Welcome to Customer Development
Stanford - School of Engineering
U.C. Berkeley - Haas School Of Business
www.steveblank.comTwitter: sgblank
Slides at: slideshare.net/sblank
Steve Blank
I Write a Blog www.steveblank.com
I Drew This
CustomerDiscovery
CustomerValidation
Company Building
Customer Creation
Pivot
I Called It:
Customer Development
CustomerDiscovery
CustomerValidation
Company Building
Customer Creation
Pivot
This Talk is Based On• Business Model Generation• Four Steps to the Epiphany
• Lean Startup
ScalableStartup
Large Company
- Business Model found- i.e. Product/Market fit- Repeatable sales model- Managers hired
What’s A Startup?
A Startup is a temporary organization used to search for a repeatable and scalable business model
Search Execute
ScalableStartup
Large CompanyTransition
- Founders depart- Professional Mgmt- Process- Beginning of scale
The Memo You Never GetThe Transition – Founders Leave
BuildSearch Execute
ScalableStartup
Large CompanyTransition
Business Model found by founders- customer needs/product features found i.e. Product/Market fit- Repeatable sales model- Managers hired
The Search for the Business Model
Startups Search and Pivot
ScalableStartup
Large CompanyTransition
- Business Model found- Product/Market fit- Repeatable sales model- Managers hired
- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 people
The Search for the Business Model The Execution of the Business Model
Startups Search, Companies Execute
ScalableStartup
LargeCompanyTransition
Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement
The Execution of the Business Model
Metrics Versus Accounting
ScalableStartup
LargeCompanyTransition
Startup Metrics- Customer Acquisition Cost- Viral coefficient- Customer Lifetime Value- Average Selling Price/Order Size- Monthly burn rate- etc.
Traditional Accounting- Balance Sheet- Cash Flow Statement- Income Statement
The Search for the Business Model The Execution of the Business Model
Metrics Versus Accounting
ScalableStartup
LargeCompanyTransition
Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan
The Execution of the Business Model
Customer Validation Versus Sales
ScalableStartup
LargeCompanyTransition
Customer Validation- Early Adopters- Pricing/Feature unstable- Not yet repeatable- “One-off’s”
Sales- Sales Organization- Scalable- Price List/Data Sheets- Revenue Plan
The Search for the Business Model The Execution of the Business Model
Customer Validation Versus Sales
ScalableStartup
Large CompanyTransition
The Execution of the Business Model
Engineering Versus Agile Development
Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs
ScalableStartup
Large CompanyTransition
Agile Development- Continuous Deployment- Continuous Learning- Self Organizing Teams- Minimum Feature Set- Pivots
The Search for the Business Model The Execution of the Business Model
Engineering Versus Agile Development
Engineering- Requirements Docs.- Waterfall Development- QA - Tech Pubs
ScalableStartup
Large CompanyTransition
Business Plan- describes “knowns”- features- customers/markets- business model
The Execution of the Business Model
Startups Model, Companies Plan
ScalableStartup
Large CompanyTransition
- Business Model- describes “unknowns”- customer needs- feature set- business model- found by iteration
The Search for the Business Model
Startups Model, Companies Plan
The Execution of the Business Model
- Plan describes “knowns”- Known features for line extensions- Known customers/markets- Known business model
How Do Startups Search For A Business Model?
• The Search is Customer Development• The Implementation is Agile Development• The Sum is the Lean Startup
Customer Development
I Have a Vision
I Know What Needs to Be Done
Lets Launch a New Product!
Five Ways Founders Fail
#1 I Know Who The Customer Is
#2I Know Exactly the Product They Need
#3I Know the Problem They Have
#4We Can Fix It After We Ship It All
#5All I Need to Do is Execute the Plan
Product Introduction Model
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
Product Introduction Model
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
The Leading Cause of Startup Death
Product Introduction Model:Two Implicit Assumptions
Customer Problem: known
Product Features: known
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
Tradition – Hire Marketing
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
Marketing
Tradition – Hire Sales
Concept/Seed
Round
Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Build Sales Organization
Marketing
Sales• Hire Sales VP• Hire 1st Sales
Staff
Tradition – Hire Bus Development
Concept Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Hire Sales VP• Pick distribution
Channel
• Build Sales Channel / Distribution
Marketing
Sales
• Hire First Bus Dev
• Do deals for FCS
Business Development
Tradition – Hire Engineering
Concept Product Dev.
Alpha/Beta Test
Launch/1st Ship
- Create Marcom Materials- Create Positioning
- Hire PR Agency- Early Buzz
- Create Demand- Launch Event- “Branding”
• Hire Sales VP• Pick distribution
Channel
• Build Sales Channel / Distribution
Marketing
Sales
• Hire First Bus Dev
• Do deals for FCS
Business Development
Engineering • Write MRD
• Waterfall
• Q/A • Tech Pubs
No Business Plan survives first contact with customers
Startups Are Not Smaller Versions of Large Companies
Startups Are Not Smaller Versions of Large Companies
Large Companies Execute Known Business Models
Startups Are Not Smaller Versions of Large Companies
Startups Search for Unknown Business Models
So Search for a Business Model
The Business Model:
Any company can be described in 9 building blocks
CUSTOMER SEGMENTS
which customers and users are you serving? which jobs do they really want to get done?
VALUE PROPOSITIONS
what are you offering them? what is that getting done for them? do they care?
CHANNELS
how does each customer segment want to be reached? through which interaction points?
CUSTOMER RELATIONSHIPS
what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
REVENUE STREAMS
what are customers really willing to pay for? how? are you generating transactional or recurring
revenues?
KEY RESOURCES
which resources underpin your business model? which assets are essential?
48
KEY ACTIVITIES
which activities do you need to perform well in your business model? what is crucial?
KEY PARTNERS
which partners and suppliers leverage your model?
who do you need to rely on?
COST STRUCTURE
what is the resulting cost structure? which key elements drive your costs?
