Commonwealth club 020811
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This document discusses strategies for successful startups. It contrasts the traditional approaches used by startups, such as hiring marketing, sales, business development, and engineering teams early on, with a more effective customer-focused approach. Rather than making assumptions about customer needs and developing products without validation, startups should search for a repeatable business model through customer interaction and iteration. The document advocates focusing first on understanding customer segments, value propositions, and revenue streams before scaling operations.
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Commonwealth club 020811
- 1. Successful Strategies for Products That WinSteve BlankStanford - School of EngineeringU.C. Berkeley - Haas School Of Businesswww.steveblank.comTwitter: sgblank
- 2. A Few Short Stories
- 3. There’s Something Happening Here, What It Is Ain’t Exactly Clear
- 5. High Cost to First ProductStartup Constraints
- 6. High Cost to First ProductLong Time to First ProductStartup Constraints
- 7. High Cost to First ProductLong Time to First ProductStartup ConstraintsSlow Customer Adoption
- 8. High Cost to First ProductLong Time to First ProductStartup ConstraintsSlow Customer AdoptionHigh Startup Failure Rate
- 9. High Cost to First ProductLong Time to First ProductStartup ConstraintsLimited Number of Venture CapitalistsSlow Customer AdoptionHigh Startup Failure Rate
- 10. High Cost to First ProductInnovation Limited to a Few RegionsLong Time to First ProductStartup ConstraintsLimited Number of Venture CapitalistsSlow Customer AdoptionHigh Startup Failure Rate
- 11. High Cost to First ProductInnovation Limited to a Few RegionsLong Time to First ProductStartup ConstraintsLimited Number of Venture CapitalistsSlow Customer AdoptionHigh Startup Failure Rate
- 12. There’s Something Happening Here, What It Is Ain’t Exactly Clear
- 14. Low Cost to 1st ProductEntrepreneurial Explosion
- 15. Low Cost to First ProductShort Time to First ProductEntrepreneurial Explosion
- 16. Low Cost to First ProductShort Time to First ProductEntrepreneurial ExplosionFast Customer Adoption
- 17. Low Cost to First ProductShort Time to First ProductEntrepreneurial ExplosionFast Customer AdoptionLower Startup Failure Rate
- 18. Low Cost to First ProductShort Time to First ProductEntrepreneurial ExplosionLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
- 19. Low Cost to First ProductGlobal InnovationShort Time to First ProductEntrepreneurial ExplosionLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
- 20. Low Cost to First ProductGlobal InnovationShort Time to First ProductEntrepreneurial ExplosionThis talkLarge Pool of Risk CapitalFast Customer Adoption RateLower Startup Failure Rate
- 21. Not All Startups Are Equal
- 22. Small BusinessStartupSmall Business StartupsServe known customer with known product
- 23. Feed the familySmall BusinessStartupExit Criteria Business Model found- Profitable business Existing team< $1M in revenueSmall Business Startupsknown customer known product
- 24. Feed the familySmall BusinessStartup- Business Model found- Profitable business Existing team< $10M in revenueSmall Business Startups5.7 million small businesses in the U.S. <500 employees
- 25. 99.7% of all companies
- 26. ~ 50% of total U.S. workershttp://www.sba.gov/advo/stats/sbfaq.pdf
- 27. Large Company Sustaining InnovationSustaining InnovationTransitionScalableStartupLarge Company Existing Market / Known customer
- 28. Known product feature needsLarge Company Disruptive InnovationNew DivisionTransitionLarge CompanyDisruptive InnovationNew Market
- 29. New tech, customers, channelsLarge Company Disruptive InnovationNew DivisionTransitionLarge CompanyDisruptive InnovationBuild
- 30. Acquire - Talent - Product - Customers - Business
- 31. ScalableStartupLarge CompanyScalable StartupSearchGoal is to solve for: unknown customer and unknown features
- 32. ExecuteSearchScalableStartupLarge CompanyExit Criteria Business model found
- 33. Total Available Market > $500m -$1B
- 34. Can grow to $100m/yearScalable Startup
- 35. ScalableStartupLarge CompanyTotal Available Market > $500m
- 36. Company can grow to $100m/year
- 37. Business model found
- 38. Focused on execution and process
- 39. Typically requires “risk capital”Scalable StartupExecuteSearch In contrast a scalable startup is designed to grow big
- 40. Typically needs risk capital
- 41. What Silicon Valley means when they say “Startup”ScalableStartupLarge CompanyBusiness Model found
