The document provides an overview of Steve Blank's teachings on business models, customer development, and how startups differ from large companies. It discusses that startups search for a repeatable business model through customer development, while large companies focus on execution. Key points include: - Startups are temporary organizations that search for a business model, while companies execute known business plans. - The business model canvas is used to visualize hypotheses about the problem and solution that are then tested through customer development. - Customer development involves building minimum viable products and pivoting based on feedback, rather than following traditional product launch processes. - Founders run customer development teams rather than hiring functional roles like sales and marketing early on.

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

2. Business Model Canvas
Why?
How?

3. TEACHING POINT
Why?
This Class

4. The Search for a Path
1602 - 1908

5. © 2012 Steve Blank

7. The MBA
the Path to Business Execution

8. © 2012 Steve Blank

9. TEACHING POINT
Business Schools

10. 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

11. What We Used to Believe

12. Startups are a Smaller Version
of a Large Company

13. What We Now Know

14. Startups Search
Companies Execute

15. TEACHING POINT
Why?
Startups are Not Smaller Versions of a
Large Company
Search versus Execution

16. 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

17. What’s a Startup?

18. © 2012 Steve Blank

19. TEACHING POINT
Why?
Why a definition of a startup?

20. 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

21. What We Used to Believe
Strategy

22. Start With an Operating Plan
and Financial Model

23. What We Now Know
Strategy

24. Planning comes before the plan

25. Business Models

27. TEACHING POINT
Why?
Business Model versus Business Plan

28. 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

29. What We Used to Believe
Process

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

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

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

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

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

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

36. What We Now Know
Process

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

38. Customer Development

39. Agile Development

40. +

41. TEACHING POINT
Why?
Customer & Agile Development versus
Product Launch and Waterfall

42. 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

43. What We Used to Believe
Organization

44. Hire and Build a
Functional Organization

47. What We Now Know
Organization

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

50. TEACHING POINT
Why?
Functional Organizations

51. 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

52. TEACHING POINT
How?
Business Model Canvas

53. 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

54. What’s a Business Model?

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

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

60. TEACHING POINT
Multiple Customer Segments

61. 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

62. TEACHING POINT
Product/Market Fit
Value Proposition + Customer Segment

63. Product/Market Fit
Does the Value Proposition MVP match
the Customer Segment Archetype?
TEACHING POINT

64. Channels
How does your Product
Get to Customers?

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

68. TEACHING POINT
We define Customer Relationships
as Get, Keep and Grow
Different and more actionable than
Osterwalder

69. TEACHING POINT

70. Revenue Streams
How do you Make Money?

72. Key Resources
What are your most important Assets?

74. Key Partners
Who are your Partners and Suppliers?

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

78. Cost Structure
What are the Costs and Expenses

80. TEACHING POINT
How?
Business Model Canvas Components

81. 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

82. But,
Realize They’re Hypotheses

83. 9 Guesses
Guess
Guess Guess
Guess
Guess
Guess Guess
Guess Guess

86. TEACHING POINT
How?
Customer Development

87. 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

88. Customer Development
Test the Problem, Then the Solution

91. TEACHING POINT
How?
Test the problem, then the solution

92. 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

93. Customer Development
The Minimum Viable Product

95. TEACHING POINT
How?
Build the minimum viable product

96. 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

97. Customer Development
The Pivot

99. TEACHING POINT
How?
The Pivot

100. 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

101. Customer Development
Done By the Founders

103. Customer Development
Canvas to Keep Score

105. TEACHING POINT
How?
Keeping Score with the Canvas

106. 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

107. Customer Development
Details

108. Customer Development is
how you search for the model

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

115. Why Do We Do This?

117. Make Your Lives Extraordinary