The First 2 Steps to the Epiphany: Customer Discovery, Customer Validation and the Customer Development Interview
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An outline of the key parts of the first two steps of Steve Blank's Four Steps to the Epiphany as well as how to do customer development interviews. I'm writing a book on How to Build Customer Driven Products based on tactics like the ones in this presentation. You can sign up to learn more here: http://eepurl.com/RZoO9
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The First 2 Steps to the Epiphany: Customer Discovery, Customer Validation and the Customer Development Interview
- 1. The First 2 Steps to the Epiphany Jason @Evanish January 30, 2014 Geekdom SF San Francisco, CA
- 2. Who is Jason @Evanish? 100’s of customer development interviews with: Cofounded: Blog my learnings at: JasonEvanish.com
- 3. Today’s Topics Customer Discovery Overview Customer Development Interview Process Customer Validation Overview
- 4. Why Customer Development? • • • • • • Move faster Reduce risk Bring process to chaos Stay in tune with customers Replace HiPPO & opinions with data Discover the best market opportunities
- 7. Who is Your Customer? Phase 3: Test Product Concept Phase 4: Verify Phase 2: Test Problem Hypothesis Phase 1: State Hypothesis
- 8. Map Your Ecosystem • Who are the entities in your business? • Connect the entities based on the flow of $$ • How does the product move through channels to meet users?
- 9. The Hypothesis : C-P-S • Customer – Who is using your product? • Problem – What problem do they have? • Solution – How will you solve the problem? Be Specific. It’s better to be wrong than vague.
- 10. The Intermediate MVP • Map out the basics of your MVP based on the solutions from C-P-S • Identify the riskiest parts & test them • This is before you build anything…just map out what you think is the solution BUILD
- 11. Helping you map it: The Lean Canvas
- 12. Why all this work?!? • Save Time and Money by discovering early on if something won’t work. • Make course adjustments before you build a large product.
- 13. Customer Discovery Wrap Up To Exit means you’ve: • You’ve identified a problem a customer wants solved. • Your product solve the customer’s needs. • You believe you have a viable and profitable business model. • You feel you’ve learned enough to go out and sell.
- 14. Learn in detail at: bit.ly/CustDevInterview How to do Customer Development Interviews
- 15. A Customer Development Interview is like a house…
- 16. It starts with a good foundation.
- 17. Then you build on it.
- 18. Finally, you add the roof.
- 19. Your foundation is the
- 20. The walls are
- 21. The roof is your to
- 22. Let’s get down to the nuts and bolts.
- 23. Build the foundation: Get to know the you’re interviewing.
- 24. Person Questions: • Who are they? What’s their role? • Where do they interact with peers? • How do they find new products for home or work? • How much time do they spend on [Task X]? • How is their budget handled? Let’s write the script
- 25. Learn about them & their role in the industry
- 27. Problem Questions: • What are your top 3 challenges you face in your job related to [industry]? • Why? Tell me more… • What’s frustrating or time consuming about [problem area]? • If you could wave a magic wand… what would the solution be? Let’s write the script
- 28. Learn if they have the problem you’re solving
- 30. Solution Questions: • Does this solve any of the problems we discussed earlier? • Would you be willing to pay for this? • Are you interested in signing up to be one of our early users? • What’s your biggest concern with my product? Let’s write the script
- 33. Gauge their interest & gather feedback
- 46. Now what? • Interview in groups of 8-10 people per customer type. • Summarize notes and review with others. • Look for common patterns matching C-P-S. • Compare to your high level metrics to see if anecdotes match data.
- 48. Can You Sell It? Phase 3: Develop Positioning Phase 4: Verify Phase 2: Sell to Visionary Customers Phase 1: Get Ready to Sell
- 49. Not time for Glengarry Yet… You’re still in learning mode. …about what customers will buy and how!
- 50. Break Down Your Sales Road Map • • • • • • Who influences a sale? Who recommends a sale? Who is the decision maker? Who is the economic buyer? Who is the saboteur? What is the budget for purchasing your type of product? • How many calls does it take to make a sale • What is the profile of an early customer?
- 51. The Word According to Blank – Phase 1 : Get Ready to Sell Articulate a Value Prop Prelim Sales & Collateral Materials Prelim Distribution Channel Plan Prelim Sales Roadmap Hire a Sales Closer Formalize Advisory Board Goal: Take what you learned from Customer Discovery and apply to development of Sales Process
- 52. Map out the Food Chain of your Sale
- 53. Find out how to (reliably) get your foot in the door… • At what level do you want to enter? • How many people on the org chart need to say yes? • Does each department perceive the problem the same way? • In what order do you need to call on people? • Who can derail the sale?
