Knowledge Sharing:
1. Cryptography is the practice and study of techniques for secure communication in the presence of third parties (called adversaries).
2. In cryptography, a key derivation function (or KDF) derives one or more secret keys from a secret value such as a master key, a password, or a passphrase using a pseudo-random function.
3. In cryptography, a key is a piece of information (a parameter) that determines the functional output of a cryptographic algorithm or cipher.
4. In cryptography, a cipher (or cypher) is an algorithm for performing encryption or decryption—a series of well-defined steps that can be followed as a procedure.
5. In encryption, a key specifies the particular transformation of plaintext into ciphertext, or vice versa during decryption.
Classes:
MessageDigest
From Maths to Computer Science:
Binary [0, 1]
bit, byte
Character, char, unicode,
1 byte = 8 bits
References:
https://docs.oracle.com/javase/7/docs/technotes/guides/security/StandardNames.html
https://en.wikipedia.org/wiki/Bcrypt
Tuesday, December 15, 2015
Monday, December 14, 2015
Research about Hash Security
Knowledge Sharing:
1. The simplest way to crack a hash is to try to guess the password, hashing each guess, and checking if the guess's hash equals the hash being cracked. If the hashes are equal, the guess is the password. The two most common ways of guessing passwords are dictionary attacks and brute-force attacks.
2. A dictionary attack uses a file containing words, phrases, common passwords, and other strings that are likely to be used as a password. Each word in the file is hashed, and its hash is compared to the password hash. If they match, that word is the password.
3. A brute-force attack tries every possible combination of characters up to a given length. These attacks are very computationally expensive, and are usually the least efficient in terms of hashes cracked per processor time, but they will always eventually find the password. Passwords should be long enough that searching through all possible character strings to find it will take too long to be worthwhile.
4. Rainbow tables that can crack any md5 hash of a password up to 8 characters long exist.
5. Lookup tables and rainbow tables only work because each password is hashed the exact same way. If two users have the same password, they'll have the same password hashes. We can prevent these attacks by randomizing each hash, so that when the same password is hashed twice, the hashes are not the same.
6. We can randomize the hashes by appending or prepending a random string, called a salt, to the password before hashing
7. As shown in the example above, this makes the same password hash into a completely different string every time. To check if a password is correct, we need the salt, so it is usually stored in the user account database along with the hash, or as part of the hash string itself.
8. The salt does not need to be secret. Just by randomizing the hashes, lookup tables, reverse lookup tables, and rainbow tables become ineffective.
9. An attacker won't know in advance what the salt will be, so they can't pre-compute a lookup table or rainbow table. If each user's password is hashed with a different salt, the reverse lookup table attack won't work either.
10. A new random salt must be generated each time a user creates an account or changes their password.
11. To make it impossible for an attacker to create a lookup table for every possible salt, the salt must be long. A good rule of thumb is to use a salt that is the same size as the output of the hash function. For example, the output of SHA256 is 256 bits (32 bytes), so the salt should be at least 32 random bytes.
12. All it does is create interoperability problems, and can sometimes even make the hashes less secure. Never try to invent your own crypto, always use a standard that has been designed by experts.
14. is not difficult to reverse engineer the algorithm. It does take longer to compute wacky hash functions, but only by a small constant factor. It's better to use an iterated algorithm that's designed to be extremely hard to parallelize (these are discussed below). And, properly salting the hash solves the rainbow table problem.
15. A password hashed using MD5 and salt is, for all practical purposes, just as secure as if it were hashed with SHA256 and salt. Nevertheless, it is a good idea to use a more secure hash function like SHA256, SHA512, RipeMD, or WHIRLPOOL if possible.
16. We've seen how malicious hackers can crack plain hashes very quickly using lookup tables and rainbow tables. We've learned that randomizing the hashing using salt is the solution to the problem. But how do we generate the salt, and how do we apply it to the password?
17. Salt should be generated using a Cryptographically Secure Pseudo-Random Number Generator (CSPRNG).
18. java.security.SecureRandom
19. We don't want our salts to be predictable, so we must use a CSPRNG.
20. The salt needs to be unique per-user per-password. Every time a user creates an account or changes their password, the password should be hashed using a new random salt. Never reuse a salt. The salt also needs to be long, so that there are many possible salts. As a rule of thumb, make your salt is at least as long as the hash function's output. The salt should be stored in the user account table alongside the hash.
21. If the connection between the browser and the server is insecure, a man-in-the-middle can modify the JavaScript code as it is downloaded to remove the hashing functionality and get the user's password.
22. Salt ensures that attackers can't use specialized attacks like lookup tables and rainbow tables to crack large collections of hashes quickly, but it doesn't prevent them from running dictionary or brute-force attacks on each hash individually. High-end graphics cards (GPUs) and custom hardware can compute billions of hashes per second, so these attacks are still very effective. To make these attacks less effective, we can use a technique known as key stretching.
23. Key stretching is implemented using a special type of CPU-intensive hash function. Don't try to invent your own–simply iteratively hashing the hash of the password isn't enough as it can be parallelized in hardware and executed as fast as a normal hash. Use a standard algorithm like PBKDF2 or bcrypt. You can find a PHP implementation of PBKDF2 here.
24. As long as an attacker can use a hash to check whether a password guess is right or wrong, they can run a dictionary or brute-force attack on the hash. The next step is to add a secret key to the hash so that only someone who knows the key can use the hash to validate a password. This can be accomplished two ways. Either the hash can be encrypted using a cipher like AES, or the secret key can be included in the hash using a keyed hash algorithm like HMAC.
25. This is not as easy as it sounds. The key has to be kept secret from an attacker even in the event of a breach. If an attacker gains full access to the system, they'll be able to steal the key no matter where it is stored. The key must be stored in an external system, such as a physically separate server dedicated to password validation, or a special hardware device attached to the server such as the YubiHSM.
26. Don't hard-code a key into the source code, generate it randomly when the application is installed. This isn't as secure as using a separate system to do the password hashing, because if there are SQL injection vulnerabilities in a web application, there are probably other types, such as Local File Inclusion, that an attacker could use to read the secret key file. But, it's better than nothing.
27. Please note that keyed hashes do not remove the need for salt. Clever attackers will eventually find ways to compromise the keys, so it is important that hashes are still protected by salt and key stretching.
28. The idea is to make the hash function very slow, so that even with a fast GPU or custom hardware, dictionary and brute-force attacks are too slow to be worthwhile. The goal is to make the hash function slow enough to impede attacks, but still fast enough to not cause a noticeable delay for the user.
29. Key stretching is implemented using a special type of CPU-intensive hash function. Don't try to invent your own–simply iteratively hashing the hash of the password isn't enough as it can be parallelized in hardware and executed as fast as a normal hash. Use a standard algorithm like PBKDF2 or bcrypt.
30.
References:
https://crackstation.net/hashing-security.htm
http://stackoverflow.com/questions/1054022/best-way-to-store-password-in-database
http://stackoverflow.com/questions/18268502/how-to-generate-salt-value-in-java
http://stackoverflow.com/questions/3103652/hash-string-via-sha-256-in-java
1. The simplest way to crack a hash is to try to guess the password, hashing each guess, and checking if the guess's hash equals the hash being cracked. If the hashes are equal, the guess is the password. The two most common ways of guessing passwords are dictionary attacks and brute-force attacks.
2. A dictionary attack uses a file containing words, phrases, common passwords, and other strings that are likely to be used as a password. Each word in the file is hashed, and its hash is compared to the password hash. If they match, that word is the password.
3. A brute-force attack tries every possible combination of characters up to a given length. These attacks are very computationally expensive, and are usually the least efficient in terms of hashes cracked per processor time, but they will always eventually find the password. Passwords should be long enough that searching through all possible character strings to find it will take too long to be worthwhile.
4. Rainbow tables that can crack any md5 hash of a password up to 8 characters long exist.
5. Lookup tables and rainbow tables only work because each password is hashed the exact same way. If two users have the same password, they'll have the same password hashes. We can prevent these attacks by randomizing each hash, so that when the same password is hashed twice, the hashes are not the same.
6. We can randomize the hashes by appending or prepending a random string, called a salt, to the password before hashing
7. As shown in the example above, this makes the same password hash into a completely different string every time. To check if a password is correct, we need the salt, so it is usually stored in the user account database along with the hash, or as part of the hash string itself.
8. The salt does not need to be secret. Just by randomizing the hashes, lookup tables, reverse lookup tables, and rainbow tables become ineffective.
9. An attacker won't know in advance what the salt will be, so they can't pre-compute a lookup table or rainbow table. If each user's password is hashed with a different salt, the reverse lookup table attack won't work either.
10. A new random salt must be generated each time a user creates an account or changes their password.
11. To make it impossible for an attacker to create a lookup table for every possible salt, the salt must be long. A good rule of thumb is to use a salt that is the same size as the output of the hash function. For example, the output of SHA256 is 256 bits (32 bytes), so the salt should be at least 32 random bytes.
12. All it does is create interoperability problems, and can sometimes even make the hashes less secure. Never try to invent your own crypto, always use a standard that has been designed by experts.
14. is not difficult to reverse engineer the algorithm. It does take longer to compute wacky hash functions, but only by a small constant factor. It's better to use an iterated algorithm that's designed to be extremely hard to parallelize (these are discussed below). And, properly salting the hash solves the rainbow table problem.
15. A password hashed using MD5 and salt is, for all practical purposes, just as secure as if it were hashed with SHA256 and salt. Nevertheless, it is a good idea to use a more secure hash function like SHA256, SHA512, RipeMD, or WHIRLPOOL if possible.
16. We've seen how malicious hackers can crack plain hashes very quickly using lookup tables and rainbow tables. We've learned that randomizing the hashing using salt is the solution to the problem. But how do we generate the salt, and how do we apply it to the password?
17. Salt should be generated using a Cryptographically Secure Pseudo-Random Number Generator (CSPRNG).
18. java.security.SecureRandom
19. We don't want our salts to be predictable, so we must use a CSPRNG.
20. The salt needs to be unique per-user per-password. Every time a user creates an account or changes their password, the password should be hashed using a new random salt. Never reuse a salt. The salt also needs to be long, so that there are many possible salts. As a rule of thumb, make your salt is at least as long as the hash function's output. The salt should be stored in the user account table alongside the hash.
21. If the connection between the browser and the server is insecure, a man-in-the-middle can modify the JavaScript code as it is downloaded to remove the hashing functionality and get the user's password.
22. Salt ensures that attackers can't use specialized attacks like lookup tables and rainbow tables to crack large collections of hashes quickly, but it doesn't prevent them from running dictionary or brute-force attacks on each hash individually. High-end graphics cards (GPUs) and custom hardware can compute billions of hashes per second, so these attacks are still very effective. To make these attacks less effective, we can use a technique known as key stretching.
