Max Mednik
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Readings and musings

Notes on Steve Blank and the Second Decade of Customer Development

10/13/2011

6 Comments

 
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I had the pleasure of seeing Steve Blank at a LeanLA event at UCLA Anderson last week. It was epic. Everyone in the SoCal tech community came out, and I learned a lot of useful stuff from the creator of the customer development movement himself.

Below are my notes on the talk.

Background
  • Steve did 8 startups in 21 years
  • Retired because wanted to see his kids grow up
  • See his post: Epitaph for an Entrepreneur
Introduction
  • Realized so many processes for product pev but no processes for customer dev so wrote a book about it based on what he learned

What's a startup?
  • 6 types of startups
Lifestyle startup
  • Known customer with known product
  • Pay for their hobby
  • Surfing instructor
Small biz startup
  • Work to feed family
  • Grocery store, plumber
  • Exit criteria: profitable biz, existing team
  • 99.7% of all companies employ 50% of total US workers
  • 5.7 million small businesses with < 500 people
Scalable startups
  • Unknown customers
  • Unknown features
  • TAM > $500M
  • Attract VC because VCs want obscene returns (like the mob)
Search, build, execute
  • Startups search for a scalable biz model
  • Founders are not going to be CEO of big company because they will get fired
  • Large companies execute on biz model
  • In middle, founders depart and professional mgmt comes in
  • When you find a repeatable biz model, VC will then figure out if you will be the executing operating exec or someone else
Buyable startup
  • Goal is to solve problem for internet, mobile, gaming apps
  • Sell $5-50m acquisition
  • Super-angels fund these
His startup definition: a startup is a temporary organization used to search for a repeatable and scalable business model.

Business model found
  • Product-market fit
  • Repeatable sales model
  • Managers hired
Big companies good at sustaining innovation
  • Existing market, known customer
  • Known product features
  • In a large company, a disruptive innovation creates a new division
  • Or external competitor does disruptive innovation
  • Counter disruption by building, partnering, or acquiring IP, talent, product, customers, business
Social entrepreneurship startups
  • Don't want to make money
  • Solve pressing social problems
  • Social enterprise: profitable
  • Social innovation, new strategies
Each of 6 startup types requires different skills
  • Startups are not smaller versions of large companies
  • Large companies execute
  • Startups search
  • Accountants don't run startups
  • Startups require metrics, not accounting
  • Save accounting until you have something to account
  • Startup metrics are only ones that matter for board meetings
  • Customer acquisition cost
  • Viral coefficient
  • Customer lifetime value
  • Average selling price / order size
  • Monthly burn rate
Customer validation versus sales
  • Large company sales are scalable, have price list, revenue plan, data sheets; VPs of sales play golf, have gray hair, have a sales organization that sells in a scalable way
  • Startups look for customer validation
  • Large company execs comfortable with certainty and can't adjust quickly
  • Startups: pricing, features unstable, one-offs, sales done by founders
  • Sales titles the same but the job specs are completely different
  • Startups: agile development, not QA and Tech Pubs
  • Maximize releases per day
  • Continuous learning
  • Minimum feature set
  • Large companies plan, business plans describe knowns, features for line extensions
  • Startups model and test
  • Focus on business model generation
  • No business plan survives contact with customers
Business model: 9 building blocks
  1. Customer segments
  2. Value propositions/product or service
  3. Channels: how deliver
  4. Customer relationships: how will create demand
  5. Revenue streams: what will pay for
  6. Key resources: world class engineers, team
  7. Key activities
  8. Key partners, suppliers
  9. Cost structure

Business model canvas
  • Start with multiple business models and sketches
  • These are just hypotheses

Customer development
  • The founders get out of the building and search for the business model
  • Customer discovery
  • Customer validation (pivot back)
  • Customer creation
  • Company building
Use MVP in first 2 steps
  • Smallest feature set that gets you the most orders/learning/feedback/failure
  • Pivot = change in 1 or more business model components
  • Iteration without crisis
  • Fast, agile, and opportunistic
  • Pivot cycle time matters
  • Minimum feature set with instant customer feedback

Second decade: web, mobile, cloud
  • Distribution channel: physical or virtual
  • Products: physical or virtual
  • Customers often teach you explicitly how to price the product
  • First test customer segment and value prop
Student examples from Stanford Lean Launchpad class
  • Lots of pivots
  • Students blogged progress
  • Photos of interviews
  • Videos posted
  • Surveys posted
  • AB testing results posted
  • Use Lean Launchlab

His slides on slideshare

Miscellaneous

  • Slides on SlideShare
  • Talk to press when your positioning has been stable for several weeks
  • Dysfunctional families the best creators of founding CEOs because used to constant chaos and change
  • Bring order out of chaos in life


Recommended books
  • The Innovator's Dilemma
  • The Innovator's Solution
  • The Lean Startup
  • Business Model Generation
  • The Four Steps to the Epiphany
6 Comments
Matt
10/21/2011 04:09:23 am

Is there a video of the talk?

Thanks Max.

Reply
Max Mednik
10/21/2011 04:21:29 am

Not that I know of....

Reply
moncler uk link
11/21/2011 05:00:40 pm

Bring order out of chaos in life

Reply
Ben Affleck link
2/13/2012 11:19:16 pm

I had the pleasure of seeing Steve Blank at a LeanLA event at UCLA Anderson last week. It was epic. Everyone in the SoCal tech community came out, and I learned a lot of useful stuff from the creator of the customer development movement himself.

Reply
ben
8/29/2012 01:41:04 am

I couldn't find the slides for this talk (http://www.youtube.com/watch?v=6t0t-CXPpyM) on SlideShare.net. Can anyone provide a link to the correct slides please? Thanks.

Reply
ben
8/29/2012 06:14:01 pm

Just to add, http://www.youtube.com/watch?v=6t0t-CXPpyM is the link to the video of this talk - someone asked that above.

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