customer development/lean startup 092409 class 5 and 6

9/23/09 1

Customer Development in theHigh Tech Enterprise

Customer DiscoveryParts 2 & 3

Steve [email protected]

Customer Development in the High-Tech Enterprise Fall 2009 2

Class 5 & 6: Agenda

Logistics/Questions Customer Discovery Customer Development Team CASE: E INK

3

E INK Case


Stop selling, start listening

Test your hypotheses Two are fundamental: problem and product concept

Customer Discovery: Step 1

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation


Customer Discovery

CustomerDiscovery

Phase 1Author

HypothesisPhase 2

TestProblem

Hypothesis

Phase 4Verify, Iterate &

Expand

Phase 3Test

ProductHypothesis

To Validation


Test “Problem” Hypothesis

Customer Discovery

Demand Creation

Hypothesis

Market TypeHypothesis

Product Hypothesis

Customer& ProblemHypothesis

Distribution & Pricing

Hypothesis

CompetitiveHypothesis

Hypotheses

MarketKnowledge

FriendlyFirst Contacts

“Problem”Presentation

CustomerUnderstanding

SecondReality Check

First RealityCheck

“Product”Presentation

Yet MoreCustomer

Visits

Test “Product” Hypothesis

Iterate orExit

Verify the Product

Verify theProblem

Verify theBusiness

Model

Verify


Test “Problem”Hypothesis

Customer Discovery

Demand Creation

Hypothesis


Product Hypothesis



Hypothesis


Hypotheses

MarketKnowledge




SecondReality Check

First RealityCheck


Yet MoreCustomer

Visits

Test “Product” Hypothesis

Iterate orExit

Verify the Product

Verify theProblem

Verify theBusiness

Model

Verify

Inside the Building

Outside the Building


Phase 1: Author Hypothesis

One-time writing exercise All other time spent in

front of customers Assumes you’re smart but

guessingPhase 1Author

Hypothesis

Phase 2Test

ProblemHypothesis

Phase 4Iterate &

Expand

Phase 3ProductConceptTesting


Hypothesis

Product Customer/Problem Distribution/Pricing Demand Creation Market Type Competition

Demand Creation

Hypothesis


Product Hypothesis



Hypothesis



Product Hypotheses

Features Benefits Product Delivery Schedule Intellectual Property Total Cost of Ownership Dependency Analysis


Customer/Problem Hypotheses

Types of Customers Magnitude of the problem Visionaries A Day in the Life of a customer Organizational impact ROI Justification Problem Recognition Minimum Feature Set


Distribution/ Pricing Hypotheses

Distribution Model Distribution Diagram Sales Cycle/Ramp Channel strategy Pricing (ASP, LTV) Customer Organization Map Demand Creation


Demand Creation Hypotheses

How do competitors create demand? How will you?

Viral Advertising PR Trade shows

Who are influencers/recommendors? Key trade shows? Key trends? Start assembling advisory board


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 ofcompetition


Competition Hypotheses

Who is out there? Why are they important? How do customers use them today? What don’t customers like about them?

16

Intermission

The Customer Development Team


Traditional organizationsand titles Fail

CEO

VP Engineering VP Marketing VP Sales VP Business Dev

Typical Startup

People equate their titles with their functions But standard titles describe execution functions We need new titles = learning & discovery functions


Customer Development TeamTasks Not Titles

CEO

VP Product Dev Technical Visionary Business Visionary Business Execution

Customer DevelopmentDriven Startup

In Front of Customers

19

End of Intermission


Customer/Problem Hypotheses

Types of Customers Magnitude of the problem Visionaries A Day in the Life of a customer Organizational impact ROI Justification Problem Recognition Minimum Feature Set


Distribution/ Pricing Hypotheses

Distribution Model Distribution Diagram Sales Cycle/Ramp Channel strategy Pricing (ASP, LTV) Customer Organization Map Demand Creation


Demand Creation Hypotheses

How do competitors create demand? How will you?

