Henrik Berglund Chalmers University of Technology Center for Business Innova8on [email protected] www.henrikberglund.com @khberglund Business Models + Customer Development 20130215 1
Nov 22, 2014
Henrik Berglund Chalmers University of Technology Center for Business Innova8on
[email protected] www.henrikberglund.com
@khberglund
Business Models +
Customer Development
2013-‐02-‐15 1
by Steve Blank and Bob Dorf
More info: www.steveblank.com Buy the book: hJp://www.amazon.com/gp/product/0984999302/
Presenta8on based on
developed by Steve Blank and Bob Dorf
hJp://www.slideshare.net/sblank/
Using slides from
Agenda
1. Startups 2. Business Models (briefly) 3. Customer Development
Part 1
Startups (What We Used to Believe What We Now Know)
What We Used to Believe
Startups are a Smaller Version of a Large Company
What We Now Know
Startups ≠ Small companies
Startups Search Companies Execute
What We Used to Believe
Strategy
Start by developing a Business Plan…
…make the financial forecasts…
…then Execute
What We Now Know
Strategy
5-‐Year Plans
Develop and Execute the Business Plan
Why?
No Business Plan survives first contact with customers
“Everybody has a plan un@l they get punched in the face” Mike Tyson
Searching for a Business Model comes before
Executing a business plan
Key activities Value proposition
Customer relationships
Customer segments
Cost structure
Key resources
Revenue streams
Channels
Key partners
Business Models
hJp://www.businessmodelalchemist.com/
Business Model Hypotheses
Search
Strategy
Execu@on
Opera@ng Plan + Financial Model
What We Used to Believe
Process
We Built Startups by Managing Processes
Product Management +
Waterfall Engineering
Tradi8onal Development Process
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
Tradi8onal Development Process Has Two Implicit Assump8ons
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
Customer Problem: known
Product Features: known
Works well for incremental development projects targe@ng exis@ng customers.
Tradi8on – Hire Marke8ng
-‐ Create Marcom Materials -‐ Create Posi@oning
-‐ Hire PR Agency -‐ Early Buzz
-‐ Create Demand -‐ Launch Event -‐ “Branding”
Marke@ng
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
Tradi8on – Hire Sales
-‐ Create Marcom Materials -‐ Create Posi@oning
-‐ Hire PR Agency -‐ Early Buzz
-‐ Create Demand -‐ Launch Event -‐ “Branding”
-‐ Build Sales Organiza@on
Marke@ng
Sales -‐ Hire Sales VP -‐ Hire 1st Sales Staff
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
Tradi8on – Hire Business Development
-‐ Create Marcom Materials -‐ Create Posi@oning
-‐ Hire PR Agency -‐ Early Buzz
-‐ Create Demand -‐ Launch Event -‐ “Branding”
-‐ Build Sales Organiza@on
Marke@ng
Sales -‐ Hire Sales VP -‐ Hire 1st Sales Staff
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
-‐ Hire First Bus Dev -‐ Do deals for FCS Business Development
Examples -‐ Recognize these?
What’s wrong with this picture?
• Both Customer Problems and Product Features are hypotheses
• Emphasis on execu8on rather than learning and discovery
• No relevant milestones for marke8ng and sales • Oeen leads to premature scaling and a heavy spending hit if product launch fails
You do not know if you are wrong un@l you are out of money/business
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
-‐ Create Marcom Materials -‐ Create Posi@oning
-‐ Hire PR Agency -‐ Early Buzz
-‐ Create Demand -‐ Launch Event -‐ “Branding”
-‐ Build Sales Organiza@on
Marke@ng
Sales -‐ Hire Sales VP -‐ Hire 1st Sales Staff
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
-‐ Hire First Bus Dev -‐ Do deals for FCS Business Development
What We Now Know
Process
Product and Customer Development
Product Development
Customer Development
Company Building
Customer Discovery
Customer Validation
Customer Creation
+
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
Problem: unknown Solu8on: unknown
Product and Customer Development
Business Model Hypotheses
Strategy
Process Customer & Agile Development
Opera8ng Plan + Financial Model
Product Management & Waterfall Development
Search Execu@on
What We Used to Believe
Organiza@on
Hire and Build a Functional Organization
What We Now Know
Organiza@on
Founders run a Customer Development Team
No sales, marketing and business
development
Business Model Hypotheses
Organiza@on Customer
Development Team, Founder-‐driven
Customer Development, Agile Development
Opera8ng Plan + Financial Model
Product Management Agile or Waterfall Development
Func@onal Organiza@on by Department
Search Execu@on Strategy
Process
Part 2
Business Models
Key activities Value proposition
Customer relationships
Customer segments
Cost structure
Key resources
Revenue streams
Channels
Key partners
Business Model
hJp://www.businessmodelalchemist.com/
Key activities Value proposition
Customer relationships
Customer segments
Cost structure
Key resources
Revenue streams
Channels
Key partners
Business Model
A framework for making your assump@ons explicit
Customer Segments Who are the customers? Why would they buy?
