1. Intro to
Customer
Development
Class 4, UCN, Antofagasta, 2011
1

2. Outline
Steve Blank
How it has been done
Product / Customer Development
Crossing the chasm
Customer Discovery
Customer Validation
Business Canvas

3. Steve Blank

4. Bases

5. How it was done
• High burn rate
• Swing for the fences
• Full management teams
• Assume customer is known
• Assume features are known
• Assumes growth is by execution

6. Crossing the Chasm: Moore

7. Concept Product
Alpha/Beta Launch /
/Seed Developm
Test 1st Ship.
Round ent
Branding
Positioning Expensive Launch
Marketing Create PR Event
Materials Early Buzz Create
Demand
Build
Hire Sales Organizati
Sales Boss on
Hire Staff Work
Leads
Close 1st
Hire Biz
Biz Dev Ship.
Dev Boss
Deals

8. Problem: Expensive Failure
Built and they will come syndrome
Expenditure is loaded upfront (1st Shipping):
Product development (p.e. design, software dev)
Infrastructure (p.e. warehusing, server clusters)
Sales & marketing departments
Hiring and executing according to “plan”
“now we need an API to integrate with...”
Hard to steer a cruise ship

9. Fix?
Focus on Develop Customers not only the Product
Design for customers
Customers from day One
finaly, match Product to Customer Development

10. Pair Product to Customer
Development
Concept Product
Alpha/Beta Launch /
/Seed Developm
Test 1st Ship
Round ent

11. Concept
/Seed
Product
Developm
ent
Solution Know
Alpha/Beta
Test
Problem Know
Launch /
1st Ship

13. SCRUM Practices
Product Backlog
Current prioritized list of work to be done
Effort Estimation
iterative on Backlog items
Sprint
30 day / 15 days iteration
Sprint Planning Meeting
decide goals for next sprint and how team will implement
Sprint Backlog
Product Backlog items for sprint
Daily Scrum meeting
what doing, what will do, and any problems
Sprint Review Meeting
present results of sprin

14.  Split-test (A/B) experimentation
 Extremely rapid deployment
 Continuous deployment, if possible
 Deploy when core ready
 Just-in-time architecture and infrastructure
 Incremental investment for incremental benefit
 Five why's – ask five times to solve problems
 Use defects to drive infrastructure investments
 E.g. Vendder had to CDN before coming to Chile.

15. Customer Development Keys
Parallel process to Product Development
Measurable Checkpoints
Not tied to FCS, but to customer milestones
Notion of Market Types to represent reality
Emphasis is on learning & discovery before execution

16. Search for a Biz
Stop selling, start listening
There are no facts inside your building, so get outside
Test your hypotheses
Two are fundamental: problem and product concept
Continuos Discovery
Done by Founders

17. Customer Discovery Cicle

18. Phase 0: Get buy-in
Convince your-self
Convince others
Gather a team
Mission statement & values

19. Phase 1: State Hypoteses
Product
Customer/Problem
Distribution/Pricing
Demand Creation
Market Type
Competition

20. Customer Discovery Cicle

21. Product Hypoteses
Features
Benefits
Product Delivery Schedule
Intellectual Property
Total Cost of Ownership
Dependency Analysis

22. Customer Discovery Cicle

23. Customer/Problem Hypothese
Types of Customers/Archetypes
Magnitude of the problem
Visionaries & Early Evangelists
A Day in the Life of a customer
Organizational impact
ROI Justification
Problem Recognition
Minimum Feature Set

24. Early Evangelist

25. Distribution / Pricing
Hypotheses
Distribution Model
Distribution Diagram
Sales Cycle/Ramp
Channel strategy
Pricing (ASP, LTV)
Customer Organization Map
Demand Creation

26. Demand Creation Hypotheses
How do competitors create demand?
How will you?
Dave McClure’s AARGH model
Who are influencers/recommendors?
Key trade shows?
Key trends?
Start assembling advisory boar

27. Exit for Customer Discovery
 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?
 Draw a day-in-the-life of a customer
 before & after your product
 Draw the org chart of users & buyers

30. CUSTOMER SEGMENTS
which customers and users are you serving?
which jobs do they really want to get done?

31. VALUE PROPOSITIONS
what are you offering them? what is that
getting done for them? do they care?

32. CHANNELS
how does each customer segment want to be
reached? through which interaction points?

33. CUSTOMER RELATIONSHIPS
what relationships are you establishing with each
segment? personal? automated? acquisitive? retentive?

