Customer Development & The Value of Ideas
April 2014
Agenda
• Customer Development
• Value of Ideas
• Economics of Ideas
• Value Propositions
• Closing Thoughts @DaveParkerSEA www.UP.co
About Dave
• Serial Entrepreneur - Five Startups, 2 sold, 1 closed, 2 Active.
• Board Member - Mid Market Companies, six exits
• Former VC - $250M Intl Fund
• VP Programs & People at UP Global
• Husband & Dad @DaveParkerSEA www.UP.co
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No campaign plan survives first contact with the enemy Field Marshall Helmuth Graf von Moltke
!
No Plan Survives First Contact With Customers Steve Blank
My Assumptions
• You want to spend the next five weeks answering real questions
• It takes as long to build a small idea as a big idea
• Investors have opinions on every idea - you need facts to overcome opinions
• You want to build something that matters
• Passion is important but not sufficient
Yes?
What is Customer Development?
• Talking to Prospects about your idea
• Maximizing learning
• Showing a demo
• Getting real <hard> feedback
Who is Your Customer?
• Business to Business
• Business to Consumer
• Not both
• What problem are you solving for them
• What’s different at Launch and at Scale?
• You need to survive to get to scale
Customer Development
• Interviews work - surveys don’t - panels, maybe
• Get out of the building - Interview real prospects (they aren’t customers until they pay)
• Ask for referrals & Introductions
• Have a great value prop <below>
Sidebar - Build a List
• Build an email list of prospects
• Ask them to opt-in
• Setup a free Mailchimp account
• Send a two week update (every two weeks)
• What we built, what we’re going to build, where we need help
Tracking Customer Dev
• Business Model Canvas is great… and to start, match:
• Value Prop
• Customer Segment
• Let customers define priorities of your build (not what’s easiest to build)
• If you have a “Fatal Flaw” in your idea when do you want to know - five weeks or five years?
What to Ask?
• Ask them about their biggest problems & how they solve them
• Ask them about tools they use today
• Challenges they have in their work
• Magic wand question - what would you make go away
• Ask the questions to disprove your hypothesis
Test/Learn/Pivot on your MVP
• What is your biggest risk? Take it on first!
• State you hypothesis
• Ask if it’s a problem
• Pivot/change
Value of Ideas
Hard to Build
Low Value
Can’t Build
High Value
Easy to Build
Hard to Build
Low Value
Can’t Build
High Value
Easy to Build
Hard to Build
Low Value
Can’t Build
High Value
Easy to Build
Hard to Build
Low Value
Can’t Build
High Value
Easy to Build
Mobile App for Organic Farmers
On Vashon
Hard to Build
Low Value
Can’t Build
High Value
Easy to Build
Mobile App for Organic Farmers
On Vashon
Cost of Ideas
• Ideas do matter and so does Execution
• Bad Ideas well executed will fail
• Great teams in bad markets will fail
• What’s the Cost of an Idea?
• How do you tell if your idea is a good idea?
Value of Ideas
• What will a customer pay you?
• Does it save or make them $$?
• Pain Pill or Vitamin?
• What’s the value of entertainment?
• Bad Ideas & Bad Markets
Progressive Improvements & Copycats
• Most ideas are a progression
• Adding design to the ugliest thing you know
• There are very view innovations - and customers won’t be looking for it!
• Copycats are fine - if you know the market
Economics of Ideas
Cost of an Idea
• What will it cost to build it?
• Build length, team, “man months”
• Cost to maintain it?
• Support/customer service
• What’s your roadmap
Cost of Customer Acquisition
• How will you acquire customers?
• Direct Sales, channel, web direct, white label, retail?
• What will it cost you to sustain traffic
• Paid search - requires demand
• Organic search - slow
• Excludes PR and one-time efforts
Revenue > Costs
Value Proposition
Defining Your Value Prop
• Products & Services
• Gain Creators
• Pain Relievers
• “Associate Test”
• Use the cohort
Closing Thoughts
Defining Your Value Prop
• Co-Founders
• Team/Culture
• Legal
• Trusting your gut
• Do you match the idea?
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Thanks!
Resources
•Startup Owners Manual - Steve Blank & Bob Dorf •Business Model Canvas - Alex Osterwalder •Business Model Generation •Simon Sinek - Start with Why Video •DKParker.com Blog