- 54. The Word According to Blank – Phase 2: Sell to Visionary Customers Contact Earlyvangelists Sell to Earlyvangelists Refine Sales Roadmap Sell to Channel Partners Refine Channel Roadmap Goal: Get someone to Pay for your product and learn how to repeat the process.
- 56. Build Your Sales Roadmap Get Lead Send initial outreach Qualify a lead Validate the lead Win over IT Second Pitch Win over the CIO Preliminary Sales Call Formal Proposal Negotiate & Close
- 57. The Word According to Blank – Phase 3: Develop Positioning Product Positioning Company Positioning Present to Analysts & Influencers Goal: Based on problem and sales lessons, optimize positioning for your product & company.
- 58. Positioning • Speak the language of your customer • Written by those that interact directly with the customer • Verify with Product team to ensure what’s built meets expectations set
- 59. The Word According to Blank – Phase 4: Verify Verify the Product Verify the Sales Roadmap Verify the Channel Roadmap Verify the Business Model Iterate or Exit Goal: Verify all the work you’ve put into Customer Validation to iterate or move onto Customer Creation.
- 61. Questions to Ask… Product: - Are you repeatedly losing any deals? Why? - Are customers satisfied? What else do they expect? - Are you building the right features? - Were there any pricing issues? Did you lose customers on pricing? Sales: - Can you verify the sales process and accurately project its success rate? - Can you realistically map your sales pipeline? - Are you closing deals?
- 62. More Questions to Ask… Channel: - Did you factor in the channel costs to the overall costs of your product? - How do various channels affect the sales time? - What does your sales force look like? Business Model: - Based on known factors, how profitable is the business? - Will costs be the same as you grow? - How much funding do you need to reach profitability?
- 63. Customer Validation Wrap Up To Exit means you’ve - Proven you found a Customer Problem - Found earlyvangelists that will pay you - Found a repeatable and scalable sales process - Demonstrated a viable business model
- 64. Common Sense + Diligent Process + Thought =
- 65. Questions? I’m happy to help. On Twitter: @Evanish Email me with questions, mentorship or consulting: Evanish.J@Gmail.com Find all my Lean learnings at: JasonEvanish.com/lean-startups/ Find a detailed, blog form of the interview process at: bit.ly/CustDevInterview And tips for finding your first customers at: bit.ly/1stcustomers
Editor's Notes
- Customer Discovery OverviewCustomer Development Interview ProcessCustomer Validation Overview
- HiPPO = Highest Paid Person in the Organization“In God we trust, all others bring data.” – W Edwards Deming
- This is the core of lean startups. The entire goal of what you’re doing is to work through this loop as fast as possible or as Eric Ries says “Minimize the Total Time through this Loop”You start with learn. The more you can discover from the customer before building *anything* the better. This comes from talking to the customer, using landing pages and other communication directly with the customer. Then once some ideas crystallize as you match patterns across all your customer interactions (online and offline), you can build your MVP. You then measure the results of your MVP, and feed it back into your next round of learning. This learning leads to adding improvements and tweaks to your MVP and thus completing the loop. Again, you want to move through this cycle as fast as you can; that’s the Core of Lean.
- This is the complete process for a Lean Startup. The first step is Customer Discovery which is all about iterating around customer problems. The next step, Customer Validation, which I’ll also talk about. The last two steps, Company Creation and Company Building won’t be covered as that’s really more conventional, MBA-Style scaling of a validated business.The true goal of lean is to take some of the mystery out of getting to the stage where you have Product-Market fit and can scale.
- The core question of the first stage is verifying you’re solving a problem for a customer. You’re laying out what you think the Customer, Problem and Solution are and then testing it in the wild talking to customers. You exit this cycle when you feel you have a customer determined that wants the product as you’ve mapped it out.
- Who are the entities in your business?Anyone who provides value or receives value from your product.Users, customers, channel partners, technical partners, strategic partners, advertisers, your customer’s customers, etcConnect the entities based on the flow of $$How does the product move through channels to meet users?
- Example:BackupifyCustomerWho is using your product?Medium to large size IT Departments that have moved to cloud based email and google apps.ProblemWhat problem do they have?IT needs a way to back up and manage cloud based email with tools like that had on premise outside what the email provider (Google) offers. Restoration of accidentally lost documents and handling departed employees are problematic.SolutionHow will you solve the problem?Backupify provides cloud based backup on Google Apps with tools to restore data and backup departed employees.
