customer development/lean startup 030910 class 8

3/27/10 1

Customer Development in the High Tech Enterprise

Customer Validation Part 1 & 2

Steve Blank sblank@kandsranch.com

Agenda

  Logistics/Questions   Review   Case: HP Kittyhawk   Guest: Hiten Shaw Kissmetrics   Customer Validation

Today: Customer Validation

Customer Discovery

Customer Validation

Customer Creation

Scale Company

•  Develop a repeatable and scalable sales process

•  Validate your business model

•  Only earlyvangelists are crazy enough to buy

Customer Validation:

Phase 1 Get

Ready to Sell

Phase 2 Sell to

EarlyVangelists

Phase 4 Business

Model Verified

Phase 3 Positioning

From Discovery To Creation

Customer Validation

Customer Validation

Product Positioning

Company Positioning

Present to Analysts & Influencers

Develop Positioning!

Sell to “EarlyVangelists”!Sell to

Channel Partners

Contact Visionary

Customers Sell to Early

Customers Refine Sales

Roadmap Refine

Channel Roadmap

Prelim Sales Roadmap

Hire a “Sales Closer”

Articulate a Value

Proposition

Prelim Sales & Collateral

Materials Prelim

Distribution Channel Plan

Align Your Executives

Get Ready to Sell!

Formalize Advisory

Board

Verify!

Verify the Business

Model

Verify the Product

Verify the Sales

Roadmap Verify the Channel

Roadmap

Iterate or Exit

Sell to “EarlyVangelists”!

Customer Validation

Prelim Sales Roadmap

Hire a “Sales Closer”

Articulate a Value

Proposition

Prelim Sales & Collateral

Materials Prelim

Distribution Channel Plan

Align Your Executives

Get Ready to Sell!

Sell to Channel Partners

Contact Visionary

Customers Sell to Early

Customers Refine Sales

Roadmap

Product Positioning

Company Positioning

Present to Analysts & Influencers

Develop Positioning!

Verify the Business

Model

Verify the Product

Verify the Sales

Roadmap Verify the Channel

Roadmap

Verify!

Formalize Advisory

Board Refine

Channel Roadmap

Iterate or Exit

Inside the Building!

Outside the Building!

Phase 1: Get Ready to Sell

  Serious preparation before 1st sales   Another writing exercise   Aligning Executives

Phase 1 Get

Ready to Sell

Phase 2 Sell to

EarlyVangelists

Phase 4 Business

Model Verified

Phase 3 Positioning

Get Ready to Sell   Value Proposition   Sales Collateral   Distribution Plan   Sales Roadmap   Sales Closer   Synchronize Execs   Advisory Board

Prelim Sales Roadmap

Hire a “Sales Closer”

Articulate a Value

Proposition

Prelim Sales & Collateral

Materials Prelim

Distribution Channel Plan

Align Your Executives

Formalize Advisory

Board

Get Ready to Sell: Articulate a Value Proposition

  Create Value Proposition   Is it emotionally compelling?   Does it make or reinforce an economic case?   Does the it pass the reality test?

  Varies by Market Type

Get Ready to Sell: Preliminary Sales Collateral

  Create collateral roadmap   What you need and when you need it   Supports the sales roadmap   Ensure the collateral matches the internal audiences

  Create all selling materials   Presentations   Data sheets   White Papers

  How would collateral differ by Market Type?

Get Ready to Sell: Preliminary Channel Road Map

  Channel Food Chain and responsibility   Channel discount and financials   Channel Management   How would channel plan differ by Market Type?

Channel Alternatives Pick One

Your Company

Your Customers

System Integrators

Direct Sales Force

Value-Added Resellers (VARs)

Dealers

Distributors

Retail/Mass Merchants/Online

OEMs

Channel Diagram Book Publishing Company

Acknowledge Returns

Sell Books Deliver Orders

Determine Allocations

-Establish Identity -Create Demand

National Wholesaler Distributor Retailer

Merchandise Titles

Dispose of Returns

Stock Books Deliver Books (from printer)

Publisher

Ship Books

Channel Margins Book Publishing Company

35% 15% 10% 40%

$7.00 $3.00 $2.00 $8.00 $20.00

% of Retail

$s

Customer National Wholesaler Publisher Distributor Retailer

Get Ready to Sell: Preliminary Sales Road Map

  Built around key insights about the selling process   Answers

  Who decides the sale?   Influencers, recommender, decision makers Where is the

budget? How many sales call to the sale? To who? What is the script for each?

  Consists of:   Organization Map   Influence Map   Customer Access Map   Sales Strategy   Implementation Plan

Early Sales

Get Ready to Sell: Hire a “Sales Closer”

  Identify need for a “Sales Closer   Founders have experience “closing” business?   Do they have a “world-class” set of contacts?   Bet the company on their ability to close sales?

  If not, hire a “Sales Closer”   Do NOT hire a VP of Sales   Typical background would be a regional manager

  How does Market Type effect this hire?

