Workshop at Chalmers Innovation Startup Camp 2013.
This presentation is based on the Customer Development theory developed by Steve Blank and Bob Dorf (http://www.steveblank.com), and is based on slides developed by Steve Blank and Bob Dorf (http://www.slideshare.net/sblank/).
1. Business
Models
+
Customer
D
evelopment
Henrik
Berglund
Chalmers
University
of
Technology
Center
for
Business
Innova8on
henber@chalmers.se
www.henrikberglund.com
@khberglund
2013-‐02-‐15
1
2. Presenta8on
based
on
by
Steve
Blank
and
Bob
Dorf
More
info:
www.steveblank.com
Buy
the
book:
hJp://www.amazon.com/gp/product/0984999302/
3. Using
slides
from
developed
by
Steve
Blank
and
Bob
Dorf
hJp://www.slideshare.net/sblank/
27. Tradi8onal
Development
Process
Has
Two
Implicit
Assump8ons
Customer
Problem:
known
Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
Product
Features:
known
Works
well
for
incremental
development
projects
targe@ng
exis@ng
customers.
28. Tradi8on
–
Hire
Marke8ng
Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
-‐
Create
Marcom
-‐
Hire
PR
Agency
-‐
Create
Demand
Marke@ng
Materials
-‐
Early
Buzz
-‐
Launch
Event
-‐
Create
Posi@oning
-‐
“Branding”
29. Tradi8on
–
Hire
Sales
Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
-‐
Create
Marcom
-‐
Hire
PR
Agency
-‐
Create
Demand
Marke@ng
Materials
-‐
Early
Buzz
-‐
Launch
Event
-‐
Create
Posi@oning
-‐
“Branding”
-‐
Hire
Sales
VP
-‐
Build
Sales
Sales
-‐
Hire
1st
Sales
Staff
Organiza@on
30. Tradi8on
–
Hire
Business
Development
Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
-‐
Create
Marcom
-‐
Hire
PR
Agency
-‐
Create
Demand
Marke@ng
Materials
-‐
Early
Buzz
-‐
Launch
Event
-‐
Create
Posi@oning
-‐
“Branding”
-‐
Hire
Sales
VP
-‐
Build
Sales
Sales
-‐
Hire
1st
Sales
Staff
Organiza@on
Business
-‐
Hire
First
Bus
Dev
-‐
Do
deals
for
FCS
Development
32. What’s
wrong
with
this
picture?
Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
• Both
Customer
Problems
and
Product
Features
are
hypotheses
• Emphasis
on
execu8on
rather
than
learning
and
discovery
• No
relevant
milestones
for
marke8ng
and
sales
• Oeen
leads
to
premature
scaling
and
a
heavy
spending
hit
if
product
launch
fails
You
do
not
know
if
you
are
wrong
un@l
you
are
out
of
money/business
33. Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
-‐
Create
Marcom
-‐
Hire
PR
Agency
-‐
Create
Demand
Marke@ng
Materials
-‐
Early
Buzz
-‐
Launch
Event
-‐
Create
Posi@oning
-‐
“Branding”
-‐
Hire
Sales
VP
-‐
Build
Sales
Sales
-‐
Hire
1st
Sales
Staff
Organiza@on
Business
-‐
Hire
First
Bus
Dev
-‐
Do
deals
for
FCS
Development
35. Product
and
Customer
Development
Product Development
Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
+
Customer Development
Customer Customer Customer Company
Discovery Validation Creation Building
37. Search
Execu@on
Strategy
Business
Model
Opera8ng
Plan
+
Hypotheses
Financial
Model
Process
Customer
&
Product
Management
&
Waterfall
Development
Agile
Development
43. Founders run a
Customer Development Team
No sales, marketing and business
development
44. Search
Execu@on
Strategy
Business
Model
Opera8ng
Plan
+
Hypotheses
Financial
Model
Customer
Development,
Product
Management
Process
Agile
Development
Agile
or
Waterfall
Development
Customer
Func@onal
Organiza@on
Organiza@on
Development
Team,
by
Department
Founder-‐driven
46. Business
Model
Key activities Value Customer
proposition relationships
Key partners
Customer
segments
Cost Key Channels Revenue
structure resources streams
hJp://www.businessmodelalchemist.com/
47. Business
Model
Key activities Value Customer
proposition relationships
Key partners
Customer
segments
Cost Key Channels Revenue
structure resources streams
A
framework
for
making
your
assump@ons
explicit
49. Customer
Segments
Who
is
the
customer?
