Duke ECE 490L: How to Start New Ventures in Electrical and Computer Engineering

Poornima Vijayashankerpoornima@femgineer.com

Jeff Glass jeff.glass@duke.edu

Akshay Rautar118@duke.edu

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Review

Duke ECE 490L

• Risk

• Positioning

• Competitive Analysis

• Differentiation Techniques

• Goal: Identify and Attract Early Adopters

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Announcements

• Lab 2 is up!

• http://femgineer.com/duke-ece-490l-labs

• Get started early!

• There are 3 assignments that need to be completed by lab period on week 7.

• Durham Startup Scene

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Idea Summary

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Agenda

• More on positioning!

• Digging into the Competitor

• Horizontal vs. Vertical Market

• Substitutes

• Secondary Markets

• Point Tool vs. Integrated Solutions

• Customer Discovery

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Still no building...

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Know thy enemy.

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To thy own self be true.

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Dig Deeper into Competitor

• Product Line• What are the various product lines and which customers does it appeal to?

• Do they have the entire spectrum? Loss leader, mid-range, and high-end

• All-in-One product that isn’t well suited to a particular segment?

• Do they have a process in place for upselling?

• Anticipate areas of growth• If they are strong, where do they appear to be heading?

• If they are weak, where do they appear to be heading?

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Case Study: Mint v. Quicken

• Who they chose to neglect? • Mac Users

• What didn’t they get? • Packaging

• Market is moving away from shrink-wrapped software

• Ease-of-Use

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Case Study: Mint v. MS Money

• Who they chose to neglect? • Mac Users

• What didn’t they get? • Packaging

• Market is moving away from shrink-wrapped software

• Ease-of-Use

• Sunset in June 2009

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Takeaways

• Understand market trends• Packaging

• Ease-of Use

• Adoption based on other factors e.g. web, mobile

• Understand neglected or up-and-coming user base and their needs

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Create an image or identity in the minds of the target market.

Occupy a position in a prospective customer’s mind - one that reflects company’s strengths and weaknesses as well as those of the competitor.

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Re-positioning: changing identity of a product, relative to competitor. e.g. luxury line.

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vs

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Lifestyle marketing.

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Lifestyle marketing: a brand attempts to embody the values and aspirations of a group or culture for the purposes of marketing.

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Early adopters embrace change.

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Open to a new way of life.

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Horizontal vs. Vertical Markets

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Horizontal Market

• Solves a BIG problem

• Large base of customers whose needs are the same

• Usually a strategy for a larger company that can spend a lot of money marketing

• Create a single product or have upselling opportunities

• May neglect nuanced needs of subgroups

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Vertical Market

• Niche market

• Product that appeals to a particular group, and has a specialized use case

• Avoids product from becoming commoditized

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Benefits of Vertical Market

• Clear value proposition

• Build a loyal following

• Product maybe specialized but hard to replicate

• Product can be subsystem for a larger product

• Product can be later “re-skinned” for other verticals

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Case Study: AeroVironment

• Two technologies: unmanned aircraft and charging systems for electric vehicles

• Seems like a niche market

• Products used in subsystems for larger mainstream and horizontal market products

• Mainstream is also starting to adopt technologies

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Substitutes.

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Substitutes

• Are they part of the target market? And by how much?

• Do they reflect a particular behavior?

• Can you transition people from using substitutes into using your product?

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Secondary markets.

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Competitors Own Reselling Market

• e.g. “Apple authorized reseller”

• Does this capture another position? e.g. lower end or higher end

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Competitors Integrating into Larger Systems

• Do they supply other vendors?

• Are the vendors happy with them?

• Are the vendors open to trying out a new product?

• Are the vendors locked into a contract or have exclusive limitations?

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Competitors Pricing and Distribution Schemes

• One-time use vs. contracts vs. upgrades

• Is there lock-in?

• Competition in product placement

• Your product is too similar?

• Your product is unknown and there is risk involved with selling it.

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Point Tool v. Integrated Solution

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Point Tool v. Integrated Solution

• Can you begin by partnering with a competitor?

• What are the limitations for building on their platform?

• e.g. Facebook Apps

• What will it take to then displace their product?

• What will it take to transition to your own platform?

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Case Study: Mint.com

• Initially integrated with third party solution: Yodlee for data

• Quality of data limited potential

• Eventually began build in-house data solution

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Market research is one part in leading to customer discovery.

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What if you’re in a new market?

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Customers Market Product Features Competitors Risk

Existing Market Known Known Critical Many

Cost of entry; Product

Development; distribution

New Market Unknown Unknown, definition critical Irrelevant at first None at first (other

startups)

Long evangelism and education

cycle

Resegment Existing Market Possibly known Unknown,

definition criticalCritical; tied to existing market

Critical, tied to existing market

Market redefinition; product definition

*Table 5.4 from The Four Steps to the Epiphany - Steve Blank

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Other market forces to consider?

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Market Forces

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• Policies: these can be non-governmental

• e.g. franchise have to buy from a certain vendor

• Regulations: this is government based

• high barrier to entry, but once you’re in you have more protection

• permits, licenses

• Infrastructure: need to build additional support

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Customer Discovery Validation Customer CreationBusiness/Company

Formation

Early AdopterPricing Product

Distribution

Mainstream AdoptersMoney for Marketing

Market Research

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Customer Discovery Validation Customer CreationBusiness/Company

Formation

Early AdopterPricing Product

Distribution

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Customer Discovery

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• Not stage of tell me what you want

• Not stage of here’s what I’ve built, will you buy it for $X

• Interview to understand pain points

• Focus on needs

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Goals of Customer Discovery

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• Goal is to valid user segments from market research to identify viable early adopters

• Identify neglected segments

• Verify demand

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Early Adopter Characteristics to Look For

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• Has or can acquire a budget.

• Has put together a solution out of piece parts (substitutes)

• Has been actively looking for a solution

• Is aware of having a problem

• Has a problem

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Other “Customers”

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• Decision Maker

• Economic Buyer

• Recommender

• Influencers

• Customers

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Put a price on pain.

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Level of need is an indicator for adoption.

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Characteristics of Needs

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• Latent Need: have a problem and know they have a problem

• Active Need: they are actively searching for a solution

• Vision: have an idea for a solution, might have cobbled together a solution but are prepared for a better one

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Level of loyalty to an existing solution is an indicator you cannot convert immediately.

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Characteristics of Loyalty

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• Need more features.

• Verifying credibility.

• Risk averse.

• Long decision time frame.

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Test across various user segments.

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Review

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• More on positioning!

• Digging into the Competitor

• Horizontal vs. Vertical Market

• Substitutes

• Secondary Markets

• Point Tool vs. Integrated Solutions

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