presentation 3 - entrepreneurship goethe

Entrepreneurship

WPMM: EPSH

Winter 2015

Sebastian Schäfer [email protected]

Thomas Funke [email protected]

The Startup Process

• Startup process is about dealing with uncertainty

• Little systematic research on the entrepreneurship process,

i.e. on how to start and grow a startup

• There are several key frameworks that trey to capture the

essence of entrepreneurship

• No „standard“ framework (yet)

2 Entrepreneurship - WiSe 2015/2016

Key Framework #1: Two „Phases“


Market Product

OR

Service

Resources

AND

Capital

People

AND

Organization

Opportunity Recognition

Pursuit of Opportunity

Key Framework #2: „Top Down“


Vision

Strategy

Execution

What do the founders wish to achieve with the

business?

What are shared goals? What is the story?

Do we have the right strategy?

Who is going to buy? What are we selling?

Why are we better?

Can we do it?

What resources are needed? What is the

blueprint for growth? Can we adapt?

Key Framework #3: Effectuation

Vision

Strategy

Execution


• What resources do I

have now?

• What can I do with

them?

Key Framework #4: Business Model Canvas


Key Framework #5: The VC Perspective


Source: Komisar, R. The Monk and the Riddle

3 questions every venture capitalist wants to know:

1. Big market?

2. Winning Strategy?

3. Excellent Team?

Key Framework #6: „Crossing the Chasm“


Key Framework #7: Customer Development


Key Framework #8: Risk Reduction


Key Framework #9: Kaplan‘s Startup Race


What BMI is all about..

The Startup Process (in detail)


The startup process in 24 steps


Six key topics

1. Who is your customer?

2. What can you do for them?

3. How do they acquire your product?

4. How do you make money off your

product?

5. How do you design and build your

product?

6. And how do you scale?


Step 0: Getting started

• Three starting points for entrepreneurship: a technology, idea, or passion.

• If you have a passion but no specific idea or technology, do some introspection to figure out the best use of your knowledge, skills, connections, financial assets, and work experience.

• “customer pain” vs values, interests an expertise


Step 1: Market segmentation

• Goal: Brainstorm a wide array of potential customers and markets for your business (preferences, behavioral patterns, socio-demographics, industry etc.)

• Narrow the list down to 6-12 markets based on whether those customers have money and a reason to spend it, whether you can reach them and beat the competition, what possibilities they open up in other markets, and your interest in them.

• Hint: Do research on those markets by talking to customers and observing them, making sure to be open to new information and not selling them on your solution.

• Go after a new market, rather than trying to sell to everyone or snag part of a huge market.


Step 1: Market segmentation


Step 2: Select a beachhead market

• Goal: Analyze your top 6-12 market opportunities and choose one to pursue. To select a beachhead market, use the same criteria as before.

• Further segment your chosen market until it meets these conditions: customers buy similar products for similar reasons, and they talk to each other (for word of mouth).

• Hint: Focus! Smaller markets tend to be better, and it’s crucial to pick just one and ignore the others (for now).


Step 3: Build an end user profile


Step 3: Build an end user profile

• Goal: Use primary market research to flesh out a detailed description of the typical end user - not necessarily the buyer - within the market segment (specific demographic, including things like age, location, income, habits, backstory, and motivations.

• Hint: It’s ideal if a founder, or at least an employee, fits into this category.


Step 4: Calculate the total addressable market (TAM)

size for the beachhead market

Entrepreneurship - WiSe 2015/2016 22

Step 4: Calculate the total addressable market

(TAM) size for the beachhead market

• Goal: Use the demographics from the End User Profile to determine quantitatively how large your beachhead market is.

• The TAM is the amount of annual revenue you could earn if you achieved 100 percent market share, which equals number of users times revenue.

• Calculate number of users using bottom-up (customer lists, trade associations) and top-down methods (market reports) to verify. Calculate estimated revenue based on what your customers spend already and how much value you’re providing.

• Hint: You should aim for a TAM of $20-100 million; if it’s more than that, you need to segment further.


Step 5: Profile the persona for the beachhead

market


Step 5: Profile the persona for the beachhead

market

• Goal: To better understand your Persona (on a social and emotional level too) choose a real person to be your Persona and develop a description of them, including their photo, backstory, job, salary, purchasing criteria (in order), and many other details.

• Hint: Get the whole team involved in this process. The goal is to help you settle questions in the future about your customer, how to sell to them, which direction to take, etc.


Step 6: Full life cycle use case


Step 6: Full life cycle use case

• Goal: Describe not just how your Persona uses your product, but how they discover a need for it, find out about it, analyze it, acquire it, install it, get value from it, pay for it, get support for it, buy more of it, and tell others about it.

• Understand why this expanded use case is important to identify and resolve problems in the most timely and cost-effective manner.

• Hint: Try to pin down and visualize how the product will fit into the customer’s value chain. Helps to identify potential barriers to adoption.