Mul8-‐sided
market?
Different
from
user?
hJp://www.businessmodelalchemist.com/2012/08/achieve-‐product-‐market-‐fit-‐with-‐our-‐brand-‐
new-‐value-‐proposi8on-‐designer.html
50. Customer
Segments
-‐
jobs
to
be
done
What
func8onal
jobs
is
your
customer
trying
get
done?
(e.g.
perform
or
complete
a
specific
task,
solve
a
specific
problem…)
What
social
jobs
is
your
customer
trying
to
get
done?
(e.g.
trying
to
look
good,
gain
power
or
status…)
What
emo8onal
jobs
is
your
customer
“What
jobs
are
the
customers
you
are
trying
get
done?
(e.g.
esthe8cs,
feel
good,
targe2ng
trying
to
get
done”
security…)
51. Customer
Segments
-‐
customer
pains
What
does
your
customer
find
too
costly?
(e.g.
takes
a
lot
of
8me,
costs,
effort)
What
makes
your
customer
feel
bad?
(e.g.
frustra8ons,
annoyances)
How
are
current
solu8ons
under-‐
performing
for
your
customer?
(e.g.
lack
of
features,
performance,
malfunc8on)
“What
are
the
costs,
nega2ve
emo2ons,
bad
situa2ons
etc.
that
your
customer
risks
What
nega8ve
social
consequences
does
experiencing
before,
during,
and
a>er
ge?ng
your
customer
encounter
or
fear?
the
job
done.”
(e.g.
loss
of
face,
power,
trust,
or
status)
52. Customer
Segments
-‐
customer
gains
Which
savings
would
make
your
customer
happy?
(e.g.
in
terms
of
8me,
money
and
effort)
What
would
make
your
customer’s
job
or
life
easier?
(e.g.
flaJer
learning
curve,
more
services,
lower
cost
of
ownership)
What
posi8ve
social
consequences
does
your
customer
desire?
(e.g.
makes
them
look
good,
increase
in
power,
status)
“What
are
the
benefits
your
customer
expects,
desires
or
would
be
surprised
by.”
What
are
customers
looking
for?
(e.g.
good
design,
guarantees,
features)
What
do
customers
dream
about?
(e.g.
big
achievements,
big
reliefs)
54. Value
Proposi@ons
What
are
your
products
and
services?
How
do
they
create
value
for
the
customer
segments?
55. Value
Proposi@ons
Can
your
product/service:
• Produce
savings?
• Make
your
customers
feel
beJer?
• Put
an
end
to
difficul8es?
• Wipe
out
nega8ve
social
consequences?
56. Value
Proposi@ons
Can
your
product/service:
• Outperform
current
solu8ons?
• Produce
outcomes
that
go
beyond
their
expecta8ons?
• Make
your
customer’s
job
or
life
easier?
• Create
posi8ve
social
consequences?
60. How
Do
You
Want
Your
Product
to
Get
to
Your
Customer?
" Yourself
" Through someone else
" Retail
" Wholesale
" Bundled with other goods or services
60
63. How
Does
Your
Customer
Want
to
Buy
Your
Product
from
your
Channel?
" • Same day
" • Delivered and installed
• Downloaded
" • Bundled with other
" products
" • As a service
• …
"
63
71. Key activities Value Customer
proposition relationships
Key partners
Customer
Visualiza@on
of
the
segments
business
model
framwork
Cost Key Channels Revenue
structure resources streams
83. The
goal
is
not
to
remain
a
startup
Large
Startup
Transi@on
Company
The
goal
of
a
startup
is
to
become
a
large
company!
