Henrik Berglund, Presentation at Venture Cup, feb 2013.
This presentation is based on the Customer Development theory developed by Steve Blank and Bob Dorf (http://www.steveblank.com), and is based on slides developed by Steve Blank and Bob Dorf (http://www.slideshare.net/sblank/).
1. Business Models/Customer Development
Henrik Berglund
Chalmers University of Technology
Center for Business Innovation
henber@chalmers.se
www.henrikberglund.com
@khberglund
2013-02-15 1
2. Presentation based on
by Steve Blank and Bob Dorf
More info: www.steveblank.com
Buy the book: http://www.amazon.com/gp/product/0984999302/
27. Traditional Development Process
Has Two Implicit Assumptions
Customer Problem: known
Concept Product Dev. Alpha/Beta Launch/
Test 1st Ship
Product Features: known
Works well for incremental development projects
targeting existing customers.
28. Tradition – Hire Marketing
Concept Product Dev. Alpha/Beta Launch/
Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”
29. Tradition – Hire Sales
Concept Product Dev. Alpha/Beta Launch/
Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”
- Hire Sales VP - Build Sales
Sales - Hire 1st Sales Staff Organization
30. Tradition – Hire Business Development
Concept Product Dev. Alpha/Beta Launch/
Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”
- Hire Sales VP - Build Sales
Sales - Hire 1st Sales Staff Organization
Business - Hire First Bus Dev - Do deals for FCS
Development
32. What’s wrong with this picture?
Concept Product Dev. Alpha/Beta Launch/
Test 1st Ship
• Both Customer Problems and Product Features
are hypotheses
• Emphasis on execution rather than learning and
discovery
• No relevant milestones for marketing and sales
• Often leads to premature scaling and a heavy
spending hit if product launch fails
You do not know if you are wrong until you
are out of money/business
33. Concept Product Dev. Alpha/Beta Launch/
Test 1st Ship
- Create Marcom - Hire PR Agency - Create Demand
Marketing Materials - Early Buzz - Launch Event
- Create Positioning - “Branding”
- Hire Sales VP - Build Sales
Sales - Hire 1st Sales Staff Organization
Business - Hire First Bus Dev - Do deals for FCS
Development
35. Product and Customer Development
Product Development
Concept Product Dev. Alpha/Beta Launch/
Test 1st Ship
+
Customer Development
Customer Customer Customer Company
Discovery Validation Creation Building
37. Search Execution
Strategy Business Model
Operating Plan +
Hypotheses
Financial Model
Process Customer & Product Management
& Waterfall Development
Agile Development
43. Founders run a
Customer Development Team
No sales, marketing and business
development
44. Search Execution
Strategy Business Model
Operating Plan +
Hypotheses
Financial Model
Customer Development, Product Management
Process
Agile Development Agile or Waterfall Development
Customer Functional Organization
Organization
Development Team, by Department
Founder-driven
46. Business Model
Key activities Value proposition Customer
relationships
Key partners
Customer
segments
Cost Key Channels Revenue
structure resources streams
http://www.businessmodelalchemist.com/
47. Business Model
Key activities Value proposition Customer
relationships
Key partners
Customer
segments
Cost Key Channels Revenue
structure resources streams
A framework for making your assumptions explicit
49. Customer Segments
Who is the customer?
Multi-sided market?
Different from user?
http://www.businessmodelalchemist.com/2012/08/achieve-product-market-fit-with-our-brand-
new-value-proposition-designer.html
50. Customer Segments
- jobs to be done
What functional 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 emotional jobs is your customer
“What jobs are the customers you are
trying get done? (e.g. esthetics, feel good,
targeting trying to get done”
security…)
51. Customer Segments
- customer pains
What does your customer find too costly?
(e.g. takes a lot of time, costs, effort)
What makes your customer feel bad?
(e.g. frustrations, annoyances)
How are current solutions under-
performing for your customer?
(e.g. lack of features, performance,
malfunction) “What are the costs, negative emotions, bad
situations etc. that your customer risks
What negative social consequences does experiencing before, during, and after getting
your customer encounter or fear? the job done.”
(e.g. loss of face, power, trust, or status)
52. Customer Segments
- customer gains
Which savings would make your customer
happy? (e.g. in terms of time, money and
effort)
What would make your customer’s job or
life easier? (e.g. flatter learning curve,
more services, lower cost of ownership)
What positive social consequences does
your customer desire? (e.g. makes them
look good, increase in power, status)
“What are the benefits your customer
expects, desires or would be surprised by.”
What are customers looking for? (e.g.
good design, guarantees, features)
What do customers dream about? (e.g.
big achievements, big reliefs)
55. Value Propositions
Can your product/service:
• Produce savings?
• Make your customers feel
better?
• Put an end to difficulties?
• Wipe out negative social
consequences?
56. Value Propositions
Can your product/service:
• Outperform current
solutions?
• Produce outcomes that go
beyond their expectations?
• Make your customer’s job
or life easier?
• Create positive social
consequences?
60. How Do You Want Your Product to Get to
Your Customer?
Yourself
Through someone else
Retail
Wholesale
Bundled with other goods or services
60
63. How Does Your Customer Want to Buy
Your Product from your Channel?
• Same day
• Delivered and installed
• Downloaded
• Bundled with other
products
• As a service
• …
63
71. Key activities Value proposition Customer
relationships
Key partners
Customer
Visualization of the segments
business model
framwork
Cost Key Channels Revenue
structure resources streams
83. The goal is not to remain a startup
Large
Startup Transition
Company
The goal of a startup is to become a large company!
Failure = failure to transition.
