translating customer needs into mvps

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Translating Customer Needs into MVPsFrank RimalovskiExecutive Director, NYU Entrepreneurial InstituteManaging Director, NYU Innovation Venture FundInstructor, NSF Innovation Corps (I-Corps)November 14, 2015

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What makes for a successful startup?

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Commercialization Myth

Basic & Applied

Research

Scientific Discovery/Invention/IP Creation

Venture Formation & Growth

@NYUEntrepreneurThe “valley of death”

Basic & Applied

Research

Scientific Discovery/Invention/ IP Creation

Customer Discovery & Prototype

Dev

Business Model &

Team Formation

Venture Formation & Growth

• Customer/market discovery• Engineering/prototypes•Mentors & advisors• Collaborative spaces• Business leadership• Legal counsel• Capital

Commercialization Reality

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(At least) Three Parts toBuilding a Successful Startups1. Advancing the product/technology

2. Beginning to build a team

3. Finding a repeatable business model

u Most focus on #1 and/or #2

u Successful efforts require all three

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It’s Bigger Than the Revenue Model

u Testing hypotheses makes substantive changes to biz model before you do science/designo Define clinical utilityo Who core & tertiary users/buyers/payers areo Sales & marketing process required for initial

revenues and downstream commercializationo Data required for future partnerships/collaborationso Intellectual property riskso Regulatory pathwayso Reimbursement strategies

u Affects your biological & clinical hypotheses

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Need to do this beforefinishing the science orbuilding/designing the product

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Evidence-based Entrepreneurship(aka the Lean Startup)

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The Business Model Canvas

Revenue Streams

Channels

Customer SegmentsValue PropositionsKey ActivitiesKey Partners

Key Resources

Cost Structure

Customer Relationships

Designed by: Date: Version:Designed for:

designed by: Strategyzer AGThe makers of Business Model Generation and Strategyzer

This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

strategyzer.com

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

is your business moreCost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)Value Driven (focused on value creation, premium value proposition)

sample characteristicsFixed Costs (salaries, rents, utilities)Variable costsEconomies of scaleEconomies of scope

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

channel phases1. Awareness

How do we raise awareness about our company’s products and services?2. Evaluation

How do we help customers evaluate our organization’s Value Proposition?3. Purchase

How do we allow customers to purchase specific products and services?4. Delivery

How do we deliver a Value Proposition to customers?5. After sales

How do we provide post-purchase customer support?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

Mass MarketNiche MarketSegmentedDiversifiedMulti-sided Platform

What type of relationship does each of our Customer Segments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

examplesPersonal assistanceDedicated Personal AssistanceSelf-ServiceAutomated ServicesCommunitiesCo-creation

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

categories ProductionProblem SolvingPlatform/Network

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

types of resourcesPhysicalIntellectual (brand patents, copyrights, data)HumanFinancial

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

motivations for partnershipsOptimization and economy Reduction of risk and uncertaintyAcquisition of particular resources and activities

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

characteristicsNewnessPerformanceCustomization“Getting the Job Done”DesignBrand/StatusPriceCost ReductionRisk ReductionAccessibilityConvenience/Usability

typesAsset saleUsage feeSubscription FeesLending/Renting/LeasingLicensingBrokerage feesAdvertising

fixed pricingList PriceProduct feature dependentCustomer segment dependentVolume dependent

dynamic pricingNegotiation (bargaining)Yield ManagementReal-time-Market


Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

HypothesisHypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

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More than half of your assumptions are wrong!

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Customer Development

Test assumptions about customer needs/problem & develop MVPs

Seek validationthat people are interested in your product/ solution

Begins to builddemand & improve efficiency of customer acquisition

Drive growth aggressively & execute business model

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Customer DiscoveryuApply the scientific method to

business model development

Modify hypothesis

Observe phenomena

Formulate hypothesis

Test hypothesis via rigorous experiments

Establish theory

based on repeated

validation of results

PIVOT!

You are here

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First test the problem, then test the solution


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Value PropositionWhat Problem Are You Solving?

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Value Proposition

describes the benefitscustomers can expect from a bundle of products and services

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Key Questions for Value Prop

u Problem Statement: What is the problem?

u Technology / Market Insight: Why is the problem so hard to solve?

u Product: How do you solve it today?

u Competition: Who is delivering that solution?

u Clinical utility: What level of improvement in efficacy/safety/cost/etc. is needed?

u Market Size: How big is this problem?

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Customer SegmentWho Cares?

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Customer Profile

u Who are they and why would they buy?