- By mapping out exactly what you think you need, you crystallize your ideas and give you a basis for specifically invalidating your ideaMap out the basics of your MVP based on the solutions from C-P-SIdentify the riskiest parts & test them one by oneThis is before you build anything…just map out what you think is the solution
- Early on, the core is all about C-P-S but you should still be thinking about the other segments to understand the big picture of what you’re doing.Is the market big enough?Who will pay money for this? Will they pay what we want them to?Can we acquire customers where we think they are? Are they actually there?Does our value prop resonate with our customer?2 Places to get this tool:www.LeanCanvas.comwww.LeanLaunchLab.comBoth allow you to track evolution/iteration of the product
- This is a trade of HOURS and DAYS for WEEKS AND MONTHS of building and pushing product.The goal of the Customer Development team during this time is to Validate the Product Spec.
- Stages:Has a problemIs aware of having the problemHas been actively looking for a solutionHas put together a solution of piece partsHas or can acquire a budget>>Dream is all of these
- Emphasize that any outreach is about having a conversation, not that you’re trying to sell them anything. Everyone likes to help, especially when you’re only asking for 20 minutes of their time. Giving off the vibe you’re trying to sell something will always turn people off.
- Interview in groups of 8-10 people per customer type.Summarize notes and review with others.Look for common patterns matching C-P-S.This is why you ask so many questions before you get to your solutionCompare to your high level metrics to see if anecdotes match data.
- Now that we feel confident we have a fit between the problem a customer has and the solution you have, it’s time to figure out how to build a scalable sales process. The work is just beginning…
- The Customer Validation is all about proving you can sell your product and refining it efficiently as a small team. It is NOT about building a huge sales team; you’re not ready for that yet. The idea is to try a lot of things and map out the process well before scaling up a team.
- This needs to be done by a team of:FounderA closer sales guy (NOT A TEAM BUILDER)The rest of your customer development team…always syncing back with the product team to stay on the same team. And still focused on learning WHAT PEOPLE WILL PAY FOR.
- The process is all about removing the guesswork of sales. You want to discover these at the executive level…not hiring a sales team to answer these questions.There are likely multiple people involved in any purchase. The goal of the roadmap is to understand all the players.
- This is the Phase 1 process as Steve Blank’s Four Steps explains it.Each step is about gelling what you already learned and applying it to now trying to tailor to the customer you think you have. It’s like refining those raw ideas you learned about the problem and figuring out how they apply to people.What problems resonate with whom? It’s not the same for every player. Who are the gatekeepers and who are the early buyers? Probably need different angles for each.Things like Backupify’s whitepaper on common losses of data being employee error is exactly what you need.
- Think about the people involved in the sales process:Who is the end user?Who is controls the budget?Who is the person who is initially looking for your solution?What other channels are they reachable by?
- Once you know your food chain you have to think about how to prioritize access to those people to start to build that repeatable model for getting your foot in the door…then you’ll optimize for working through the process once inside.
- This is the Phase 2 goals. Now you’re trying to get people to PAY MONEY for your product.
- You can only truly learn from PAYING customers.When you don’t pay for something, it doesn’t enter your mind the same way.Talk about Followup.cc story. Until you are invested financially you aren’t motivated. You won’t commit to what really bothers you or you love about the product.
- As you sell to your first customers, you’re not just adapting the pitch, but actually learning the process of making the sale…what steps are involved? What steps can you eliminate?
- This is the Phase 3 goals. Pretty simple. Pretty damn important and much easier and accurate after all the work you’ve already put in.In each of these steps…you’re building on what you did in the step before.By this point, you should have talked to so many customers, the language they use is second nature to you. Speak it back to them in your marketing materials (aka- positioning)
- Customer Discovery team should be writing this stuff because they know how the customers are thinking about the problem.
- This is the Phase 4 is all about CYA: Making sure you’ve got it right before you pour the gasoline on the fire and try to scale the business up. Once you raise $10-$50M it’s REALLY hard to turn back and iterate…you need to be in execution only mode after this step.
- At each step you’re thinking about the paranoia of your product:Are you repeatedly losing any deals? Why?Are customers satisfied? What else do they expect?Can you realistically map your sales pipeline?Are you closing deals?!
- You haven’t finished Customer Validation until ALL of these are complete.
- If you’ve read through all of this it probably sounds pretty easy and straightforward. Yes, none of this is hard from a brain power sense. What is hard is having the discipline and putting in the effort to stick to this.Lean Startups are harder than blind startups that go just on gut feel and winging it. Lean Startups just have a better chance of success.