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Tagged Steve Blank

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Steve Blank at San Diego Tech Founders

At long last, here's the video from Steve Blank's presentation last month.

Steve Blank speaks to San Diego Tech Founders from Brant Cooper on Vimeo.

Contents:
00:00 My Intro
03:17 Why Accountants Don't Run Startups
- Old constraints on startups
- Entrepreneurial explosion
- Startups vs Small Businesses vs Large Businesses
- IBM example of big company disruptive innovation
- What did my income statement say in month 1?
- "You've just washed ashore on an a deserted island with a knife in your mouth and a loincloth."
- Searching for a business model, not a business plan
- Customer Development
58:26 Atoms or Bits (New Material)
- Physical vs Online products
- History of Lean
1:03:26 Sloan vs Durant
1:08:41 Q&A
1:29:50 My Conclusion

Be sure to come check out entrepreneur turned investor Mark Suster talk to San Diego Tech Founders March 31.

=> Startups RSVP here.

=> Investors, Service Providers, Professionals RSVP here.

The #CustDev Whiteboard

Steve Blank and Alex Osterwalder have combined their respective methodologies, Customer Development and Business Model Generation, into a powerful business model generation and testing framework.  There are several good sources for how these two mesh, including this Jan post on Osterwalder's blog, here and most recently, in Blank's SXSW presentation:

Blank's Customer Development is critical, otherwise speculating what comprises your startup's business model is just another academic exercise.  Arguably, one could easily waste as much time documenting assumptions on your business model canvas as documenting them inside a 40 page business plan.  The canvas exposes your hypotthesis and customer development tests them.  It's a laudable ambition to document and test all of your business model canvas components.

But how much is necessary to get going?

All building blocks are not created equal.  I believe there's a natural progression towards figuring out your business model and many blocks are directly dependent on prior blocks.  Is it worth the time to document 2nd or 3rd tier blocks before establishing the reality of 1st tier?  The answer, of course, depends on you and your business.  It doesn't hurt to go as far as you can at the start, unless the activity inhibits you from getting started, i.e., "getting out of the building."

To use a rather simplistic example, you might presume that your customer is an enterprise-sized business that requires a field sales force and partnerships with highly technical systems integrators.  What if your customer ends up being a medium-sized business that requires SaaS product distribution?  Early customer development might very well point you down the correct path from the outset.  Some business model components flow naturally from validated core hypotheses.

The real dilemma in my mind is, what do you test first? The key to getting started is to nail the validate of the core hypotheses: Customer, Problem, Solution.

Go to the #CustDev White Board

#CustDev whiteboard imageIn our book, The Entrepreneur's Guide to Customer Development, Patrick Vlaskovits and I developed a white board exercise to help think through business model risk in order to determine what to test first.  The key components are:

=> draw the ecosystem around your business as you imagine it, including partners, distributors, customers.

=> determine which are mission critical -- in other words, can you get going without any?  Which are absolutely necessary?

=> state the value proposition for each mission critical participant -- what determines whether or not they join the ecosystem?

=> list the minimum product functionality necessary to get entities to participate.

=> prioritize the risks (technical and market) based on the above.

Ultimately, what you trying to prioritize is: what's the quickest way to fail your business model. The "value path" of testing your business model runs through testing the the core value proposition of each of your mission critical ecosystem entities.  Easiest to test means:  what you can test in the shortest time frame.

If building a landing page and driving traffic to it has the potential of killing your present business model hypotheses, then it's a legitimate "intermediate MVP" and worth testing.  But be careful.  Are you sure you're not testing your ability to drive some amount of traffic or your positioning?  If a 3rd party API doesn't provide the hooks you need to develop a critical piece of technology and therefore your business model fails, maybe that's what you test first.

Documenting the building blocks of your business model = good.  Using the #CustDev White Board exercise in conjunction helps you determine what to document and test first.

How do you determine what to test first?