23. Key stretching is implemented using a special type of CPU-intensive hash function. Don't try to invent your own–simply iteratively hashing the hash of the password isn't enough as it can be parallelized in hardware and executed as fast as a normal hash. Use a standard algorithm like PBKDF2 or bcrypt. You can find a PHP implementation of PBKDF2 here.
24. As long as an attacker can use a hash to check whether a password guess is right or wrong, they can run a dictionary or brute-force attack on the hash. The next step is to add a secret key to the hash so that only someone who knows the key can use the hash to validate a password. This can be accomplished two ways. Either the hash can be encrypted using a cipher like AES, or the secret key can be included in the hash using a keyed hash algorithm like HMAC.
25. This is not as easy as it sounds. The key has to be kept secret from an attacker even in the event of a breach. If an attacker gains full access to the system, they'll be able to steal the key no matter where it is stored. The key must be stored in an external system, such as a physically separate server dedicated to password validation, or a special hardware device attached to the server such as the YubiHSM.
26. Don't hard-code a key into the source code, generate it randomly when the application is installed. This isn't as secure as using a separate system to do the password hashing, because if there are SQL injection vulnerabilities in a web application, there are probably other types, such as Local File Inclusion, that an attacker could use to read the secret key file. But, it's better than nothing.
27. Please note that keyed hashes do not remove the need for salt. Clever attackers will eventually find ways to compromise the keys, so it is important that hashes are still protected by salt and key stretching.
28. The idea is to make the hash function very slow, so that even with a fast GPU or custom hardware, dictionary and brute-force attacks are too slow to be worthwhile. The goal is to make the hash function slow enough to impede attacks, but still fast enough to not cause a noticeable delay for the user.
29. Key stretching is implemented using a special type of CPU-intensive hash function. Don't try to invent your own–simply iteratively hashing the hash of the password isn't enough as it can be parallelized in hardware and executed as fast as a normal hash. Use a standard algorithm like PBKDF2 or bcrypt.
30.
References:
https://crackstation.net/hashing-security.htm
http://stackoverflow.com/questions/1054022/best-way-to-store-password-in-database
http://stackoverflow.com/questions/18268502/how-to-generate-salt-value-in-java
http://stackoverflow.com/questions/3103652/hash-string-via-sha-256-in-java
Saturday, November 14, 2015
Research about Sales Funnel
Knowledge Sharing:
1. A company's marketing department is typically responsible for lead generation.
9. The sooner that you as the salesperson can verify you’re dealing with a solid sales prospect, the greater your chance of being successful and maximizing profit.
10. In marketing, lead generation is the generation of consumer interest or inquiry into products or services of a business.
11. some say leads are qualified prospects, others say prospects are developed from leads, and still others say prospects are equivalent to sales leads.
12. a lead is information that indirectly points toward a sale.
14. Sales-ready leads have provided the same information and demonstrated a greater degree of sales potential. In both cases, the information is typically user-generated and provides a contact method (thus enabling further communication and sales potential). With these two clarifications taken into account, the final definition is the following.
15. Lead – An individual who has provided contact information and, in doing so, pointed toward a potential sales opportunity.
16. Prospects tend to be classified in one of two ways. Some consider prospects to be contacts who fit one of a company’s buyer personas, but have not expressed interest. Others consider prospects to be sales-ready leads that have moved on to the sales team
17. The verbiage around “lead” discusses slight or indirect indications toward a subject, while that around “prospect” discusses the potential for immediate development and actualization. In other words, a leads puts you on the path toward an outcome, while a prospect is the final step before actualization of the outcome.
18. Prospect – A qualified and interested individual who, through two-way interaction, has demonstrated they are preparing to make a purchase decision
19. The single biggest difference between prospects and leads is their engagement; leads are characterized by one way communication, while prospects are characterized by two way communication.
20. A lead has reached out to a company – through a form or sign-up – and provided their information. Once the company has that information, they enter the lead into their nurture process, wherein the lead receives communications from the company with hopes of driving further engagement. More qualified leads may engage with the content, but there is no sustained back and forth. Prospects, on the other hand, are created after a sales-ready lead is contacted by a rep. In order to be elevated to the status of prospect, the lead has to engage in dialog with the rep. This could take the form of a chain of email messages, a phone call, or a meeting.
21. The other key difference between leads and prospects is the methods of communication. Leads are typically contacted in large groups or as part of an automated program. In either case, processes are defined by the marketing department. Messages come from general addresses (marketing@company.com, newsletter@company.com, etc.) and calls to action are related to consuming additional content or connecting in on additional channels. Prospects are usually contacted on an individual or small group basis. Messages come from associated reps and are highly personalized to the recipient. Calls to action for prospects usually center on keeping the dialog going (scheduling a call, requesting a quote, etc.).
1. A company's marketing department is typically responsible for lead generation.
2. Our challenge in sales is to be able to spot the imposter quickly so we don’t waste time on them.
3. Sales prospects who are interested will engage with you consistently, while suspects will only engage with you as long as it’s safe.
4. lead generators: any marketing-related activity intended to publicize the availability of a vendor's product or service.
5. lead nurturing: the practices that a company establishes for dealing with potential leads.
6. lead scoring: processes or software designed to rank the importance of leads to the company.
7. The way you call them out is by asking them to share with you something about themselves or their business that is not publically known. Prospects, if they genuinely are interested in you and your product, will see the value in sharing such information. Suspects will not.
8. Second level is to then ask the person to do something for you after you leave. You might ask them to review some information and email you with their comments. You might ask them to provide you with internal documents. The idea is to get them to spend time doing something after you’ve left the call. A real prospect, if they’re serious, is naturally going to do this, because they see the value. On the other hand, a suspect is not going to do something for you, because their goal is to get you to do everything for them.9. The sooner that you as the salesperson can verify you’re dealing with a solid sales prospect, the greater your chance of being successful and maximizing profit.
10. In marketing, lead generation is the generation of consumer interest or inquiry into products or services of a business.
11. some say leads are qualified prospects, others say prospects are developed from leads, and still others say prospects are equivalent to sales leads.
12. a lead is information that indirectly points toward a sale.
14. Sales-ready leads have provided the same information and demonstrated a greater degree of sales potential. In both cases, the information is typically user-generated and provides a contact method (thus enabling further communication and sales potential). With these two clarifications taken into account, the final definition is the following.
15. Lead – An individual who has provided contact information and, in doing so, pointed toward a potential sales opportunity.
16. Prospects tend to be classified in one of two ways. Some consider prospects to be contacts who fit one of a company’s buyer personas, but have not expressed interest. Others consider prospects to be sales-ready leads that have moved on to the sales team
17. The verbiage around “lead” discusses slight or indirect indications toward a subject, while that around “prospect” discusses the potential for immediate development and actualization. In other words, a leads puts you on the path toward an outcome, while a prospect is the final step before actualization of the outcome.
18. Prospect – A qualified and interested individual who, through two-way interaction, has demonstrated they are preparing to make a purchase decision
19. The single biggest difference between prospects and leads is their engagement; leads are characterized by one way communication, while prospects are characterized by two way communication.
20. A lead has reached out to a company – through a form or sign-up – and provided their information. Once the company has that information, they enter the lead into their nurture process, wherein the lead receives communications from the company with hopes of driving further engagement. More qualified leads may engage with the content, but there is no sustained back and forth. Prospects, on the other hand, are created after a sales-ready lead is contacted by a rep. In order to be elevated to the status of prospect, the lead has to engage in dialog with the rep. This could take the form of a chain of email messages, a phone call, or a meeting.
21. The other key difference between leads and prospects is the methods of communication. Leads are typically contacted in large groups or as part of an automated program. In either case, processes are defined by the marketing department. Messages come from general addresses (marketing@company.com, newsletter@company.com, etc.) and calls to action are related to consuming additional content or connecting in on additional channels. Prospects are usually contacted on an individual or small group basis. Messages come from associated reps and are highly personalized to the recipient. Calls to action for prospects usually center on keeping the dialog going (scheduling a call, requesting a quote, etc.).
Sunday, October 25, 2015
Read books about Customer Discovery
Knowledge Sharing:
1. thinking and acting as if all startups are the same is a strategic error.
2. By our definition, (a product that allows users to do something they couldn't do before) Palm in 1996 created a new market. In contrast, Handspring in 1999 was in an existing market.
3. Market Type changes everything.
4. You can enter an existing market with a cheaper or repositioned "niche" product, but if that is the case we call it a resegmented market.
5. Creating a new market requires understanding whether there is a large customer base who couldn't do this before, whether these customers can be convinced they want or need your new product, and whether customer adoption occurs in your lifetime. It also requires rather sophisticated thinking about financing - how you manage the cash burn rate during the adoption phase, and how you manage and find investors who are patient and have deep pockets
6. Resegmenting an existing market can take two forms: a lowcost strategy or a niche strategy.
7. By the way, segmentation is not the same as differentiation. Segmentation means you've picked a clear and distinct spot in customers' minds that is unique, understandable, and, most important, concerns something they value and want and need now
8. If you truly can be a low cost (and profitable) provider, entering existing markets at this end is fun, as incumbent companies tend to abandon low-margin businesses and head up-market.
9. What kind of startup are we?
10. The interaction in a large company between Product Development and Customer Development is geared to delivering additional features and functions to existing customers at a price that maximizes market share and profitability
11. In short, in big companies, the product spec is market-driven; in startups, the marketing is product-driven
12. One of the goals of a formal Customer Development process is to ensure the focus on the product and the focus on the customer remain in concert without rancor and with a modicum of surprise.
14. If customers do not agree there's a problem to be solved, or think the problem is not painful, or don't deem the product spec solves their problem, only then do the customer and Product Development teams reconvene to add or refine features.
15. While each step has its own specific objectives, the process as a whole has one overarching
goal: proving there is a profitable, scalable business for the company. This is what turns the
company from a nonprofit into a moneymaking endeavor.
16. In a startup, the first product is not designed to satisfy a mainstream customer. No startup can afford the engineering effort or the time to build a product with every feature a mainstream customer needs in its first release. The product would take years to get to market and be obsolete by the time it arrives.
17. Asuccessful startup solves this conundrum by focusing its development and early selling efforts on a very small group ofearly customers who have bought into the startup's vision.
18. EarlyvangeUsts are a special breed of customers willing to take a risk on your startup's product
or service because they can actually envision its potential to solve a critical and immediate
problem—and they have the budget to purchase it. Unfortunately, most customers don't fit this
profile.
19. Customers like these are the traditional "late adopters" becausethey have a "latent need."
20. Since they have an "active need," you can probably sell to these customers later, when you can deliver a "mainstream" product, but not today.
21. The idea that a startup builds its product for a small group of initial customers, rather than
devising a generic mainstreamspec, is radical.
22. Amore productive approach is to proceed with Product Development, with the feature list driven by the vision and experience ofthe company's founders.