Customer Segments
Who is the customer? Mul8-‐sided market? Different from user?
hJp://www.businessmodelalchemist.com/2012/08/achieve-‐product-‐market-‐fit-‐with-‐our-‐brand-‐new-‐value-‐proposi8on-‐designer.html
Customer Segments -‐ jobs to be done
What func8onal jobs is your customer trying get done? (e.g. perform or complete a specific task, solve a specific problem…) What social jobs is your customer trying to get done? (e.g. trying to look good, gain power or status…) What emo8onal jobs is your customer trying get done? (e.g. esthe8cs, feel good, security…)
“What jobs are the customers you are targe2ng trying to get done”
Customer Segments -‐ customer pains
What does your customer find too costly? (e.g. takes a lot of 8me, costs, effort) What makes your customer feel bad? (e.g. frustra8ons, annoyances) How are current solu8ons under-‐performing for your customer? (e.g. lack of features, performance, malfunc8on) What nega8ve social consequences does your customer encounter or fear? (e.g. loss of face, power, trust, or status)
“What are the costs, nega2ve emo2ons, bad situa2ons etc. that your customer risks experiencing before, during, and a>er ge?ng the job done.”
Customer Segments -‐ customer gains
Which savings would make your customer happy? (e.g. in terms of 8me, money and effort) What would make your customer’s job or life easier? (e.g. flaJer learning curve, more services, lower cost of ownership) What posi8ve social consequences does your customer desire? (e.g. makes them look good, increase in power, status) What are customers looking for? (e.g. good design, guarantees, features) What do customers dream about? (e.g. big achievements, big reliefs)
“What are the benefits your customer expects, desires or would be surprised by.”
Value Proposi@ons What are you building? For whom?
Value Proposi@ons
What are your products and services? How do they create value for the customer segments?
Value Proposi@ons Can your product/service: • Produce savings?
• Make your customers feel beJer?
• Put an end to difficul8es?
• Wipe out nega8ve social consequences?
Value Proposi@ons Can your product/service: • Outperform current
solu8ons?
• Produce outcomes that go beyond their expecta8ons?
• Make your customer’s job or life easier?
• Create posi8ve social consequences?
Product Market Fit Genng this right is essen8al!
Product Market Fit Genng this right is essen8al!
Channels How does your product get to customers?
How Do You Want Your Product to Get to Your Customer?
60
Yourself
Through someone else
Retail
Wholesale
Bundled with other goods or services
"""""
Web Channels
61
Physical Channels
62
How Does Your Customer Want to Buy Your Product from your Channel?
63
• Same day
• Delivered and installed
• Downloaded
• Bundled with other products
• As a service
• …
""""""
Customer Rela@onships How do you get/keep/grow customers?
Customer Rela@onships
Revenue Streams How do you make money?
Key Resources What are your most important assets?
Key Ac@vi@es What ac8vi8es are most important for the business?
Key Partnerships Who are your key partners and suppliers?
Cost Structure What are the costs of opera8ng the business model?
Visualiza@on of the business model
framwork
Key activities Value proposition
Customer relationships
Customer segments
Cost structure
Key resources
Revenue streams
Channels
Key partners
What’s a Company?
What’s a Company?
A business organiza@on, which sells a product or service in exchange for revenue
and profit
How are Companies organized?
How are Companies organized?
Companies are organized around Business Models
How are Companies organized?
Companies are organized around Business Models
What’s a Startup?
What’s a Startup?
A temporary organiza8on designed to search
for a repeatable and scalable business model
What’s a Startup?
A temporary organiza8on designed to search
for a repeatable and scalable business model
What’s a Startup?
A temporary organiza8on designed to search
for a repeatable and scalable business model
Guess Guess
Guess
Guess
Guess
Guess
Guess
Guess Guess
The goal is not to remain a startup
Startup Large Company
The goal of a startup is to become a large company! Failure = failure to transi@on.
Transi@on
Part 3
Customer Development
To repeat
More startups fail from a lack of customers than from a failure of product development…
To repeat
… because they think startups = small companies…
…they focus on execu8ng the plan…
• Both Customer Problems and Product Features are hypotheses
• Emphasis on execu8on rather than learning and discovery
• No relevant milestones for marke8ng and sales • Oeen leads to premature scaling and a heavy spending hit if product launch fails
You do not know if you are wrong un@l you are out of money/business
Concept Product Dev. Alpha/Beta Test
Launch/ 1st Ship
… so they scale on untested assump8ons…
… and end up going bust.