- 42. i.e. Product/Market fit- Repeatable sales model- Managers hiredWhat’s A Startup?A Startup is a temporary organization used to search for a scalable and repeatable business model
- 43. What VC’s Don’t Tell You:The TransitionScalableStartupTransitionLarge CompanySearchBuildExecute
- 44. What VC’s Don’t Tell You:The Transition – Founders LeaveScalableStartupTransitionLarge CompanyFounders depart
- 45. CEO = Operating Exec
- 47. Process
- 48. Beginning of scaleScalableStartupTransitionLarge CompanyBusiness Model found
- 49. i.e. Product/Market fit- Repeatable sales model- Managers hiredWhat’s A Startup?You fail if you stay a startup
- 50. Why Startups Are Not Small Versions of A Large Company
- 51. Startups Search and PivotThe Search for the Business ModelScalableStartupTransitionLarge Company Business Model found by founders customer needs/product features found i.e. Product/Market fit Repeatable sales model- Managers hired
- 52. Startups Search, Companies ExecuteThe Execution of the Business ModelThe Search for the Business ModelScalableStartupTransitionLarge Company- Cash-flow breakeven- Profitable- Rapid scale- New Senior Mgmt~ 150 peopleBusiness Model found
- 53. Product/Market fit- Repeatable sales model- Managers hired
- 54. Metrics Versus AccountingThe Execution of the Business ModelScalableStartupTransitionLargeCompanyTraditional AccountingBalance Sheet
- 55. Cash Flow Statement
- 56. Income StatementMetrics Versus AccountingThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyStartup Metrics Customer Acquisition Cost
- 58. Customer Lifetime Value
- 59. Average Selling Price/Order Size
- 60. Monthly burn rate
- 61. etc. Traditional Accounting Balance Sheet
- 62. Cash Flow Statement
- 63. Income StatementCustomer Validation Versus SalesThe Execution of the Business ModelScalableStartupTransitionLargeCompanySalesSales Organization
- 64. Scalable
- 65. Price List/Data Sheets
- 66. Revenue PlanCustomer Validation Versus SalesThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLargeCompanyCustomer Validation Early Adopters
- 68. Not yet repeatable
- 70. Scalable
- 71. Price List/Data Sheets
- 72. Revenue PlanEngineering Versus Agile DevelopmentThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.
- 74. QA
- 75. Tech PubsEngineering Versus Agile DevelopmentThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyEngineering Requirements Docs.
- 77. QA
- 78. Tech PubsAgile Development Continuous Deployment
- 80. Self Organizing Teams
- 81. Minimum Feature Set
- 82. PivotsStartups Model, Companies PlanThe Execution of the Business ModelScalableStartupTransitionLarge CompanyBusiness Plandescribes “knowns”
- 83. features
- 85. business modelStartups Model, Companies PlanThe Search for the Business ModelThe Execution of the Business ModelScalableStartupTransitionLarge CompanyBusiness Model
- 87. customer needs
- 88. feature set
- 89. business model
- 90. found by iteration
- 92. Known features for line extensions
- 94. Known business modelWhy Startups Fail
- 95. More startups fail from a lack of customers than from a failure of product development
- 96. Product Introduction ModelConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship
- 97. Product Introduction ModelThe Leading Cause of Startup DeathConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship
- 98. Product Introduction Model:Two Implicit AssumptionsCustomer Problem: knownConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship Product Features: known
- 99. Tradition – Hire MarketingConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing
- 100. Tradition – Hire SalesConcept/Seed RoundProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Organization
- 101. Hire Sales VP
- 102. Hire 1st Sales StaffSales
- 103. Tradition – Hire Bus DevelopmentConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Channel / Distribution
- 104. Hire Sales VP
- 105. Pick distribution ChannelSalesBusiness Development Hire First Bus Dev
- 106. Do deals for FCSTradition – Hire EngineeringConceptProduct Dev.Alpha/Beta TestLaunch/1st Ship- Create Demand- Launch Event- “Branding”- Hire PR Agency- Early Buzz Create Marcom Materials- Create PositioningMarketing Build Sales Channel / Distribution
- 107. Hire Sales VP
- 108. Pick distribution ChannelSalesBusiness Development Hire First Bus Dev
- 109. Do deals for FCSEngineering Write MRD
- 110. Waterfall
- 111. Q/A
- 112. Tech Pubs
- 113. How Startups Succeed
- 114. No Business Plan survives first contact with customers
- 115. So Search for a Business Model
- 116. The Business Model:Any company can be described in 9 building blocks
- 117. CUSTOMER SEGMENTSwhich customers and users are you serving? which jobs do they really want to get done?
