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Customer Discovery Sean Ammirati Partner, Birchmere Ventures Adjunct Professor, Carnegie Mellon University #CMULean

Customer Discovery: Lean Entrepreneurship

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Customer Discovery is the first of four steps in the Customer Development process originally documented in Steve Blank's The Four Steps to the Epiphany. The important thing to figure out as an entrepreneur at this step of development is: Does your product / service solve a problem for an identifiable group of users? Slides for my Lean Entrepreneurship course @ Carnegie Mellon University (94-840)

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Page 1: Customer Discovery: Lean Entrepreneurship

Customer Discovery

Sean Ammirati

Partner, Birchmere VenturesAdjunct Professor, Carnegie Mellon University

#CMULean

Page 2: Customer Discovery: Lean Entrepreneurship

The Customer Development Model

#CMULean

Focus

CustomerDiscovery

CustomerValidation

CustomerCreation

CompanyBuilding

A product solves a problem for anidentifiable group

of users

The market is saleable and large enough that a viable

business might be built

The business is scalable through a

repeatable sales and marketing roadmap

Company departments

and operational processes are

created to support scale

Page 3: Customer Discovery: Lean Entrepreneurship

Why is this important?

#CMULean

Page 4: Customer Discovery: Lean Entrepreneurship

Dec 2006

Conviction to build FeedHub

Aug 2007

Private Beta of FeedHub

Sept 2007

Launch FeedHub @ Demo 2007

10 months of “Stealth Mode”

#CMULean

Page 6: Customer Discovery: Lean Entrepreneurship

#CMULean

Page 8: Customer Discovery: Lean Entrepreneurship

In a sense there's just one mistake that kills startups: not making something users want. If you

make something users want, you'll probably be fine, whatever else you do or don't do. And if you don't make something users want, then you're

dead, whatever else you do or don't do.

Paul Graham, Y Combinator

http://www.paulgraham.com/startupmistakes.html

Page 9: Customer Discovery: Lean Entrepreneurship

Most Startups FAIL not because what they

imagine can’t build it, but because

NO ONE WANTS what they built.

#CMULean

Page 10: Customer Discovery: Lean Entrepreneurship

“Launch early enough to be embarrassed by your product’s first version”

Reid Hoffman, Co-Founder & Chairman

LinkedIn

Source: http://www.flickr.com/photos/joi/1431818434/sizes/l/in/photostream/#CMULean

Page 11: Customer Discovery: Lean Entrepreneurship

The Customer Development Model

#CMULean

Today’s Focus

CustomerDiscovery

CustomerValidation

CustomerCreation

CompanyBuilding

A product solves a problem for anidentifiable group

of users

The market is saleable and large enough that a viable

business might be built

The business is scalable through a

repeatable sales and marketing roadmap

Company departments

and operational processes are

created to support scale

Page 12: Customer Discovery: Lean Entrepreneurship

C-P-S Hypothesis

Customer: I believe my best customers are Marketers.

Problem: They have no idea if a specific campaign is generating a return on investment (ROI).

Solution: Analytics that easily demonstrate marketing ROI.

#CMULean

Example Source: The Entrepreneur's Guide to Customer Development

The objective is to define a hypothesis

that is testable...

Page 13: Customer Discovery: Lean Entrepreneurship

C-P-S Hypothesis v2

#CMULean

Example Source: The Entrepreneur's Guide to Customer Development

Customer: I believe my best customers are small and medium-sized business (SMB) marketers.

Problem: Who cannot easily measure campaign ROI because existing solutions are too expensive, complicated to deploy,and display a dizzying array of nonactionable charts.

Solution: Low cost, easy to deploy analytics systems designed for non-technical marketers who need actionable metrics.

Page 14: Customer Discovery: Lean Entrepreneurship

3 Other Key Hypothesis

1. Your business: assumptions concerning business model, partners, relationships, and dependencies captured in your ecosystem diagram.

2. Your product: the features requirements you believe are necessary to complete your final MAP.

3. Your funnel: assumptions about how you will acquire and convert your customers.Adapted from The Entrepreneur's Guide to Customer Development

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Page 15: Customer Discovery: Lean Entrepreneurship

“The FACTS Reside OUTSIDE

the Building”

#CMULean

Page 16: Customer Discovery: Lean Entrepreneurship

Interviews

Problem CurrentSituation

ProposedSolution

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Page 17: Customer Discovery: Lean Entrepreneurship

Reach into extended network ...

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Page 18: Customer Discovery: Lean Entrepreneurship

#CMULean#CMULean

http://blog.startupcompass.co/pages/startup-genome-report-extra-on-premature-scal

Page 19: Customer Discovery: Lean Entrepreneurship

#CMULean#CMULean

http://blog.startupcompass.co/pages/startup-genome-report-extra-on-premature-scal

Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves. Startups can prematurely scale their team,

their customer acquisition strategies or over build the product.

Page 20: Customer Discovery: Lean Entrepreneurship

#CMULean#CMULean

http://blog.startupcompass.co/pages/startup-genome-report-extra-on-premature-scal

Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure

to scale prematurely.

Page 21: Customer Discovery: Lean Entrepreneurship

#CMULean#CMULean

http://blog.startupcompass.co/pages/startup-genome-report-extra-on-premature-scal

In our dataset we found that 70% of startups scaled prematurely along some dimension. While this number seemed high, this may

go a long way towards explaining the 90% failure rate of startups.