Presentation slides and background material for customer development kick-off session at Aalto Summer of Startups 2012 program on June 11th, 2012. Presentors and coaches: Juha Mattsson of Symbioosi and Heikki Leskelä of Bluebiiit

1. salesgeneration
new perspective
Aalto Summer of Startups 2012
Customer Development Basics
Dr. Juha Mattsson June 11th, 2012
CEO & Co-founder, Symbioosi
juha.mattsson@symbioosi.fi

2. 2 June 15th, 2012 (c) Symbioosi Partners, Juha Mattsson

3. The Lean Startup Model
Problem Solution
Core Key idea
assumptions Customer Product Architecture
Positioning Features
Acquisition
Feedback
Customer Product
Development Development
Problem/Solution
Validation (Source: Eric Ries, The
Lean Startup, 2011)
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4. Things to learn from startup methodology
 Good ideas are “dime a dozen”, execution is the key
 Acting like an entrepreneur:
– Investing your personal money on a high-risk venture
– Sacrificing your scarce time in front of more secure options
– Obtain just enough funding (and dilute your ownership) as necessary to
execute to next phase
 Managing a chaos
– Fast-moving business environments
– Zero existing structures (organization, customers, markets, brand, etc.)
 Fighting natural psychological tendencies to
– Believing in your own ideas and assumptions
– One-pont-estimation
 The fail fast -principle!
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5. Lean Startups
 Lean startups combine fast, iterative product development methodologies with
customer development principles
– Origins in software business where open source platforms and free software
have enabled a new ”lean” approach to business creation
– Agile development methodologies
– Rapid, repetitive customer-centric iteration of core soltion
 Customer development team works on constantly testing core assumptions
– Who is the customer
– What need/problem to solve
– What the solution should be
 The Product development team actually builds the solution
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6. (Source: Presentation by Eric Ries)
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7. A few notes about the Customer Development
approach
 The customer development process iterates on
– core business assumptions (customer-problem-solution)
– product functionality & features
– assumptions of customer acquisition and conversion
 Tasks
– To validate core hypotheses (customer-problem-solution)
– To develop a Minimum Viable Product
– To achieve product-market fit
– To produce a development and marketing/sales roadmap for building scale
 Two desired outcomes from the process
1. A thriving, successful company
(build organization and scale the business)
2. Realization that there is no real market or the market is insufficient
(stop and change direction)
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8. The Customer Development Framework
Pivot
Customer Customer Customer Company
discovery validation creation building
Problem- Product-
solution fit market fit Scale
organization
Business Scale
Proposed MVP
model execution
Scale
(Steve Blank)
Sales &
Proposed operations
marketing
Funnel(s)
roadmap
A product solves a The market is The business is Operational processes
problem for an saleable and large scalable through a and a structured
identifiable group of enough that a viable repeatable marketing organization is built to
users business can be built and sales roadmap support scale
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9. Essential Concepts in Customer Development
 Early Adopters / Evangelists
 Segmentation
 Market type
 Non-traditional business models
 Positioning
 Product-Market Fit
 Minimum Viable Product (MVP)
 Pivot
 Getting out of the building
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10. The Business Model Canvas
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11. MVP Develops in Stages
Concept Product-market Eval Product-market Fit
MPV #1 MVP #2 MVP #3
PPC campaign Product drawings Prototype
Landing page Detailed specs Functional output
Feature/benefit
Customer description, ”More Product Drawings,
Field pilot
Interaction Info” –call for exact specs
action
Locate strategic
Get market insight, partners, obtain Revenue, customer
Objective identify early seed funding, get validation, capital
adopters paid beta- investment
customers
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12. Early Adopters, Evangelists, Lead Users
 Passionate, early users of a new innovation (technology/process/business
model) who understand its value before mainstream markets
 Early adopters are important, because
– They seek out new solutions & technology to solve their problems – not
just for the sake of playing around with newest technology
– Don’t rely on references from others to make buying decisions (though
are incluenced by other early adopters)
– Are often willing to help you and want you to be successful!
Technology
adoption cycle
Lead Users
Innovators Early Adopters Early Majority Late Majority Laggards
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13. Segmentation
 The practice of breaking down a larger market into smaller identifiable groups of
users that
– share a specific need/problem
– can be approached by a common marketing/sales program
– have access to each other and use one other as a trusted reference
 Benefits of segmentation
– Focus: validating specific Customer-Problem-Solution (CPS) -hypotheses
– Prioritization: allocating scarce resources effectively
– Systematization: executing effective sales&marketing campaings targeted at
specific segments
– Positioning: attaining a market leader position in a specific user/customer base
– Phasing: generating a series of meaningful steps for scaling up the business
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14. Market Type
Three relevant ways of thinking your markets:
1. A new product to a new market
2. A new product to an existing market
3. Re-segmenting an existing market
”There is a tendency of entrepreneurs to believe that they have a new product for a
new market, though this is rarely the case”
 Thus, most likely, you are re-segmenting an existing market.
Important
– Your customer’s view of your market is more important than yours
– You can choose your market type!
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15. Non-Traditional business models
 Business models that do not sell a product to a customer directly for a set amount of