51images by JAM
customer segments
key partners
cost structure
revenue streams
channels
customer relationships
key activities
key resources
value proposition
sketch out your business model
sketch out your business models
But,Realize They’re Hypotheses
9 Guesses
Guess Guess
Guess
Guess
GuessGuess
Guess
GuessGuess
Customer Development
Get Out of the BuildingThe founders
^
Customer DevelopmentThe Search For the Business Model
CompanyBuilding
Customer
Discovery
Customer
Validation
Customer Creation
Pivot
• Stop selling, start listening• Test your hypotheses• Continuous Discovery• Done by founders
Customer Discovery
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
Test Hypotheses:• Product• Market Type• Competition
Turning Hypotheses to Facts
Test Hypotheses:• Problem• Customer• User• Payer
Test Hypotheses:• Channel
Test Hypotheses:• Problem• Customer• User• Payer
Test Hypotheses:• Demand
Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market Type• Competitive
Test Hypotheses:• Pricing Model / Pricing
Test Hypotheses:• Size of Opportunity/Market• Validate Business Model
Test Hypotheses:• Channel• (Customer)• (Problem)
Test Hypotheses:• Problem• Customer• User• Payer
Test Hypotheses:• Demand
Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market Type• Competitive
Test Hypotheses:• Pricing Model / Pricing
Test Hypotheses:• Size of Opportunity/Market• Validate Business Model
Test Hypotheses:• Channel• (Customer)• (Problem) Customer
Development Team
Agile Development
The Minimum Viable Product (MVP)
• Smallest feature set that gets you the most …
- orders, learning, feedback, failure…
The Pivot
• The heart of Customer Development
• Iteration without crisis
• Fast, agile and opportunistic
Pivot Cycle Time Matters
• Speed of cycle minimizes cash needs
• Minimum feature set speeds up cycle time
• Near instantaneous customer feedback drives feature set
The Pivot
A Pivot is the change of one or more Business Model Canvas Components
The Pivot
A Pivot is the change of one or more Business Model Canvas Components
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Capital Equipment Sales and disposable itemPer use fees
Product DevelopmentIPClinical trialsFDAPublishing
IP Leading doctorsTechnical Expertise
Leading doctorsKey Opinion Leaders3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACS
Doctors:Earlier detectionPriceAccuracy
Patients:Radiation FreeNon-Invasive
How Does This Really Work?
Stanford Lean LaunchPad Class
How Does This Really Work?
Stanford Lean LaunchPad Class
8 Weeks From an Idea to a Business
Pivot ExampleRobotic Weeding
Talked 75 Customers in 8 Weeks
Our initial plan
Confidential
20 interviews, 6 site visits…We got OUR Boots dirty
WeedingVisited two farms in Salinas Valley to better understand problem
Interviewed:• Bolthouse Farms, Large Agri-Industry in Bakersfield• White Farms, Large Peanut farmer in Georgia• REFCO Farms, large grower in Salinas Valley• Rincon Farms, large grower in Salinas Valley• Small Organic Corn/Soy grower in Nebraska• Heirloom Organics, small owner/operator, Santa Cruz Mts• Two small organic farmers at farmers market• Ag Services of Salinas, Fertilizer applicator
MowingInterviewed:• Golf: Stanford Golf course • Parks: Stanford Grounds Supervisor, head of maintenance and
lead operator (has crew of 6)• Toro dealer (large mower manufacturer) • User of back-yard mowing system• Maintenance Services for City of Los Altos• Colony Landscaping (Mowing service for stadiums)
Business Plan Autonomous Vehicles for Mowing & Weeding
We reduce operating cost- Labor reduction- Better utilization of assets (eg mow or weed at nights)- Improved performance (less rework, food safety)
Mowing- Owners of public or commercially used green spaces (e.g. golf courses)- Landscaping service provider
Weeding- Farmers with manual weeding operations
Dealers sell, installs and supports customer
Co. trains dealers, supports dealers
- Mowing Dealers- Ag Dealers
- Innovation- Customer Education- Dealer training
Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment
- Dealers (Mowing and Ag)- Vehicle OEMs (John Deere, Toro, Jacobsen, etc)
- Research labs
Asset saleOur revenue stream derives from selling the equipment
Engineers on Autonomous vehicles, GPS, path-planning
Found weeding in organic crops is HUGE problem; 50 - 75% of costs
Crews of 100s-1000
Back-breaking task
(Ilegal) labor harder to get
1-5 weedings per year/field
$250-3,500 per acre and increasing
Food contamination risk
Decision to make – mowing vs weeding
Application If ROI is < 1 yr they will
buy
Labor costs significant?
Autonomous would solve
problem?
TAM
Mowing of large fields
Yes.Professionally
run organizations
Yes Yes Adjusted up toxxx
Weeding in Agriculture
Agri Industry: YES!
Large Growers: Yes
Small Growers: No
YES! for organic crops
They are spending $500/ac!
Not necessarily
Key need is weed vs. crop differentiation
TAM increased to $2.6 B (Total
organic)
Target Market (organic
specialty) 162 M/yr
18%/yr growth
Autonomous vehicles WEEDING
We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns
- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables
Dealers sell, installs and supports customer
Co. trains dealers, supports dealers
- Ag Dealers- Ag Service providers
- Innovation- Customer Education- Dealer training
Dealer discount COGS seek a 50-60% Gross MarginHeavy R&D investment
- Ag Dealers- Ag Service providers
- Research labs
Asset saleOur revenue stream derives from selling the equipment
Engineers on Machine VisionTwo problems:- Identification- Elimination
1 Week – 1 CarrotBot
Confidential
CARROTBOT
Machine Vision data collection platform Monochrome & Color
Cameras Laser-line sweep
(depth measurement)
Encoders (position/velocity)
Onboard data acquisition & power
CarrotBot 1.0
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacturers
• Distribution Network
• Service Providers
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force pains
• Eliminate bio-waste hazards
• IP – Patents• Video
Classifier Files
• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Organic Farmers
• Weeding Service Providers
• Conventional Farmers
• Dealers• Direct Service• Indirect
Service• … then
Dealers• Asset Sale• Direct Service
with equipment rental
• … then Asset Sale
Value-Driven
Visit Highlights
Above: Organic Carrots, 7wks. Top right: Conventional carrotsBottom Right: Very weedy. Will require multiple passes of hand weeding
Visit Highlights
Carrot vs. WeedsDue to small root systems, carrots have no chance against
weeds
Visit Highlights
Organic Broccoli, closely cultivated. Weeds close to plants are hand-picked
Visit Highlights
State of the Art in Weeding Technology for Organic Crops
Customer Hypothesis
Hypothesis Confirmed• Growers interested in own
equipment • Industrial (10,000s of acres) • Large (1,000s of acres)• Willing to pay $100k for one
unit
• Smaller growers (100s of acres) usually subcontract the labor services or rent equipment
• All purchases through local dealers• Customer service is essential
Pre-Test
Post-Test
Customer Map #1 – Industrial Growers
Example: Bolthouse Farms – Large Industrial Carrot Producer – 8K acres/yr
• Equipment Operator
• Director, Ag Technology
• Justin Grove, interviewed
• VP, Growing Operations
• CFO, CEO (Jeff Dunn)
• Local Farm Mgr• Cliff Kirkpatrick, visited
Equipment Operator
Cliff, Farm Mgr
Customer Map #2 – Service Providers
Example: Ag Services – Service Provider, Salinas Valley
• Equipment Operator
• Service Mgr
• ?? (service mgr’s boss)
Me (left), Marty (middle, Service Mgr), Doug (right, Grower)
• Grower
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacturers
• Distribution Network
• Service Providers
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force pains
• Eliminate bio-waste hazards
• IP – Patents• Video
Classifier Files
• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Mid/Large Organic Farmers
• Agricultural corporations
• Weeding Service Providers
• Mid/Large Conventional Farmers
• Direct Service• Indirect
Service• … then
Dealers
• Direct Service with equipment rental
• ($1,500/d; 120d/yr )• Low density:
$1,500/d• High density:
$6,000/d
Value-Driven
World Ag Expo interviews:the need is real and wide spread
• 10+ interviews at show– Everyone confirmed the need– Robocrop, UK based, crude
competitor sells for $171 K
• Revenue Stream– Mid to small growers prefer a
service– Large growers prefer to buy, but
OK with service until technology is proven
– Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability)
Confidential
The Business Plan Canvas Updated
• Research Labs
• Equipment Manufacturer
• Distribution Network
• Service Providers
• 2 or 3 Key Farms
• Technology Design
• Marketing• Demo and
customer feedback
• Cost Reduction
• Remove labor force pains
• Eliminate bio-waste hazards
• IP – Patents• Video
Classifier Files
• Robust Technology
• Farming conventions.