Viral Advertising PR Trade shows

Who are influencers/recommendors? Key trade shows? Key trends? Start assembling advisory board


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 ofcompetition


Competition Hypotheses

Who is out there? Why are they important? How do customers use them today? What don’t customers like about them?


Phase 2:Test & Qualify Problem

Hypothesis

Get out of the building Test the problem Become the customer Solve a real problemPhase 1

AuthorHypothesis

Phase 2Test

ProblemHypothesis

Phase 4Iterate &

Expand

Phase 3Test

ProductHypothesis


Test & QualifyProblem Hypothesis

Friendly First Contacts “Problem” Presentation Customer Understanding Market Knowledge

MarketKnowledge





Test & Qualify Problem:First Contacts

Build a Rolodex Develop “Innovators” list Create reference story/sales script Schedule Customer Visits


Test & Qualify Problem:Create Problem Presentation

Not a Sales Pitch Test of your understanding of the customers

problem Problem/Solution – Slide

Problems column 1 Today’s solution column 2 Your solution column 3

Capture other missing data


Test & Qualify Problem:Customer Understanding

Become a Domain Expert Understand their “Day-in-the Life” Understand their problems/pain Get a feel of how this impacts their life/work Who has similar products that solve this problem How do they learn about new solutions Can they be helpful later


The Big Idea

What is the problem? Who has the problem? How important is the problem’s solution to the

customer? How valuable is the problem’s solution to the

customer?


Test & Qualify Problem:Market Knowledge

Get a feel for the “lay of the land” Adjacent Market players Industry Influencers Key Analysts Attend Conferences/Tradeshows


Phase 3:Test Product Hypothesis

First reality checkw/product development

The product hits the street Lots of customer visits More doses of realityPhase 1

HypothesisPhase 2Test

& QualifyHypothesis

Phase 4Iterate &

Expand

Phase 3Test

ProductHypothesis


Test Product Hypothesis

First Reality Check Product Presentation Yet More Customer Visits Second Reality Check

SecondReality Check

First RealityCheck


Yet MoreCustomer

Visits


Test Product Hypothesis:First Reality Check

Build a Workflow Map of customer Before and after your product

Problem scale Key insights How did the product spec match needs? Re-review product feature List Why are you different


Test Product Hypothesis:Product Presentation

Questionnaire Start w/Problem Presentation Then describe the Product Demo if you have one


Test Product Hypothesis:Yet More Customer Visits

Set up More Calls Validate Solution Validate Product Validate Positioning Understand Customer and Org. Pain Validate Pricing and Budget Understand “Whole Product” needs Understand Approval Process Update potential Advisory Board candidates


Test Product Hypothesis:Second Reality Check

Does the product solve a problem? Serious problem? For a large scalable market?

How did the product spec match needs? Re-review product Feature List


Phase 4: Verify, Iterate & Expand

The Problem The Product The Business Model Iterate or Exit

Phase 1HypothesisPhase 2

TestProblem

Hypothesis

Phase 4Iterate &

Expand

Phase 3Test

ProductHypothesis

Iterate orExit

Verify the Product

Verify theProblem

Verify theBusiness

Model


Verify, Iterate and Expand:The Problem

Problem Hypothesis Testing Magnitude of customer needs Rank customer problems Summary of customer problem input


Verify, Iterate and Expand:The Product

Product match Problem? Feature list Quantify customer problem Summary of customer product input Why are you different? Review Product Spec


Verify, Iterate and Expand:The Business Model

Customer Model ROI Market Size Service Development Manufacturing Customer Acquisition


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

Draw a day-in-the-life of a customer before & after your product

Draw the org chart of users & buyers


Verify- Iterate or Exit

Summarize Iterate Exit

44

Webvan Case

customer development/lean startup 092409 class 5 and 6

Documents

customers customer development

customer development

e ink customer development

hightech enterprise

product phase

hightech enterprisefall

hightech enterprisemodel

demand creation hypotheses