Cement Mixers and Customer Development

Brant and I have finally finished our book, The Entrepreneur's Guide to Customer Development:  A cheat sheet to The Four Steps to the Epiphany, within which we have included interviews from successful entrepreneurs in order see if their startup experiences mesh well with Brant's and my interpretation of and experiences with Customer Development.  (I won't beat around the bush, while our interviewees may not have called it Customer Development per se, they certainly practiced elements of what Steve Blank has codified as Customer Development in almost all but name.  And without exception, they applied fierce and relentless skepticism to all aspects of their businesses.)

We've had the pleasure of speaking with Jeff Smith (Smule), Fabrice Grinda (Zyngy, OLX), Ranjith Kumaran (YouSendIt), and Bruce Moeller (DriveCam).  We've condensed their experiences into case studies which are featured in the book.  However, there was so much great material, we simply could not include all of it.  Therefore, I'd like to take this opportunity to share an insight that came out of our interview with Bruce that we found quite edifying, one that goes to the heart of the Customer Development methodologies.

Background:  DriveCam uses video technology, expert analysis and driver coaching to reduce claims costs and saves lives by improving the way people drive.  From the DriveCam website:

DriveCam's palm-sized, exception based video event recorder is mounted on the windshield behind the rearview mirror and captures sights and sounds inside and outside the vehicle. Exceptional forces such as hard braking, swerving, collision, etc. cause the recorder to save critical seconds of audio and video footage immediately before and after the triggered event.

[Emphasis mine.]

Bruce shared an interesting story about how assumptions made in the lab, based on data and "sophisticated" math undertaken by "sophisticated" analysts, fared in the real world of cement mixer trucks.  Remember, the DriveCam device's core feature is to record audio and video when triggered by exceptional forces such as swerving.  When DriveCam went after the cement mixer truck market, they calibrated their devices based on the assumption that cement mixers would flip only if subject to a large sideways g force.

Seems reasonable, right?  After all, cement mixers are big, heavy trucks, and not to mention, filled with, well, the eponymous cement.

Turns out, not so reasonable after all.

Bruce recounted that when one of their first customer's cement mixer trucks flipped over, the DriveCam device had failed to record what had occurred and what may have caused the accident -- the customer was irate and Bruce was more than a little embarrassed.

Turns out that (outside of the lab!) cement mixers trucks can flip at very low speeds (1-2 mph) while at normal g forces when encountering things in the chaos of the real world, very ordinary and common things such as soft road shoulders.  Bruce's customer knew this and was counting on Bruce and the DriveCam team to know this as well.

Lesson learned:

"My philosophy is you don't know what you don't know and if you were ever right in a given moment, and if your guesses were ever true it would be serendipitous.  You must attack your assumptions at all times. My basic tenet: question yourself, because the world is ever-changing.”

-Bruce Moeller

For more insights that speak directly to the Customer Development processes, please purchase The Entrepreneur's Guide to Customer Development:  A cheat sheet to The Four Steps to the Epiphany.

Seller Beware: Customers Have Their Own Agenda

Note: One of the more difficult aspects of customer development is understanding when to listen to customers/prospects and when not to. When should you rely on intuition and when is the customer right, if not always? Steve Blank's oft quoted clarion call to "get out of the building" demands that you listen to customers, but not that you necessarily heed what they say! You may have the wrong customer for your business. You may have the right customer who emphasizes the wrong root cause to a problem. As I tweeted the other day:

maybe your product focus should be what your current customers don't ask for or what your lost customers wanted.

I invited "CustDevGuy," author of the "Fake Screenshot/LOI" customer development case study, to write up a continuation of that story, which illustrates an easy trap to fall into when interacting with potential customers. Here's his story:

--------------------------------------------------------

Hi there.

This guest-post is a follow-up to my original Case Study posted at the Lean Startup Circle.  (Thanks Brant for lending me your digital soapbox.)  I wanted to further flesh out an important insight that came out of conversations about my ongoing Customer Development experiences as well as address a common fallacy that keeps popping up in conversations and email threads with regards to what Customer Development is and isn't.  The fallacy being that customers will simply hand over the Holy Grail (read: Product/Market Fit) if you go and chat a bit with them.
Continue reading “Seller Beware: Customers Have Their Own Agenda” »

Who owns the vision?