“We have been too visionary. We wanted everything to be perfect, and we have not had control of costs" Ernst Malmsten (BBC News, May 18 2000)
So what to do?
Customer Development: Key Ideas
• Parallel process to Product Development (agile)
• Measurable checkpoints not @ed to FCS but to customer insights
• Emphasis on itera@ve learning and discovery before execu@on
• Must be done by small team including CEO/project leader
Customer Development Heuris8cs
• There are no facts inside, so get out of the building! • Earlyvangelists make your company, and are smarter than you!
• Develop a minimum viable product to maximize fast learning.
• Customer Discovery Ar8culate and Test your Business Model Hypotheses
• Customer Valida@on Sell your MVP and Validate your MB & Sales Roadmap
• Customer Crea@on Scale via relentless execu8on and fill the sales pipeline
• Company Building (Re)build company’s organiza8on & management
Customer Development: Four Stages search
execu8on
Customer Discovery
• Articulate and test your BM hypotheses (value prop/customers key)
• No selling, just listening • Must be done by founder
building block
building block
building block
building block
building block
building block
building block
building block
building block
building block
building block
building block
But, Realize it’s just Hypotheses!
Guess Guess
Guess
Guess
Guess
Guess
Guess
Guess Guess
”Do you have this problem?” 1. 2. 3.
Test Customer Problem Hypotheses
”Do you have this ”Tell me about it, how problem?” do you solve it today?” 1. 1. 2. 2. 3. 3.
Test Customer Problem Hypotheses
”Do you have this ”Tell me about it, how ”Does something like this problem?” do you solve it today?” solve your problem?” 1. 1. 1. 2. 2. 2. 3. 3. 3.
Listen carefully to what they say at each step! Focus on learning -‐ Don’t try to sell them on your idea! In the process you find out about other BM parts as well: workflow, benefits (to users & others), preferred channels, cri@cal influencers, respected peers etc… You want to become a domain expert!
Test Customer Problem Hypotheses
Finding people
Introduc8ons (ask everyone you know) • Provide the exact text that they can copy and paste into
a tweet or email (They’re doing you a favor! Make it as easy as possible for them)
• Tell them exactly how you are going to communicate with their contacts (They’re risking a bit of social capital for you. Be very clear that you won’t spam or annoy people)
• Tell them your goals (What do you think you’ll get/learn if they make this intro for you? People want to know that they’re contribu8ng to a bigger picture!)
Finding people
AdWords, Facebook Ads, Promoted Tweets Summarize your idea and get it in front of people who have expressed an interest in it by having searched for your keywords and clicked your ad – get conversa8ons (and/or test hypotheses using landing pages).
hJp://www.cindyalvarez.com/best-‐prac8ces/customer-‐development-‐interviews-‐how-‐to-‐finding-‐people
Finding people
TwiJer Search Look for people who have already discussed a similar product, problem, or solu8on and address a tweet directly to them:
“@username Would love yr feedback on [product/problem/solu2on] – shd only take 2mins [URL] thanks!”
Finding people
Google Alerts Set up Google Alerts for your product/problem/solu8on – when it finds relevant blog posts or comments, email and ask for feedback:
“I read your [post/comment] about [product/problem/solu2on]. I’m currently working on a related idea and I think your opinion would be very valuable to me – could you take 2 minutes and check out [URL]? Thank you – I’d be happy to return the favor any 2me.”
Interview 8ps
hJp://www.giffconstable.com/2011/07/12-‐8ps-‐for-‐customer-‐development-‐interviews-‐revised/
Much faster to build => get quan8ta8ve feedback sooner. Use a low-‐fi landing page as subs8tute for – and introduc8on to – conversa8ons. Key to drive traffic through AdWords/Facebook Ads/Promoted Tweets etc. Build (design test), measure (run test) and analyze (evaluate test)!
Web
hJp://blog.kissmetrics.com/landing-‐page-‐blueprint/
Landing page design
Reality check!
CustDev and ProdDev teams meet and discuss the lessons learned from the field.
”Here is what we thought about customers and their problems, here is what we found out”
BM hypotheses, product specs or both are jointly revised.
Test Solu8on Hypothesis
1) ”We believe you have this important problem” – listen (check). 2) Demo how your product solves the problem. Focusing on a few key features. Include workflow story: ”life before our product” and ”life aeer our product” – listen! 3) ”What would this solu8on need to have for you to purchase it?” Listen, ask follow up ques8ons.
