Here are some random notes from Steve Blank's course on Entrepreneurship delivered through Coursera.
- Launchpad Central
- Startups are not smaller versions of large companies
- Startups are as much about search as they are about execution
- No startup plan survives the first contact with customers
- Use business model canvas to organize your thoughts and figure out which hypotheses are facts!
- Waterfall development
- Engineering was sort of waterfall development
- Waterfall model assumes that you know the customer's problem in the first place. This does not necessarily apply to startups
- Customer Development
- Startups go out of business because of lack of a customer, not because of the product! Customer Risk!. Hence, the need for customer development!
- Startups are temporary organizations. They are the search for a business model
Four Phases of Customer Development
Customer Discovery (search phase) - Construct your hypothesis and get out of the building and start testing them. Check if others really have the problem that you think they have?
Customer Validation (search phase) - Does your solution match what the customer need? Also called product / market fit
You believe you have a product market fit but you need to get ready to sell. Develop sales roadmap, develop sales collateral, build high fidelity mockups, acquire and activate customers.
Develop positioning. You have a product that you believe customers need. How will you describe it to you customer so that they understand it! How can you say it better?
Customer Creation (execution phase)
- Company Building (execution phase)
- Market Opportunity Analysis
- Identify a customer / market need
- Size the market
- Look at competitors
- Figure out the growth potential
- Total Available Market (TAM)
- How many could have a need for the product?
- Look at analyst reports
- Market research companies
- Look at Google
- Served Available Market (SAM)
- How big is my pie?
- How many are actually capable of being served? (Narrow down the TAM based on actual constraints and truth of the business model)
- How many can actually be reached?
- Target Market
- How many are I am actually going to sell?
- Who am I going to sell?
- How many customers is that?
- How large if they all bought?
- Market Size Summary
- How big can the market be?
- How much of it can we get?
- Market growth rate?
- Is the market mature or in flux?
- Talk to customers and sales channels
- Market size estimates by competitive approximation
- Wall street analyst reports
- Market research firms
- Need to solve a customer need!
- Product / Market fit .... Is what I am building needed by a customer?
- What are the features of the product and what are the problems that the product solves?
- Develop a customer archetype. How a customer "looks" like?
What are the pain points that the product solves?
- Do customers feel better?
- Does it produce cost savings to the customers
- Does it fix bad solutions?
- Does it eliminate risks
- Does it impact social consequences?
- Does it end challenges?
What are the gains to the customer?
- Rank the gains to the customer
Get the MVP out to the customer
- Get a low fidelity app for customer feedback
- Do not demo the app first (i.e. before understanding the customer's need)
- Later build a "high fidelity" app
- Maximizes the time spent learning what is needed
MVP: What is the product / service you are building in your first instance that is delivered to the customers.
- MVP is not a minimal product. It is an iterative nature iterating with the customer need and the MVP
Common mistakes with value proposition
- It may be a feature to someone else's product
What do customers do today? Check for their value proposition?
Types of value proposition
- Technology insight (more efficient, smaller, faster)
- Lower cost, simpler
- Market insight (better distribution, better bundling, better branding)
Lecture 3 - Customer Segments
- Who are your customers and why are they going to buy from you?
- What is the customer demographics? How will you target them? How will you reach them?
- What is the job to be done?
- What is that the customer needs to get done? (physical jobs, emotionals jobs, what is the need being fulfilled?)
- Rank each job according to its significance
- You are mainly guessing on day one. You need to reach out to the customer!
What does the customer gain?
- It would make them happy? (save money, save time, etc??)
- What would delight them?
- Is the problem you are trying to solve actually in the main pain points for the customer?
Need to define the customer archetype or persona
- Existing Market
- Resegmented Market
- New Market
- Clone Market
Type of market affects multiple aspects
- Market size
- Cost of entry
- Launch Type
- Competitive Barriers
- Sales Strategy
- Sales Model
- Sales Cycle
- Chasm Width
- Ongoing capital
Lecture 4 : Channels
How do you want to get your product to the customer?
- Product: Is it a virtual product or a physical product?
- Channel: Is it a direct channel or an indirect (system integrators, aggregators) channel?
Web distribution channel
- Dedicated E-commerce
- App that runs on a mobile device
- 2-step distribution (e.g. via Amazon)
- Aggregator (e.g for insurance ... lendign tree or zappos, social commerce like facebook), living social or groupon
You can't afford to have multiple channels on day one. You need to pick and choose how to invest your resources
- Physical Distribution Channel
- OEM (e.g. graphics supplier to apple or hp)
- System Integrator (e.g. cisco selling to a telephone network provider who creates an entire syste)
- Value Added Reseller (They combine various components from various providers, perhaps add some of their own and then sell it to the end customer)
- Direct sales force
- Web or Online sales
- Distributors (they branch into dealers or retailers)
Focus on Product-Channel fit
- How are we going to make money?
- Direct sales ... List Price = COGS + R&D, Selling + G&A + Profit - Discount Offered
- Indirect Channel Economics ... e.g. Resellers .. List Price = COGS + R&D + Selling Costs (lower vs. direct sales) + Re-seller fee + Profit margin
OEM Channel Economics
Lecture 5 : Customer Relationships
- Customer Relationships: Get, Keep, Grow
- Customer Archetypes
Paid Demand Creation Activities
- Public Relations
- Trade Shows
- Email / Direct Mail
Earned Demand Creation Activities
- Publications in Journals
- Conferences / Speeches
- Loyalty programs
- Referral programs
Lecture 6 : Revenue Model
Direct and ancillary models (ways of making revenue)
- Usage fee
- Subscription fee - fee for continuous access to a service
- Intermediation fee - e.g. in market places (airbnb)
- Fixed price (cost + markup)
- Value price (based on customer segment needs or features)
Volume pricing (10-100 units, 100-1000 units .... discounting based on volume) - Stepped Pricing
Dynamic pricing (negotiated prices)
- Yield management (airlines)
- Real time pricing (stock market)
Common startup mistakes
- Be careful on pricing. Do not price low unless well thought.
Market types and pricing
- Nature of market (pure competition, monopoly, oligoply)
- How will they react
Single and Multi sided markets
- Multi sided (e.g. google)
Key revenue model questions
- What are my customers paying for?
- What capacity do my customers have to pay?
- How will you package your product? (dont fill it up with features!)
- How will you price the offerings?
Market size and share
- How many will you sell? How many can your distribution channel sell?
- How much will the channel cost?
- How much it will cost to acquire a customer?