1. Customer Development
in the High Tech Enterprise
MBA 295-F/EMBA 295-F
Customer Discovery: Part 1
Steve Blank
sblank@kandsranch.com
1
2. Agenda
Case: WebVan
Startup Hypothesis
Testing the Problem
Customer Development Team
Testing the Product Concept
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
4. Customer Discovery: Step 1
Customer Customer Customer Company
Discovery Validation Creation Building
Existing Market: 1 Month – 1 Year
Resegmenting a Market: 6 Months – 3 Years
New Market: 1 Year – 3 Years
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
5. Customer Discovery: Step 1
Customer Customer Customer Company
Discovery Validation Creation Building
Existing : 1-6 Months
Resegmenting: 3-12 Months
New: 1-2 Years
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
6. Methodology
Customer Development can take months or years
Each Step has a set of phases
Plan what you need to learn in writing so everyone knows:
what they should be doing
when they should do it
If they succeeded
If they need to do more
These are checklists, not the inviolable commandments
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
7. Before You Start
Board and Management Buy-In
Learning and discovery not execution
Customer Development Team
Not traditional hires
Sufficient funding for 2-3 passes
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
8. Modify the Process for
Your Company
Text Example = Enterprise Software Co.
You need to develop your own
Specifically for your company/market
Don’t quibble about details but understand there is a
process
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
9. Discovery = Hypothesis Testing
What are Hypothesis?
Where do Hypothesis come from?
Why Test them?
How do you test them?
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
10. Customer Discovery: Step 1
Customer Customer Customer Company
Discovery Validation Creation Building
Stop selling, start listening
Test your hypotheses
Two are fundamental: problem and product concept
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
11. Customer Discovery
Phase 3 Phase 4
Customer
Test Verify, Iterate &
Discovery
Product Expand
Hypothesis
To Validation
Phase 1
Phase 2 Author
Test Hypothesis
Problem
Hypothesis
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
12. Customer Discovery
Hypotheses
Customer Distribution Demand Market Type
Product Competitive
& Problem & Pricing Creation Hypothesis
Hypothesis Hypothesis
Hypothesis Hypothesis Hypothesis
Test “Problem” Hypothesis
“Problem” Customer Market
Friendly
Presentation Understanding Knowledge
First Contacts
Test “Product” Hypothesis
“Product” Yet More Second
First Reality
Presentation Customer Reality Check
Check
Visits
Verify
Verify the Iterate or
Verify the
Verify the
Business Exit
Problem
Product
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
Model
13. Customer Discovery
Hypotheses
Inside the Building
Customer Distribution Demand Market Type
Product Competitive
& Problem & Pricing Creation Hypothesis
Hypothesis Hypothesis
Hypothesis Hypothesis Hypothesis
Test “Problem”
Hypothesis
“Problem” Customer Market
Friendly
Presentation Understanding Knowledge
First Contacts
Outside the Building
Test “Product” Hypothesis
“Product” Yet More Second
First Reality
Presentation Customer Reality Check
Check
Verify Visits
Verify the Verify the Iterate or
Verify the
Problem Business Exit
Product
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
Model
14. Phase 1: Author Hypothesis
One-time writing exercise
Phase 3 Phase 4
Product Iterate &
Concept Expand
All other time spent in
Testing
front of customers
Assumes you’re smart but
Phase 1
guessing
Phase 2
Author
Test
Problem
Hypothesis
Hypothesis
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
15. Hypothesis
Product
Customer/Problem
Distribution/Pricing
Demand Creation
Market Type
Competition
Customer Distribution Demand Market Type
Product Competitive
& Problem & Pricing Creation Hypothesis
Hypothesis Hypothesis
Hypothesis Hypothesis Hypothesis
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
16. Product Hypotheses
Features
Benefits
Product Delivery Schedule
Intellectual Property
Total Cost of Ownership
Dependency Analysis
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
18. Traditional organizations
and titles Fail
Typical Startup
CEO
VP Engineering VP Marketing VP Sales VP Business Dev
People equate their titles with their functions
But standard titles describe execution functions
We need new titles = learning & discovery functions
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
19. Customer Development Team
Tasks Not Titles
Customer Development
Driven Startup
CEO
VP Product Dev Technical Visionary Business Visionary Business Execution
In Front of Customers
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
21. Customer/Problem Hypotheses
Types of Customers/Archetypes
Magnitude of the problem
Visionaries
A Day in the Life of a customer
Organizational impact
ROI Justification
Problem Recognition
Minimum Feature Set
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
22. Distribution/ Pricing Hypotheses
Distribution Model
Distribution Diagram
Sales Cycle/Ramp
Channel strategy
Pricing (ASP, LTV)
Customer Organization Map
Demand Creation
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
23. Demand Creation Hypotheses
How do competitors create demand?
