cleantech open 071611
TRANSCRIPT
Customer Development and the Business ModelJuly 16, 2011
Welcome to Customer Development
Stanford - School of Engineering
U.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
First -What’s A Startup?
Five Types of Startups
Small BusinessStartup
Small Business Startups
• Serve known customer with known product
• Feed the family
Small BusinessStartup
Exit Criteria- Business Model found- Profitable business- Existing team< $1M in revenue
Small Business Startups
• known customer known product
• Feed the family
Small BusinessStartup
- Business Model found- Profitable business- Existing team< $10M in revenue
Small Business Startups
• 5.7 million small businesses in the U.S. <500 employees• 99.7% of all companies• ~ 50% of total U.S. workers
http://www.sba.gov/advo/stats/sbfaq.pdf
Large Non-Profit
Social Startup
Social Entrepreneurship Startups
• Solve pressing social problems• Social Enterprise: Profitable• Social Innovation: New Stratagies
Transition Large Company
ScalableStartup
Sustaining Innovation
• Existing Market / Known
customer• Known product feature needs
Large Company Sustaining Innovation
Large Company Disruptive Innovation
New Division Transition Large
Company
Disruptive Innovation• New Market• New tech, customers, channels
Large Company Disruptive Innovation
New Division Transition Large Company
Disruptive Innovation• Build• Acquire - IP - Talent - Product - Customers - Business
ScalableStartup
Large Company
Scalable Startup
Goal is to solve for: unknown customer and
unknown features
Search
ScalableStartup
Large Company
Exit Criteria- Business model found- Total Available Market > $500m -$1B- Can grow to $100m/year
Scalable Startup
Search Execute
ScalableStartup
Large Company
- Total Available Market > $500m- Company can grow to $100m/year- Business model found- Focused on execution and process- Typically requires “risk capital”
Scalable Startup
• In contrast a scalable startup is designed to grow big• Typically needs risk capital• What Silicon Valley means when they say “Startup”
Search Execute
ScalableStartup
Large Company
Exit Criteria- Business model found- Total Available Market > $500m -$1B- Can grow to $100m/year
Scalable Startup
Search Execute
• VC-backed scalable startups:• 13% of all public companies• 4% of total sales of all U.S. public companies ~$1 trillion
Source: Josh Lerner, Harvard: VC and Innovation in Energey
Small BusinessStartup
- Business Model found- Profitable business- Existing team< $10M
ScalableStartup
Large Company
- Total Available Market > $500m- Company can grow to $100m/year- Business model found- Focused on execution and process- Typically requires “risk capital”
Very Different Startup Goals
Small BusinessStartup
ScalableStartup
Large Company
Venture Firms Invest in Scalable Startups
ScalableStartup
$5 to 50M Acquisition
Buyable Startup
Goal is to solve for: Internet and Mobile Apps
Search Sell
ScalableStartup
$5 to 50M Acquisition
Buyable Startup
Goal is to solve for: Internet and Mobile Apps
Search Sell
Sell to larger company
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
Next,What’s A Founder?
What You and I Saw
What Michelangelo Saw
What You and I Saw
What Van Gogh Saw
Founders See Things Others Don’t
Founders See Things Others Don’t
Founders are Artists.Actually They are Composers.
They Create Something From Nothing
Founders See Things Others Don’t
They Build a Company By Convincing Others To See What They Do
Founders See Things Others Don’t
The Early Employees Who Join Them Are the Performers
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?
59
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?
62images by JAM
customer segments
key partners
cost structure
revenue streams
channels
customer relationships
key activities
key resources
value proposition
sketch out your business model
But,Realize They’re Hypotheses
9 Guesses
Guess Guess
Guess
Guess
GuessGuess
Guess
GuessGuess
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
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…
• MVP + Customer are the first two you need to nail
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)?
• Interview customers to make sure they have a matching core problem• Set up web site landing page to test for conversion• See what offers are required to get customers to use the product (e.g.
prizes, payment)• Use problem definition as described by customers 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
The Pivot
• The heart of Customer Development
• Iteration without crisis
• Fast, agile and opportunistic
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)
Confidential
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
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
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
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
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
Business Canvas Change Progress
1
Business Canvas Change Progress
2
Business Canvas Change Progress
3
Business Canvas Change Progress
4
Business Canvas Change Progress
5
Business Canvas Change Progress
6
Business Canvas Change Progress
7
Sidebar
Market Type
Product Introduction Conundrum
• Product introductions aren’t predictable– Why?– Is it the people that are different?– Is it the product that are different?
• Are there different “types” of startups?
Three Markets Types
• Market Type changes everything• Sales, marketing and business development
differ radically by market type
Existing Market Resegmented Market
New Market
Market Type Changes Everything
Market– Market Size– Cost of Entry– Launch Type– Competitive
Barriers– Positioning
Sales– Sales Model– Margins– Sales Cycle– Chasm Width
Existing Market Resegmented Market
New Market
Finance• Ongoing Capital• Time to Profitability
Customers• Needs• Adoption
Three Types of Markets
• Existing Market– Faster/Better = High end
• Resegmented Market– Niche = marketing/branding driven– Cheaper = low end
• New Market– Cheaper/good enough = creates a new class of
product/customer– Innovative/never existed before
Existing Market Resegmented Market
New Market
Carpe Diem
www.steveblank.com
REVENUE STREAMS
what are customers really willing to pay for? how? are you generating transactional or recurring
revenues?
Market Size
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
182
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
CUSTOMER SEGMENTS
images by JAM
which customers and users are you serving? which jobs do they really want to get done?
Customers
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
Corporate Customers
Business to Business (B to B)
What do they want you to do?
Increase revenue? Decrease costs? Get them new customers? Keep up with or pass competitors? How important is 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?
How Do They Interact to Buy?
Organization Chart Influence Map Sales Road Map
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
Consumer Customers
Business to Consumer (B to C)
What do they want you to do?
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?
Consumer Customers
Do they buy it by themselves? Do they need approval of others? Do they use it alone or with others?
How Do They Decide to Buy?
Demand Creation Viral? SEO/SEM Network effect? AARRR (Dave McClure)
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?
The Consumer Sales Channel
A product that’s bits can use the web But getting a physical consumer product into
retail distribution is hard Is Wal-Mart a customer? More next week
Multi-Sided Markets
Business to Business to Consumer
(B to B to C)
Who’s The Customer?
Consumer End Users, Corporate Customers Pay
Multiple Consumers Etc.
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?
Customer Relationships
Get – Keep - Grow
CUSTOMER RELATIONSHIPS
what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
“Get Customers” Funnel
Acq
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Act
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Getting Customers – Virtual Channel
$
Earned and Paid Media
“Get Customers” FunnelPR
SEO
Advertising
Blogs/Website
Tradeshows
Acq
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Act
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Viral Mktg
SEM/PPC
Affiliate Mktg
Getting Customers – Virtual Channel
$
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“Get Customers” Funnel
Getting Customers – Physical Channel
$
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Co
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Inte
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Pu
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ase
Earned and Paid Media
“Get Customers” FunnelPR
Product Reviews
Advertising
Blogs/Website
Tradeshows
Getting Customers – Physical Channel
$
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Co
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Inte
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Earned and Paid
Media Get Customers
Keep Customers
Customer check-in calls
Customer satisfaction survey
product updates
Loyalty Programs
Keeping Customers
Aw
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Inte
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Earned and Paid Media
Get Customers
Keep Customers
Customer check-in calls
customer satisfaction survey
product updates Loyalty Programs
Grow CustomersR
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Growing Customers