• Demo, demo, and demo!!
• Proximity is paramount
• Mid/Large Organic Farmers
• Agricultural corporations
• Weeding Service Providers
• Mid/Large Conventional Farmers
• Direct Service• Indirect
Service• … then
Dealers
• Direct Service with equipment rental
• Low density: $1,500/d
• High density: $6,000/d
Value-Driven• R&D• Bill of Materials• Training &
Service• Sales
Autonomous weeding - Final
We reduce operating cost- Labor reduction (100 to 1)- Reduced risk of contamination- Mitigate labor availability concerns
- Low density vegetable growers- High density vegetable growers- Thinning operations- Conventional vegetables
Direct- Provide high quality service at competitive price
Direct - Alliance with service providers- Eventually sell through dealers
- Innovation- Customer Education- Dealer training
Costs for service provisionCOGS seek a 50-60% Gross MarginHeavy R&D investment
- Ag Service providers
- Research Institutes (eg UC Davis, Laser Zentrum Hannover)
- 3-4 key farms
Service provision- Charge by the acre with modifier according to weed density - Eventually move to asset sale
Engineers on Machine VisionTwo problems:- Identification- Elimination
MammOpticsFinal project presentation for E 245 Winter 2011
Project OverviewInitial industry guesses and customer hypothesis
MammOpticsInitial Idea
Breast cancer
Leading cause of cancer in women190,000 diagnosis every year US41,000 deaths every year USIncreasing diagnosis rates
Mammography
15%-25% false negatives rate25% false positives rateRequires X-ray radiationLow resolution
Novel technology based on RF-modulated optical spectroscopy
MammOptics
- Earlier detection
- Non-radiative- Non-invasive
MammOpticsTechnology Comparison
RiskInvasiveness
Resolution
False Pos.
False Neg.
Device Cost
Time Require
d
MammOptics Very Low Very Low <.1 cm <15% 5% 15-20k 10 min.
Mammography
High High .6 cm 25% 30% 20-50k 20 min.
MRI Medium Medium .1 cm 70% 5% 1000k 45 min.
Ultra-Sound Very Low Very Low >.6 cm >30% >40% 5-15k 20 min.
I.I.T.Y.I.W.H.T.K.Y
MammOpticsBusiness Model Canvas 1 of 4
Radiation-freeEarlier detectionNon-invasive
Pioneering radiologists inhospitals
Direct sales to hospitals
Strong clinical dataTrainingMaintenance
Product DevelopmentClinical trialsOperating Costs Capital equipment
sales and disposable item
Product DevelopmentIPClinical trialsFDA
IP Leading doctorsTechnical Expertise
HospitalsLeading doctors3rd party manufacturersDistributors
MammOpticsBusiness Model Canvas 1 of 4
Radiation-freeEarlier detectionNon-invasive
Pioneering radiologists inhospitals
Direct sales to hospitals
Strong clinical dataTrainingMaintenance
Product DevelopmentClinical trialsOperating Costs Capital equipment
sales and disposable item
Product DevelopmentIPClinical trialsFDA
IP Leading doctorsTechnical Expertise
HospitalsLeading doctors3rd party manufacturersDistributors
Initi
al guess
Initi
al guess
Initi
al guess
Initi
al guess
MammOpticsBusiness Model Canvas 1 of 4
Test:Customer segment
Value proposition
Finding the right customerFrom radiologists to gynecologists
MammOpticsExcursions into hospitals
Leading doctors
Patients
Hospital Managers
Technicians
Debra Ikeda Jason Davies
Jafi Alissa LipsonSunita Pal
6 women >40 8 women <40
Alicia X-ray mammography
Paul BillingsHolly V. Gautier
MammOpticsHospital purchasing decision tree
MammOpticsHospital purchasing decision tree
Hospitals
Complex purchasing decision
tree. Several saboteours
MammOpticsPrivate practice purchasing decision tree
MammOpticsPrivate practice purchasing decision tree
Private practice
Faster adoption rate
Attractive value proposition✔
Pioneering DoctorsHospitalsOB/GYNsPCPs
Direct Sales to doctors
Strong clinical dataTrainingMaintenance
Product DevelopmentClinical trialsOperating Costs
Capital Equipment Sales and disposable item
Product DevelopmentIPClinical trialsFDA
IP Leading doctorsTechnical Expertise
Hospitals (Capital Spending Committee)Leading doctors3rd party manufacturersDistributorsResearch Hospitals
Doctors:Earlier detectionPriceAccuracy
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 2 of 4
Pioneering DoctorsHospitalsOB/GYNsPCPs
Direct Sales to doctors
Strong clinical dataTrainingMaintenance
Product DevelopmentClinical trialsOperating Costs
Capital Equipment Sales and disposable item
Product DevelopmentIPClinical trialsFDA
IP Leading doctorsTechnical Expertise
Hospitals (Capital Spending Committee)Leading doctors3rd party manufacturersDistributorsResearch Hospitals
Doctors:Earlier detectionPriceAccuracy
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 2 of 4
How do we get to our customer?