23. Therefore, the Customer Development model has your founding team take the product as spec'd and search to see if there are customers—any customers—who will buy the product exactly as you have defined it. When you do find those customers, you tailor the first release of the product so it satisfies their needs.
24. The shift in thinking is important. For the first product in a startup, your initial purpose in
meeting customers is not to gather feature requests so you can change the product. Instead,
your purpose in talking to customers is to find customers for the product you are already building.
25. In the Customer Development model, then, feature request is by exception rather than rule. This eliminates the endless list of requests that oftendelayfirst customer ship and driveyour ProductDevelopment team crazy
26. Product Development no longer will roll their eyes after every request for features or changes to the product, but instead understand they comefrom a deep understanding of customer needs.
27. To sum up the Customer Discovery philosophy: in sharp contrast to the MRD approach of
building a product for a wide group ofcustomers, a successful startup's first release is designed
to be "good enough only for our first paying customers."
28. you start development based on your initial vision, using your visionary customers to test whether that vision has a market. And you adjust your vision according to what you find out.
29. in phase 4 you stop and verify you understand customers' problems, the product
solves those problems, customers will pay for the product, and the resulting revenue will result
in a profitable business model. This phase culminates in the deliverables for the Customer
Discovery step: a problem statement document, an expanded product requirement document,
an updated sales and revenue plan, and a sound business and product plan. With
30. With your product features and business model validated, you decide whether you have learned enough to go out and try to sell your product to a few visionary customers or whether you need to go
back to customers to learn some more. If, and only if, you are successful in this step do you
proceed to Customer Validation.
31. At first, this "team" may consist of the company's technical founder who moves out to talk
with customers while five engineers write code (or build hardware, or design a new coffee cup,
etc.). More often than not it includes a "head of Customer Development" who has a product
marketing or product management background and is comfortable moving back and forth
between customer and Product Development conversations. Later, as the startup moves into
the Customer Validation step, the Customer Development team may grow to several people
including a dedicated "sales closer" responsible for the logistics of getting early orders signed.
32. But whether it is a single individual or a team, Customer Development must have the
authority to radically change the company's direction, product or mission and the creative,
flexible mindset of an entrepreneur.
33. The Product Development process emphasizes execution. The Customer Development
process emphasizes learning, discovery, and failure.
34. Unique to the process is the commitment of the Product Development team to spend at
least 15 percent of its time outside the building talking to customers. You need to review these
organizational differences with your entire startup team and make sure everyone is on board.
35. Write these down and post them on your wall. When the company is confused about what product to build or what market you wanted to serve, refer to the mission statement.
36. This constant reference back to the basic mission of the company is called missionoriented
leadership. In times of crisis or confusion, understanding why the company exists and
what its goals are will provide a welcome beacon of clarity.
37. it calls for the marketing people to bite their tongues and listen to the Product Development group's assumptions about exactly how the features will benefit customers. These engineering-driven benefits represent hypotheses you will test against real customer opinions.
38. These are important because the Customer Development team will be out trying to convince a small group of early customers to buy based on the product spec, long before you can physically
deliver the product.
39. To do so they will have to paint a picture for customers of what the product will ultimately look like several releases into the future. It's because these customers are buying into your total vision that they will give you money for an incomplete, buggy, barely functional first product.
40. These assumptions cover two key areas: who the customers are (the customer hypothesis) and what problems they have (the problem hypothesis).
41. For example, children are a large consumer market and the users of many products, but their parents are the buyers.
42. What's different is recognizing since a real problem or need does not exist, for consumers to purchase a luxury, they have to give themselves a justification for the purchase.
43. The reason is simple: it's much easier to sell when you can build your story about your product's features and benefits around a solution to a problem you know the customer already has.
44. Understanding your customers' problems involves understanding their pain—that is, how
customers experience the problem, and why (and how much) it matters to them.
45. If they could wave a magic wand and change anything at all, what would it be?
46. Now that you are firmly ensconced in thinking through your customers' problems, look at
the problem from one other perspective: are you solving a mission-critical company problem or
satisfying a must have consumer need?
47. As I suggested earlier, one test of a have-to-have product is that the customers have built
or have been trying to build a solution themselves. Bad news? No, it's the best news a startup
could find. You have uncovered a mission-critical problem and customers with a vision of a
solution. Wow. Now all you need to do is convince them that if they build it themselves they
are in the software development and maintenance business, and that's what your company
does for a living.
48. One of the most satisfying exercises for a true entrepreneur executing Customer Development
is to discover how a customer "works."
49. To begin with, how do the potential end users of the product (the tellers)
spend their days? What products do they use? How much time do they spend using them? How
would life change for these users after they had your product? Unless you've been a bank teller
before, these questions should leave you feeling somewhat at a loss. But how are you going to
sell a product to a bank to solve tellers' problems if you don't really know how they work?
50. In Customer Development, the answers turn out to be easy; it's asking the right questions that's difficult. You will be going out and talking to customers with the goal of filling in all the blank spots on the customer/problem brief.
51. For a consumer product, the same exercise is applicable. How do consumers solve their
problems today? How would they solve their problems having your product? Would they be
happier? Smarter? Feel better? Do you understand how and what will motivate these
customers to buy?
52. They interact with other people. In enterprise sales it will be other people in their company, and in a sale to a consumer their interaction is with their friends and/or family.
53. For most purchases, both corporate and consumer customers need to feel the purchase was "worth it," that they got "a good deal."
54. For a company this is called return on investment, or ROI. (For a consumer this can be "status" or some other justification of their wants and desires.) ROI represents customers' expectation from their investment measured against goals such as time, money, or resources as well as status for consumers.
55. In the Customer Development model, however, the premise is that a very small group of early visionary customers will guide your follow-on features. So your mantra becomes "Less is more, to get an earlier first customer ship." Rather than asking customers explicitly about feature X, Y or Z, one approach to defining the minimum features set is to ask, "What is the smallest or least complicated problem the customer will pay us to solve?"
56. A startup picks a sales channel with three criteria in mind: (1) Does the channel add value
to the sales process? (2) What are the price and the complexity of the product? And (3) Are
there established customer buying habits/practices?
57. Since some day you are going to have to "create demand" to reach these customers, use the
opportunity of talking to them to find out how they learn about new companies and new products.
58. In a perfect world customers would know telepathically how wonderful your product is, drive,
fly or walk to your company, and line up to give you money. Unfortunately it doesn't work that
way. You need to create "demand" for your product. Once you create this demand you need to
drive those customers into the sales channel that carries your product.
59. What that means is the further away from a direct sales force your channel is, the more expensive your demand creation activities are.
60. Do they go to trade shows? Do others in their company go? What magazines do they read?
Which ones do they trust? What do their bosses read? Who are the best salespeople they know?
Who would they hire to call on them?
61. In every market or industry there is a select group of individuals who pioneer the trends, style,
and opinions. They may be paid pundits in market research firms. They may be kids who wear
the latest fashions. In this brief you need to find out who are the influencers who can affect
your customer's opinions.
62. This list will also become your road map for assembling an advisory board as well as targeting key industry analysts and press contacts which you will do in Customer Validation step.
63. Positioning your product against the slew of existing competitors is accomplished by adroitly picking the correct product features where you are better.
64. Here your positioning will rest on either a) the claim of being the "low cost provider" or b) finding a unique niche via positioning (some feature of your product or service redefines the existing market so you have a unique competitive advantage.)
65. remember a market is a set of companies with common attributes.
66. Without sounding pedantic, creating a new market means a market does not currently exist—there are no customers
67. As I noted in Chapter 2, you compete in a new market not by besting other companies with
your product features, but by convincing a set of customers your vision is not a hallucination
and solves a real problem they have or could be convinced they have.
68. New market is more scary, because that means no customers.
69. if you are entering an existing market or resegmenting one, the basis of competition is all about some attribute(s) of your product. Therefore you need to know how and why your product is better
than your competitors. This brief helps you focus on answering that question.
70. If you are entering a new market doing a competitive analysis is like dividing by zero;
there are no direct competitors. However, using the market map you developed in the last
phase as a stand-in for a competitive hypothesis answer the questions below as if each of the
surrounding markets and companies will ultimately move into your new market.)
71. When the share of the largest player in a market is around 30% or less, there is no
single dominant company. You have a shot at entering this market. When one company owns
over 80% share (think Microsoft), that player is the owner of the market and a monopolist. The
only possible move you have is resegmenting this market.
72. A natural tendency of startups is to compare themselves to other startups around them.
That's looking at the wrong problem. In the first few years, other startups do not put each
other out of business. While it is true startups compete with each other for funding and
technical resources, the difference between winning and losing startups is that winners
understand why customers buy. The losers never do. Consequently, in the Customer
Development model, a competitive analysis starts with why customers will buy your product.
Then it expands into a broader look at the entire market, which includes competitors, both
established companies and other startups.
73. Since all you have inside the company are opinions—the facts are with your customers—the founding team leaves the building and comes back only when the hypotheses have turned into data.
74. Instead, your first set of customer meetings isn't to learn whether customers love your product. It's to learn whether your assumptions about the problems customers have are correct. If those assumptions are wrong, it doesn't matter how wonderful the product is, no one will buy it. Only after you gather sufficient data on your understanding of the customer do you return to customers to get feedback on the product itself, in Phase 3
75. Keep in mind the goal of this initial flurry of calling is not only to meet with people whose
names you collect but to use these customer contacts to network your way up "the food-chain of
expertise." Always keep asking your contacts "who's the smartest person you know?"
Remember, the ultimate goal in this Customer Discovery step is to make sure you understand
the customers problem(s) and to ensure your product as spec'd solves that problem.
76. A consumer product at times can be just as challenging - how do you get a hold of someone you don't know? But the same technique can be used; a reference from someone they know.
77. Do not, I repeat, do not, try to "convince" customers they really have the problems you describe. They are the ones with the checkbooks, and you want them to convince you.
78. My favorite summary of this discussion is to ask two questions I alluded to earlier: "What
is the biggest pain in how you work (or in RoboVac's case—how you clean)? If you could wave a
magic wand and change anything in what you do, what would it be?" I call these the "IPO
questions."
79. In addition to checking your assumptions about customer problems and your solution, you need
to validate your hypotheses concerning how customers actually spend their day, spend their
money and get their job done.
80. If your customers' eyes haven't glazed over yet, dip your toe into the hypothetical product
spec. "If you had a product like this [describe yours in conceptual terms], what percentage of
your time could be spent using the product? How mission critical is it? Would it solve the pain
you mentioned earlier? What would be the barriers to adopting a product like this?"
81. Your goal, after enoughof these customer conversations, is to be able to stand up in front of
your company and say, "Here were our hypotheses about our customers, their problems, and
how they worked. Now here's what they are saying their issues really are, and this is how they
really spend their day."
82. While corporate customers may have more formal organization to diagram, a consumer will have
more external influencers to track.