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Define Customer Archetypeu Who are they?

o Position / title / age / sex / role

u How/where do they buy?o Discretionary budget (name of

budget and amount)

u What matters to them?o What motivates them?

u Who influences them?o What do they read/who do they

listen to?

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Problem-Solution Fit

Fit

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So where does my technology come in?

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It’s not about your technology!

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bit.ly/1MFD3YJ

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So where does my technology come in?

Customers don’t care about technologyThey are trying to solve a problem

Customer discovery is about identifying that problem & exploring how you could solve it

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put yourself in the customers’ shoes

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But how?

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Customer Interviews(aka Talking to Humans)


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“You can’t just ask customers

what they want and then try to give that

to them.”

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“New ideas come from watchingsomething, talk(ing) to people, experimenting, asking questions and getting out of the office!”

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Talk to Humans!u GOTB: The #1

lesson of this talk

u In person is best

u You must gaininsight into your customer & market

u You are doing pattern recognition… Must have sufficient data points to see

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2B. Story

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Meet People You Don’t Knowu People you know will be nice and tell

you what you want to hear

u Those interviews are possibly harmful

u Let other teams use people you know

u People you don’t know have no relationship to protect…Only they will tell you the truth

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Secret: This is why we brought all the mentors in!

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What do you want to learn?

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Revenue Streams

Channels

Customer SegmentsValue PropositionsKey ActivitiesKey Partners

Key Resources

Cost Structure

Customer Relationships

Designed by: Date: Version:Designed for:

designed by: Strategyzer AGThe makers of Business Model Generation and Strategyzer

This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

strategyzer.com

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

is your business moreCost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)Value Driven (focused on value creation, premium value proposition)

sample characteristicsFixed Costs (salaries, rents, utilities)Variable costsEconomies of scaleEconomies of scope

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

channel phases1. Awareness

How do we raise awareness about our company’s products and services?2. Evaluation

How do we help customers evaluate our organization’s Value Proposition?3. Purchase

How do we allow customers to purchase specific products and services?4. Delivery

How do we deliver a Value Proposition to customers?5. After sales

How do we provide post-purchase customer support?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

Mass MarketNiche MarketSegmentedDiversifiedMulti-sided Platform

What type of relationship does each of our Customer Segments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

examplesPersonal assistanceDedicated Personal AssistanceSelf-ServiceAutomated ServicesCommunitiesCo-creation

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

categories ProductionProblem SolvingPlatform/Network

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

types of resourcesPhysicalIntellectual (brand patents, copyrights, data)HumanFinancial

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

motivations for partnershipsOptimization and economy Reduction of risk and uncertaintyAcquisition of particular resources and activities

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

characteristicsNewnessPerformanceCustomization“Getting the Job Done”DesignBrand/StatusPriceCost ReductionRisk ReductionAccessibilityConvenience/Usability

typesAsset saleUsage feeSubscription FeesLending/Renting/LeasingLicensingBrokerage feesAdvertising

fixed pricingList PriceProduct feature dependentCustomer segment dependentVolume dependent

dynamic pricingNegotiation (bargaining)Yield ManagementReal-time-Market

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Don’t Assume You Understand the Problem!

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What do you want to learn?u Do not sell! No demos! No presos!

u You are there to learn!

u Get stories, not speculation

u Ask open-ended questionso Learn about their problems and how they

solve them today

u Ask why? Then why? They why again!

u Create a guide (not a script)

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Ensuring an Effective Interview

u Beware of confirmation bias

u Get subjects to tell a story

u Look for solution hacks

u Understand their priorities

u Follow your nose & drill down

u Listen and STFU!

u Have someone take notes

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Gaining Insightu Facts are interesting…Insights are your goal

u Don’t just scratch the surface, dive deep

u Find the hidden motivations

u Ask why? And why? Then why again?

u Depth of understanding always leads to insight

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“It's gruelinglistening to

customer feedback. And

if it isn't, you're probably doing it wrong."

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The Minimum Viable Product


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Help start the process of learning as quickly & cheaply as possible

The Minimum Viable Product

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What is this?

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What is this?

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What is this?

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What is this?

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Why create an MVP?u Answer questions & generate new ones

u Validate your assumptions

u Compare alternatives

u Fail early & cheaply

u Visualize your ideas & share with otherso Teamo Customerso Investors

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Why use this approach?

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1. Find go-to-market strategy…

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…and do it more quickly

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2. Design an MVP

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Start the process of learning as quickly & cheaply as possible

Minimum Viable Product

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Questions?

[email protected]@nyuentrepreneurentrepreneur.nyu.edu16 Washington Place

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Helping startups start up

translating customer needs into mvps

Health & Medicine