I love the work Eric Ries is doing with Lean Startup.  (IMO, coupled with an investment model where funds are predicated on implementation of lean startup principles and achieving specific customer development milestones #leanstartup could revolutionize the start-up and investment landscapes.)

Words are powerful and and the intent of catchy phrases can be lost when removed from their original context.  I brought this up before a few weeks back, when the "Fail Fast" meme was cruising through Twitter and among some cheerleaders, it seems, failing itself had become the best means to success, as if it were the end objective, as if tripping your way to finish line will ensure you are the winner.

So it goes, IMO, with this quote about the customer's vision:

Early customers are often more visionary than the startup they work with for that product.

I'm not so sure.  Continue reading “Who owns the vision?” »

Customer Development Gut Checks

Through the evolution of their start-ups, entrepreneurs will face many  inflection points, at which decisions made or not made will determine their future.   The painful truth is that a wrong turn may lead to its demise, whereas a right turn leads to another inflection point.

Relevant to ongoing discussions about Blank's "Customer Development," I wish to highlight a few of these "inflection points."

The first step in Blank's model is "Customer Discovery."   This step seeks to answer this fundamental question: Continue reading “Customer Development Gut Checks” »

Customer Development and Start-up Models

I am sensing marked uptake on the concept of conducting serious customer research in order to jump start high tech start-ups.  It's about time. There's definitely buzz building around Steve Blank's customer development methodology.  Ego dictates that whatever you're thinking about must be what the world is thinking about and to that, I plead guilty.

But I wrote a post about an iterative, process-oriented approach to high-tech sales and marketing on 2.9.9.   Shortly thereafter, Andrew Beinbrink, CEO of the interesting San Diego start-up SportsTV, introduced me to Seal Ellis who introduced me to Steven Blank's book The Four Steps to the Epiphany, which sounded an awful lot like what I had blogged about.  Whew.  Oh, and Steve's even got a new blog.
Continue reading “Customer Development and Start-up Models” »

Lean Start-up Part III

A little background is in order.

"Lean Start-up" is a phrase, I believe, coined by Eric Ries of Lessons Learned. This is a great blog and well worth you spending time with it. In a nutshell, a Lean Start-up is one that combines fast-release, iterative development methodologies (e.g., Agile) with Steve Blank's "Customer Development" concepts.  The objective is to efficiently create customer-driven products quickly and with a low burn rate.

Though I believe these principles are likely to fare well for software and even hardware products, it appears that most of those implementing the Lean Start-up are Internet-based products.   Without getting too deep into the specific practices, Internet products offer several advantages:
Continue reading “Lean Start-up Part III” »

Lean Start-up: Part 1

I have a great opportunity to test out some theories and to follow the principles advocated by the likes of Eric Ries, Andrew Chen, Sean O'Malley, Dave McClure and Sean Ellis.  I thought I'd keep a running blog on our progress.

I won't name the company until the time is right, but I'll tell you a little about it:

- Company is self-funded.  This is a good thing.  Not only is it a bad time to seek funding, it's a great time to prove the business model prior to funding.

- Product is barely started.  This is a good thing, as well.   This should enable us to run customer development principles in parallel with development.  The days of figuring out who your customers are after product completion (often after funding) hopefully will soon be over.

- Team of 3:  vision guy, domain expert and business development (CEO); developer; marketing guy (me, FWIW).

- Business plan assumes a Freemium model, with additional revenue from highly targeted advertising, lead selling, and a la carte purchases.

Week 1 Tasks:

  • Document Business Hypotheses - market segment, customers, pain, acquisition methods, etc.
  • Identify 100 potential users to interview.
  • Identify 50 potential partners to interview.
  • Create interview process and objectives.
  • Create MRD based on "vision."
  • Identify key metrics for proving model.
  • Prepare blog launch using company domain.

Comments welcome

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