ENTR Test 1 Customer Development

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Value can be created simply by helping a customer get certain jobs done.

"Getting the job done"

a product may stand out because of superior design (especially in the fashion and consumer electronics industries).

Design

describes the most important things a company must do to make its business model work

Key Activities

Some Value Propositions satisfy an entirely new set of needs that customers previously didn't perceive because there was no similar offering.

Newness

ideas come In theory:

Patent Office Gazette, Government (NASA, CERN), Technology Transfer, Trade Shows, Doctoral Dissertations, Invention Expositions, Brainstorming.

Factor driving subscriptions

Price: chaper convenience: subscribing on amazon personalization: personalized playlists

Competitive analysis

Product, sales, marketing

Lean Startup Approach (powerpoint)

Rather than engaging in months of planning and research, entrepreneurs accept that all they have on day one is a series of untested hypotheses.

Customers value reducing the risks they incur when purchasing products or services.

Risk reduction

What is the principal building block of entrepreneurship

Starting a new business

Sticking to one market segment increases the benefits of segmentation

Sticking to one market segment increases the benefits of segmentation

problem discovery = ___________

making empathetic connections with our customers

types of key resources

physical, intellectual, human, financial

multi-sided market

product requires two or more independent markets to succeed

3- Early majority

rely on benefits of new technology, but will wait for others to work out kinks

add-on pattern

useful for product and pricing strategy: The basic product can be bought and used for a good price and satisfies the core need. Various additional elements are available to enhance the product and cost extra money useful when there are products similar to yours that offer the same as you

Types of Startup Costs:

• Advertising and promotion • Borrowing costs (debt financing) • Employee expenses (wages, salaries and benefits) • Office Space (utilities), equipment and supplies • Insurance, license and permit fees (for example health inspections or industry-specific permits). • Research expenses (customer and product development) • Technological expenses (for example the cost of a website, information systems and software (including accounting and payroll software) • Taxes

Minimum viable product (MVP)

*essentially a prototype or a pilot of your idea and you test it in the marketplace* few features, and if ppl are willing to way in trade of scarce resource MVP is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort

Key Activities types

- Production: designing, making, and delivering a product. - Problem-solving: coming up with new solutions to individual customer problems. - Platform/network (e.g., eBay's business model requires that the company continually develops and maintains its platform) - Business-specific activities

Steve Blank: The Principles of Lean

- Startups are not smaller versions of large companies - Large companies execute a known business model - Startups search for unknown business models - Startups fail because they confuse search with execute -Startups need their own tools, different from those used in existing companies -Lean startup: a risk reduction methodology

Ideas have to be

-Creative -Impactful -Feasible

9 building blocks

-Customer Segment -Value Preposition -Channels -Customer Relationships -Revenue Stream -Key Resources -Key Activities -Key Partnerships -Cost Structure

entrepreneurial team are crucial in terms of:

-Idea generation -Resource acquisition and capital mix -Commitment and shared risks -Core competences and domain expertise -Social Capital (network and reputation) -Management of complexity -Social and psychological suppport

Proper segmentation allows you to:

-Learn faster about market fit -Find an unoccupied segment (no competition) -Become a market leader earlier -Line up segments (consquistar un segmento va a ser que sus vecinos se interesen tambien) -Maximize capital efficiency by focusing existing resources

Elements contributing to customer value creation:

-Newness -Performance -Customization -"Getting the job done" -Design -Brand/status -Price -Cost reduction -Risk reduction -Accessibility -Convenience/usability:

represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings)

-Revenue Stream

The problem with the ideas are

-The are the same -Low-impact (logo on a shirt) -Not feasible (the techno does not exist)

Lean Startup are born out of 3 trends

-The use of platforms enabled by open source and free software -the application of agile development methodologies -ferocious customer-centric rapid iteration, as exemplified by the customer development process

If you're introducing a new product into an existing market:

-You are not trying to grow the market, you are trying to steal it. -Here they will STOP using the competitors product to use yours. -Preference will come because yours is better, not cheaper

Customer Development

-four step framework to discover and validate that you have identified the market for your product, built the right product features that solve customer's needs, tested the correct methods for acquiring and converting customers, and deployed the right sources to scale the business -At abstract level: questioning your core business assumptions -Maximizes success

Types of Customer Segments

-mass market -niche market -segmented market -diversified market -multi-sided market

"getting out of the building"

-means not accepting your assumptions as true. check them all the time, challenge them, talk to people with experience -Go talk to your talking customers to get feedback -helps you to know if your business idea will work (viable) -designed to minimized your real and opportunity costs.