Need sensitivity and specificity
Getting to our customerThe world of direct sales and medical marketing
MammOpticsInterviews
Breast Cancer Advocacy Groups
OB/GYNs
FDA/Clinical Trials
Medical Sales
Be Bright PinkJennifer Glover
Dr. Cindy WooDr. Jags Powers
Dr. Aaron Shuvkan
Katrina BellTanay Dudhela
Jed Hwang
Phyllis WhitelyCarl Simpson
MammOpticsMarketing
Access to ACOG by former member
Strong influence on doctors via ACOG Standard of Care
Strongly influenced by
KOLs
MammOpticsMarketing
Researchers conducting
important clinical trials
Researchers with numerous
publications
Outsourced survey research
Researchers with strong peer
recommendations
MammOpticsMarketing
Focus on prominent journals Need two big
publications
Choose KOL as Principal Investigators
(PI)
MammOpticsMarketing
Effective method for educating
doctors
Doctors required to attend
workshops
Workshop must be approved by ACOG
Taught by objective medical
experts
MammOpticsMarketing
ACOG Annual Clinical
Meeting
Miami Breast Cancer Conference
Opportunity for feedback from
doctors
MammOpticsMarketing
Trusted information source for patients
Critical opinion leader for
technology adoption
Access to media outlets
MammOpticsMarketing
IndividualDoctors
Purchasing Administrato
rs
High value medical products
(e.g. cardiovascular stents)
Commodity medical products
(e.g. latex gloves)
• Doctor education• Direct feedback from doctors• Very expensive
• No doctor education• No customer feedback• Inexpensive
Direct Sales
Distributors
MammOpticsChannel Strategies and Costs
Individual Doctors
Purchasing Administrato
rs
Channel Strategies and CostsMammOptics
5 dedicated sales people$150,000 each/year
Hire nurses or technicianswith establishedrelationships
Early adopter feedback
Continue with core group of sales people
Use women’s healthcare equipment distributor
Already established network of customers
Sales strategy 1 Sales strategy 2
MammOpticsPricing Strategy
Equipment Lease model
Per-use model
Consumable
Cost of the device
Service per year
Per-use fee
Consumable
$50,000
$3,000
0
0
$5,000
$10,000
0
0
$5,000
0
$50
0
$25,000
0
0
$20
MammOpticsPricing Strategy
Equipment Lease model
Per-use model
Consumable
Cost of the device
Service per year
Per-use fee
Consumable
$50,000
$3,000
0
0
$5,000
$10,000
0
0
$5,000
0
$50
0
$25,000
0
0
$20
Approved by
customers and
investors
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
RadiologistMammography
MammOpticsCustomer Workflow
Current market Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
RadiologistMammography
MammOpticsCustomer Workflow
Current market
But what would happen if we replace mammography?
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOpticsCustomer Workflow
Breast Radiologists
Technicians Hospitals
Loss of jobs
Loss of jobs Eliminates loss leaderPuts emphasis on
biopsies
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOpticsCustomer Workflow
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOpticsCustomer Workflow
InsuranceSame cost as mammography
($140)Reduced number of biopsies
($1000)
ACOG/ACSImproved healthcare(mammography weak
technique)
Insurance
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Insurance
Radiologist
Mammography
MammOpticsCustomer Workflow
Insurance
Doctor specialty
committee
Hospital Administrati
on
Technician
RadiologistMammography
MammOpticsCustomer Workflow
ACOGACS
MammOptics
Patient
PCPOB/GYN
Insurance
Doctor specialty
committee
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOpticsCustomer Workflow
ACOGACS
MammOptics
Patient
PCPOB/GYN
Hospital Administrati
on
Technician
Radiologist
Mammography
MammOptics
Patient
PCPOB/GYN
PCP OB/GYNsIncreased revenue
More complete patient care
PatientImproved healthcare
Comfort
MammOpticsRevenue
ACOGACS
Doctor specialty
committee
Hospital Administrati
on
Technician
Insurance
Radiologist
Mammography
MammOpticsCustomer Workflow
MammOptics
Patient
PCPOB/GYN
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Capital Equipment Sales and disposable itemPer use fees
Product DevelopmentIPClinical trialsFDAPublishing
IP Leading doctorsTechnical Expertise
Leading doctorsKey Opinion Leaders3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACS
Doctors:Earlier detectionPriceAccuracy
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 3 of 4
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Capital Equipment Sales and disposable itemPer use fees
Product DevelopmentIPClinical trialsFDAReimbursementPublishing
IP Leading doctorsTechnical Expertise
Leading doctorsKey Opinion Leaders3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACS
Doctors:Earlier detectionPriceAccuracy
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 3 of 4
Learned how to reach the customer
How do we build a company based on this?
Building the companyThe backstage of a medical device company
MammOpticsInterviews
FDA Clinical Trials
Manufacturing
Venture Capitalists
Reimbursement
Stanford Statistics Steve AxelrodMarga Ortigas-
Wedekind
Nick MourlasDon
Archambault
Shannon BergstedtAli Habib
Dana MeadBill Starling
Doctors/Sales
Dr. Aron Shuftan
Jed HwangMichael J. Nohr
Manufacturing
MammOpticsPartners
Choose manufacturing facility close to
home
Manufacturing Partner
75% gross margin
9 Inches
~5 lbs
DSP
RFIC
Photo probe
Disposable head
Discounts for Revenue Model
COGS$4-5k per
unit
MammOptics
I.I.T.Y.I.W.H.T.K.Y
Part IP Development
Manufacturing
COGS
1 Digital Processing Unit / Algorithms MammOptics In-House Off the Shelf $200
2 Customized RF Integrated Circuitry MammOptics In-House Out-Sourced $500
3 Probe Bank (Lasers and Photo-Detectors)
Licensed - Off the Shelf $1500
4 Disposable Skin Contact Pad MammOptics In-House Out-Sourced $2
5 Packaging MammOptics Out-Sourced Out-Sourced $2000
TechnologyMammOptics
I.I.T.Y.I.W.H.T.K.Y
Manufacturing Reimbursement
MammOpticsPartners
Difficult to get coverage for new product.
