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1
Customer Development in the High Tech Enterprise
MBA 295-F/EMBA 295-F
Customer Discovery: Part 2
Steve Blank [email protected]
Class 5: Agenda
! Logistics/Questions ! CASE: WebVan ! Customer Discovery
3
Webvan Case
! Stop selling, start listening
! Test your hypotheses " Two are fundamental: problem and product concept
Customer Discovery
Customer Discovery
Customer Validation
Company Building
Customer Creation
Customer Discovery
Customer Discovery
Phase 1 Author
Hypothesis Phase 2
Test Problem
Hypothesis
Phase 4 Verify, Iterate &
Expand
Phase 3 Test
Product Hypothesis
To Validation
Test “Problem” Hypothesis!
Customer Discovery
Demand Creation
Hypothesis Market Type Hypothesis
Product Hypothesis
Customer & Problem Hypothesis
Distribution & Pricing
Hypothesis Competitive Hypothesis
Hypotheses!
Market Knowledge
Friendly First Contacts
“Problem” Presentation
Customer Understanding
Second Reality Check
First Reality Check
“Product” Presentation
Yet More Customer
Visits
Test “Product” Hypothesis!
Iterate or Exit
Verify the Product
Verify the Problem
Verify the Business
Model
Verify!
Test “Problem” Hypothesis!
Customer Discovery
Demand Creation
Hypothesis
The im
Market Type Hypothesis
Product Hypothesis
Customer & Problem Hypothesis
Distribution & Pricing
Hypothesis Competitive Hypothesis
Hypotheses!
Market Knowledge
Friendly First Contacts
“Problem” Presentation
Customer Understanding
Second Reality Check
First Reality Check
“Product” Presentation
Yet More Customer
Visits
Test “Product” Hypothesis!
Iterate or Exit
Verify the Product
Verify the Problem
Verify the Business
Model
Verify!
Inside the Building!
Outside the Building!
Customer Discovery - Web
Source: ash maurya
Phase 1: Author Hypothesis
! One-time writing exercise ! All other time spent in
front of customers ! Assumes you’re smart but
guessing Phase 1 Author
Hypothesis
Phase 2 Test
Problem Hypothesis
Phase 4 Iterate & Expand
Phase 3 Product Concept Testing
Customer/Problem Hypotheses
! Types of Customers ! 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?
" Viral " Advertising " PR " Trade shows
! 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 of competition
Competition Hypotheses
! Who is out there? ! Why are they important? ! How do customers use them today? ! What don’t customers like about them?
15
Intermission
The Customer Development Team
Traditional organizations and 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 Team Tasks Not Titles
CEO
VP Product Dev Technical Visionary Business Visionary Business Execution
Customer Development Driven Startup
In Front of Customers
18
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 of competition
Competition Hypotheses
! Who is out there? ! Why are they important? ! How do customers use them today? ! What don’t customers like about them?
How Do You Figure Out Your Business Model?
25
26 Source: Alexander Osterwalder
27 Source: Alexander Osterwalder
28 Source: Alexander Osterwalder
29 Source: Alexander Osterwalder
30 Source: Alexander Osterwalder
31 Source: Alexander Osterwalder
32 Source: Alexander Osterwalder
33 Source: Alexander Osterwalder
34 Source: Alexander Osterwalder
35 Source: Alexander Osterwalder
36 Source: Alexander Osterwalder
37 Source: Alexander Osterwalder
38
39 Source: Alexander Osterwalder
40 Source: Alexander Osterwalder
41 Source: Alexander Osterwalder
42 Source: Alexander Osterwalder
43 Source: Alexander Osterwalder
44 Source: Alexander Osterwalder
Phase 2: Test & Qualify Problem
Hypothesis
! Get out of the building ! Test the problem ! Become the customer ! Solve a real problem Phase 1
Author Hypothesis
Phase 2 Test
Problem Hypothesis
Phase 4 Iterate & Expand
Phase 3 Test
Product Hypothesis
Test & Qualify Problem: First Contacts
! Build a Rolodex ! Develop “Innovators” list ! Create reference story/sales script ! Schedule Customer Visits
Test & Qualify Problem: Create Problem Presentation
! Not a Sales Pitch " Test of your understanding of the customers
problem ! Problem/Solution – Slide
" Problems column 1 " Today’s solution column 2 " Your solution column 3
! Capture other missing data
Test & Qualify Problem: Customer Understanding
! Become a Domain Expert ! Understand their “Day-in-the Life” ! Understand their problems/pain ! Get a feel of how this impacts their life/work ! Who has similar products that solve this problem ! How do they learn about new solutions ! Can they be helpful later
The Big Idea
! What is the problem? ! Who has the problem? ! How important is the problem’s solution to the
customer? ! How valuable is the problem’s solution to the
customer?
Test & Qualify Problem: Market Knowledge
! Get a feel for the “lay of the land” ! Adjacent Market players ! Industry Influencers ! Key Analysts ! Attend Conferences/Tradeshows
Phase 3: Test Product Hypothesis
! First reality check w/product development
! The product hits the street ! Lots of customer visits ! More doses of reality Phase 1
Hypothesis Phase 2 Test
& Qualify Hypothesis
Phase 4 Iterate & Expand
Phase 3 Test
Product Hypothesis
Test Product Hypothesis: First Reality Check
! Build a Workflow Map of customer " Before and after your product
! Problem scale ! Key insights ! How did the product spec match needs? ! Re-review product feature List ! Why are you different
Test Product Hypothesis: Product Presentation
! Questionnaire ! Start w/Problem Presentation ! Then describe the Product ! Demo if you have one
Test Product Hypothesis: Yet More Customer Visits
! Set up More Calls ! Validate Solution ! Validate Product ! Validate Positioning ! Understand Customer and Org. Pain ! Validate Pricing and Budget ! Understand “Whole Product” needs ! Understand Approval Process ! Update potential Advisory Board candidates
Test Product Hypothesis: Second Reality Check
! Does the product solve a problem? " Serious problem? " For a large scalable market?
! How did the product spec match needs? ! Re-review product Feature List