1. This presentation is made possible by the support of the American People through the United States Agency
for International Development (USAID). The contents of this presentation are the sole responsibility of Rick
Rasmussen and do not necessarily reflect the views of USAID or the United States Government.
Startup Owner’s Manual
The four steps to the epiphany
Based on books from Steve Blank and Bob Dorf

2. Old Product Development Model
Concept / Seed
Round
Product Dev Alpha/Beta Test Launch / 1st Ship

3. What’s Wrong With This?
- Marketing
- Sales
- Engineering
Concept / Seed
Round
Product Dev Alpha/Beta Test Launch / 1st Ship
- Marcom Materials
- Create Positioning
- Hire PR Agency
- Early Buzz
- - Hire Sales VP
- Hire 1st Sales Staff
- Hire first Bus Dev
- Create Demand
- Launch Event
- “Branding”
- Build Sales
Organization
- Do deals for FCS

4. Connect to Customers:
Customer Development is as Important as Product
Development
Concept / Seed
Round
Product Dev Alpha/Beta Test Launch / 1st Ship
Customer
Discovery
Customer
Validation
Customer
Creation
Company
Building

5. Customer Development Philosophy
• Connect with Customers – they’re your life blood
• Get outside the building..!
• Earlyvangelists
– They make your company
• The goal for release 1
– Minimum feature set for Earlyvangelists
– Minimum Viable Product

6. Customer and Product Development Synchronization
Concept / Seed
Round
Product Dev Alpha/Beta Test Launch / 1st Ship
Customer
Discover
y
Customer
Validation
Customer
Creation
Company
Building

7. Customer Development
• Each step has a set of phases
• Plan what you need to learn in writing so everyone knows:
– what they should be doing
– when they should be doing it
– if they succeeded, then what?
– if they need to do more
• These are tests and checklists, not inviolable
commandments

8. This presentation is made possible by the support of the American People through the United States Agency
for International Development (USAID). The contents of this presentation are the sole responsibility of Rick
Rasmussen and do not necessarily reflect the views of USAID or the United States Government.
Customer Discovery
The first step
of the
4 Steps to the Epiphany

9. Timeline
• Existing Market: 1 to 6 months
• Resegmentation: 3 to 12 months
• New Market: 1 to 4 years
Customer
Discover
y
Customer
Validation
Customer
Creation
Company
Building

10. Customer Discovery
• Stop selling, start listening
• Test your two fundamental hypotheses
– The Problem you’re solving (unmet need)
– The Product Concept
Customer
Discover
y
Customer
Validation
Customer
Creation
Company
Building

11. Discovery = Hypothesis Testing
• What are Hypothesis?
• Where do Hypothesis come from?
• Why test them?
• How do you test them?

12. The Customer Discovery Process
To Customer
Validation
Phase 1
Author
Hypothesis
Phase 2
Problem
Hypothesis
Phase 4
Verify, Iterate and
Expand
Phase 3
Product
HypothesisNote:
Resolve Product first
then design product

13. Phase 1: Author Hypothesis
• One-time
writing exercise
• All other time
spent in front of
customers
• Assumes
you’re smart
but guessing
Phase 1
Author
Hypothesis
Phase 2
Problem
Hypothesis
Phase 4
Verify, Iterate
and Expand
Phase 3
Product
Hypothesis

14. Hypothesize each of these Issues
• Customer/Problem
• Product
• Distribution/Pricing
• Demand Creation
• Market Type
• Competition
Product
Customer /
Problem
Distribution /
Pricing
Demand
Creation
Market Type Competition

15. What’s the PROBLEM you’re solving for..?
• Types of customers
• Magnitude of the problem
• Visionaries
• A day in the life of customer
• Organizational Impact
• ROI Justification
• Problem Recognition
• Minimum feature set MVP

16. What’s the PRODUCT that solves the PROBLEM?
• Features
• Benefits
• Product Delivery Schedule
• Intellectual Property
• Total cost of Ownership
• Dependency analysis

17. How do you connect with CUSTOMERS?
• Distribution Model
• Distribution Diagram
• Sales Cycle / Ramp
• Channel strategy
• Pricing (ASP, LTV)
• Customer Organization Map
• Demand Creation

18. Hypotheses for Demand Creation
• How will you?
- Create Virility
- Focus Advertising
- PR
• Who are influencers / recommenders?
• How do competitors create demand?
• Key trade shows?
• Key trends?

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

20. Phase 2: Test and Qualify Problem Hypothesis
• Get out of the
building
• Solve a real problem
• Test the problem
• Become the
customer
Phase 1
Author
Hypothesis
Phase 2
Problem
Hypothesis
Phase 4
Verify, Iterate
and Expand
Phase 3
Product
Hypothesis

21. Test & Qualify Problem Hypothesis
• Friendly First Contacts
• “Problem” Presentation
• Customer Understanding
• Market Knowledge
Friendly first
contacts
“Problem”
Presentation
Customer
Understanding
Market
knowledge

22. Test & Qualify Problem: First Contacts
• Build your Rolodex
• Develop “innovators” list
• Create reference story / sales script
• Schedule Customer Visits

23. 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?

24. Test & Qualify Problem: Market Knowledge
• Get a feel for the “lay of the land”
• Adjacent market players
• Industry influences
• Key Analysts
• Attend Conferences / Tradeshows

25. What Problem?
• You are responding to customer needs
– Are clearly understood by the customer
– If the solution were presented, the customer would purchase
• Where responding to customer needs
– Problem not understood by the customer
– If an eye-opening solution were presented, they would buy
• The customer is complete unaware they need it
– If an eye-opening solution were presented, they would buy
You can build a company on these!

26. Phase 3: Test Product Hypothesis
• First reality check with
product development
• The product hits the
streets
• Lots of customer visits
• More doses of reality
Phase 1
Author
Hypothesis
Phase 2
Problem
Hypothesis
Phase 4
Verify, Iterate
and Expand
Phase 3
Product
Hypothesis

27. Test Product Hypothesis
• First Reality Check
• Product Presentation
• Yet More Customer Visits
• Second Reality Check
First reality
check
Product
Presentation
Yet more
customer visits
Second reality
check

28. 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?

29. Test Product Hypothesis
Product Presentation
• Questionnaire
• Start with Problem Presentation
• Then describe the product
• Demo if you have one

30. Test Product Hypothesis:
Yet More Customer Visits
• Set up more calls
• Validate solution, product and positioning
• Understand customer and organization pain
• Validate Pricing and Budget
• Understand “Whole Product” needs
• Understand Approval Process

31. 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 feature list

32. Phase 4: Verify, Iterate and Expand
• The Problem
• The Product
• The Business
Model
• Iterate or Exit
The Problem The Product
The Business
Model
Iterate or Exit
Phase 1
Author
Hypothesis
Phase 2
Problem
Hypothesis
Phase 4
Verify, Iterate
and Expand
Phase 3
Product
Hypothesis

33. Verify, Iterate & Expand:
The Problem
• Problem Hypothesis Testing
• Magnitude of customer needs
• Rank customer problems
• Summary of customer problem input

34. Verify, Iterate & Expand
The Product
• Product match problem?
• Feature list
• Quantify customer problem
• Summary of customer product input
• Why are you different?
• Review Product Spec

35. Verify, Iterate & Expand
The Business Model
• Customer model
• ROI
• Market Size
• Service
• Development
• Manufacturing
• Customer Acquisition

36. Customer Discovery
Exit Criteria
• What are your customers top problems?
– How much will they pay you 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 and after your product
• Draw the org chart of users and buyers
• Are you ready to move on to Customer Building?