Manufacturing
MammOpticsPartners
Reimbursement PartnersMammOptics
Insurances
CPT Codes$75-$150
MammOpticsPartners
Manufacturing
FDA Clinical Trials
Reimbursement
510K vs. PMALargest cost
Biggest financial risk
Clinical Trials
12/4/2009
Stage 1Pilot trials
50 patients$600K
MammOptics
6 months
FeasibilityComparison
with mammograph
y
Clinical Trials
12/4/2009
MammOptics
6 months 15 months
Stage 1Pilot trials
Stage 2Interim trials
500 patients$7.2M
Prove superior safety-
efficacy & sensitivity
Clinical Trials
12/4/2009
MammOptics
6 months 15 months
Stage 1Pilot trials
Stage 2Interim trials
24 months
Stage 3FDA
pivotal trials1500
patients$20.5M
FDA class II, 510(K) w/ trials
Focus on superiority &
economic end-points
Clinical Trials
12/4/2009
MammOptics
6 months 15 months
Stage 1Pilot trials
Stage 2Interim trials
Stage 3FDA
pivotal trials
Stage 4Post-
market studies2000 patients$26.8M
Specific Cat III CPT/ACP CodesMarket traction
24 months24 months
Clinical Trials
12/4/2009
MammOptics
6 months 15 months
Stage 1Pilot trials
Stage 2Interim trials
Stage 3FDA
pivotal trials$600K
$7.2M
$20.5M
$26.8M
Stage 4Post-
market studies
24 months 24 months
Clinical Trials
12/4/2009
MammOptics
MammOpticsPartners
MammOpticsPartners
Manufacturing
FDA Clinical Trials
Reimbursement
Financial timeline
Funding
$10M
$15M
2012
Series A $3.5 MM
Cash
Rese
rve
Clin
ical
Mile
stones
$5M
Initialize
Desi
gn
Mile
stones
Reg
ula
tory
/ IP
M
ilest
ones
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
Series B $9 MM
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Launch
Series C $30.5 MM
$30M
$20M
Regulatory / Clinical
Series D $35
MM
M&A / IPO $50 MM
$40M
145 12/4/2009
Proof of Concep
t
Pilot Studie
s
IC and Processing Patents
Marketable Product
Provisional Patent
Beta-Versio
n Testin
g
Application and
System Patents
IRB / IDE
Clinical Results
Second Release
Initial Product Launch
Specific Codes (Cat. I CPT / APC)
Non-Specific Codes
1st Release
Test
2nd Release Test
Publication
Post-Market Clinical Studies
Beta Prototype
US Interim Trials
FDA – Class II – 510 (k) with Clinical Trials
Publication
Financial / Operations Timeline
Cat III
CPT
US Pivotal Clinical Trials
Laboratory
Prototype
Technology
Licensing
MammOpticsMammOptics
Financial timeline
$10M
$15M
2012
Cash
Rese
rve
Clin
ical
Mile
stones
$5M
Initialize
Desi
gn
Mile
stones
Reg
ula
tory
/ IP
M
ilest
ones
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
$30M
$20M
$40M
146 12/4/2009
Proof of Concep
t
Provisional Patent
Financial / Operations Timeline
Technology
Licensing
MammOpticsMammOptics
$10M
$15M
2012
Series A $3.5 MM
Cash
Rese
rve
Clin
ical
Mile
stones
$5M
Initialize
Desi
gn
Mile
stones
Reg
ula
tory
/ IP
M
ilest
ones
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
$30M
$20M
$40M
147 12/4/2009
Proof of Concep
t
Provisional Patent
Beta-Versio
n Testin
g
Laboratory
Prototype
Beta Prototype
Technology
Licensing
Financial / Operations Timeline
Pilot Studie
s
MammOpticsMammOptics
$10M
$15M
2012
Series A $3.5 MM
Cash
Rese
rve
Clin
ical
Mile
stones
$5M
Desi
gn
Mile
stones
Reg
ula
tory
/ IP
M
ilest
ones
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
Series B $9 MM
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
$30M
$20M
$40M
148 12/4/2009
IC and Processing Patents
Marketable Product
Beta-Versio
n Testin
g
Application and
System Patents
IRB / IDE
Beta Prototype
Financial / Operations Timeline
Pilot Studie
s
Regulatory / Clinical
Laboratory
Prototype
MammOpticsMammOptics
$10M
$15M
2012
Cash
Rese
rve
Clin
ical
Mile
stones
$5M
Desi
gn
Mile
stones
Reg
ula
tory
/ IP
M
ilest
ones
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
Series B $9 MM
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Series C $30.5 MM
$30M
$20M
Regulatory / Clinical
$40M
149
IC and Processing Patents
Application and
System Patents
IRB / IDE
Cat III
CPT
Second Release
1st Release
Test
US Interim Trials US Pivotal Clinical Trials
Publication
Financial / Operations Timeline
Pilot Studie
s
MammOpticsMammOptics
$10M
$15M
2012
Cash
Rese
rve
Clin
ical
Mile
stones
$5M
Desi
gn
Mile
stones
Reg
ula
tory
/ IP
M
ilest
ones
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Launch
Series C $30.5 MM
$30M
$20M
Regulatory / Clinical
Series D $35
MM
$40M
150 12/4/2009
Clinical Results
Second Release
Initial Product Launch
Non-Specific Codes
2nd Release Test
Publication
US Interim Trials
FDA – Class II – 510 (k) with Clinical Trials
Publication
Financial / Operations Timeline
US Pivotal Clinical Trials
MammOpticsMammOptics
$10M
$15M
2012
Cash
Rese
rve
Clin
ical
Mile
stones
$5M
Desi
gn
Mile
stones
Reg
ula
tory
/ IP
M
ilest
ones
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016 2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Launch
$30M
$20M
Regulatory / Clinical
Series D $35
MM
M&A / IPO $50 MM
$40M
12/4/2009
Clinical Results
Initial Product Launch
Specific Codes (Cat. I CPT / APC)
Non-Specific Codes
Publication
Post-Market Clinical Studies
FDA – Class II – 510 (k) with Clinical Trials
Financial / Operations TimelineMammOpticsMammOptics
$10M
$15M
2012
Series A $3.5 MM
Cash
Rese
rve
Clin
ical
Mile
stones
$5M
Initialize
Desi
gn
Mile
stones
Reg
ula
tory
/ IP
M
ilest
ones
Q1 Q2 Q3 Q4
2013Q1 Q2 Q3 Q4
2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2016
Series B $9 MM
System
2017Q1 Q2Q1 Q2 Q3 Q4
2018Q3
Launch
Series C $30.5 MM
$30M
$20M
Regulatory / Clinical
Series D $35
MM
M&A / IPO $50 MM
$40M
152 12/4/2009
Proof of Concep
t
Pilot Studie
s
IC and Processing Patents
Marketable Product
Provisional Patent
Beta-Versio
n Testin
g
Application and
System Patents
IRB / IDE
Clinical Results
Second Release
Initial Product Launch
Specific Codes (Cat. I CPT / APC)
Non-Specific Codes
1st Release
Test
2nd Release Test
Publication
Post-Market Clinical Studies
Beta Prototype
US Interim Trials
FDA – Class II – 510 (k) with Clinical Trials
Publication
Financial / Operations Timeline
Cat III
CPT
US Pivotal Clinical Trials
Laboratory
Prototype
Technology
Licensing
MammOpticsMammOptics
MammOpticsBusiness Model Canvas 4 of 4
OB/GYNsPCPs
Direct Sales to hospitalsDistributorOnline
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Per use fees
Product DevelopmentIPClinical trialsFDAReimbursement Publishing
IP Leading doctorsTechnical Expertise
KOLs3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACSClinical trial designer
Doctors:Earlier detectionPriceAccuracyImmediate Results
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 4 of 4
Earlier detectionNon invasivePriceAccuracyImmediate Results
OB/GYNsPCPs
Direct Sales to hospitalsDistributorOnline
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Per use fees