83. Once the customer workflow and interactions are fully described, you can get into the real
news. What problems did customers say they have? How painful were these problems? Where
on the "problem scale" were the customers you interviewed? How are they solving these
problems today? Draw the customer workflow with and without your product. Was the
difference dramatic? Did customers say they would pay for that difference? In general, what
did you learn about customers' problems? What were the biggest surprises? What were the
biggest disappointments?
84. Given all you have learned talking to customers, how well do your preliminary product specs solve their problems? Dead on? Somewhat? Not exactly? If the answer is somewhat or not exactly, this meeting becomes a painful, soul-searching, company-building exercise. Is it because you haven't talked to the right people? To enough people? Because you haven't asked the right questions? This assessment is critical because ofa fundamental assumption of the Customer Development model: before changing the product, you need to keep looking for a market where it might fit. If and only if you cannot find anymarket for the product do you discuss changing the feature list.
85. This rigor of no newfeatures until you've exhausted the search of market space - counters
a natural tendency ofpeople who talk to customers - you tend to collect a list offeatures that if
added, will get one additional customer to buy. Soon you have a ten page feature list just to
sell ten customers. The goal is to have a single paragraph feature list that can sell to
thousands of customers.
86. What do you do if you believe you are talking to the right customers but their feedback tells
you you're building the wrong product? Something has to change. Don't continue building the
product and think miracles will happen. Either get back outside the building and find a
different set of customers who will buy the product or consider changing the features or how
the product is configured.
87.
Key Results of Customer Discovery:
Customers:
1. Latent Need
2. Active Need
3. Customer
4. Ultimate Customer
Earlyvangelist customer characteristics
Types:
1. A New Product in an Existing Market
2. A New Product in a New Market
3. A New Product Attempting to Resegment an Existing Market: Low Cost
4. A New Product Attempting to Resegment an Existing Market: Niche
PetSwap:
1. For Mainstrain, Resegment an Existing Market: Niche
2. For existing Niche Marketing, A New Product in an Existing Market
3. For Competitors, a New Product in a New Market
2. PetSwap is new. Pet Care Swapping concept is new. Some people do it in a private network. It is not in large scale.
3. Some existing products are available,
Visions -> Early Customers -> Evangelists -> Earlyvangelists
1. thinking and acting as if all startups are the same is a strategic error.
2. By our definition, (a product that allows users to do something they couldn't do before) Palm in 1996 created a new market. In contrast, Handspring in 1999 was in an existing market.
3. Market Type changes everything.
4. You can enter an existing market with a cheaper or repositioned "niche" product, but if that is the case we call it a resegmented market.
5. Creating a new market requires understanding whether there is a large customer base who couldn't do this before, whether these customers can be convinced they want or need your new product, and whether customer adoption occurs in your lifetime. It also requires rather sophisticated thinking about financing - how you manage the cash burn rate during the adoption phase, and how you manage and find investors who are patient and have deep pockets
6. Resegmenting an existing market can take two forms: a lowcost strategy or a niche strategy.
7. By the way, segmentation is not the same as differentiation. Segmentation means you've picked a clear and distinct spot in customers' minds that is unique, understandable, and, most important, concerns something they value and want and need now
8. If you truly can be a low cost (and profitable) provider, entering existing markets at this end is fun, as incumbent companies tend to abandon low-margin businesses and head up-market.
9. What kind of startup are we?
10. The interaction in a large company between Product Development and Customer Development is geared to delivering additional features and functions to existing customers at a price that maximizes market share and profitability
11. In short, in big companies, the product spec is market-driven; in startups, the marketing is product-driven
12. One of the goals of a formal Customer Development process is to ensure the focus on the product and the focus on the customer remain in concert without rancor and with a modicum of surprise.
14. If customers do not agree there's a problem to be solved, or think the problem is not painful, or don't deem the product spec solves their problem, only then do the customer and Product Development teams reconvene to add or refine features.
15. While each step has its own specific objectives, the process as a whole has one overarching
goal: proving there is a profitable, scalable business for the company. This is what turns the
company from a nonprofit into a moneymaking endeavor.
16. In a startup, the first product is not designed to satisfy a mainstream customer. No startup can afford the engineering effort or the time to build a product with every feature a mainstream customer needs in its first release. The product would take years to get to market and be obsolete by the time it arrives.
17. Asuccessful startup solves this conundrum by focusing its development and early selling efforts on a very small group ofearly customers who have bought into the startup's vision.
18. EarlyvangeUsts are a special breed of customers willing to take a risk on your startup's product
or service because they can actually envision its potential to solve a critical and immediate
problem—and they have the budget to purchase it. Unfortunately, most customers don't fit this
profile.
19. Customers like these are the traditional "late adopters" becausethey have a "latent need."
20. Since they have an "active need," you can probably sell to these customers later, when you can deliver a "mainstream" product, but not today.
21. The idea that a startup builds its product for a small group of initial customers, rather than
devising a generic mainstreamspec, is radical.
22. Amore productive approach is to proceed with Product Development, with the feature list driven by the vision and experience ofthe company's founders.
23. Therefore, the Customer Development model has your founding team take the product as spec'd and search to see if there are customers—any customers—who will buy the product exactly as you have defined it. When you do find those customers, you tailor the first release of the product so it satisfies their needs.
24. The shift in thinking is important. For the first product in a startup, your initial purpose in
meeting customers is not to gather feature requests so you can change the product. Instead,
your purpose in talking to customers is to find customers for the product you are already building.
25. In the Customer Development model, then, feature request is by exception rather than rule. This eliminates the endless list of requests that oftendelayfirst customer ship and driveyour ProductDevelopment team crazy
26. Product Development no longer will roll their eyes after every request for features or changes to the product, but instead understand they comefrom a deep understanding of customer needs.
27. To sum up the Customer Discovery philosophy: in sharp contrast to the MRD approach of
building a product for a wide group ofcustomers, a successful startup's first release is designed
to be "good enough only for our first paying customers."
28. you start development based on your initial vision, using your visionary customers to test whether that vision has a market. And you adjust your vision according to what you find out.
29. in phase 4 you stop and verify you understand customers' problems, the product
solves those problems, customers will pay for the product, and the resulting revenue will result
in a profitable business model. This phase culminates in the deliverables for the Customer
Discovery step: a problem statement document, an expanded product requirement document,
an updated sales and revenue plan, and a sound business and product plan. With
30. With your product features and business model validated, you decide whether you have learned enough to go out and try to sell your product to a few visionary customers or whether you need to go
back to customers to learn some more. If, and only if, you are successful in this step do you
proceed to Customer Validation.
31. At first, this "team" may consist of the company's technical founder who moves out to talk
with customers while five engineers write code (or build hardware, or design a new coffee cup,
etc.). More often than not it includes a "head of Customer Development" who has a product
marketing or product management background and is comfortable moving back and forth
between customer and Product Development conversations. Later, as the startup moves into
the Customer Validation step, the Customer Development team may grow to several people
including a dedicated "sales closer" responsible for the logistics of getting early orders signed.
32. But whether it is a single individual or a team, Customer Development must have the
authority to radically change the company's direction, product or mission and the creative,
flexible mindset of an entrepreneur.
33. The Product Development process emphasizes execution. The Customer Development
process emphasizes learning, discovery, and failure.
34. Unique to the process is the commitment of the Product Development team to spend at
least 15 percent of its time outside the building talking to customers. You need to review these
organizational differences with your entire startup team and make sure everyone is on board.
35. Write these down and post them on your wall. When the company is confused about what product to build or what market you wanted to serve, refer to the mission statement.
36. This constant reference back to the basic mission of the company is called missionoriented
leadership. In times of crisis or confusion, understanding why the company exists and
what its goals are will provide a welcome beacon of clarity.
37. it calls for the marketing people to bite their tongues and listen to the Product Development group's assumptions about exactly how the features will benefit customers. These engineering-driven benefits represent hypotheses you will test against real customer opinions.
38. These are important because the Customer Development team will be out trying to convince a small group of early customers to buy based on the product spec, long before you can physically
deliver the product.
39. To do so they will have to paint a picture for customers of what the product will ultimately look like several releases into the future. It's because these customers are buying into your total vision that they will give you money for an incomplete, buggy, barely functional first product.
40. These assumptions cover two key areas: who the customers are (the customer hypothesis) and what problems they have (the problem hypothesis).
41. For example, children are a large consumer market and the users of many products, but their parents are the buyers.
42. What's different is recognizing since a real problem or need does not exist, for consumers to purchase a luxury, they have to give themselves a justification for the purchase.
43. The reason is simple: it's much easier to sell when you can build your story about your product's features and benefits around a solution to a problem you know the customer already has.
44. Understanding your customers' problems involves understanding their pain—that is, how
customers experience the problem, and why (and how much) it matters to them.
45. If they could wave a magic wand and change anything at all, what would it be?
46. Now that you are firmly ensconced in thinking through your customers' problems, look at
the problem from one other perspective: are you solving a mission-critical company problem or
satisfying a must have consumer need?
47. As I suggested earlier, one test of a have-to-have product is that the customers have built
or have been trying to build a solution themselves. Bad news? No, it's the best news a startup
could find. You have uncovered a mission-critical problem and customers with a vision of a
solution. Wow. Now all you need to do is convince them that if they build it themselves they
are in the software development and maintenance business, and that's what your company
does for a living.
48. One of the most satisfying exercises for a true entrepreneur executing Customer Development
is to discover how a customer "works."
49. To begin with, how do the potential end users of the product (the tellers)
spend their days? What products do they use? How much time do they spend using them? How
would life change for these users after they had your product? Unless you've been a bank teller
before, these questions should leave you feeling somewhat at a loss. But how are you going to
sell a product to a bank to solve tellers' problems if you don't really know how they work?
50. In Customer Development, the answers turn out to be easy; it's asking the right questions that's difficult. You will be going out and talking to customers with the goal of filling in all the blank spots on the customer/problem brief.
51. For a consumer product, the same exercise is applicable. How do consumers solve their
problems today? How would they solve their problems having your product? Would they be
happier? Smarter? Feel better? Do you understand how and what will motivate these
customers to buy?
52. They interact with other people. In enterprise sales it will be other people in their company, and in a sale to a consumer their interaction is with their friends and/or family.
53. For most purchases, both corporate and consumer customers need to feel the purchase was "worth it," that they got "a good deal."
54. For a company this is called return on investment, or ROI. (For a consumer this can be "status" or some other justification of their wants and desires.) ROI represents customers' expectation from their investment measured against goals such as time, money, or resources as well as status for consumers.
55. In the Customer Development model, however, the premise is that a very small group of early visionary customers will guide your follow-on features. So your mantra becomes "Less is more, to get an earlier first customer ship." Rather than asking customers explicitly about feature X, Y or Z, one approach to defining the minimum features set is to ask, "What is the smallest or least complicated problem the customer will pay us to solve?"