Failure
=
failure
to
transi@on.
88. …they
focus
on
execu8ng
the
plan…
Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
• Both
Customer
Problems
and
Product
Features
are
hypotheses
• Emphasis
on
execu8on
rather
than
learning
and
discovery
• No
relevant
milestones
for
marke8ng
and
sales
• Oeen
leads
to
premature
scaling
and
a
heavy
spending
hit
if
product
launch
fails
You
do
not
know
if
you
are
wrong
un@l
you
are
out
of
money/business
90. …
and
end
up
going
bust.
“We
have
been
too
visionary.
We
wanted
everything
to
be
perfect,
and
we
have
not
had
control
of
costs"
Ernst
Malmsten
(BBC
News,
May
18
2000)
93. Customer
Development:
Key
Ideas
• Parallel
process
to
Product
Development
(agile)
• Measurable
checkpoints
not
@ed
to
FCS
but
to
customer
insights
• Emphasis
on
itera@ve
learning
and
discovery
before
execu@on
• Must
be
done
by
small
team
including
CEO/project
leader
94. Customer
Development
Heuris8cs
• There
are
no
facts
inside,
so
get
out
of
the
building!
• Earlyvangelists
make
your
company,
and
are
smarter
than
you!
• Develop
a
minimum
viable
product
to
maximize
fast
learning.
95. Customer
Development:
Four
Stages
search
execu8on
• Customer
Discovery
Ar8culate
and
Test
your
Business
Model
Hypotheses
• Customer
Valida@on
Sell
your
MVP
and
Validate
your
MB
&
Sales
Roadmap
• Customer
Crea@on
Scale
via
relentless
execu8on
and
fill
the
sales
pipeline
• Company
Building
(Re)build
company’s
organiza8on
&
management
96. Customer Discovery
• Articulate and test
your BM hypotheses
(value prop/customers key)
• No selling, just listening
• Must be done by founder
97. building
building
block
block
building
block
building
building
building
block
block
block
building
block
building
building
block
block
build
g
ing
building
buildin block
block
block
103. Test Customer Problem Hypotheses
”Do
you
have
this
”Tell
me
about
it,
how
problem?”
do
you
solve
it
today?”
1.
1.
2.
2.
3.
3.
104. Test Customer Problem Hypotheses
”Do
you
have
this
”Tell
me
about
it,
how
”Does
something
like
this
problem?”
do
you
solve
it
today?”
solve
your
problem?”
1.
1.
1.
2.
2.
2.
3.
3.
3.
Listen
carefully
to
what
they
say
at
each
step!
Focus
on
learning
-‐
Don’t
try
to
sell
them
on
your
idea!
In
the
process
you
find
out
about
other
BM
parts
as
well:
workflow,
benefits
(to
users
&
others),
preferred
channels,
cri@cal
influencers,
respected
peers
etc…
You
want
to
become
a
domain
expert!
105. Finding
people
Introduc8ons
(ask
everyone
you
know)
• Provide
the
exact
text
that
they
can
copy
and
paste
into
a
tweet
or
email
(They’re
doing
you
a
favor!
Make
it
as
easy
as
possible
for
them)
• Tell
them
exactly
how
you
are
going
to
communicate
with
their
contacts
(They’re
risking
a
bit
of
social
capital
for
you.
Be
very
clear
that
you
won’t
spam
or
annoy
people)
• Tell
them
your
goals
(What
do
you
think
you’ll
get/learn
if
they
make
this
intro
for
you?
People
want
to
know
that
they’re
contribu8ng
to
a
bigger
picture!)
