Bus model and cust dev jan 2013

1. Business Models & Customer Development www.steveblank.com @ sgblank Teaching Points

2. Business Model Canvas Why? How?

3. Why? This Class Teaching Point

4. The Search for a Path 1602 - 1908

5. © 2012 Steve Blank

6. The MBA the Path to Business Execution

7. © 2012 Steve Blank

8. Business Schools Teaching Point

9. Business Schools Made the American Century Embraced entrepreneurship Myles Mace HBS 1947 , Stanford 1953 But as an activity you execute Now embracing search Teaching Point

10. What We Used to Believe

11. Startups are a Smaller Version of a Large Company

12. What We Now Know

13. Startups Search Companies Execute

14. Why? Startups are Not Smaller Versions of a Large Company Search versus Execution Teaching Point

15. Startups versus existing companies That startups begin with a series of unknowns ( mostly ) They Search That existing companies deal with execution of knowns ( mostly ) They Execute The insight is that management tools built to execute do not work in search Early stage ventures need their own tools Teaching Point

16. What’s a Startup?

17. © 2012 Steve Blank

18. Why? Why a definition of a startup? Teaching Point

19. What’s A Startup A temporary organization designed to search for a repeatable and scalable business model This is what the class is about It’s a definition filled with action Each word has meaning Temporary Search Repeatable Scalable Business Model Teaching Point

20. What We Used to Believe Strategy

21. Start With an Operating Plan and Financial Model

22. What We Now Know Strategy

23. Planning comes before the plan

24. Business Models

25. Why? Business Model versus Business Plan Teaching Point

26. Business Model versus Business Plan We are not saying never to a business plan We are saying, “ not first ” Plans are static Models are dynamic Planning comes before the plan Teaching Point

27. What We Used to Believe Process

28. Product Introduction Model Concept/ Seed Round Product Dev. Alpha/Beta Test Launch/ 1 st Ship

29. Tradition – Hire Marketing Concept/ Seed Round Product Dev. Alpha/Beta Test Launch/ 1 st Ship Create Marcom Materials - Create Positioning - Hire PR Agency - Early Buzz - Create Demand - Launch Event - “Branding” Marketing

30. Tradition – Hire Sales Concept/ Seed Round Product Dev. Alpha/Beta Test Launch/ 1 st Ship Create Marcom Materials - Create Positioning - Hire PR Agency - Early Buzz - Create Demand - Launch Event - “Branding” Build Sales Organization Marketing Sales Hire Sales VP Hire 1 st Sales Staff

31. Tradition – Hire Bus Development Concept Product Dev. Alpha/Beta Test Launch/ 1 st Ship Create Marcom Materials - Create Positioning - Hire PR Agency - Early Buzz - Create Demand - Launch Event - “Branding” Hire Sales VP Pick distribution Channel Build Sales Channel / Distribution Marketing Sales Hire First Bus Dev Do deals for FCS Business Development

32. Tradition – Hire Engineering Concept Product Dev. Alpha/Beta Test Launch/ 1 st Ship Create Marcom Materials - Create Positioning - Hire PR Agency - Early Buzz - Create Demand - Launch Event - “Branding” Hire Sales VP Pick distribution Channel Build Sales Channel / Distribution Marketing Sales Hire First Bus Dev Do deals for FCS Business Development Engineering Write MRD Waterfall Q/A Tech Pubs

33. Customer Problem : known Product Features : known Waterfall / Product Management Execution on Two “Knowns ” Requirements Design Implementation Verification Maintenance Source: Eric Ries http://startuplessonslearned.blogspot.com

34. What We Now Know Process

35. More startups fail from a lack of customers than from a failure of product development

36. Customer Development

37. Agile Development

38. +

39. Why? Customer & Agile Development versus Product Launch and Waterfall Teaching Point

40. Customer & Agile Development versus Product Launch and Waterfall Product Launch process assumes hypotheses are facts Waterfall development assumes you know: the customer problem Entire solution Teaching Point