Step 7: High-level product specification


Step 7: High-level product specification

• Goal: Create a visual representation of your product: storyboards or wireframes for your website, or diagrams for your device.

• Then, create a brochure that focuses on features and, more importantly, how they benefit the customer.

• Hint: Not too many details.


Step 8: Quantify the value proposition


Step 8: Quantify the value proposition

• Goal: Determine how the benefits of your product turn into value that the customer gets out of the product (by top priority of the Persona)

• Use real numbers and quantitative metrics to show this value to the customer.

• Hint: Err on the side of underpromising and overdelivering.


Step 9: Identify your next 10 customers


Step 9: Identify your next 10 customers

• Goal: Try to identify 10 customers who are similar to your Persona and willing to buy. You do this by actually talking to them and trying to validate your full lifecycle use case, product specification, and quantified value proposition.

• Hint: If they’re on board with everything, then you can ask for a commitment to buy; if not, go back to the drawing board and revise your assumptions. (That’s part of the process; after all, your assumptions are only estimates.)

• If you have tried and tried and can’t find 10 customers, it’s possible you need to change your Persona or even look into a new beachhead market.


Step 10: Define your Core


Step 10: Define your Core

• Goal: Explain your Core – your “secret sauce” that competitors can’t duplicate easily (this is the internal view)

• It might be the network of users you’ve built up, fantastic customer service, low cost, or user experience.

• Hint: It usually isn’t your intellectual property, speed of innovation, first-mover advantage, or exclusive contracts with suppliers.


Step 11: Chart your competitive position


Step 11: Chart your competitive position

• Goal: Make a competitive positioning chart: a two-dimensional graph that plots the customer’s top two priorities on either axis.

• Put yourself and your competition (including “the status quo”) on the map – you should be in the top right corner. And make sure your competitive position makes use of your Core – if not, you may need a different market opportunity.

• Hint: Useful to communicate qualitative value proposition.


The 24 steps are not linear



Customer Development


Focus on the right customer

Has a problem

Is aware of having a problem

Has been actively looking for a solution

Has put together a solution out of piece parts

Has or can acquire a budget


What makes an Innovator so special?

My customers are too stupid to know

what they want!


What makes an Innovator so special?

….or?



Concept/ Bus.

Plan Product Dev.

Alpha / Beta

Test

Launch / 1st

Ship

Product Development


?

(Steve Blank)

? ? ?



Concept/ Bus.

Plan Product Dev.

Alpha / Beta

Test

Launch / 1st

Ship

Product Development


Customer Discovery

Customer Validation

Customer Creation

Company Building

(Steve Blank)


Why is knowing your customer important?


What can we do to avoid this?

Customer Discovery

Customer Validation

Customer Creation

Company Building



Customer Discovery

Customer Validation

Customer Creation

Company Building

Find a product the market wants



Customer Discovery

Customer Validation

Customer Creation

Company Building

Find a product the market wants Optimize the product for the market!



Customer Discovery

Customer Validation

Customer Creation

Company Building

People in search for a new product Most clones start here



Customer Discovery

Customer Validation

Customer Creation

Company Building

We will focus on this!



Customer Discovery

Customer Validation

Customer Creation

Company Building

Customer Discovery:

Find a problem worth solving!

Find a potential solution!

Customer Validation:

Validate that this solution works!

Validate a business model!

(Steve Blank)


Customer Development: Customer Discovery

Customer Discovery

Customer Validation

Customer Creation

Company Building

How can you find that information out?

Semi-structured interview/observation (exploratory approach)

Questionnaire (builds on assumptions)

What are the main challenges you are facing?

Customers often don‘t know by themselves about their needs.

Misleading information due to politeness or „social-desirability effects“

„Sticky information“ – problem: it is very difficult to express needs, e.g. what does my favorite car look like

The knowledge of customer is very often limited and is based on experiences and their power of imagination.

Try to understand to whom you should listen to and why!


Customer Development: Customer Validation

Customer Discovery

Customer Validation

Customer Creation

Company Building

Validate the problem:

Do they care?

Do they need it?

Do they have budget for it?

Who really is they?

(Steve Blank)


Customer Development: Customer Validation

Customer Discovery

Customer Validation

Customer Creation

Company Building

Validate the solution:

Does our solution solve their problem?

Do they understand our solution?

Would they pay for it?

(Steve Blank)


Customer Development: Customer Discovery

Customer Discovery

Customer Validation

Customer Creation

Company Building

Learn and Confirm!

assumptions validation/revision

of assumptions


When did I reach problem-solution fit?


How does this work?

How do I know what

customers want?

How can I find out?



The MOM Test


The hardest things of consumer interviews

Knowing who your customer is

Asking them the right way

Understand their feedback

Iterate or kill the idea


People are lying bastards!

(People tell us what we want to hear, if you ask the wrong

questions)


“The MOM-Test” by Rob Fitzpatrick


Example MOM-Test

You: “Mom, I have an idea for a business — can I run it by you?”