Get Ready to Sell: Synchronize Your Execs

  Product Development   Schedule   Deliverables   “Good-enough” Philosophy

  Engineering’s role in sales, installation, post-sales support   Sales Collateral review

Get Ready to Sell: Formalize Advisory Boards

  Advisory boards are critical in nascent stages of a startup   To sell to industry specific customers requires an industry

advisory board   Multiple Advisory Boards

  Use at different times   Different purposes

Phase 2: Sell

  First sales   First channel sales   Scalable and Repeatable

Phase 1 Get

Ready to Sell

Phase 2 Sell to

EarlyVangelists

Phase 4 Business

Model Verified

Phase 3 Positioning

Sell to EarlyVangelists   Contact Visionaries   Sell   Refine Sales Roadmap   Sell to Channel Partners   Refine Channel Roadmap

Sell to Channel Partners

Contact Visionary

Customers Sell to Early

Customers Refine Sales

Roadmap Refine

Channel Roadmap

Sell: Contact Visionaries

  Looking for people with problems   They are few are far between   They need to become your

cheerleaders… while paying you to do so

Sell: Turn Visionaries into EarlyVangelists

  Very few are early customers   Visionaries will emerge to buy an unfinished

product if it truly solves a painful problem   A lack of these early purchasers is a red-flag   Market Type effects ease of execution

Build the Organization Map

Our Potential Customer

= in house competition

= issues to be addressed before a sale

Neil Garrett VP Database

Marketing

Suzanne Kellogg VP Merchandizing

Karen Rogers VP Marketing

Dave Jones CEO

One Step at A Time

Our Potential Customer

= in house competition

= issues to be addressed before a sale

Leslie Elders Financial Modeling

Joe Black Dir. Sales Operations

Ben White VP Sales

Neil Garrett VP Database

Marketing

Suzanne Kellogg VP Merchandizing

Karen Rogers VP Marketing

Dave Jones CEO

Organization Map

Geoff Smith Financial Tools Development

Phil Whitry Director IT

Roger Smith CIO

Our Potential Customer

= in house competition

= issues to be addressed before a sale

Leslie Elders Financial Modeling

Joe Black Dir. Sales Operations

Ben White VP Sales

Neil Garrett VP Database

Marketing

Suzanne Kellogg VP Merchandizing

Karen Rogers VP Marketing

Dave Jones CEO

The Influence Map

Functional Technical

High Executive 1

Low

The Influence Map

Functional Technical

High Executive 1 2 CIO or Division IT executive

Low

The Influence Map

Functional Technical

High Executive 1 2 CIO or Division IT executive

Low End Users 3

The Influence Map

Functional Technical

High Executive 1 2 CIO or Division IT executive

Low End Users 3 4 Corp. IT staff or Division IT

The Sales Roadmap: Starts with Influence Map

Execs

End Users

Operational

High

Low

Educate & Present Solution

Technical

CIO

IT Staff

The Sales RoadMap: Adds Access, Assessment & Strategy

Finance

Product Mgmt

Support

Corp. Mktg

Sales

IT

Intro Meetings

Execs

End Users

Operational

Account Strategy

High

Low

Access Assess Needs

Strategy Educate & Present Solution

Technical

CIO

IT Staff

The Sales RoadMap

Finance

Product Mgmt

Support

Corp. Mktg

Sales

IT

Intro Meetings

Execs

End Users

Operational

Implement Plan

Proposal Account Strategy

High

Low

Access Assess Needs

Strategy Educate & Present Solution

Technical

CIO

IT Staff

Sell, Sell, Sell, Sell

RoadMap becomes The Sales Pipeline

13. Close!

2. Initial Meeting • Ask tough questions • Do Buy - In Demo 3. Qualify?

4. Understand Existing Situation a) Technology b) Organization c) Competition

The im

5. Custom Pitch • Prepare! • Get NDA signed 6. Win Over IT

• Tech deep dive 7. Define Problem • Develop Action Plan

8. ROI Pitch • Prove the Value!

11. Formal Pricing Proposal

•  No surprises! 12. Negotiate

• Sales • Finance • Support

10. Solution Session

• •  Detailed Tech discovery

1. Prepare • Hoovers, One Source, Web

9. Exec Session • Set expectations for this meeting early on.

Sell: Sell/Refine Channel Roadmap

  Early channel partners need to be “Visionaries”   Indirect channels/integrators have $ minimum   Indirect channels/integrators just fulfill   Market Type affects channel adoption

Phase 3: Company & Product Positioning

  Market Type driven   Company & Product   Based on real-world facts

Phase 1 Get

Ready to Sell

Phase 2 Sell to

EarlyVangelists

Phase 4 Business

Model Verified

Phase 3 Positioning

Develop Positioning

  Product Positioning   Company Positioning   Present to Analysts & Influencers   Builds briefs for demand creation activities

Product Positioning

Company Positioning

Present to Analysts & Influencers

Positioning: Product Positioning

  Market Type affects positioning

Positioning: Company Positioning

  Market Type affects positioning

Existing Market New Market Resegmented Market Company Positioning Statements

Compare your company to your competitors. Describe how your company is both different and credible.

It’s too earlier for customers to understand how different your company is, since in a new market there are no other companies to compare it to. Therefore, company posi tioning is about communicating a vision and passion of what could be.

Company positioning for this type of market communicates the value of the market segment you’ve chosen and the innovation your company brings to it. What is it that customers value and want and need now.

Phase 4: Verify, Iterate or Exit

  Market Type driven   Company & Product

Phase 1 Get

Ready to Sell

Phase 2 Sell to

EarlyVangelists

Phase 4 Business

Model Verified

Phase 3 Positioning

Verify

  Product   Sales Roadmap   Channel Roadmap   Business Model

Verify the Business

Model

Verify the Product

Verify the Sales

Roadmap Verify the Channel

Roadmap

Iterate or Exit