Product DevelopmentIPClinical trialsFDAReimbursement Publishing
IP Leading doctorsTechnical Expertise
KOLs3rd party manufacturersBreast Cancer FoundationsACOGACSClinical trial designer
Final iteration of our business model
But… need to think about the big picture…
Radiation-freeEarlier detectionNon invasive
Pioneering DoctorsHospitals
Direct Sales to hospitals
Strong clinical dataTrainingMaintenance
Product DevelopmentClinical trialsOperating Costs
Capital Equipment Sales and disposable item
Product DevelopmentIPClinical trialsFDA
IP Leading doctorsTechnical Expertise
HospitalsLeading doctors3rd party manufacturersDistributors
MammOpticsBusiness Model Canvas 1
Radiation-freeEarlier detectionNon invasive
Pioneering DoctorsHospitals
Direct Sales to hospitals
Strong clinical dataTrainingMaintenance
Product DevelopmentClinical trialsOperating Costs
Capital Equipment Sales and disposable item
Product DevelopmentIPClinical trialsFDA
IP Leading doctorsTechnical Expertise
HospitalsLeading doctors3rd party manufacturersDistributorsResearch Hospitals
MammOpticsBusiness Model Canvas 2
Pioneering DoctorsHospitals
Direct Sales to hospitals
Strong clinical dataTrainingMaintenance
Product DevelopmentClinical trialsOperating Costs
Capital Equipment Sales and disposable item
Product DevelopmentIPClinical trialsFDA
IP Leading doctorsTechnical Expertise
Hospitals (Capital Spending Committee)Leading doctors3rd party manufacturersDistributorsResearch Hospitals
Doctors:Earlier detectionPriceAccuracy
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 3
Pioneering DoctorsHospitalsOB/GYNsPCPs
Direct Sales to hospitals
Strong clinical dataTrainingMaintenance
Product DevelopmentClinical trialsOperating Costs
Capital Equipment Sales and disposable item
Product DevelopmentIPClinical trialsFDA
IP Leading doctorsTechnical Expertise
Hospitals (Capital Spending Committee)Leading doctors3rd party manufacturersDistributorsResearch HospitalsBreast Cancer Foundations
Doctors:Earlier detectionPriceAccuracyImmediate Results
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 4
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Capital Equipment Sales and disposable item
Product DevelopmentIPClinical trialsFDAReimbursementPublishing
IP Leading doctorsTechnical Expertise
Leading doctorsKey Opinion Leaders3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACS
Doctors:Earlier detectionPriceAccuracy
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 5
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Capital Equipment Sales and disposable itemPer use fees
Product DevelopmentIPClinical trialsFDAReimbursement Publishing
IP Leading doctorsTechnical Expertise
KOLs3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACS
Doctors:Earlier detectionPriceAccuracyImmediate Results
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 6
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Per use fees
Product DevelopmentIPClinical trialsFDAReimbursement Publishing
IP Leading doctorsTechnical Expertise
KOLs3rd party manufacturersDistributorsBreast Cancer FoundationsACOGACSClinical trial designer
Doctors:Earlier detectionPriceAccuracyImmediate Results
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 7
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Per use fees
Product DevelopmentIPClinical trialsFDAReimbursement Publishing
IP Leading doctorsTechnical Expertise
KOLs3rd party manufacturers(local)Breast Cancer FoundationsACOGACSClinical trial designer
Doctors:Earlier detectionPriceAccuracyImmediate Results
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 8
OB/GYNsPCPs
Direct Sales to hospitalsDistributor
Strong clinical dataTrainingMaintenanceConferencesCME courses
Product DevelopmentClinical trialsOperating CostsMarketing Costs
Per use fees
Product DevelopmentIPClinical trialsFDAReimbursement Publishing
IP Leading doctorsTechnical Expertise
KOLs3rd party manufacturers(local)Breast Cancer FoundationsACOGACSClinical trial designer
Doctors:Earlier detectionPriceAccuracyImmediate Results
Patients:Radiation FreeNon-Invasive
MammOpticsBusiness Model Canvas 9
Personal Libraries
Insight: No more bookshelves
Printed Books -20% YoY ‘10
eBooks+150% YoY ‘10
Version 1.0: Personal Libraries
Original Idea: Personal Digital Libraries
Import, organize and share thousands of digital papers
something-something-something.com
Original idea
SHORT TERMResearchersLawyersScientists
LONG TERMAvid book readersProfessionals
Import, organize and share thousands of papers
FB/TW posts from users you know
Company blog, FB, TW, support forums
Affiliate program
SEO/SEM/SM
IE/FF/Chrome App Stores
Targeted marketing
Product development
Constant iteration & testing
DevelopersMarketers
Libraries, Universities, Research Centers
Bloggers and media targeting customer segment
Academic Database providers
Affiliate program feesLicensingSubscription feesAd revenue
AWS InfrastructureSEMEng & Marketing OpEx
Invincible Business Model: Version 1.0
Here’s What We DidVersion 1.0: Personal Libraries
Got out of the building
Got out of the building
• 100+ Interviews
Professors, Litigators, IP lawyers, Post-docs, PhD researchers, Engineering Students, Law Students…
Got out of the building
• 100+ Interviews• Extensive Surveys
Got out of the building
• 100+ Interviews• Extensive Surveys• 33,000+ Adwords
Got out of the building
• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review
Got out of the building
• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing
Got out of the building
• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers
Got out of the building
• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks
Got out of the building
• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks• Usability Tests
Got out of the building
• 100+ Interviews• Extensive Surveys• 33,000+ Adwords• Compete Review• Market Sizing• 50 bloggers• 6 Social Networks• Usability Tests• Rapid Iteration
Here’s What We FoundVersion 1.0: Personal Libraries
Here's what we found: Version 1.0
GOOD• Subscriptions Rock
A great business if we had more users…
Here's what we found: Version 1.0
GOOD• Subscriptions Rock• Pipelines Optimize
Shorter pages raise conversions 80%
Here's what we found: Version 1.0
GOOD• Subscriptions Rock• Pipelines Optimize• The Web Listens
Sites will feature your service
Here's what we found: Version 1.0
GOOD• Subscriptions Rock• Pipelines Optimize• The Web Listens
BAD• Academics = Cheap
Teaching team saw pattern in our data
Run away from this customer as fast as possible.
Run away from this customer as fast as possible.
They don’t want to spend money and will incur infinite support and infinite cost.
