ENTR Test 1 Customer Development
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