Customer groups represent separate segments if:

-their needs require and justify a distinct offer -they are reached through different distribution channels -they require different types of relationships -they have substantially different profitabilities -they are willing to pay for different aspects of the offer

Lean Startup helps to

-validate core hypothesis (customer-problem-solution) -develop the minimum viable product -achieve product-market fit -produce a development and marketing roadmap for scaling

If you're introducing a new product into a new market:

-your new tech: shatters the existing market -product owns 100% market share -Describe in a complete form your product (what is and for, use) -Your target will not stop using a product when they start using yours.

The opportunity may entail:

1) pioneering a truly innovative product; 2) devising a new business model; 3) creating a better or cheaper version of an existing product; 4) targeting an existing product to new sets of customers

Four steps to Customer development

1- Observing and describing a phenomenon 2-Formulating a hypothesis to explain the Pheno. 3-Using the hypothesis to predict the results of new informations 4-Measuring predictions performance based on experimental tests

First and second desires

1- Thriving successful company 2-Realization that there is no market or the market is insufficient upon which to build the business you desire. So, find if you can thrive in that market or not. C.D eliminates the middle point between these two.

The gap between them is (the types of buyers)

1-A product's requirements 2- The buying habits

in traditional business model Product Market Fit needs to satisfy 3 criterias

1-Customer willing to pay for your product 2-Less cost for getting the customer than what they pay for the product 3-Enough evidence that market is large enough to support the business

What type of buyer is the most important to startup companies? and why? Erlyvangelists

1-Early Adopters 2- Seek out new techno (to solve their company's problems, not for the sake of owning new tech. -Don't rely on references of others for their buying decisions, even though they are influenced by other E.A, their main concern is solving a known problem -They want to help you and want you to be successful, enjoy opportunities that make them heroes, by solving real problems. THEY ARE IMPORTANT TO START PRODUCT ADOPTION!

Technology is adopted in five phases categorized by the type of buyer:

1-Innovators 2-Early adopters 3- Early majority 4-Late majority 5-Laggards

what C.D is not

1-Not a set of actions that leads to success 2- Deep contemplation 3- Authoritative nor dogmatic

We can distinguish between several categories of Customer Relationships, which may co-exist in a company's relationship with a particular Customer Segment:

1-Personal assistance 2-Dedicated personal assistance 3-Self-service 4-Automated service 5-Communities 6-Co-creation

ways to generate revenue streams

1. Asset sale 2. Usage fee 3. Subscription fees 4. Lending/Renting/Leasing 5. Licensing 6. Brokerage fees 7. Advertising

5 phases of channels

1. Awareness 2. Evaluation 3. Purchase 4. Delivery 5. After sales

Customer relationships may be driven by the following motivations:

1. Customer acquisition 2. Customer retention 3. Boosting sales (upselling)

Types of segmentation

1. Demographics (Age, race, gender, marital status, income, education and occupation). 2. Lifestyle (shared lifestyle interests and hobbies to target customers). 3. Behavioral Traits (such as level of usage. You could target nonusers to entice them to buy, prior users to get them back, potential users to convince them to give your product a try, and current users to strengthen their level of commitment). 4. Geographic

As a formal method, the Lean Startup consists of three parts:

1. The Business Model Canvas -to frame hypotheses 2. Customer Development -to test those hypotheses in front of customers 3. Agile Engineering- to build Minimum Viable Products to maximize learning

Key Partnerships

1. The network of suppliers and partners that make the business model work. 2. Strategic Alliances and Joint Ventures. 3. Acquisition of particular resources and activities 4. Acquisition of knowledge, licenses, or access to customers

If you're introducing a new product into an re-segmented market:

A new product entering with a sustainable, dramatically lower price, not only targets market share for incumbents (titulares) but also is more powerful because of the price-sensitive customers. They will use yours because of cost savings, or because they couldn't afford the competitor's anymore. New functionality will also be successful, it brings new customers to the market also Either they will stop using the competitor's cuz the functionality of yours matches their needs, or you will get new users because the product that were there already never actually satisfied (fitted) their needs.

niche market

A smaller part of a larger market in which customers have more specific needs and wants

Lean Startup

A startup which combines fast, iterative development methodologies with customer development principles *begins with a business model and is followed by quick rounds of experimentation of the plan and gathering feedback before executing* Helps you question everything

Making products and services available to customers who previously lacked access to them is another way to create value.