56. A startup picks a sales channel with three criteria in mind: (1) Does the channel add value
to the sales process? (2) What are the price and the complexity of the product? And (3) Are
there established customer buying habits/practices?
57. Since some day you are going to have to "create demand" to reach these customers, use the
opportunity of talking to them to find out how they learn about new companies and new products.
58. In a perfect world customers would know telepathically how wonderful your product is, drive,
fly or walk to your company, and line up to give you money. Unfortunately it doesn't work that
way. You need to create "demand" for your product. Once you create this demand you need to
drive those customers into the sales channel that carries your product.
59. What that means is the further away from a direct sales force your channel is, the more expensive your demand creation activities are.
60. Do they go to trade shows? Do others in their company go? What magazines do they read?
Which ones do they trust? What do their bosses read? Who are the best salespeople they know?
Who would they hire to call on them?
61. In every market or industry there is a select group of individuals who pioneer the trends, style,
and opinions. They may be paid pundits in market research firms. They may be kids who wear
the latest fashions. In this brief you need to find out who are the influencers who can affect
your customer's opinions.
62. This list will also become your road map for assembling an advisory board as well as targeting key industry analysts and press contacts which you will do in Customer Validation step.
63. Positioning your product against the slew of existing competitors is accomplished by adroitly picking the correct product features where you are better.
64. Here your positioning will rest on either a) the claim of being the "low cost provider" or b) finding a unique niche via positioning (some feature of your product or service redefines the existing market so you have a unique competitive advantage.)
65. remember a market is a set of companies with common attributes.
66. Without sounding pedantic, creating a new market means a market does not currently exist—there are no customers
67. As I noted in Chapter 2, you compete in a new market not by besting other companies with
your product features, but by convincing a set of customers your vision is not a hallucination
and solves a real problem they have or could be convinced they have.
68. New market is more scary, because that means no customers.
69. if you are entering an existing market or resegmenting one, the basis of competition is all about some attribute(s) of your product. Therefore you need to know how and why your product is better
than your competitors. This brief helps you focus on answering that question.
70. If you are entering a new market doing a competitive analysis is like dividing by zero;
there are no direct competitors. However, using the market map you developed in the last
phase as a stand-in for a competitive hypothesis answer the questions below as if each of the
surrounding markets and companies will ultimately move into your new market.)
71. When the share of the largest player in a market is around 30% or less, there is no
single dominant company. You have a shot at entering this market. When one company owns
over 80% share (think Microsoft), that player is the owner of the market and a monopolist. The
only possible move you have is resegmenting this market.
72. A natural tendency of startups is to compare themselves to other startups around them.
That's looking at the wrong problem. In the first few years, other startups do not put each
other out of business. While it is true startups compete with each other for funding and
technical resources, the difference between winning and losing startups is that winners
understand why customers buy. The losers never do. Consequently, in the Customer
Development model, a competitive analysis starts with why customers will buy your product.
Then it expands into a broader look at the entire market, which includes competitors, both
established companies and other startups.
73. Since all you have inside the company are opinions—the facts are with your customers—the founding team leaves the building and comes back only when the hypotheses have turned into data.
74. Instead, your first set of customer meetings isn't to learn whether customers love your product. It's to learn whether your assumptions about the problems customers have are correct. If those assumptions are wrong, it doesn't matter how wonderful the product is, no one will buy it. Only after you gather sufficient data on your understanding of the customer do you return to customers to get feedback on the product itself, in Phase 3
75. Keep in mind the goal of this initial flurry of calling is not only to meet with people whose
names you collect but to use these customer contacts to network your way up "the food-chain of
expertise." Always keep asking your contacts "who's the smartest person you know?"
Remember, the ultimate goal in this Customer Discovery step is to make sure you understand
the customers problem(s) and to ensure your product as spec'd solves that problem.
76. A consumer product at times can be just as challenging - how do you get a hold of someone you don't know? But the same technique can be used; a reference from someone they know.
77. Do not, I repeat, do not, try to "convince" customers they really have the problems you describe. They are the ones with the checkbooks, and you want them to convince you.
78. My favorite summary of this discussion is to ask two questions I alluded to earlier: "What
is the biggest pain in how you work (or in RoboVac's case—how you clean)? If you could wave a
magic wand and change anything in what you do, what would it be?" I call these the "IPO
questions."
79. In addition to checking your assumptions about customer problems and your solution, you need
to validate your hypotheses concerning how customers actually spend their day, spend their
money and get their job done.
80. If your customers' eyes haven't glazed over yet, dip your toe into the hypothetical product
spec. "If you had a product like this [describe yours in conceptual terms], what percentage of
your time could be spent using the product? How mission critical is it? Would it solve the pain
you mentioned earlier? What would be the barriers to adopting a product like this?"
81. Your goal, after enoughof these customer conversations, is to be able to stand up in front of
your company and say, "Here were our hypotheses about our customers, their problems, and
how they worked. Now here's what they are saying their issues really are, and this is how they
really spend their day."
82. While corporate customers may have more formal organization to diagram, a consumer will have
more external influencers to track.
83. Once the customer workflow and interactions are fully described, you can get into the real
news. What problems did customers say they have? How painful were these problems? Where
on the "problem scale" were the customers you interviewed? How are they solving these
problems today? Draw the customer workflow with and without your product. Was the
difference dramatic? Did customers say they would pay for that difference? In general, what
did you learn about customers' problems? What were the biggest surprises? What were the
biggest disappointments?
84. Given all you have learned talking to customers, how well do your preliminary product specs solve their problems? Dead on? Somewhat? Not exactly? If the answer is somewhat or not exactly, this meeting becomes a painful, soul-searching, company-building exercise. Is it because you haven't talked to the right people? To enough people? Because you haven't asked the right questions? This assessment is critical because ofa fundamental assumption of the Customer Development model: before changing the product, you need to keep looking for a market where it might fit. If and only if you cannot find anymarket for the product do you discuss changing the feature list.
85. This rigor of no newfeatures until you've exhausted the search of market space - counters
a natural tendency ofpeople who talk to customers - you tend to collect a list offeatures that if
added, will get one additional customer to buy. Soon you have a ten page feature list just to
sell ten customers. The goal is to have a single paragraph feature list that can sell to
thousands of customers.
86. What do you do if you believe you are talking to the right customers but their feedback tells
you you're building the wrong product? Something has to change. Don't continue building the
product and think miracles will happen. Either get back outside the building and find a
different set of customers who will buy the product or consider changing the features or how
the product is configured.
87.
Key Results of Customer Discovery:
- problem statement document
- an expanded product requirement document
- an updated sales and revenue plan
- sound business and product plan
Customers:
1. Latent Need
2. Active Need
3. Customer
4. Ultimate Customer
Earlyvangelist customer characteristics
- The customer has a problem.
- The customer understands he or she has a problem.
- Thecustomer is actively searching for a solution and has a timetable for finding it.
- The problem is painful enoughthe customerhas cobbled together an interim solution.
- The customer has committed, or can quickly acquire, budget dollars to solve the
- problem.
Types:
1. A New Product in an Existing Market
2. A New Product in a New Market
3. A New Product Attempting to Resegment an Existing Market: Low Cost
4. A New Product Attempting to Resegment an Existing Market: Niche
PetSwap:
1. For Mainstrain, Resegment an Existing Market: Niche
2. For existing Niche Marketing, A New Product in an Existing Market
3. For Competitors, a New Product in a New Market
2. PetSwap is new. Pet Care Swapping concept is new. Some people do it in a private network. It is not in large scale.
3. Some existing products are available,
Visions -> Early Customers -> Evangelists -> Earlyvangelists
Saturday, September 26, 2015
Research Customer Behavior and Human Psychology
Knowledge Sharing:
1. Self-Determination Theory, as espoused by researchers Edward Deci and Richard Ryan, contends that people are motivated by deeper psychological needs for competence, autonomy, and relatedness. Clearly, making sure people know why their work matters is always the first step.
2. There will always be tasks people don’t want to do. But, there are ways to get people to do things they don’t want to do. There are better ways to motivate others, principally by designing conditions where people actuate themselves.
3. Instead, designing behavior by putting in the forethought to appropriately stage tasks, providing progress indicators, and finally, offering celebratory rewards under the right circumstances, are easy ways to motivate while maintaining a sense of autonomy.
4. The first reason you can’t just ask customers what they want is that they aren’t always attuned to what they really need. Steve Jobs famously said, “People don’t know what they want until you show it to them.”
5. Typically, it is easier for people to review and comment on something that is placed in front of them rather than asking to imagine something that doesn’t yet exist. This can mean anything from developing a fully functioning prototype to a clickable presentation, or even simple, hand-drawn “screens” to help customers get a sense of the experience.
6. Additionally, it is also difficult for customers to articulate what it is they want or need, especially if it relates to a topic that is not something they often think about. People have a tendency to use what they know, which is why user adoption for certain products may take longer to catch on than others.
7. The second danger in asking customers direct questions is the human desire to develop patterns and habits. Sigmund Freud called this phenomenon “repetition compulsion,” in that humans seek comfort in the familiar as well as a desire to return to an earlier known state of things.
8. These habits are sometimes formed over long periods of time, which makes trying to break or introduce new habits an extremely difficult and delicate process. During our user research phase, we try to avoid asking questions about potentially disrupting a customer’s current habit, instead asking questions that are related.
9. Rather than asking individuals to “imagine a new world” that would alter the current habits of their lives resulting in potential resistance, we are able to gain a better understanding of their natural tendencies, current mentalities and preferences, which results in more rich and insightful information.
10. The final risk is people’s overwhelming desire to be a part of something, to be well liked, and the need to please others.
11. Yes, you read that correctly. Sure, you need to keep your promises, but that's just the bare minimum. If you truly want to keep customers coming back, you need to wow them every time by offering them even more than they think is fair.
12. Your Customers Love Stories and Are More Open to Your Business Selling through Them
14.
Research about Social Psychology:
1. Customers Care More about Service Quality and Attitude than about Service Speed
2. researchers found that the #1 reason customers would abandon a brand was due to poor quality and rude customer service, which were cited 18% more often than “slow or untimely service.”
3. Good service trumps fast service every time, in both customer retention and satisfaction.
4. Customers Know What They (and Other Customers) Want; They’re also Willing to Help
5. User-lead innovations had an average revenue of $146 million dollars (in 5 years).
Internally generated innovations had an average revenue of $18 million (for the same span of time).
6. Customer surveys and analyzing customer feedback should be an integral part of your research.
7. Customers like Loyalty Programs… as Long as You Make Them Seem Easy
8. Customers like reward programs but are much more likely to participate if the business in question utilizes “artificial advancement.”
In a truly interesting look into human nature, people like being part of “gold” and “premium” reward groups… but only if there is a group of people below them.
9. Beginning a new task is a point where our brains often try to sabotage us, and additional research has shown that we are much more likely to complete a task if we feel like we’ve already taken the first few steps. This “artificial advancement” used on the second card was what made customers more likely to complete the card program to the end.