How will you?
Dave McClure’s AARGH model
Who are influencers/recommendors?
Key trade shows?
Key trends?
Start assembling advisory board
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
24. Type of Market Hypotheses
Positioning and Differentiation
Existing Market
The product is the basis of competition
New Market
Creating the market is the basis of competition
Redefine Existing Market
Resegment the existing market is the basis of
competition
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
25. Competition Hypotheses
Who is out there?
Why are they important?
How do customers use them today?
What don’t customers like about them?
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
26. Next Week: Discovery Part 2
Read
Christensen
Discovering What Has Already Been Discovered
Note on Lead User Research
Blank
Four Steps to the E.piphany – Chapter 3
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
27. XP Phases
(Extreme Programming)
XP by far most common agile method
Exploration
customers write story cards
Project team becomes familiar with tools, technology and practices
Planning
set priority of stories & contents first release
Iterations to Release
iterations before releases
Productionizing
extra testing & checking before release to customer
Maintenance and Death
new iterations and no more more customer stories
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
28. MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
29. XP Practices
(Extreme Programming)
Planning game
programmers estimate effort of implementing cust stories
customer decides about scope and timing of releases
Short releases
new release every 2-3 months
Simple design
emphasis on simplest design
Testing
development test driven. Unit tests before code
Refactoring
restructuring and changes to simplify
Pair Programming
2 people at 1 computer
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
30. MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
31. XP (Extreme Programming)
Roles and Responsibilities
Programmer
writes tests and then code
Customer
writes stories and functional tests
Tester
helps customer write tests and runs them
Tracker
gives feedback on estimates and process on iterations
Coach
person responsible for whole process
Consultant
supplies specific technical knowledge needed
Manager
makes decisions
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
32. XP (Extreme Programming) Practices
Collective ownership
anyone can change any part of the code at any time
Continuous integration
new builds as soon as code ready
40 hour week
maximum 40-hour week. No overtime
On-site customer
customer present and available full-time for team
Coding standards
rules exist and are followed
Open workspace
large room small cubicles
Just rules
team has own rules but can be changed any at time
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
33. Scrum Phases
Pregame
Planning - define system. Product Backlog
Architecture - high level design of system
Development
Iterative cycles (sprints) - new/enhanced functionality
Postgame
Requirements satisfied - no new items or issues
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
34. Scrum
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
35. Scrum Practices
Product Backlog
Current prioritized list of work to be done
Effort Estimation
iterative on Backlog items
Sprint
30 day iteration
Sprint Planning Meeting
decide goals for next sprint and how team will implement
Sprint Backlog
Product Backlog items for sprint
Daily Scrum meeting
what doing, what will do, and any problems
Sprint Review Meeting
present results of sprint
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009
36. Scrum Roles and Responsibilities
Scrum Master
project following rules and practices
Product owner
officially responsible for project
Scrum Team
project team
Free to organize as they see fit to achieve goals of each
sprint
Customer
participates in Backlog items
Management
Makes final decisions
MBA295-F Customer Development in the High-Tech Enterprise Spring 2009