Here's what we found: Version 1.0
GOOD• Subscriptions Rock• Pipelines Optimize• The Web Listens
BAD• Academics = Cheap• Negative Margins
Working for peanuts, and hitting wild product success leads to economic failure
Here's what we found: Version 1.0
GOOD• Subscriptions Rock• Pipelines Optimize• The Web Listens
BAD• Academics = Cheap• Negative Margins• ECM = Boring
No adjacent pivots worked for the team
Version 2.0: Trusted Advice
something-something-something.com
Original idea
Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)
Discover online goods recommended by friends at the lowest possible price from trusted vendors
FB/TW posts from users you know
Company blog, FB, TW accounts
Affiliate program
SEO/SEM/SM
IE/FF/Chrome App Stores
Developing trusted advice and advisors
Web marketing
Affiliate partnerships
Constant iteration & testing
DevelopersMarketersContent LibraryInstall baseReadership base
Bloggers and Media targeting customer segment
Retail marketing partners
IE/FF/Chrome teams
Affiliate Program Providers
Affiliate program feesLicensingSubscription feesAd revenue
AWS InfrastructureSEMEng & Marketing OpEx
Invincible Business Model: Version 2.0
New Hypotheses
Here’s What We DidVersion 2.0: Trusted Advice
Got out of the building, again
• 40+ Interviews
Got out of the building, again
• 40+ Interviews• Extensive Surveys
Got out of the building, again
• 40+ Interviews• Extensive Surveys• Landing Page Tests
Landing pages tested on affluent, career aged professionals, approximately 70/30
male/female, N=800+
Got out of the building, again
• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research
Got out of the building, again
• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research
Got out of the building, again
• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research• Revenue Analysis
Got out of the building, again
• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research• Revenue Analysis• Two Prototypes
Insidely.com
wantio.com
Got out of the building, again
• 40+ Interviews• Extensive Surveys• Landing Page Tests• Market Research• Compete Research• Revenue Analysis• Two Prototypes• Refined Personas
Customer Segment: Professional-class consumers shopping frequently online
Pat the ProfessionalUpwardly mobile professional (some Grad Students)Salary: $40,000 – 150,000/yearFinance, Consulting, PR, MarketingFollows fashion/technology trendsSpends $1-15K on discretionary items onlinePurchased online in last 30 days
Demographics• Male/female, aged 18-35• Minimum bachelors from expensive schoolTraits:• Ideas from blogs & shopping websites • Values celebrity trends & friends’ opinions• Wants high ticket items at lowest price• Event-driven shopper—new release or sale
Motivation• Craves new products• Hates tedious work• Identifies as influencer among friends• Fears being cheated online
Behavior• Spends 5 hour+ monthly hearing about products • Shares online and in person about products he
lovesBudget• $2-10K+/year in discretionary online purchases
“The XXX is awesome, I really want one. I know I just bought the YYY, but it’s probably time to upgrade.”
Source: US Bureau of Labor Statistics
~5.9M “Pat the Professionals” in USDrawn from top 1/3 of 17.8M frequent online shoppers17.8M based on 40.2M Professionals (2008 Census) * 0.762 US Internet Penetration (Nielsen 2010Q1) * 0.58 consumers shopping online in last month (Nielsen 2010Q1)
Online Recommendation Market Opportunity (conservative strawman #s)Assuming 10% share, 5% affiliate fees
Top Shoppers (~$7B/year spend): ~ $35M/year
Professional-class frequent shoppers (~$1.8B/year): ~ $9M/year
Other Professional-class shoppers ($0.7B/year): ~3.5M/year
Version 2.0: Trusted AdviceTop ~6M US Influentials (~$9B/year)
something-something-something.com
Original idea
Upwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)
Discover online goods recommended by friends at the lowest possible price from trusted vendors
FB/TW posts from users you know
Company blog, FB, TW accounts
Affiliate program
SEO/SEM/SM
IE/FF/Chrome App Stores
Developing trusted advice and advisors
Web marketing
Affiliate partnerships
Constant iteration & testing
DevelopersMarketersContent LibraryInstall baseReadership base
Bloggers and Media targeting customer segment
Retail marketing partners
IE/FF/Chrome teams
Affiliate Program Providers
Affiliate program feesLicensingSubscription feesAd revenue
AWS InfrastructureSEMEng & Marketing OpEx
Invincible Business Model: Version 2.0
Here’s What We FoundVersion 2: Trusted Advice
Findings on "Trusted Advice"
GOOD• Fast Interest
Insidely.comTrusted advice site for Silicon Valley/Stanford MBAs
Launched 2/15
425 visitors by 2/28
Findings on "Trusted Advice"
GOOD• Fast Interest
Ranked #6 by Google for “Stanford Admissions Books”
Findings on "Trusted Advice"
GOOD• Fast Interest• High Conversion
43% clickthrough on Top Admissions Books for Stanford MBAs article
Compare to 0.5% clickthrough on ads
~100x difference
Findings on "Trusted Advice"
GOOD• Fast Interest• High Conversion• Needs Addressed
Positive results on “Trusted Advice” Shopping Add-in testing
See videos at http://factnote.com/c/e245
Findings on "Trusted Advice"
GOOD• Fast Interest• High Conversion• Needs Addressed
Super easy to install and use.
I really did enjoy it!
Great idea! I will keep the extension installed because I do think this is practical!
I could see myself using this regularly
Positive results on “Trusted Advice” Shopping Add-in testing
Findings on "Trusted Advice"
GOOD• Fast Interest• High Conversion• Needs Addressed BAD• Missing Features
Some negative results on “Trusted Advice” Shopping Add-in testing
See videos at http://factnote.com/c/e245
Findings on "Trusted Advice"
GOOD• Fast Interest• High Conversion• Needs Addressed BAD• Missing Features
Some negative results on “Trusted Advice” Shopping Add-in testing
I was a little frustrated when it didn’t find the item I was looking for
I can find more thorough price comparisons elsewhere…
I usually don’t shop in Chrome, so that’s an inconvenience.
Findings on "Trusted Advice"
GOOD• Fast Interest• High Conversion• Needs Addressed BAD• Missing Features• SEO Battle
MBA Exchange spams us out of Google
Here’s Where We Ended Up Version 2.1: Trusted Advice
The adventure continues
Trusted Advice 2.0
Protection against SEO-spammers
Next Experiments: • Trusted Lead Gen • Trusted Advice
website powered by Shopping Add-in
something-something-something.com
Original idea
PAT THE PROFESSIONALUpwardly mobile young professionals making $2-10K of discretionary online purchases a year (excluding travel)
TRUSTED ADVICE Discover online goods recommended by friends at the lowest possible price from trusted vendors
Foil advertorial spammers polluting the Interweb with toxic pseudo-content
FB/TW posts from users you know
Company blog, FB, TW accounts
Affiliate program
SEO/SEM/SM
IE/FF/Chrome App Stores
Developing trusted advice and advisors
Web marketing
Affiliate partnerships
Constant iteration & testing
DevelopersMarketersContent LibraryInstall baseReadership base
Bloggers and Media targeting customer segment
Retail marketing partners
IE/FF/Chrome teams
Affiliate Program Providers
Affiliate program feesLicensingSubscription feesAd revenue
AWS InfrastructureSEMEng & Marketing OpEx
Invincible Business Model: Version 3.0
What We Learned
• Potential for disruption abounds
What We Learned
• Potential for disruption abounds
• Life is short, focus on big markets
What We Learned
• Potential for disruption abounds
• Life is short, focus on big markets
• All we need is to be relentless
Blog Your Progress
How?