10. Last but not least, Nunes did a separate study on reward levels within customer loyalty programs and found that customers are even MORE loyal if they are labeled within a “gold club,” but only if there is another level below them.
11. Customers will embrace loyalty programs if you can make them feel like they aren’t a “new task” to perform, but a task that’s already begun. They also like being part of different levels and will strive to be in a “gold club”… but only if there are levels below them.
12. Creating Goodwill with Customers Doesn’t Take a Lot of Money
14. Quite an ROI for a simple can of Coca-Cola!
15. While the cost of the gifts/actions is quite small, the human mind simply cannot refuse the psychological construct of reciprocity.
16. Customers perceive the service as a genuine act of kindness rather than as you trying to buy their affection with costly gifts.
17. Customers Absolutely Adore Personalization; They Will Gladly Pay More for It
18. Once inside the story, we are less likely to notice things which don’t match up with our everyday experience. For example, an inspirational Hollywood movie with a “can-do” spirit might convince us that we can tackle any problem, despite what we know about how the real world works.
Also, when concentrating on a story, people are less aware that they are subject to a persuasion attempt: The message gets in under the radar.
19. Customers Will Remember Your Business If You Can Remember Their Names
20. People open emails with more consistency if their name is included. (That’s a big reason to ask for a name if you want increased conversions via email.)
21. People often assume you are more competent if you know their name; it’s a big part of their identity, and if you recall it and use it, you are instantly viewed in a better light in their eyes.
22. It’s difficult to scale, but if you care about your customers, it’s an essential part of winning them over.
23. There’s quite a difference between receiving an automated email from “DO-NOT-REPLY” versus receiving one from “Scott” saying, “Hey Greg, thank you for your purchase! :)”
24. It Pays to Surprise Your Customers: You Don’t Need to Trumpet Every Benefit
25. People like getting things for free and like them even more when they are viewed as “favors,” but they love receiving these favors as surprises.
26. For instance, did you know that Zappos automatically upgrades all purchases to priority shipping… without so much as even a mention on the sales or checkout page?
27. That kind of reciprocity is justified by almost any cost, and the hit Zappos takes by doing this is paid back multiple times over by the customer loyalty they generate from making people happy.
28. Have you ever wondered why commercials for “cheap beer” never, ever focus on the money that you can save by buying them?
Instead, they create ads and slogans that focus on having a great time (i.e., “It’s Miller Time!”)
29. As it turns out, new research from Stanford reveals that selling “time” over money can make customers more receptive to buying.
30. Getting people to think about a period of time they enjoyed (associated with a product) can be much more effective than reminding them that they could be saving money.
31. [Marketers] who should be particularly cautious about money cues are those who want to appeal to the viewer’s feelings about others.
32. Be wary of reminding your customers about money if your product isn’t related to serving self-interests.
33. Small companies can differentiate themselves from large competition and win over new customers with great service
40. Engaging with your customers on Twitter is a great investment. Follow and promote them to your own followers when you have the opportunity. Most importantly, be there to listen if something goes wrong.
41. Monitor your brand’s mentions on social media channels so you can respond to customer complaints before they escalate. It’s an opportunity to wow them!
42. A high percentage of buyers on your website will have a question before completing their purchase. The speed, personal touch and accuracy with which you are able to provide an answer will make all the difference in whether they buy and keep buying from you.
43. Knowledge of the product is more important than speed when emailing a customer, so do everything in your power to get it right the first time, every time.
44. Smart businesses should come to realize that the customer service bar is lower— and that today, it’s easier than ever to differentiate your company from the pack with (crazy as it seems) actual quality customer service.”
45.
Experiment:
The first card needed 8 stamps to get a free wash.
The second card needed 10 stamps to get a free wash, but 2 stamps were automatically added when the customer joined.
That means both cards took 8 stamps total to get a free wash; they were just framed differently. Which one do you think performed better?
Their findings: Despite the similar process, the second card performed almost twice as well as the first card, having 34 percent of participants complete it versus 19 percent for the other card.
The results were surprising to say the least:
The first group studied had waiters giving mints along with the check, making no mention of the mints themselves. This increased tips by around 3% against the control group.
The second group had waiters bring out two mints by hand (separate from the check), and they mentioned them to the table (i.e., “Would anyone like some mints before they leave?”). This saw tips increase by about 14% against the control group.
The last group had waiters bring out the check first along with a few mints. A short time afterward, the waiters came back with another set of mints and let customers know they had brought out more mints, in case they wanted another.
That last group is where waiters saw a 21% increase in tips… yet they still were bringing out only two mints.
Principles:
The Customer Doesn’t Always Know What They Want
The Human Desire to Develop Patterns and Habits
Our Overwhelming Need to Please Others
Principles:
1. Try to avoid people to do things they don't want to do.
2. If absolutely needed, figure it out why ?
3.
References:
https://en.wikipedia.org/wiki/Self-determination_theory
https://blog.kissmetrics.com/what-customers-want/
https://blog.kissmetrics.com/what-customers-want/
1. Self-Determination Theory, as espoused by researchers Edward Deci and Richard Ryan, contends that people are motivated by deeper psychological needs for competence, autonomy, and relatedness. Clearly, making sure people know why their work matters is always the first step.
2. There will always be tasks people don’t want to do. But, there are ways to get people to do things they don’t want to do. There are better ways to motivate others, principally by designing conditions where people actuate themselves.
3. Instead, designing behavior by putting in the forethought to appropriately stage tasks, providing progress indicators, and finally, offering celebratory rewards under the right circumstances, are easy ways to motivate while maintaining a sense of autonomy.
4. The first reason you can’t just ask customers what they want is that they aren’t always attuned to what they really need. Steve Jobs famously said, “People don’t know what they want until you show it to them.”
5. Typically, it is easier for people to review and comment on something that is placed in front of them rather than asking to imagine something that doesn’t yet exist. This can mean anything from developing a fully functioning prototype to a clickable presentation, or even simple, hand-drawn “screens” to help customers get a sense of the experience.
6. Additionally, it is also difficult for customers to articulate what it is they want or need, especially if it relates to a topic that is not something they often think about. People have a tendency to use what they know, which is why user adoption for certain products may take longer to catch on than others.
7. The second danger in asking customers direct questions is the human desire to develop patterns and habits. Sigmund Freud called this phenomenon “repetition compulsion,” in that humans seek comfort in the familiar as well as a desire to return to an earlier known state of things.
8. These habits are sometimes formed over long periods of time, which makes trying to break or introduce new habits an extremely difficult and delicate process. During our user research phase, we try to avoid asking questions about potentially disrupting a customer’s current habit, instead asking questions that are related.
9. Rather than asking individuals to “imagine a new world” that would alter the current habits of their lives resulting in potential resistance, we are able to gain a better understanding of their natural tendencies, current mentalities and preferences, which results in more rich and insightful information.
10. The final risk is people’s overwhelming desire to be a part of something, to be well liked, and the need to please others.
11. Yes, you read that correctly. Sure, you need to keep your promises, but that's just the bare minimum. If you truly want to keep customers coming back, you need to wow them every time by offering them even more than they think is fair.
12. Your Customers Love Stories and Are More Open to Your Business Selling through Them
14.
Research about Social Psychology:
1. Customers Care More about Service Quality and Attitude than about Service Speed
2. researchers found that the #1 reason customers would abandon a brand was due to poor quality and rude customer service, which were cited 18% more often than “slow or untimely service.”
3. Good service trumps fast service every time, in both customer retention and satisfaction.
4. Customers Know What They (and Other Customers) Want; They’re also Willing to Help
5. User-lead innovations had an average revenue of $146 million dollars (in 5 years).
Internally generated innovations had an average revenue of $18 million (for the same span of time).
6. Customer surveys and analyzing customer feedback should be an integral part of your research.
7. Customers like Loyalty Programs… as Long as You Make Them Seem Easy
8. Customers like reward programs but are much more likely to participate if the business in question utilizes “artificial advancement.”
In a truly interesting look into human nature, people like being part of “gold” and “premium” reward groups… but only if there is a group of people below them.
9. Beginning a new task is a point where our brains often try to sabotage us, and additional research has shown that we are much more likely to complete a task if we feel like we’ve already taken the first few steps. This “artificial advancement” used on the second card was what made customers more likely to complete the card program to the end.
10. Last but not least, Nunes did a separate study on reward levels within customer loyalty programs and found that customers are even MORE loyal if they are labeled within a “gold club,” but only if there is another level below them.
11. Customers will embrace loyalty programs if you can make them feel like they aren’t a “new task” to perform, but a task that’s already begun. They also like being part of different levels and will strive to be in a “gold club”… but only if there are levels below them.
12. Creating Goodwill with Customers Doesn’t Take a Lot of Money
14. Quite an ROI for a simple can of Coca-Cola!
15. While the cost of the gifts/actions is quite small, the human mind simply cannot refuse the psychological construct of reciprocity.
16. Customers perceive the service as a genuine act of kindness rather than as you trying to buy their affection with costly gifts.
17. Customers Absolutely Adore Personalization; They Will Gladly Pay More for It
18. Once inside the story, we are less likely to notice things which don’t match up with our everyday experience. For example, an inspirational Hollywood movie with a “can-do” spirit might convince us that we can tackle any problem, despite what we know about how the real world works.
Also, when concentrating on a story, people are less aware that they are subject to a persuasion attempt: The message gets in under the radar.
19. Customers Will Remember Your Business If You Can Remember Their Names
20. People open emails with more consistency if their name is included. (That’s a big reason to ask for a name if you want increased conversions via email.)
21. People often assume you are more competent if you know their name; it’s a big part of their identity, and if you recall it and use it, you are instantly viewed in a better light in their eyes.
22. It’s difficult to scale, but if you care about your customers, it’s an essential part of winning them over.
23. There’s quite a difference between receiving an automated email from “DO-NOT-REPLY” versus receiving one from “Scott” saying, “Hey Greg, thank you for your purchase! :)”
24. It Pays to Surprise Your Customers: You Don’t Need to Trumpet Every Benefit
25. People like getting things for free and like them even more when they are viewed as “favors,” but they love receiving these favors as surprises.
26. For instance, did you know that Zappos automatically upgrades all purchases to priority shipping… without so much as even a mention on the sales or checkout page?
27. That kind of reciprocity is justified by almost any cost, and the hit Zappos takes by doing this is paid back multiple times over by the customer loyalty they generate from making people happy.
28. Have you ever wondered why commercials for “cheap beer” never, ever focus on the money that you can save by buying them?
Instead, they create ads and slogans that focus on having a great time (i.e., “It’s Miller Time!”)
29. As it turns out, new research from Stanford reveals that selling “time” over money can make customers more receptive to buying.