88. …they focus on executing the plan…
Concept Product Dev. Alpha/Beta Launch/
Test 1st Ship
• Both Customer Problems and Product Features
are hypotheses
• Emphasis on execution rather than learning and
discovery
• No relevant milestones for marketing and sales
• Often leads to premature scaling and a heavy
spending hit if product launch fails
You do not know if you are wrong until you
are out of money/business
90. … 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)
93. Customer Development: Key Ideas
• Parallel process to Product Development (agile)
• Measurable checkpoints not tied to FCS but to customer
insights
• Emphasis on iterative learning and discovery before execution
• Must be done by small team including CEO/project leader
94. Customer Development Heuristics
• 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.
95. Customer Development: Four Stages
search
execution
• Customer Discovery
Articulate and Test your Business Model Hypotheses
• Customer Validation
Sell your MVP and Validate your MB & Sales Roadmap
• Customer Creation
Scale via relentless execution and fill the sales pipeline
• Company Building
(Re)build company’s organization & management
96. Customer Discovery
• Articulate and test
your BM hypotheses
(value prop/customers key)
• No selling, just listening
• Must be done by founder
103. 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.
104. 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, critical
influencers, respected peers etc…
You want to become a domain expert!
105. Finding people
Introductions (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 contributing to a bigger picture!)
106. 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 conversations (and/or
test hypotheses using landing pages).
http://www.cindyalvarez.com/best-practices/customer-
development-interviews-how-to-finding-people
107. Finding people
Twitter Search
Look for people who have already discussed a similar
product, problem, or solution and address a tweet directly
to them:
“@username Would love yr feedback on
[product/problem/solution] – shd only take 2mins [URL]
thanks!”
108. Finding people
Google Alerts
Set up Google Alerts for your product/problem/solution –
when it finds relevant blog posts or comments, email and
ask for feedback:
“I read your [post/comment] about
[product/problem/solution]. 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 time.”
110. Web
Much faster to build =>
get quantitative feedback sooner.
Use a low-fi landing page as substitute for –
and introduction to – conversations.
Key to drive traffic through
AdWords/Facebook Ads/Promoted Tweets
etc.
Build (design test), measure (run test) and
analyze (evaluate test)!
113. 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.
114. Test Solution 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 after our product” – listen!
3) ”What would this solution need to have for you to
purchase it?” Listen, ask follow up questions.
115.
116. Dropbox
• 1st solution test: a three minute video made in the
founder’s apartment before a complete code was
written.
– Generated valuable feedback from visionary customers.
• 2nd solution test: another video of the product that was
posted on a social network.
– Waiting 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.
117.
118. Test Product Hypotheses
After demoing, ask about other things:
Positioning – how do they describe the product?
Product category (new, existing, resegmented)
Competitors
Features needed for first version
Preferred revenue model
Pricing
Additional service needs
Marketing – how do they find this type of product?
Purchasing process
Who has a budget?
etc.
119. Web
Build out a high-fidelity web page with “functioning”
back-end, based on lessons learned.
“Mechanical Turk”-solution.
Ask for money: first “pre-order” then charging.
Continue to test, measure and analyze!
120.
121. 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.
122. Customer Discovery: Exit Criteria
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 & after your product
Can you draw the org charts of users, buyers
and channels?
123. Customer Validation
• Develop and sell MVP to passionate earlyvangelists
• Validate a repeatable sales roadmap
• Verify the business model
124. Minimal Viable Product
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!
125. 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.
126. The owner of this unit added a keyboard and a wooden case.
http://en.wikipedia.org/wiki/Apple_Inc.
127.
128. Minimal Viable Product
The MVP is not the goal = Requires commitment
to iteration!
• “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.”
129. Types of earlyvangelists
Not
1. Has a problem
helpful
2. Understands he or she has a problem
3. Actively searching for a solution
4. Cobbled together an interim solution
5. Committed and can quickly fund Jackpot!
a solution
130. Customer Validation: Exit Criteria
Do you have a proven sales roadmap?
Organization chart? Influence map?
No staffing until roadmap is proven!
Do you have a set of orders ($’s) of the
product validating the roadmap?
Is the business model scalable?
LTV > CAC, Cash
132. If no – Pivot!
• The heart of Customer Development
• Change without crisis
(and without firing executives)
“The idea that successful startups change directions but
stay grounded in what they've learned”
133.
134.
135.
136.
137. Pivot
Adapt the Business Model
until you can prove it
works
139. Customer Creation
• Grow customers from few to many
• Comes after proof of sales
• Inject $’s for scale
• This is where you “cross the chasm”
• “Growth Hacking”
140. Company Building
• (Re)build company’s organization & management
• Dev.-centric Mission-centric Process-centric
141. Summary – Customer Development
• Customer Discovery
Articulate and Test your Business Model Hypotheses
• Customer Validation
Sell your MVP and Validate your BM & Sales Roadmap
• Customer Creation
Scale via relentless execution and fill the sales pipeline
• Company Building
(Re)build company’s organization & management
142. Don’t do a Boo!
Concept Product Dev. Alpha/Beta Launch/
Test 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)
143. Tack!
Henrik Berglund
Chalmers University of Technology
Center for Business Innovation
henber@chalmers.se
www.henrikberglund.com
@khberglund
2013-02-15 143
144. Presentation based on
by Steve Blank and Bob Dorf
More info: www.steveblank.com
Buy the book: http://www.amazon.com/gp/product/0984999302/
Most Value Propositions compete with others for the same Customer Segment. I like thinking of this as an “open slot” that will be filled by the company with the best fit.
The user problem you’retryingtosolve. How the userencountersyour solution.Howyour solution willwork (from the user’sperspective). How the userwill benefit.
thepoint, a now largely inactive site primarily for activists and philanthropists who wanted to encourage like-minded people to invest and support their causes. http://www.thepoint.com/