• Customer Development– The Process
• Narrative– Interviews– Surveys– Videos– Prototypes
• Business Model Canvas– Scorekeeping
• Real-time Feedback• Physical Reality Checks
– Skype– Face-to-face
We Made Students Blog Their Progress
It Changed Everything
Interview
Photos Videos
Surveys
Interview& Photos
Competitive Analysis
Key Findings
A/B Test Results
Key Question
Strategy
Business Model Canvas as the Scorecard
Carpe Diem
www.steveblank.com
Customer DevelopmentTesting Your Hypotheses
Stanford - School of EngineeringU.C. Berkeley - Haas School Of Business
www.steveblank.comTwitter: sgblank
Steve Blank
I Write a Blog www.steveblank.com
This Talk is Based On• Business Model Generation• Four Steps to the Epiphany
• Lean Startup
Customer Discovery Phase 1 - Hypotheses
Stop selling, start listening
Test your hypotheses Two are fundamental: problem and product concept
Customer Discovery
CustomerDiscovery
CustomerValidation
CompanyBuilding
CustomerCreation
Customer Discovery
CustomerDiscovery
Phase 1AuthorHypothesis
Phase 2Test ProblemHypothesis
Phase 4Verify, Iterate & Expand
Phase 3Test SolutionHypothesis
To Validation
Customer Discovery
Customer Discovery
Outside the Building
Inside the Building
Value Prop 1Product/MVP
CustomersWho/Problem
ChannelsPhysical/
Virtual
Value Prop 2Market Type
Customer RelationshipsGet/Keep/Grow
Revenue StreamsPricing
PartnersKey Resources
Customer Discovery Phase 1 - Hypotheses
Value Prop 1Product/MVP
CustomersWho/
Problem
ChannelsPhysical/Virtual
Value Prop 2Market Type
Customer Relationships
Get/Keep/Grow
Revenue StreamsPricing
PartnersKey Resources
Customer Discovery Value Proposition – Product/MVP
Long-Term Vision/
Mkt Size
Product Features/B
enefits
MVP
VALUE PROPOSITIONS
what are you offering them? what is that getting done for them? do they care?
Testing the MVP
• Smoke testing with landing pages using AdWords• In-product split-testing• Prototypes (particularly for hardware)• Removing features• Continued customer discovery and validation• Surveys• Interviews
Testing the MVP (Web Example)
Can you get customers to pay for a product that doesn’t yet exist (or barely does)?
• Do customers say they have a matching core problem?• Landing page test for conversion• What’s required to get customers to activate? (prizes, payment)• Use customer problem to identify key word list
– plug into Google search traffic estimator - high traffic means there is problem awareness
• Drive traffic to site using Google search and see how deep into a registration process customers are willing to go through
Testing the MVP (Non-Web)Can you get customers to pay for a product that
doesn’t yet exist (or barely does)?
• Interview customers to make sure they have a matching core problem
• Set up web site landing page to test for conversion• Set up a Lighthouse Customer Program where
potential customers pay to get early access to product prototypes
Value Prop 1Product/MVP
CustomersWho/Problem
ChannelsPhysical/
Virtual
Value Prop 2Market Type
Customer RelationshipsGet/Keep/Grow
Revenue StreamsPricing
PartnersKey Resources
Customer Discovery Customer Segments
CUSTOMER SEGMENTS
which customers and users are you serving? which jobs do they really want to get done?
Who’s The Customer?
Consumer End Users, Corporate Customers Pay
Multiple Consumers Etc.
Market/Opportunity Analysis
How Big is It?: Market/Opportunity Analysis– Identify a Customer and Market Need– Size the Market– Competitors– Growth Potential
How Big is the Pie?Total Available Market
Total Available Market
• How many people would want/need
the product?
• How large is the market be (in $’s) if they all bought?
• How many units would that be?
How Do I Find Out?
• Industry Analysts – Gartner, Forrester
• Wall Street Analysts – Goldman, Morgan
How Big is My Slice?Served Available Market
• How many people need/can use product?
• How many people have the money to buy the product
• How large would the market be (in $’s) if they all bought?
• How many units would that be?
How Do I Find Out?• Talk to potential customers
Served Available
Market
TotalAvailableMarket
How Much Can I Eat?Target Market
• Who am I going to sell to in year 1, 2 & 3?
• How many customers is that?
• How large is the market be (in $’s) if they all bought?
• How many units would that be?
How Do I Find Out?• Talk to potential customers
• Identify and talk to channel partners
• Identify and talk to competitors
TotalAvailableMarket Target
Market
ServedAvailableMarket
TotalAvailableMarket
SegmentationIdentification of groups most likely to buy
254
ServedAvailableMarket
Target Market
• Geographic• Demographic• Psychographic variables• Behavioral variables• Channel• etc…
Market Size: Summary• Market Size Questions:
– How big can this market be? – How much of it can we get?– Market growth rate– Market structure (Mature or in flux?)
• Most important: Talk to Customers and Sales Channel• Next important: Market size by competitive approximation
– Wall Street analyst reports are great• And : Market research firms Like Forester, Gartner
Corporate? Consumer?
Business to Business (B to B) Use or buy inside a company
Business to Consumer (B to C) Use or buy for themselves
Business to Business to Consumer (B to B to C) Sell a business to get to a consumer Other Multi-sided Markets with multiple
customers
What do they want you to do?Corporate
Increase revenue? Decrease costs? Get them new customers? Keep up with or pass competitors? How important is it?
What do they want you to do?Consumers
Does it entertain them? Does it connect them with others? Does it make their lives easier? Does it satisfy a basic need? How important is it? Can they afford it?
Market Type & Ignoring Customers
Existing Market? Resegmenting an Existing Market?
niche or low cost New Market?
When do I ignore customer feedback?
Who’s the Customer in a Company?
User? Influencer? Recommender? Decision Maker? Economic Buyer? Saboteur? Archetypes for each?
MammOpticsHospital purchasing decision tree
HospitalsComplex purchasing decision tree. Several saboteours
MammOpticsPrivate practice purchasing decision tree
Private practiceFaster adoption rateGood value proposition
✔
Radiologist
Mammography
Technician
Doctor specialty
committee
Hospital Administrati
on
Insurance
ACOGACS
PCPOB/GYN
Patient
MammOptics
Sales representatives
Demand Creation
MammOpticsCustomer Workflow
How Do Corporate Customers Interact to Buy?
Organization Chart Influence Map Sales Road Map
Consumer Customer Interactions
Do they buy it by themselves? Do they need approval of others? Do they use it alone or with others?
Pass/Fail Signals & Experiments
How do you test interest? Where do you test interest? What kind of experiments can you run? How many do you test?
How Do They Hear About You?
Demand Creation Network effect Sales
Value Prop 1Product/MVP
ChannelsPhysical/Virtual
CustomersWho/Problem
Value Prop 2Market Type
Customer Relationships
Get/Keep/Grow
Revenue StreamsPricing
PartnersKey Resources
Customer Discovery Channels
Multiple Customer Segments
Each has its own Value Proposition Each has its own Revenue Stream One segment cannot exist without the other Which one do you start with?
CHANNELS
how does each customer segment want to be reached? through which interaction points?
Our Company
Our Customers
System Integrators
Direct Sales Force
Value-Added Resellers (VAR’s)
Dealers
Distributors
Retail/Mass Merchants
OEM
Web/Online
OEM
System Integrators
Direct Sales Force
Value-Added Reseller
Dealers
Distributors
Retailers/Mass Merchants