenance and Death new iterations and no more more customer stories



XP (Extreme Programming) Practices

Planning game programmers estimate effort of implementing cust stories customer decides about scope and timing of releases

Short releases new release every 2-3 months

Simple design emphasis on simplest design

Testing development test driven. Unit tests before code

Refactoring restructuring and changes to simplify

Pair Programming 2 people at 1 computer



XP (Extreme Programming)

Roles and Responsibilities

Programmer writes tests and then code

Customer writes stories and functional tests

Tester helps customer write tests and runs them

Tracker gives feedback on estimates and process on iterations

Coach person responsible for whole process

Consultant supplies specific technical knowledge needed

Manager makes decisions


XP (Extreme Programming) Practices Collective ownership

anyone can change any part of the code at any time Continuous integration

new builds as soon as code ready 40 hour week

maximum 40-hour week. No overtime On-site customer

customer present and available full-time for team Coding standards

rules exist and are followed Open workspace

large room small cubicles Just rules

team has own rules but can be changed any at time


Scrum Phases

Pregame Planning - define system. Product Backlog Architecture - high level design of system

Development Iterative cycles (sprints) - new/enhanced functionality

Postgame Requirements satisfied - no new items or issues


Scrum


Scrum Practices Product Backlog

Current prioritized list of work to be done Effort Estimation

iterative on Backlog items Sprint

30 day iteration Sprint Planning Meeting

decide goals for next sprint and how team will implement Sprint Backlog

Product Backlog items for sprint Daily Scrum meeting

what doing, what will do, and any problems Sprint Review Meeting

present results of sprint


Scrum Roles and Responsibilities

Scrum Master project following rules and practices

Product owner officially responsible for project

Scrum Team project team

Free to organize as they see fit to achieve goals of eachsprint

Customer participates in Backlog items

Management Makes final decisions