106. Finding
people
AdWords,
Facebook
Ads,
Promoted
Tweets
Summarize
your
idea
and
get
it
in
front
of
people
who
have
expressed
an
interest
in
it
by
having
searched
for
your
keywords
and
clicked
your
ad
–
get
conversa8ons
(and/or
test
hypotheses
using
landing
pages).
hJp://www.cindyalvarez.com/best-‐prac8ces/customer-‐
development-‐interviews-‐how-‐to-‐finding-‐people
107. Finding
people
TwiJer
Search
Look
for
people
who
have
already
discussed
a
similar
product,
problem,
or
solu8on
and
address
a
tweet
directly
to
them:
“@username
Would
love
yr
feedback
on
[product/
problem/solu2on]
–
shd
only
take
2mins
[URL]
thanks!”
108. Finding
people
Google
Alerts
Set
up
Google
Alerts
for
your
product/problem/solu8on
–
when
it
finds
relevant
blog
posts
or
comments,
email
and
ask
for
feedback:
“I
read
your
[post/comment]
about
[product/problem/
solu2on].
I’m
currently
working
on
a
related
idea
and
I
think
your
opinion
would
be
very
valuable
to
me
–
could
you
take
2
minutes
and
check
out
[URL]?
Thank
you
–
I’d
be
happy
to
return
the
favor
any
2me.”
110. Web
Much
faster
to
build
=>
get
quan8ta8ve
feedback
sooner.
Use
a
low-‐fi
landing
page
as
subs8tute
for
–
and
introduc8on
to
–
conversa8ons.
Key
to
drive
traffic
through
AdWords/
Facebook
Ads/Promoted
Tweets
etc.
Build
(design
test),
measure
(run
test)
and
analyze
(evaluate
test)!
113. Reality check!
CustDev
and
ProdDev
teams
meet
and
discuss
the
lessons
learned
from
the
field.
”Here
is
what
we
thought
about
customers
and
their
problems,
here
is
what
we
found
out”
BM
hypotheses,
product
specs
or
both
are
jointly
revised.
114. Test
Solu8on
Hypothesis
1)
”We
believe
you
have
this
important
problem”
–
listen
(check).
2)
Demo
how
your
product
solves
the
problem.
Focusing
on
a
few
key
features.
Include
workflow
story:
”life
before
our
product”
and
”life
aeer
our
product”
–
listen!
3)
”What
would
this
solu8on
need
to
have
for
you
to
purchase
it?”
Listen,
ask
follow
up
ques8ons.
115.
116. Dropbox
• 1st
solu8on
test:
a
three
minute
video
made
in
the
founder’s
apartment
before
a
complete
code
was
wriJen.
– Generated
valuable
feedback
from
visionary
customers.
• 2nd
solu8on
test:
another
video
of
the
product
that
was
posted
on
a
social
network.
– Wai8ng
list
jumped
from
5
000
to
75
000.
• Dropbox’s
original
intent
was
to
build
and
ship
their
product
in
eight
weeks.
• Instead,
they
gathered
feedback
and
launched
a
public
version
18
months
later.
117.
118. Test Product Hypotheses
Aeer
demoing,
ask
about
other
things:
Posi8oning
–
how
do
they
describe
the
product?
Product
category
(new,
exis8ng,
resegmented)
Compe8tors
Features
needed
for
first
version
Preferred
revenue
model
Pricing
Addi8onal
service
needs
Marke8ng
–
how
do
they
find
this
type
of
product?
Purchasing
process
Who
has
a
budget?
etc.
119. Web
Build
out
a
high-‐fidelity
web
page
with
“func8oning”
back-‐end,
based
on
lessons
learned.
“Mechanical
Turk”-‐solu8on.
Ask
for
money:
first
“pre-‐order”
then
charging.
Con8nue
to
test,
measure
and
analyze!
120.
121. Reality check!
CustDev
and
ProdDev
teams
meet
and
discuss
the
lessons
learned.
”Here
is
what
we
thought
about
product
features
and
here
is
what
we
found
out”
BM
hypotheses,
product
specs
or
both
are
again
jointly
revised.
122. 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
for
it?
Can
you
draw
a
day-‐in-‐the-‐life
of
a
customer?
Before
&
aeer
your
product
Can
you
draw
the
org
charts
of
users,
buyers
and
channels?