30. Getting people to think about a period of time they enjoyed (associated with a product) can be much more effective than reminding them that they could be saving money.
31. [Marketers] who should be particularly cautious about money cues are those who want to appeal to the viewer’s feelings about others.
32. Be wary of reminding your customers about money if your product isn’t related to serving self-interests.
33. Small companies can differentiate themselves from large competition and win over new customers with great service
34. Eliminate unnecessary barriers between you and your customers. They will happily do business with you if they feel valued
35. If you offer some sort of live service (phone or live chat), it’s paramount that you get customers to a live person in 2 minutes or less. Otherwise it creates frustration that can lead to a seriously unhappy customer.
36. Decide what metrics are critical to measuring customer satisfaction. Don’t just go with your gut; prove that you provide great service with data. Also, don’t hesitate to survey customers for feedback and measure success that way.
37. Resolve a complaint in the customer’s favor and they will do business with you again 70% of the time..
38. Competing on price isn’t the most effective way to build an enduring business. Great service, delivered time and time again, is defensible against the stiffest and most well-funded competition
39. you need to make people who aren’t your customers wish they were. Social media gives businesses the tools to do that for the first time in a scalable way.40. Engaging with your customers on Twitter is a great investment. Follow and promote them to your own followers when you have the opportunity. Most importantly, be there to listen if something goes wrong.
41. Monitor your brand’s mentions on social media channels so you can respond to customer complaints before they escalate. It’s an opportunity to wow them!
42. A high percentage of buyers on your website will have a question before completing their purchase. The speed, personal touch and accuracy with which you are able to provide an answer will make all the difference in whether they buy and keep buying from you.
43. Knowledge of the product is more important than speed when emailing a customer, so do everything in your power to get it right the first time, every time.
44. Smart businesses should come to realize that the customer service bar is lower— and that today, it’s easier than ever to differentiate your company from the pack with (crazy as it seems) actual quality customer service.”
45.
Experiment:
The first card needed 8 stamps to get a free wash.
The second card needed 10 stamps to get a free wash, but 2 stamps were automatically added when the customer joined.
That means both cards took 8 stamps total to get a free wash; they were just framed differently. Which one do you think performed better?
Their findings: Despite the similar process, the second card performed almost twice as well as the first card, having 34 percent of participants complete it versus 19 percent for the other card.
The results were surprising to say the least:
The first group studied had waiters giving mints along with the check, making no mention of the mints themselves. This increased tips by around 3% against the control group.
The second group had waiters bring out two mints by hand (separate from the check), and they mentioned them to the table (i.e., “Would anyone like some mints before they leave?”). This saw tips increase by about 14% against the control group.
The last group had waiters bring out the check first along with a few mints. A short time afterward, the waiters came back with another set of mints and let customers know they had brought out more mints, in case they wanted another.
That last group is where waiters saw a 21% increase in tips… yet they still were bringing out only two mints.
Principles:
The Customer Doesn’t Always Know What They Want
The Human Desire to Develop Patterns and Habits
Our Overwhelming Need to Please Others
Principles:
1. Try to avoid people to do things they don't want to do.
2. If absolutely needed, figure it out why ?
3.
References:
https://en.wikipedia.org/wiki/Self-determination_theory
https://blog.kissmetrics.com/what-customers-want/
https://blog.kissmetrics.com/what-customers-want/
Monday, September 21, 2015
Research customer development
Document: How to do customer research
Customer Research:
1. Customer Development is about Testing the Founder’s Hypothesis
2. All I had done was proudly go out and get customer input. Isn’t that what I was supposed to do? No.
3. Any idiot can get outside the building and ask customers what they want, compile a feature list and hand it to engineering. Gathering feature requests from customers is not what marketing should be doing in a startup. And it’s certainly not Customer Development.
4. In a startup the role of Customer Development is to:
test the founders hypothesis about the customer problem
test if the product concept and minimum feature set solve that problem
5. This is a big idea and worth repeating. Customer Development is about testing the founder’s hypothesis about what constitutes product/market fit with the minimum feature set. Thereby answering the questions, “Does this product/service as spec’d solve a problem or a need customers have?” Is our solution compelling enough that they want to buy it or use it today? You know you have achieved product/market fit when you start getting orders (or users, eyeballs or whatever your criteria for success was in your business model.)
6. The time to start iterating the product is if and only if sufficient customers tell you your problem hypotheses are incorrect or point out features you missed that would cause them not to buy
7. If you’re lucky you’ll find this out early in Customer Discovery or if not, when no one buys in Customer Validation.
8. You’ve just listed the reasons why startups are not done by accountants with spreadsheets. It’s an art.
Customer Development is not a giant focus group. At best it is a way to inform an entrepreneurs instinct and reduce risk.
9. With that in mind, the last thing you want to do is be hard selling your idea to them. Instead, you want to interview your customers to understand their problems. You can learn how to do customer development interviews here.
10. don’t worry about scaling right now. Just do whatever it takes to find people and the scalable methods will emerge later.
11. Takeaways: 1) you don’t need an “idea” for a product. In fact, it can be better not to have one. 2) The best ways to choose a customer segment are access (existing relationships), market research, passion, and customer development based on hypotheses about which customer segments have the biggest problem. In this case, the customer segment was chosen based on market outreach. 3) Customer development interviews can allow you to gain extremely valuable customer insights. At this stage, you want to get your customers talking as much as possible. It’s important not to ask leading questions that get them stuck on a potential product.
12. Takeaway: If you’re truly solving a problem for your customers, they will be more than happy to talk to you. In fact, they will be eager to help.
14. To avoid spending time and money building something that wasn’t truly of value to our customers, we wanted to get even more data and conviction. Interviews and conversations are great, but the bias is for customers to agree with you. Asking a customer pay, and having them do so, is the ultimate form of validation.
15. Next we created three separate e-mail templates - one for each of the three value propositions described above. The e-mail very briefly described the value proposition and included a call to action, which was a link to a landing page we created where they could sign up for early access to the product. We created a sense of legitimacy for the company by building a website using tools like Squarespace that make it easy for non-technical people to build a professional looking site in hours. We then divided the e-mail addresses into three equal groups and sent one of the e-mails to each group
16. 1) The bias is for customers to agree with you. Structuring interviews in such a way as to avoid this is important. Getting commitment for payment is a way to distinguish between bias and reality. 2) Experiment and customer interview results are rarely cut and dry. Use them to give you guidance not necessarily specific answers. Some creative thinking and instinct is still required.
17. We then sent a second e-mail to those had signed up on our landing page to receive more information about the product. The copy in this e-mail about was about managing investment returns. The call to action was “We’re launching in two months at a price of $15 per month. Sign up now at just $5 per month to get early access.”
18. The value of getting commitment for revenue is not the actual money, it’s the validation. We knew we were closer to finding product/market fit because users were enthusiastic enough to use their credit cards.
19. Within weeks we went from a blank canvas to paying customers. It’s easy to throw product ideas against the wall, build them, and see what sticks. The Casual Corp process is designed to streamline the process of identifying and solving a problem for a customer, and reduce wasted time and resources.
20. The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself.
21. I had originally planned restaurants in Palo Alto as a proof of concept and had idly thought of simply walking up and down University Ave and asking passerby or sitting in a Starbucks and offering to buy people coffee in exchange for their time. Of course, this isn’t very effective or efficient.
22. First, I joined all the Meetup groups with users and interests that would be interested in my startup idea and invested in its success. Second, I messaged 36 users (12 per day, as is the Meetup policy limit) and received 5 responses, or a 14% response rate, which isn’t exceptional but isn’t too bad either. I’ve stopped messaging users because I had begun getting similar, repeated feedback
23. So I then simply focused on just messaging members who were most recently active on Meetup groups (last visited a Meetup group in the past 2 weeks vs. in the past year).
24. your targeted audience is key. Knowing who your users are (especially getting a group of beta testers and early adopters!) and going to them and soliciting feedback should be one of your first steps in validating a market need.
25. If you want to build an online service, and you don't test it with a fake AdWords campaign ahead of time, you're crazy.
26. Our goal is to find out whether customers are interested in your product by offering to give (or even sell) it to them, and then failing to deliver on that promise. If you're worried about disappointing some potential customers - don't be. Most of the time, the experiments you run will have a zero percent conversion rate - meaning no customers were harmed during the making of this experiment.
27. And if you do get a handful of people taking you up on the offer, you'll be able to send them a nice personal apology. And if you get tons of people trying to take you up on your offer - congratulations. You probably have a business. Hopefully that will take some of the sting out of the fact that you had to engage in a little trickery.
28. that doesn't necessarily mean you don't have a business, but I'd give it some serious thought. Products that truly solve a severe pain for early adopters can usually find some visionary customers who will pre-order, just based on the vision that you're selling. If you can't find any, maybe that means you haven't figured out who your customer is yet.
29. The harder customers are to interview, the harder they’ll be to monetize
30. From personal experience, finding customers who are willing to be interviewed is daunting.
31. The process of finding customers to interview is a preview of what it’ll take to sell to our customers. Will we need to stand out on the street, do cold calls, create meetups? Just getting customer interviews is a test in-and-of-itself!
32. Don’t pitch a product, try to solicit feedback, etc. This is entirely about you earning trust by providing value – free of charge.
33. The downside of the Webinar Honey Pot is simply that it takes time. Time to know the space, time to get the word out about your webinar, etc. That said, everything in a B2B play takes time, so it’s good to get used to it now before you bet the farm.
34. Finding customers to interview is a challenge, but one that will immediately tell you if you’re on the right track.
35. Since Nick and I talked, I’ve done a couple dozen interviews this way and the results have been fantastic. Nothing like “getting out of the building” at home, at midnight, with an ice cream sandwich in hand
36. When we interview Sam, we want her to tell us what problems she has with remote coding – no cheating.
37. So who keeps you honest and tells you when you don’t have a business? Your customers and your hypotheses.
38. There may come a time you need to face the fact that the earlyvangelists you thought you had are actually just very polite users. Face the fact that your product won’t be able to make money or scale. Face the fact that your hypotheses are all wrong. And ultimately, face that fact that it’s time to majorly rewrite your vision. The sooner you face these facts the more chances you’ll have to course-correct and win.
39. Specifically ask the client how he/she perceives the price, the quality, the performance and the convenience of the solution she/he is currently using. The definition of these four criteria depends on the context (see example below), be sure to bring your own context to your questions.
* Price: purchase fee, setup, fee, subscription fee, license fee
* Quality: relevance of results, infrastructure availability, customer service quality
* Performance: response time, delivery time, travel speed, quantity of items, number of results
* Convenience: easy to use, easy to carry on, easy to park, easy to access, easy to order
40. Most people are surprised when I tell them I don’t have a desire to expand the business. I really enjoy being able to work hands on with two new startups per quarter. If I built a large team to fill the current void of specialists, I’d be too busy managing the team. This would mean less time learning how to improve my customer development approach.