41. What We Used to Believe Organization

42. Hire and Build a Functional Organization

43. What We Now Know Organization

44. Founders run a Customer Development Team No sales, marketing and business development

45. Why? Functional Organizations Teaching Point

46. Functional Organizations An easy trap for startups Large companies have VP’s of Sales, Marketing & Business Development I guess we should too Titles are the same, functions are radically different Teaching Point

47. How? Business Model Canvas Teaching Point

48. The Canvas in Class Forces students to articulate all 9 parts of a business model ( static ) Used to keep score of customer development progress ( dynamic ) Allows visualization of the entrepreneurial process 9 boxes provides a convenient tempo for weekly classes Different from Osterwalder's original intent - strategy Teaching Point

49. What’s a Business Model?

50. Value Proposition What Are You Building and For Who?

51. Customer Segments Who Are They? Why Would They Buy?

52. Multiple Customer Segments Teaching Point

53. Multiple Customer Segments Might have multiple segments of users Might have users and payers Might have 5 or 6 different customers Medical devices have doctors, hospitals, patient, insurance company, FDA, etc. For every customer segment you need: Value proposition Revenue model And may have unique channels, cust relationships, etc. Teaching Point

54. Product/Market Fit Value Proposition + Customer Segment Teaching Point

55. Product/Market Fit Does the Value Proposition MVP match the Customer Segment Archetype ? Teaching Point

56. Channels How does your Product Get to Customers?

57. Customer Relationships How do you Get, Keep and Grow Customers?

58. We define Customer Relationships as Get, Keep and Grow Different and more actionable than Osterwalder Teaching Point

59. Teaching Point

60. Revenue Streams How do you Make Money?

61. Key Resources What are your most important Assets?

62. Key Partners Who are your Partners and Suppliers?

63. Key Activities What’s Most Important for the Business?

64. Cost Structure What are the Costs and Expenses

65. How? Business Model Canvas Components Teaching Point

66. Canvas Components We overview all the 9 boxes in the first lecture Subsequent classes detail each of canvas components But that’s a sleight of hand What we are really doing is getting the students to talk to 100 customers in a quarter The class is not about the lectures It’s about the work the students do outside the building Teaching Point

67. But, Realize They’re Hypotheses

68. 9 Guesses Guess Guess Guess Guess Guess Guess Guess Guess Guess

69. How? Customer Development Teaching Point

70. Customer Development While so far the class looked like an easy business model canvas class … The class is actually all about Customer Development ! Drawing the canvas hypotheses are easy Testing them is really, really hard Just like a startup Teaching Point

71. Customer Development Test the Problem, Then the Solution

72. How? Test the problem, then the solution Teaching Point

73. Test the Problem then the Solution Customer development is about hypothesis testing It’s why scientists do great in this class What are you testing? All the nice, neat assumptions in the business model canvas First, you test basic assumptions Then, you test the solution itself Customer discovery and validation is a fairly rigorous process Teaching Point

74. Customer Development The Minimum Viable Product

75. How? Build the minimum viable product Teaching Point

76. Build the minimum viable product This is easy if you use Agile development You build your product iteratively and incrementally The goal is feedback, learning, insight, orders, etc. with the minimum feature set Teaching Point

77. Customer Development The Pivot

78. How? The Pivot Teaching Point

79. The Pivot A core concept of Customer Development In the past a failure to make “the plan” meant a failure of an individual to execute In the past we fixed problems and changed strategies by firing executives Now we first fire the plan A pivot is a substantive change in one or more business model canvas components An iteration is a minor change in one or more business model canvas components Teaching Point

80. Customer Development Done By the Founders

81. Customer Development Canvas to Keep Score

82. How? Keeping Score with the Canvas Teaching Point

83. Keeping Score with the Canvas A core concept of the class Weekly updates of the canvas allow the teaching team to visually see customer development process Visualize the canvas extending in the Z-axis That axis represents the customer development process over time Teaching Point

84. Customer Development Details

85. Customer Development is how you search for the model

86. Customer Development Physical vs. Web/Mobile Products and Channels

87. Why Do We Do This?

88. Make Your Lives Extraordinary