123. Customer Validation
• Develop
and
sell
MVP
to
passionate
earlyvangelists
• Validate
a
repeatable
sales
roadmap
• Verify
the
business
model
124. Minimal
Viable
Product
Based
on
your
insights
from
Customer
Discovery,
sell
the
smallest
feature
set
customers
are
willing
to
pay
for!
• Purpose
1:
Reduce
wasted
engineering
hours
(and
wasted
code)
• Purpose
2:
Get
something
into
the
hands
of
earlyvangelists
as
soon
as
possible
=>
maximize
learning!
125. The
Apple
I,
Apple’s
first
product,
was
sold
as
an
assembled
circuit
board
and
lacked
basic
features
such
as
a
keyboard,
monitor
and
case.
126. The
owner
of
this
unit
added
a
keyboard
and
a
wooden
case.
hJp://en.wikipedia.org/wiki/Apple_Inc.
127.
128. Minimal
Viable
Product
The
MVP
is
not
the
goal
=
Requires
commitment
to
itera8on!
• “A
complex
system
that
works
is
invariably
found
to
have
evolved
from
a
simple
system
that
worked.”
• “A
complex
system
designed
from
scratch
never
works
and
cannot
be
made
to
work.
You
have
to
start
over,
beginning
with
a
working
simple
system.”
129. Types
of
earlyvangelists
Not
helpful
1.
Has
a
problem
2.
Understands
he
or
she
has
a
problem
3.
Ac8vely
searching
for
a
solu8on
4.
Cobbled
together
an
interim
solu8on
5.
CommiJed
and
can
quickly
fund
Jackpot!
a
solu8on
130. Customer
Valida8on:
Exit
Criteria
Do
you
have
a
proven
sales
roadmap?
Organiza8on
chart?
Influence
map?
No
staffing
un8l
roadmap
is
proven!
Do
you
have
a
set
of
orders
($’s)
of
the
product
valida8ng
the
roadmap?
Is
the
business
model
scalable?
LTV
>
CAC,
Cash
132. If
no
–
Pivot!
•
The
heart
of
Customer
Development
•
Change
without
crisis
(and
without
firing
execu8ves)
“The
idea
that
successful
startups
change
direc2ons
but
stay
grounded
in
what
they've
learned”
139. Customer
Crea8on
• Grow
customers
from
few
to
many
• Comes
aeer
proof
of
sales
• Inject
$’s
for
scale
• This
is
where
you
“cross
the
chasm”
• “Growth
Hacking”
140. Company Building
• (Re)build
company’s
organiza8on
&
management
• Dev.-‐centric
⇒
Mission-‐centric
⇒
Process-‐centric
141. Summary
–
Customer
Development
• Customer
Discovery
Ar8culate
and
Test
your
Business
Model
Hypotheses
• Customer
Valida@on
Sell
your
MVP
and
Validate
your
BM
&
Sales
Roadmap
• Customer
Crea@on
Scale
via
relentless
execu8on
and
fill
the
sales
pipeline
• Company
Building
(Re)build
company’s
organiza8on
&
management
142. Don’t
do
a
Boo!
Concept
Product
Dev.
Alpha/Beta
Launch/
Test
1st
Ship
“We
have
been
too
visionary.
We
wanted
everything
to
be
perfect,
and
we
have
not
had
control
of
costs"
Ernst
Malmsten
(BBC
News,
May
18
2000)
143. Tack!
Henrik
Berglund
Chalmers
University
of
Technology
Center
for
Business
Innova8on
henber@chalmers.se
www.henrikberglund.com
@khberglund
2013-‐02-‐15
143
144. Presenta8on
based
on
by
Steve
Blank
and
Bob
Dorf
More
info:
www.steveblank.com
Buy
the
book:
hJp://www.amazon.com/gp/product/0984999302/
145. Using
slides
from
developed
by
Steve
Blank
and
Bob
Dorf
hJp://www.slideshare.net/sblank/