Accessibility

Business model patterns

Add-on Hock and bait Freemium Subscription Sharing economy Customer Data Monetization

acquisition

An acquisition is the purchase of an existing business. Many successful businesses today were acquisitions by entrepreneurs.

An entrepreneurial team

An entrepreneurial team can be defined as 'two or more individuals who have a significant financial interest and participate actively in the development of the enterprise

add-on success factors

Basic Product: Make sure that the basic product fulfills the core needs but also creates the desire for the add-ons. If this threshold is overlooked the product is simply incomplete. Profitability : Develop a balanced pricing strategy that includes the basic product with (usually) a low or no margin and attractive add- ons with high margin. Test new Add-ons: Constantly run tests with new add-ons to keep your product fresh and to learn about changing needs or undiscovered potentials. Customer Relationship : Buyer-seller relationships are imperative with communication, empathy and understanding of wants and needs. Upselling: "encouraging customers to buy a more expensive product than they had in mind (Tom Duncan)" - example: fast food chains

Customers may find value in the simple act of using and displaying a specific brand.

Brand/status

Non traditional business models

Business model that do not sell a product to a customer directly for a set amount of money

describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition the right mix of Channels to satisfy how customers want to be reached

Channels

Company departments and operational processes are created to support scale

Company Building

The business is scalable through a repeatable sales and marketing roadmap

Company Creation

Market type

Concept coined by Steve Blank to describe different types of market conditions confronting new products, comprised of existing market, re-segmented market and new market.

Making things more convenient or easier to use can create substantial value

Convenience/usability

describes all costs incurred to operate a business model

Cost Structure

Helping customers reduce costs is an important way to create value.

Cost reduction

Cost-driven

Cost-driven business models focus on minimizing costs wherever possible. This approach aims at creating and maintaining the leanest possible Cost Structure, using low price Value Propositions, maximum automation, and extensive outsourcing

Customer Data Monetization

Customer Data Monetization means that the user gets the service (for free) and the company sells the data to a partner service for free, data for a fee

Customer Development draws the problem and finds a solution, and Product Development builds the solution

Customer Development draws the problem and finds a solution, and Product Development builds the solution

A product solves a problem for an identifiable group of users

Customer Discovery

describes the types of relationships a company establishes with specific Customer Segments

Customer Relationships

Building Block defines the different groups of people or organizations an enterprise aims to reach and serve.

Customer Segment

The market is saleable and large enough that a viable business might be built

Customer Validation

Tailoring products and services to the specific needs of individual customers or Customer Segments creates value.

Customization

CustDev concentrates on getting to and preparing to cross the gap between ________

Early Adopters and Early Majority

Revenue streams app business

Free (facebook, twitter) Freemuim (spotify, dropbox) Premium (you gotta pay for this app)

If we know customers buy solutions to problems, it makes sense that any entrepreneurial journey should start from a problem, not a product

If we know customers buy solutions to problems, it makes sense that any entrepreneurial journey should start from a problem, not a product

Where do ideas come from? two types

In theory and Practice

5. Communities

Increasingly, companies are utilizing user communities to become more involved with customers/prospects and to facilitate connections between community members

describes the network of Suppliers and Partners that make the business model work

Key Partnerships

Building Block describes the most important assets required to make a business model work

Key Resources

rules of thumb

Most of the time, your'e actually re-segmenting the market. You gotta make sure your customer's view of market is the same as yours also you can choose your market. It is cheaper to re-segment than new market

Segmentation

Often confused with customer profile and industry verticals: is the practice of breaking down a larger market into a smaller identifiable group of users who share specific needs and who reference each other

Improving product or service performance has traditionally been a common way to create value.

Performance

Ideas come In Practice:

Personal satisfaction and dissatisfaction, Link with prior vocation (market knowledge), Outgrowth of hobbies, Ideas rejected by employer, Customers generated ideas.