Dropbox
• 1st solu8on test: a three minute video made in the founder’s apartment before a complete code was wriJen. – Generated valuable feedback from visionary customers.
• 2nd solu8on test: another video of the product that was posted on a social network. – Wai8ng list jumped from 5 000 to 75 000.
• Dropbox’s original intent was to build and ship their product in eight weeks.
• Instead, they gathered feedback and launched a public version 18 months later.
Test Product Hypotheses
Aeer demoing, ask about other things: Posi8oning – how do they describe the product? Product category (new, exis8ng, resegmented) Compe8tors Features needed for first version Preferred revenue model Pricing Addi8onal service needs Marke8ng – how do they find this type of product? Purchasing process Who has a budget? etc.
Build out a high-‐fidelity web page with “func8oning” back-‐end, based on lessons learned. “Mechanical Turk”-‐solu8on. Ask for money: first “pre-‐order” then charging. Con8nue to test, measure and analyze!
Web
Reality check!
CustDev and ProdDev teams meet and discuss the lessons learned.
”Here is what we thought about product features and here is what we found out”
BM hypotheses, product specs or both are again jointly revised.
What are your customers top problems? How much will they pay to solve them?
Does your product concept solve them? Do customers agree?
How much will they pay for it?
Can you draw a day-‐in-‐the-‐life of a customer? Before & aeer your product
Can you draw the org charts of users, buyers and channels?
Customer Discovery: Exit Criteria
Customer Validation
• Develop and sell MVP to passionate earlyvangelists • Validate a repeatable sales roadmap • Verify the business model
Based on your insights from Customer Discovery, sell the smallest feature set customers are willing to pay for!
• Purpose 1: Reduce wasted engineering hours (and wasted code)
• Purpose 2: Get something into the hands of earlyvangelists as soon as possible => maximize learning!
Minimal Viable Product
The Apple I, Apple’s first product, was sold as an assembled circuit board and lacked basic features such as a keyboard, monitor and case.
The owner of this unit added a keyboard and a wooden case. hJp://en.wikipedia.org/wiki/Apple_Inc.
The MVP is not the goal = Requires commitment to itera8on!
• “A complex system that works is invariably found to have evolved from a simple system that worked.”
• “A complex system designed from scratch
never works and cannot be made to work. You have to start over, beginning with a working simple system.”
Minimal Viable Product
Not helpful
Jackpot!
1. Has a problem
2. Understands he or she has a problem
3. Ac8vely searching for a solu8on
4. Cobbled together an interim solu8on
5. CommiJed and can quickly fund a solu8on
Types of earlyvangelists
Do you have a proven sales roadmap? Organiza8on chart? Influence map?
No staffing un8l roadmap is proven!
Do you have a set of orders ($’s) of the product valida8ng the roadmap?
Is the business model scalable? LTV > CAC, Cash
Customer Valida8on: Exit Criteria
If yes – Start execu8ng
If no – Pivot!
• The heart of Customer Development
• Change without crisis (and without firing execu8ves)
“The idea that successful startups change direc2ons but stay grounded in what they've learned”
YouTube - Customer Need Pivot
Friday, April 23, 2010
Pivot
Adapt the Business Model un8l you can prove it works
search
execu8on
• Grow customers from few to many
• Comes aeer proof of sales
• Inject $’s for scale
• This is where you “cross the chasm”
• “Growth Hacking”
Customer Crea8on
• (Re)build company’s organiza8on & management
• Dev.-‐centric ⇒ Mission-‐centric ⇒ Process-‐centric
Company Building
• Customer Discovery Ar8culate and Test your Business Model Hypotheses
• Customer Valida@on Sell your MVP and Validate your BM & Sales Roadmap
• Customer Crea@on Scale via relentless execu8on and fill the sales pipeline
• Company Building (Re)build company’s organiza8on & management
Summary – Customer Development
Don’t do a Boo! Concept Product Dev. Alpha/Beta
Test Launch/ 1st Ship
“We have been too visionary. We wanted everything to be perfect, and we have not had control of costs" Ernst Malmsten (BBC News, May 18 2000)
Henrik Berglund Chalmers University of Technology Center for Business Innova8on
[email protected] www.henrikberglund.com
@khberglund
Tack!
2013-‐02-‐15 143
by Steve Blank and Bob Dorf
More info: www.steveblank.com Buy the book: hJp://www.amazon.com/gp/product/0984999302/
Presenta8on based on
developed by Steve Blank and Bob Dorf
hJp://www.slideshare.net/sblank/
Using slides from