Customer Development Model: A Brief Presentation

Customer Development ModelThe Four Steps to Epiphany07/25/2013

Product Development Model

Concept/Concept/Seed Seed RoundRound

Product Product Dev.Dev.

Alpha/Alpha/Beta Beta TestTest

Launch/Launch/11stst Ship ShipLaunch/Launch/11stst Ship Ship







Product Development Model











MarketingMarketing

• Create Marcom Create Marcom MaterialsMaterials

• Create Create PositioningPositioning

• Hire PR Hire PR AgencyAgency

• Early BuzzEarly Buzz

• Create DemandCreate Demand• Launch EventLaunch Event• ““Branding”Branding”

SalesSales• Hire Sales VPHire Sales VP• Hire 1Hire 1stst Sales Sales

StaffStaff

• Build Sales Build Sales OrganizationOrganization

Business Business DevelopmentDevelopment

• Hire 1Hire 1stst Business Business DeveloperDeveloper

• Do deals for Do deals for FCS (1FCS (1stst Customer Customer Shipment)Shipment)

Build It And They Will Come

• Only true for life and death products• i.e. Biotech Cancer Cure• Issues are development risks and distribution, not customer acceptance

• Not true for most other products• Software, Consumer, Web• Issues are customer acceptance and market adoption

Chasing The FCS Date

• Sales & Marketing costs are front loaded• focused on execution vs. learning & discovery

• First Customer Shipment becomes the goal• Execution & hiring predicated on business plan hypothesis

• Heavy spending hit if product launch is wrong• Financial projections, assumes all startups are the same

=

You don’t know if you’re wrong until You don’t know if you’re wrong until you’re out of business/moneyyou’re out of business/money

IfIf

Startups Fail from a Lack of Startups Fail from a Lack of customerscustomers

not Product Development Failure not Product Development Failure

Then why do we haveThen why do we have

process to manage product development

no process to manage customer development

An Inexpensive FixAn Inexpensive Fix

Focus on Customers Focus on Customers and Markets from Day and Markets from Day

OneOne

How?How?











Product Development

Customer Development











Product Development

Customer Development

Customer Development: Big Ideas

• Parallel process to Product DevelopmentParallel process to Product Development

• Measurable CheckpointsMeasurable Checkpoints

• Not tied to FCS, but to customer milestonesNot tied to FCS, but to customer milestones

• Notion of Market Types to represent realityNotion of Market Types to represent reality

• Emphasis is on learning & discovery before Emphasis is on learning & discovery before executionexecution

Customer Development Heuristics

• There are no facts inside your building, There are no facts inside your building, so get outsideso get outside

• Develop for the Few, not the ManyDevelop for the Few, not the Many• Earlyvangelists make your companyEarlyvangelists make your company• And are smarter than youAnd are smarter than you

• Focus Groups are for big companies, not Focus Groups are for big companies, not startupsstartups

• The goal for release 1 is the minimum The goal for release 1 is the minimum feature set for earlyvangelistsfeature set for earlyvangelists

Customer Discovery:

Step 1

• Stop selling, start listeningStop selling, start listening• There are no facts inside your building, so There are no facts inside your building, so get outsideget outside

• Test your hypotheses Test your hypotheses • Two are fundamental: problem and product Two are fundamental: problem and product conceptconcept

Customer Validation:

Step 2

• Develop a repeatable sales processDevelop a repeatable sales process

• Only earlyvangelists are crazy enough to Only earlyvangelists are crazy enough to buybuy

Customer Validation:

Step 2

Customer Creation: Step 3

• Creation comes after proof of salesCreation comes after proof of sales• Creation is where you “cross the chasm”Creation is where you “cross the chasm”• It is a strategy not a tacticIt is a strategy not a tactic

Company Building: Step 4

• (Re)build your company’s organization & (Re)build your company’s organization & managementmanagement

• Re look at your missionRe look at your mission

Wrap up

• Parallel process to Product Development

• Hypothesis Testing

• Measurable Checkpoints

• Not tied to FCS, but to customer milestones

• Notion of Market Types to represent reality

• Emphasis is on learning & discovery before execution