Offering similar value at a lower price to satisfy the needs of price-sensitive Customer Segments. Low-price Value Propositions have important implications for the rest of a business model (no frills airlines - Ryanair)

Price

All businesses need to reach revenue at some point, so all businesses must have a _______ If you cannot prove that you can acquire customers for less than what you earn from selling them your product, you have a fundamental business problem.

Product-Market fit milestone

5. Licensing

Revenue Stream is generated by giving customers permission to use protected intellectual property in exchange for licensing fees

Value-driven

Some companies are less concerned with the cost implications of a particular business model design, and instead focus on value creation. Premium Value Propositions and a high degree of personalized service usually characterize value-driven business models. Luxury hotels, with their lavish facilities and exclusive services, fall into this category

hook and bait success factors

Suitability: It is important to lock the "blade" to the "razor" and make it attractive for the customer to buy the razor item or service for a period of time. Loyalty: The company either needs to create loyalty for their brand or prevent other firms from entering the market.

hook and bait

The basic product (hook) is offered cheaply or free; the complementary product or refill (bait) is sold expensively. The basic product cannot be used without the complementary product

The differentiator is not the compelling reason to buy but your benefit differentiator provides

The differentiator is not the compelling reason to buy but your benefit differentiator provides

1. Asset sale

The most widely understood Revenue Stream derives from selling ownership rights to a physical product.

6. Brokerage fees

This Revenue Stream derives from intermediation services performed on behalf of two or more parties. Credit card providers, for example, earn revenues by taking a percentage of the value of each sales transaction executed between credit card merchants and customers. Brokers and real estate agents earn a commission each time they successfully match a buyer and seller

4. Lending/Renting/Leasing

This Revenue Stream is created by temporarily granting someone the exclusive right to use a particular asset for a fixed period in return for a fee.

3. Subscription fees

This Revenue Stream is generated by selling continuous access to a service

2. Usage fee

This Revenue Stream is generated by the use of a particular service. The more a service is used, the more the customer pays.

7. Advertising

This Revenue Stream results from fees for advertising a particular product, service, or brand

describes the bundle of products and services that create value for a specific Customer Segment solves a customer problem or satisfies a customer need

Value Preposition

The ________ is the reason why customers turn to one company over another

Value Proposition

Freemium Business Model

a business model in which a firm provides a basic version of its service for free, and makes money by selling a premium version of the service

Sharing economy

a business model where people rent or barter what they need rather than buying it private customers share access to products or services with other private customers - a platform serves as intermediary what is mine is yours, access

Business Model Canvas

a diagram of how a company creates value for itself and its customers

Traditional Approach

a founder must create a business plan

Pursuit

a single, relentless focus

business plan

a static document with a series of implicit hypotheses describing the size of an opportunity, the problem to be solved, and the solution that the new venture will provide Typically it includes a 5-year forecast for revenue, profits, and cash flow

diversified market

a variety of services that for two customer segments with different needs and problems, and which bear no relationship to each other

1-Innovators

aggressively pursue new technology, often out of pure interest in it

mass market

all possible customers in a market, regardless of the differences in their specific needs and wants

"Opportunity" implies

an offering that is novel in one or more of four ways.

Direct competitors

are businesses that offer a product or service that could pass as a similar substitute for yours.

2-Early adopters

are the first to pursue technology for its intrinsic benefits

1. Personal assistance

based on human interaction. The customer can communicate with a real representative to get help during the sales process or after the purchase is complete (on- site at the point of sale, through call centers, by e-mail, or through other means)

3. Self-service

company maintains no direct relationship with customers. It provides all the necessary means for customers to help themselves

For (__________), (________) is a (_________) which provides (_________), unlike (__________) which provide (____________).

customer segment, customer segment, market category, main benefits, primary competitor, competitor's benefits.