34. REVENUE STREAMS
what are customers really willing to pay for? how?
are you generating transactional or recurring
revenues?

35. KEY RESOURCES
which resources underpin your business model?
which assets are essential?

36. KEY ACTIVITIES
which activities do you need to perform well in
your business model? what is crucial?
36

37. KEY PARTNERS
which partners and suppliers leverage your
model?
who do you need to rely on?

38. COST STRUCTURE
what is the resulting cost structure?
which key elements drive your costs?

39. key value customer
activities proposition relationships
key customer
partners segments
cost revenue
structure key streams
resources channels
39
images by JAM

40. 4
ÁREAS
Cómo Qué Quién
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41. 9 Guesses
Gues
Gues Gues
s Gues
s s
s
Gues
s Gues
Gues
s s
Gues Gues
s s

42. Turning Hypotheses to Facts
Test
Hypotheses:
•
Product
•
Market
Type
•
Competition

43. Test
Hypotheses
:
•
Problem
•
Customer
•
User
•
Payer

44. Test
Hypotheses:
•
Channel

45. Test
Hypotheses: Test
Test
•
Demand Hypotheses
Test Hypotheses: Creation :
Hypotheses: •
Product •
Problem
•
Channel •
Market Type •
Customer
•
(Customer) •
Competitive •
User
•
(Problem)
•
Payer
Test Hypotheses:
•
Channel
Test Hypotheses: Test Hypotheses:
•
Size of Opportunity/Market •
Pricing Model / Pricing
•
Validate Business Model

46. Test
Hypotheses: Test
Agile Demand
Test
•
Hypotheses
Developme Creation
Test Hypotheses: :
nt
Hypotheses: •
Product •
Problem
•
Channel •
Market Type •
Customer
•
(Customer) •
Competitive •
User
•
(Problem)
•
Payer
Customer
Developme Test Hypotheses:
nt Team •
Channel
Test Hypotheses: Test Hypotheses:
•
Size of Opportunity/Market •
Pricing Model / Pricing
•
Validate Business Model

47. Test
Hypotheses: Test
Agile Demand
Test
•
Hypotheses
Developme Creation
Test Hypotheses: :
nt
Hypotheses: •
Product •
Problem
•
Channel •
Market Type •
Customer
•
(Customer) •
Competitive •
User
•
(Problem)
•
Payer
Customer
Developme Test Hypotheses:
nt Team •
Channel
Test Hypotheses: Test Hypotheses:
•
Size of Opportunity/Market •
Pricing Model / Pricing
•
Validate Business Model

48. The Pivot
•
The heart of Customer
Development
•
Iteration without crisis
•
Fast, agile and opportunistic

50. Extra

52. Startup Metrics for Pirates
• Acquisition: users come to site from various channels
• Activation: users enjoy 1st visit: "happy” experience
• Retention: users come back, visit site multiple times
• Referral: users like product enough to refer others
• Revenue: users conduct some monetization behavior
AARRR
!
(note: If you’re in a hurry,
Google “Startup Metrics” &
watch 5m video)

53. AARRR!: 5-Step Startup Metrics Model
SEO Campaigns,
SEM PR Contests Biz
Social
Network Dev
s Blogs Affiliate
O
Q
N
U
A
C
S
T
I
I
I
Apps & s Direct,
Widgets Email Tel, TV
Viral
Domain
Loops
s
Emails & Ac Homepage / Emails &
Alerts tiv Landing Page
widgets
RE
LRF
ati
AE
R
Product
on
Blogs, RSS, Affiliates,
News Feeds Features Contests
Ret
enti
Biz Dev
on
Ads, Lead Gen,
Re
System Events & Subscriptions,
ve
Time-based
ECommerce
nu
Features
e
Website.com $$
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