money
 Freemium business models: offering multiple account levels differentiated on
product functionality and price
– Example: almost all SAAS based corporate productivity tools such as Box.net,
Basecamp, LinkedIn, etc.
 Free business models: offering something for free to a specific group of users while
the user bases itself enables alternative revenue models
– E.g. Google, Facebook
 Pre-revenue business models: giving the basic product initially out for free to grow
user base and criticall mass. Introducing payments as product/category/brand gets
established
– E.g. YouSendIt.com, Shazam, Skype
 Many related options and concepts: gamification, crowdsourcing, open-source,
customization/consultation, service/maintenance, donations
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16. Positioning
 The act of placing your product/brand within a market landscape, in your audience’s
mind
 Key idea: to make your target customers to understand what benefit they willl
receive from you and why you are better than anyone else
 Important: positioning may vary by audience (media, investors, opinion leaders,
early adopters, mainstream customers, etc.)
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17. Product-Market Fit
 Product-Marketg Fit is reached when a product shows strong demand by passionate
users representing a sizeable market
 Qualifiers
– The customer is willing to pay for the product
– The cost of acquiring a customer is less than what they are willing to pay
– There is evidence that indicates the underlying market is large enough
”Achieving Product-Market fit requires at least 40% of users saying they would be very
disappointed wouthout the product.” (Sean Ellis)
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18. Minimum Viable Product (MVP)
 Key idea: A product with the fewest number of features needed to achieve a specific
need-satisfying objecive, and users are willing to pay in terms of some scarce resource
 The aim is to produce a product version with minimum effort and features that allows
maximum learning about the behavior of core customers
– Conversely: minimize damage & lost efforts if this version of the product doesn’t
ultimately work out, i.e. fit the market & customer need
 Important
– It is central to know which is the smallest feature set customers are willing to pay
for in the first actual release
– There are typically different MVP versions along the development cycle
– The MVP is usually centered around a specific problem and solution, a ”core use
case”
– Scarce resource = time, money, attention, etc. that represents a sacrifice from
the customer’s part
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19. ”Getting out of the
Pivot
building”
 Key idea: change some element(s) of  Key idea: Don’t accept your
your customer-problem-solution assumptions and visions but get out of
hypothesis or business model, based the building and talk face-to-face to
on learning from customers living and breathing customers.
 Fail fast!  Analytics, surveys, other fancy user-
facing testing tools are, at best,
complementary to concrete customer
development and getting out of the
building
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20. The 8 Steps to Customer Discovery
1. Document C-P-S hypotheses
2. Brainstorm business model hypotheses
3. Find prospects to talk to
4. Reach out to prospects
5. Engaging prospects
6. Phase gate I: compile, measure, test
7. Problem-solution fit / MVP testing
8. Phase gate II: compile, measure, test
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21. Task 1: Get together and choose a NPD idea
 Get together with your group
– Short introductions, if needed
– Choose a project manager (who’ll keep everything together)
– Decide on other roles & responsibilities if you find it useful (”PPT wizard”, ”idea
owner”, ”industry expert”, etc.)
 Choose a NPD idea/template to work with
– This can be an actual idea/context from one of the participants’ organizations!
– Or a ”fictional” (but realistic enough) concept
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22. Task 2: The whiteboard excercise
1. Draw a map of your ecosystem
– Entities involved (users, customers, channel partners, technical partners,
strategic partners, advertisers, customers’ customers, etc.)
– Value flows (either direct or indirect)
– Money flows
– Product distribution (assumptions of how your product moves through your
channels to reach end users)
2. Define a value proposition for each partner
– What benefit will each entity in the ecosystem gain by participating?
– What will they need to sacrifice/pay?
– Transfer each value proposition to a C-P-S hypothesis, if possible
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23. Task 2: The whiteboard excercise
3. Sketch a final MVP
– Also intermediate MVP’s if necessary/relevant
– Think of what you need to provide to each entity with whom you have a direct
relationship, in order to achieve the value identified above?
– Currency: what the user/buyer ”pays” for using the MVP
– MPV metric: what are you measuring to determine viability
– Value determinants: what features and functionality do the users/buyers require at
minimum to pay their currency?
4. Evaluate risks and critical success factors
– Short term vs. long term risks, their implications, and how to account for
– How the ecosystem needs to change/remain in order for your business to work?
– Critical dependencies and players?
5. Draw a value path
– That describes how the MVP’s and business model develops step-by-step, constantly
increasing the value generated to the ecosystem
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24. Step 3: Design an action plan for the 8 steps to
Customer Discovery
1. Document C-P-S hypotheses
2. Brainstorm business model hypotheses
3. Find prospects to talk to
4. Reach out to prospects
5. Engaging prospects
6. Phase gate I: compile, measure, test
7. Problem-solution fit / MVP testing
8. Phase gate II: compile, measure, test
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25. http://www.custdev.com
Additional readings http://marketbynumbers.com
http://steveblank.com
Steven Blank Cooper & Vlaskovits Eric Ries
2005 2010 2011
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26. Thank you!
Our new book:
Best Cases in B2B
Sales Management
Mattsson & Parvinen,
2011
Juha Mattsson
juha.mattsson@symbioosi.fi
www.symbioosi.fi
26 June 15th, 2012 (c) Symbioosi Partners, Juha Mattsson