2. Dedicated personal assistance

dedicating a customer representative specifically to an individual client

5-Laggards

don't want anything to do with technology; uses technology when it's without knowledge of its existence

Agile development

eliminates wasted time and resources by developing the product iteratively and incrementally. It's the process by which star tups create the minimum viable products they test

Market segments are

groups of consumers who share common interest, who have access to each other and who look to one another as a trusted reference If they do not share means of communication then they are not from the same segment work different work and different responsibilities also ACCESS TO COMMUNICATE

The first step in trying to learn from the market is ________

having an opinion about who your market actually is

is important to you go and talk to your customers, do not be afraid of rejection, do not embrace your idea if your customer does not like it, if there is not market for it.

is important to you go and talk to your customers, do not be afraid of rejection, do not embrace your idea if your customer does not like it, if there is not market for it.

Indirect Competitor

is one that provides products that are not the same but could satisfy the same customer need or solve the same problem

Positioning

is the act of of placing your product within a landscape, in your audience's mind Insights: knowing your customer and what they need, the name of your product and its type, they key benefit of it to your customer (compelling reason to buy), the state of being without the product and how yours changes the game Tell them what the benefit is and why you are better

Entrepreneurship

is the pursuit of opportunity without regard of the resources currently controlled -Often perceive a short window of opportunity. have a sense of urgency that is seldom seen in established companies, where any opportunity is part of a portfolio and resources are more readily available

Corporate Entrepreneurship

is when individuals inside of a corporation pursue opportunities without regards of the resources they currently control this process leads to a new business and the transformation of new companies through a renewal of their key ideas.

Gap between E.A and E.M

it's so wide and deep, best described as chasm

Pivot

means to change an element of your customer-problem-solution hypothesis or business model, based on learning . "by testing, new learning leads to a new pivot, where we change just one element of the business plan, but don't abandon everything we learned" sooner you know a hypothesis is wring, the faster you can update and reset it.

New ventures assemble __________ and immediately elicit customer feedback. Then, using customers' input to revise their assumptions, Lean Startups start the cycle over again, testing redesigned offerings and making further small adjustments ________ or more substantive ones ______ to ideas that aren't working

minimum viable products (MVPs), (iterations), (pivots)

6. Co-creation

more companies are going beyond the traditional customer-vendor relationship to co-create value with customers.

4. Automated service

more sophisticated form of customer self-service. For example, personal online profiles give customers access to customized services. Automated services can recognize individual customers and their characteristics, and offer information related to orders or transactions

4-Late majority

not interested in technology per se; waits for established leader to emerge, buys de facto standard

Freemium

offers users a basic service for free and then charges a premium for upgrades or advanced features Known as the business model of the internet

A business model may define ______________ Customer Segments

one or several large or small

subscription

selling the product in a constant loop

Entrepreneurship in a lean startup is a ________, each designed to answer a specific question ________. Both "a landing page and a buy button" and a working hardware prototype can be considered MVPs, depending on the product, market, and current objective of the product owner.

series of MVP's, (hypothesis),

segmented market

similar but different/varying needs and problems

the business model should be carefully designed around a _______________.

strong understanding of specific customer needs

Main issue with the traditional approach:

this process tends to build an increasingly false sense of certainty, in an environment that is fundamentally uncertain

solo entrepreneurship

those who identified their business ideas on their own

why is this process of the 4 used for?

to discover and validate the following business info: -Product solves the problem for a bunch of people (Customer Discovery) -Market is saleable and big enough that the business will be built (Customer Validation) -Business is scalable through a repeatable sales and marketing roadmap (Company Creation) -Creation of departments and operational processes to support scale (Company Building)

Product Market Fit

when a product shows strong demand by passionate users representing a sizable market

A free business model is used by a business

when its primary objective is user growth, prior to knowing how to monetize the users through ads, selling leads, meta-data or virtual goods.

org chart

which describes how a company executes to deliver known products to known customers

ACCESS TO COMMUNICATE is important to share the same segment, why?

word of mouth (for recommendation of products) "access to each other" common methodology to reach them (mas facil para agarrar a las personas) Indirect knowledge of like individuals buying a product is a powerful influence.

Buying a Franchise

you have work within the system and follow rules that were set by others, fees and ongoing royalties

MVP facts

• MVP must carry enough value to the users • MVP is more about the process, not the product • MVP is not a product with the minimum number of elements, but rather has core features sufficient to implement an idea and retain early adopters • MVP is based on the lean startup philosophy and implies the iterative process of building-> measuring-> learning loop until the product meets the market need completely • MVP aims to avoid building unuseful, unnecessary products by gaining insight about the market first


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