Mom: “Of course, dear.”

You: “You like your iPad, right? You use it a lot?”

Mom: “Sure, it’s great”


You: “Okay, so would you ever buy an app which was like a

cookbook for your iPad?”

Mom: “Hmmm”

You: ”And it only costs $40 – that’s cheaper than those

hardcovers on your shelve”

Mom: ”I love cookbooks, sounds nice. Does it come with vegan

recipes? Or something special for Xmas?”


But…

You: “Mom, I have an idea for a business — can I run it by you?”

Mom: “Of course, dear.” I’m proud of you and I don’t want to hurt

your feelings

You: “You like your iPad, right? You use it a lot?”

Mom: “Sure, it’s great” I only use it to read emails on the sofa

and surf the internet


You: “Okay, so would you ever buy an app which was like a cookbook

for your iPad?”

Mom: “Hmmm” As if I need another cookbook at my age.

You: ”And it only costs $40 – that’s cheaper than those hardcovers on

your shelve”

Mom: ”I love cookbooks, sounds nice. Does it come with vegan recipes?

Or something special for Xmas?” Well, I have plenty of cookbooks. I

don’t need a computer in the kitchen – It might get dirty! App? I never

bought an app. Aren’t they supposed to be $1? Do you need your credit

card for that? Let me try to change the subject…


Customer interviews

Interview set-up

1. Find out if they are the customer

2. Explore their World View

3. Get commitment or advancement



Customer Interviews


Exercise


Design an interview guide and write down some questions in order to test whether there is

a market need for this invention.

Question 1:

Do you have a problem

with X?


Question 1:

You are young and won an oscar. Are

you not worried about your career

peaking to soon?

Uhh – well. Now I am!

Jennifer Lawrence


Question 2:

Tell me about X!


Question 3:

Do you think it is a good

idea?


Question 4:

Would you buy a

product which solved

the problem?


Question 5:

How do you currently

deal with this problem?


Question 6:

Talk me through the last

time you had this

probem


Question 6:

Talk me through the last

time you had this

problem


Question 7:

How much would you

pay for this?


Question 8:

How much money does

this problem cost you?


Question 9:

Is there a budget for it?


Question 10:

Who else should I talk

to?


Good Questions

Did or Do – NEVER

would

Don‘t assume

problems

Don‘t ask for opinions,

rather let them speak

about

experiences/examples


A carrot


http://startupgeist.com/


Understanding Feedback


Feedback:

Sounds great. I love it!


Feedback:

Brilliant – let me know

when it launches!


Feedback:

There are a couple

people that I could intro

you when you are

ready!


Feedback:

There are a couple

people that I could intro

you when you are

ready!

Why not now??


Feedback:

I would definitivly buy

that!


Feedback:

I would definitely buy

that!

Dangerous! People can‘t

predict their own behaviour!


Feedback:

We are spending 500 $

on this per month!


Feedback:

We are spending 500 $

on this per month!

Awesome Feedback! Prooves

that there is a problem, they kind

of solved it, and there is budget

available.


Opinions are worthless!

Facts about their life!

Commitments!

Think vs. Do!


The Interview Process!

Know what you want to learn!

1. Find Customers

2. Validate Problem

3. Validate Solution

4 Learn & Iterate


Validate the problem! The interviews…

Talk to the people! Don‘t be awkward:

- We are looking for expert feedback or we are doing a survey

- Don‘t: We do Customer Development

- Ask open questions

- Let them speak

- Let them be the expert

- In Person, No Skype, no phone, no email.

Stop if the responses remain the same!



Never delegate interviews!!!

Interviews should be done by the founders

Especially if they hate sales (they need to learn it)


Validate the solution!

If you were wrong, be happy!

… most start-ups started out wrong



Talk to the people! Be precise

- Use index cards!

- If possible take a second person

- Write down exact phrases

- Use visual indicators!

Stop if the responses remain the same!


Validate the solution!

Come back to the interviewees!

- Focus first on their current solution

- Discuss flaws of their current solution

- Show mockups, prototypes etc.

- Get improvement feedback

- Get them to commit

- or iterate!



Review in the team!

- User exact customer wording

- Understand their answers and context

- Don‘t try to be correct with your assumptions

- See what you learned



Review in the team!

- Write down what you learned

- See which old assumptions were wrong

- Adapt your solution


Exemplary Questions

1. Many startups fail because they don’t address a market need. What can you do

to avoid this? Which concept(s) are relevant?

2. Assume you were co-founder of studentica. You are now responsible for doing

the primary market research and talk to customers. Who are your customers

and how can they be described? Which questions would you ask and why?


Recommended Videos

How to Run a User Interview (Emmett Shear) Lecture 16: http://startupclass.samaltman.com/


presentation 3 - entrepreneurship goethe

Documents

entrepreneurship wise

entrepreneurship process

entrepreneurship wpmm

essence of entrepreneurship

key frameworks

key topics

standard framework

market product