- 118. VALUE PROPOSITIONSwhat are you offering them? what is that getting done for them? do they care?
- 119. CHANNELShow does each customer segment want to be reached? through which interaction points?
- 120. CUSTOMER RELATIONSHIPSwhat relationships are you establishing with each segment? personal? automated? acquisitive? retentive?
- 121. REVENUE STREAMSwhat are customers really willing to pay for? how? are you generating transactional or recurring revenues?
- 122. KEY RESOURCESwhich resources underpin your business model? which assets are essential?
- 123. KEY ACTIVITIESwhich activities do you need to perform well in your business model? what is crucial?66
- 124. KEY PARTNERSwhich partners and suppliers leverage your model? who do you need to rely on?
- 125. COST STRUCTUREwhat is the resulting cost structure? which key elements drive your costs?
- 126. value propositioncustomer relationshipskey activitiescustomer segmentskey partnerscost structurerevenue streamskey resourceschannels69images by JAM
- 127. How Do Startups Search For A Business Model? The Search is called Customer Development
- 128. The Implementation is called Agile DevelopmentThe Lean Startup The Search is called Customer Development
- 129. The Implementation is called Agile DevelopmentCustomer Development
- 130. Customer DevelopmentThe founders^Get Out of the Building
- 131. Product DevelopmentConcept/Bus. PlanProduct Dev.Alpha/Beta TestLaunch/1st Ship+CustomerDevelopmentCompanyBuildingCustomerDiscoveryCustomerValidationCustomer CreationCustomer DevelopmentPivot
- 132. Customer DiscoveryCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationStop selling, start listeningTest your hypothesesContinuous DiscoveryDone by founders
- 134. Market Type
- 135. CompetitionTurning Hypotheses to Facts
- 137. Customer
- 138. User
- 139. PayerTest Hypotheses:ChannelTest Hypotheses:Demand CreationTest Hypotheses:Problem
- 140. Customer
- 141. User
- 143. Market Type
- 145. (Customer)
- 146. (Problem)Test Hypotheses:ChannelTest Hypotheses:Pricing Model / PricingTest Hypotheses:Size of Opportunity/Market
- 147. Validate Business ModelTest Hypotheses:Demand CreationTest Hypotheses:Problem
- 148. Customer
- 149. User
- 150. PayerAgile DevelopmentTest Hypotheses:Product
- 151. Market Type
- 153. (Customer)
- 154. (Problem)Customer Development TeamTest Hypotheses:ChannelTest Hypotheses:Pricing Model / PricingTest Hypotheses:Size of Opportunity/Market
- 155. Validate Business ModelTest Hypotheses:Demand CreationTest Hypotheses:Problem
- 156. Customer
- 157. User
- 158. PayerAgile DevelopmentTest Hypotheses:Product
- 159. Market Type
- 161. (Customer)
- 162. (Problem)Customer Development TeamTest Hypotheses:ChannelTest Hypotheses:Pricing Model / PricingTest Hypotheses:Size of Opportunity/Market
- 163. Validate Business ModelThe PivotThe heart of Customer Development
- 165. Fast, agile and opportunisticWrap UpStartup are not small versions of large companiesTraditional big company planning tools failStartups are built on hypothesesYou need to test each one of themBusiness Models help you keep scoreCustomer Development is how you test hypotheses
- 167. I Write a Blog www.steveblank.com
- 169. Atoms or Bits?Speed of Experimentation
- 170. Atoms or Bits?Access to customers changes dramaticallyThe product can be “bits” or physicalThe sales channel can be “web” or physicalSpeed of experimentation increases and cost decreases when both are bits
- 171. Distribution Channel – Bits or Atoms?
- 172. The Product - Bits vs. Atoms
- 173. Product & Channel are Bits
- 174. Web 2.0 - Product & Channel are Bits
- 175. Product is Bits but Channel is People
- 177. Physical Products Sold Over the Web
- 179. The Factories May be in China
- 180. We Still Make Things that Need Salespeople
- 182. Silicon Valley - A Happy AccidentCold war research in microwaves/electronics at StanfordCold war military funding drives Stanford spinouts in microwaves for the defense industry in the 1950’sStanford Engineering Dean encourages startup cultureA Bell Labs researcher starts his semiconductor company next to Stanford in in 1956 which led to…the wave of semiconductor startups in the 1960’s/70’sthe emergence of venture capital as an industrythe personal computer revolution in 1980’sthe rise of the Internet in the 1990’s and finallythe internet commerce applications of the 21st century.