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Talking to Humans:The Art of Customer DiscoveryFrank RimalovskiExecutive Director, NYU Entrepreneurial InstituteInstructor, NSF I-CorpsNovember 17, 2015

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2B. Story

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Customer Development

Test assumptions about customer needs/problem & develop MVPs

Seek validationthat people are interested in your product/ solution

Begins to builddemand & improve efficiency of customer acquisition

Drive growth aggressively & execute business model

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Why are we here?Share ideas, tips, tricks and secrets on how to best do customer discovery

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“You can’t just ask customers

what they want and then try to give that

to them.”

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“New ideas come from watchingsomething, talk(ing) to people, experimenting, asking questions and getting out of the office!”

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The Business Model Canvas

Revenue Streams

Channels

Customer SegmentsValue PropositionsKey ActivitiesKey Partners

Key Resources

Cost Structure

Customer Relationships

Designed by: Date: Version:Designed for:

designed by: Strategyzer AGThe makers of Business Model Generation and Strategyzer

This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

strategyzer.com

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

is your business moreCost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)Value Driven (focused on value creation, premium value proposition)

sample characteristicsFixed Costs (salaries, rents, utilities)Variable costsEconomies of scaleEconomies of scope

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

channel phases1. Awareness

How do we raise awareness about our company’s products and services?2. Evaluation

How do we help customers evaluate our organization’s Value Proposition?3. Purchase

How do we allow customers to purchase specific products and services?4. Delivery

How do we deliver a Value Proposition to customers?5. After sales

How do we provide post-purchase customer support?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

Mass MarketNiche MarketSegmentedDiversifiedMulti-sided Platform

What type of relationship does each of our Customer Segments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

examplesPersonal assistanceDedicated Personal AssistanceSelf-ServiceAutomated ServicesCommunitiesCo-creation

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

categories ProductionProblem SolvingPlatform/Network

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

types of resourcesPhysicalIntellectual (brand patents, copyrights, data)HumanFinancial

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

motivations for partnershipsOptimization and economy Reduction of risk and uncertaintyAcquisition of particular resources and activities

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

characteristicsNewnessPerformanceCustomization“Getting the Job Done”DesignBrand/StatusPriceCost ReductionRisk ReductionAccessibilityConvenience/Usability

typesAsset saleUsage feeSubscription FeesLending/Renting/LeasingLicensingBrokerage feesAdvertising

fixed pricingList PriceProduct feature dependentCustomer segment dependentVolume dependent

dynamic pricingNegotiation (bargaining)Yield ManagementReal-time-Market

Hypotheses & the BMC

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

HypothesisHypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

Hypothesis

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More than half of your assumptions are wrong!

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Your job is not to validate your product…

Your job is not to validate your product…

It’s to validate the problem and how best to

solve it?

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Customer DiscoveryuApply the scientific method to

business model development

Modify hypothesis

Observe phenomena

Formulate hypothesis

Test hypothesis via rigorous experiments

Establish theory

based on repeated

validation of results

PIVOT!

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Create Valid HypothesesuHypotheses must be falsifiable

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“Our product will spread through word of mouth.”

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Create Valid HypothesesuHypotheses must be falsifiable

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“our viral coefficient over the next 12 months will be >0.5”

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Create Valid HypothesesuHypotheses must be falsifiable

uBe specific (quantifiable)

uYou must avoid validation

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“people want to buy my product”

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Create Valid HypothesesuHypotheses must be falsifiable

uBe specific (quantifiable)

uYou must avoid validation

u Inverse hypothesis cannot be ridiculous

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“people want to save money”

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Talk to Humans!u GOTB: The #1

lesson of this talk

u In person is best

u You must gaininsight into your customer & market

u You are doing pattern recognition… Must have sufficient data points to see

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2B. Story

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Who do you want to learn from?

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3A. Who Do You Want To Learn From (Inked)

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Who Cares?

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Meet People You Don’t Knowu People you know will be nice and tell

you what you want to hear

u Those interviews are possibly harmful

u People you don’t know have no relationship to protect…Only they will tell you the truth

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What do you want to learn?

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4D. What Do You Want To Learn

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What do you want to learn?

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The Business Model Canvas

Revenue Streams

Channels

Customer SegmentsValue PropositionsKey ActivitiesKey Partners

Key Resources

Cost Structure

Customer Relationships

Designed by: Date: Version:Designed for:

designed by: Strategyzer AGThe makers of Business Model Generation and Strategyzer

This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

strategyzer.com

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

is your business moreCost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)Value Driven (focused on value creation, premium value proposition)

sample characteristicsFixed Costs (salaries, rents, utilities)Variable costsEconomies of scaleEconomies of scope

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

channel phases1. Awareness

How do we raise awareness about our company’s products and services?2. Evaluation

How do we help customers evaluate our organization’s Value Proposition?3. Purchase

How do we allow customers to purchase specific products and services?4. Delivery

How do we deliver a Value Proposition to customers?5. After sales

How do we provide post-purchase customer support?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

Mass MarketNiche MarketSegmentedDiversifiedMulti-sided Platform

What type of relationship does each of our Customer Segments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

examplesPersonal assistanceDedicated Personal AssistanceSelf-ServiceAutomated ServicesCommunitiesCo-creation

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

categories ProductionProblem SolvingPlatform/Network

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

types of resourcesPhysicalIntellectual (brand patents, copyrights, data)HumanFinancial

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

motivations for partnershipsOptimization and economy Reduction of risk and uncertaintyAcquisition of particular resources and activities

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

characteristicsNewnessPerformanceCustomization“Getting the Job Done”DesignBrand/StatusPriceCost ReductionRisk ReductionAccessibilityConvenience/Usability

typesAsset saleUsage feeSubscription FeesLending/Renting/LeasingLicensingBrokerage feesAdvertising

fixed pricingList PriceProduct feature dependentCustomer segment dependentVolume dependent

dynamic pricingNegotiation (bargaining)Yield ManagementReal-time-Market

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Don’t Assume You Understand the Problem!

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Don’t Assume You Understand the Problem!

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What do you want to learn?u Do not sell! No demos! No presos!

u You are there to learn!

u Get stories, not speculation

u Ask open-ended questionsu Learn about their problems and how they

solve them today

u Ask why? Then why? They why again!

u Create a guide (not a script)

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Finding Interview Subjects

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5A. How Do You Find Your Interview Subjects (Inked)

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Finding Interview Subjectsu At least one degree of separation

u Learn to love LinkedIn

u Make referrals happen

u Get creative…recruiting hacksu Fish where the fish are…

u …In the wild

u Promise to be briefu Enterprise customers are people too!

u Play the student/researcher card

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Ensuring Effective Interviews

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6B. How To Ensure An Effective Session (Draft)

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Ensuring Effective Interviewsu Beware of confirmation biasu Do it in person, one at a time

u Get subjects to tell a story

u Look for solution hacksu Understand their priorities

u Follow your nose & drill down

u Listen and STFU!

u Have someone take notes

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Pro Tipsu Practice, practice, practice

u NO email, focus groups or surveys

u Don’t start with your dream customer

u Being an entrepreneur means being aggressive & persistent

u Flatter subjects

u Be transparent

u Follow up/stay in touch

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“It's gruelinglistening to

customer feedback. And

if it isn't, you're probably doing it wrong."

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Exercise

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Your Last >$100 Purchase1. Write description of item on top of page2. Find a partner next to you & swap pages3. Create interview guide: ~5 questions

u Explain what you bought and why?

u What was the process from desire to acquisition?

u What other options/alternatives did you consider?

u How did you decide to buy it? Who/what did you consult?

u How did you decide where to buy it?

4. 5 minute interview…take notes5. Switch

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Discuss: Observations, challenges & questions

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Documenting Interviewsu Assign someone to take notes

u Write down key a-ha’s as they happen

u Note questions that worked & use them again!

u Take pictures or videos!

u Capture key insights

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Making Sense of What You Learn

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7B. How Do You Make Sense Of What You Learn (Draft)

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Gaining Insightu Facts are interesting…Insights are your goal

u Be honest…Don’t be too quick to validate or too slow to disprove your hypothesis

u Find the hidden motivations

u Ask why? And why? Then why again?

u Don’t fear picking the wrong market

u Depth of understanding always leads to insight

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What’s an insight?(the a-ha’s along your journey)

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in•sight |ˈinˌsīt|noun

the capacity to gain an accurate and deep intuitive understanding of a person or thing

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in•sight |ˈinˌsīt|noun

something you’re so excited about you tell strangers on the train

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Learning Is Paramountu The knowledge you gain in customer

discovery is critical to the success or failure of your business

u >Half of your assumptions are wrong

u You must not try to validate what you already think or want to be true

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Pro Tips v2u Focus on actual behavior, not

speculative or abstract feelings

u If they’ve made an MVP…ask to see it!

u Listen, don’t talk

u Parrot back or misrepresent to confirm

u Ask for introductions

u Write up your notes ASAP

u Avoid premature conclusions

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Customer Discovery Resources

TALKING TO HUMANS

Success starts with understanding your customers

GIFF CONSTABLE

Pre-release edition

with Frank Rimalovskiand illustrations by Tom Fishburne

bit.ly/llpcdvstalkingtohumans.com

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Questions?

entrepreneur@nyu.edu@rimalovskientrepreneur.nyu.edu16 Washington Place, NYC

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