41.
Lesson Learnt:
1. This week I validated a market problem/need, sourced 10+ beta testers, talked to users and solicited feedback from Meetup groups and Reddit, researched and began to focus on product/market fit, found my rhythm and struggled with focus. Next week will be focused on building the MVP, product differentiation and monetization.
In order to avoid wasting effort and money on tactical growth drivers, the following steps need to be completed first:
References:
http://steveblank.com/2009/11/30/customer-development-is-not-a-focus-group/
http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-march-2009
http://notes.casualcorp.com/post/55805301226/how-to-go-from-zero-to-revenue-in-under-five-weeks
http://paulgraham.com/startupideas.html
http://jasonevanish.com/2011/11/27/the-lean-product-life-cycle/
http://ask.goodproductmanager.com/2011/10/11/how-do-i-set-up-customer-interviews/
Customer Research:
1. Customer Development is about Testing the Founder’s Hypothesis
2. All I had done was proudly go out and get customer input. Isn’t that what I was supposed to do? No.
3. Any idiot can get outside the building and ask customers what they want, compile a feature list and hand it to engineering. Gathering feature requests from customers is not what marketing should be doing in a startup. And it’s certainly not Customer Development.
4. In a startup the role of Customer Development is to:
test the founders hypothesis about the customer problem
test if the product concept and minimum feature set solve that problem
5. This is a big idea and worth repeating. Customer Development is about testing the founder’s hypothesis about what constitutes product/market fit with the minimum feature set. Thereby answering the questions, “Does this product/service as spec’d solve a problem or a need customers have?” Is our solution compelling enough that they want to buy it or use it today? You know you have achieved product/market fit when you start getting orders (or users, eyeballs or whatever your criteria for success was in your business model.)
6. The time to start iterating the product is if and only if sufficient customers tell you your problem hypotheses are incorrect or point out features you missed that would cause them not to buy
7. If you’re lucky you’ll find this out early in Customer Discovery or if not, when no one buys in Customer Validation.
8. You’ve just listed the reasons why startups are not done by accountants with spreadsheets. It’s an art.
Customer Development is not a giant focus group. At best it is a way to inform an entrepreneurs instinct and reduce risk.
9. With that in mind, the last thing you want to do is be hard selling your idea to them. Instead, you want to interview your customers to understand their problems. You can learn how to do customer development interviews here.
10. don’t worry about scaling right now. Just do whatever it takes to find people and the scalable methods will emerge later.
11. Takeaways: 1) you don’t need an “idea” for a product. In fact, it can be better not to have one. 2) The best ways to choose a customer segment are access (existing relationships), market research, passion, and customer development based on hypotheses about which customer segments have the biggest problem. In this case, the customer segment was chosen based on market outreach. 3) Customer development interviews can allow you to gain extremely valuable customer insights. At this stage, you want to get your customers talking as much as possible. It’s important not to ask leading questions that get them stuck on a potential product.
12. Takeaway: If you’re truly solving a problem for your customers, they will be more than happy to talk to you. In fact, they will be eager to help.
14. To avoid spending time and money building something that wasn’t truly of value to our customers, we wanted to get even more data and conviction. Interviews and conversations are great, but the bias is for customers to agree with you. Asking a customer pay, and having them do so, is the ultimate form of validation.
15. Next we created three separate e-mail templates - one for each of the three value propositions described above. The e-mail very briefly described the value proposition and included a call to action, which was a link to a landing page we created where they could sign up for early access to the product. We created a sense of legitimacy for the company by building a website using tools like Squarespace that make it easy for non-technical people to build a professional looking site in hours. We then divided the e-mail addresses into three equal groups and sent one of the e-mails to each group
16. 1) The bias is for customers to agree with you. Structuring interviews in such a way as to avoid this is important. Getting commitment for payment is a way to distinguish between bias and reality. 2) Experiment and customer interview results are rarely cut and dry. Use them to give you guidance not necessarily specific answers. Some creative thinking and instinct is still required.
17. We then sent a second e-mail to those had signed up on our landing page to receive more information about the product. The copy in this e-mail about was about managing investment returns. The call to action was “We’re launching in two months at a price of $15 per month. Sign up now at just $5 per month to get early access.”
18. The value of getting commitment for revenue is not the actual money, it’s the validation. We knew we were closer to finding product/market fit because users were enthusiastic enough to use their credit cards.
19. Within weeks we went from a blank canvas to paying customers. It’s easy to throw product ideas against the wall, build them, and see what sticks. The Casual Corp process is designed to streamline the process of identifying and solving a problem for a customer, and reduce wasted time and resources.
20. The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself.
21. I had originally planned restaurants in Palo Alto as a proof of concept and had idly thought of simply walking up and down University Ave and asking passerby or sitting in a Starbucks and offering to buy people coffee in exchange for their time. Of course, this isn’t very effective or efficient.
22. First, I joined all the Meetup groups with users and interests that would be interested in my startup idea and invested in its success. Second, I messaged 36 users (12 per day, as is the Meetup policy limit) and received 5 responses, or a 14% response rate, which isn’t exceptional but isn’t too bad either. I’ve stopped messaging users because I had begun getting similar, repeated feedback
23. So I then simply focused on just messaging members who were most recently active on Meetup groups (last visited a Meetup group in the past 2 weeks vs. in the past year).
24. your targeted audience is key. Knowing who your users are (especially getting a group of beta testers and early adopters!) and going to them and soliciting feedback should be one of your first steps in validating a market need.
25. If you want to build an online service, and you don't test it with a fake AdWords campaign ahead of time, you're crazy.
26. Our goal is to find out whether customers are interested in your product by offering to give (or even sell) it to them, and then failing to deliver on that promise. If you're worried about disappointing some potential customers - don't be. Most of the time, the experiments you run will have a zero percent conversion rate - meaning no customers were harmed during the making of this experiment.
27. And if you do get a handful of people taking you up on the offer, you'll be able to send them a nice personal apology. And if you get tons of people trying to take you up on your offer - congratulations. You probably have a business. Hopefully that will take some of the sting out of the fact that you had to engage in a little trickery.
28. that doesn't necessarily mean you don't have a business, but I'd give it some serious thought. Products that truly solve a severe pain for early adopters can usually find some visionary customers who will pre-order, just based on the vision that you're selling. If you can't find any, maybe that means you haven't figured out who your customer is yet.
29. The harder customers are to interview, the harder they’ll be to monetize
30. From personal experience, finding customers who are willing to be interviewed is daunting.
31. The process of finding customers to interview is a preview of what it’ll take to sell to our customers. Will we need to stand out on the street, do cold calls, create meetups? Just getting customer interviews is a test in-and-of-itself!
32. Don’t pitch a product, try to solicit feedback, etc. This is entirely about you earning trust by providing value – free of charge.
33. The downside of the Webinar Honey Pot is simply that it takes time. Time to know the space, time to get the word out about your webinar, etc. That said, everything in a B2B play takes time, so it’s good to get used to it now before you bet the farm.
34. Finding customers to interview is a challenge, but one that will immediately tell you if you’re on the right track.
35. Since Nick and I talked, I’ve done a couple dozen interviews this way and the results have been fantastic. Nothing like “getting out of the building” at home, at midnight, with an ice cream sandwich in hand
36. When we interview Sam, we want her to tell us what problems she has with remote coding – no cheating.
37. So who keeps you honest and tells you when you don’t have a business? Your customers and your hypotheses.
38. There may come a time you need to face the fact that the earlyvangelists you thought you had are actually just very polite users. Face the fact that your product won’t be able to make money or scale. Face the fact that your hypotheses are all wrong. And ultimately, face that fact that it’s time to majorly rewrite your vision. The sooner you face these facts the more chances you’ll have to course-correct and win.
39. Specifically ask the client how he/she perceives the price, the quality, the performance and the convenience of the solution she/he is currently using. The definition of these four criteria depends on the context (see example below), be sure to bring your own context to your questions.
* Price: purchase fee, setup, fee, subscription fee, license fee
* Quality: relevance of results, infrastructure availability, customer service quality
* Performance: response time, delivery time, travel speed, quantity of items, number of results
* Convenience: easy to use, easy to carry on, easy to park, easy to access, easy to order
40. Most people are surprised when I tell them I don’t have a desire to expand the business. I really enjoy being able to work hands on with two new startups per quarter. If I built a large team to fill the current void of specialists, I’d be too busy managing the team. This would mean less time learning how to improve my customer development approach.
41.
Lesson Learnt:
- 8. Startups begin with hypotheses about a customer problem or need
- Founders talk to customers to discover and validate whether the total solution solves that problem or addresses that need
- If, and not only if, there are no “buy signs” from the customer or customers repeatably point out missing features, does the product change
- Collecting feature lists and holding focus groups are for established companies with existing customers looking to design product line extensions
1. This week I validated a market problem/need, sourced 10+ beta testers, talked to users and solicited feedback from Meetup groups and Reddit, researched and began to focus on product/market fit, found my rhythm and struggled with focus. Next week will be focused on building the MVP, product differentiation and monetization.
In order to avoid wasting effort and money on tactical growth drivers, the following steps need to be completed first:
- Validate the product/service is gratifying a reasonable percentage of users.
- Create a value proposition that will attract the right type of users and pull them through the conversion funnel to gratification (and ultimately a transaction).
- Eliminate friction from the conversion funnel.
- Fine tune a business model that supports scalable customer acquisition channels.
References:
http://steveblank.com/2009/11/30/customer-development-is-not-a-focus-group/
http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-march-2009
http://notes.casualcorp.com/post/55805301226/how-to-go-from-zero-to-revenue-in-under-five-weeks
http://paulgraham.com/startupideas.html
http://jasonevanish.com/2011/11/27/the-lean-product-life-cycle/
http://ask.goodproductmanager.com/2011/10/11/how-do-i-set-up-customer-interviews/
Research about Founding Team
My view is the Platonic startup has a founding team of a developer, a designer and a distributor.
The perfect startup has all three founders:
someone who understands how to build technologies and systems to solve problems;
someone who understands the human factors behind those problems, why they exist, what it takes to fix them and how to shape the experience;
someone who understands how to reach, talk to and sell to the people whose problems are being solved - and keep finding more of them
Initially Marketing vs Product: 5% to 95%
Later Marketing vs Product: 80% to 20%
The typical answer as Michael Thomas, Forbes, and Steve Blank pointed out:
Hacker
Hustler
Hipster
(Visionary)
- The designer is responsible for desirability of the product. Talking with customers, understanding their needs, making sure the experience doesn’t suck.
- The engineer is responsible for the feasibility. S/he must determine if the product can actually be built, how, and for how much.
- The business person is responsible for the viability of the business model. S/he acts as the scales of justice when feasibility conflicts with desirability. The business person also takes care of the profit & loss statement and often manages the personalities involved.
Knowledge Sharing:
1. Designers today have to be technical in front-end development and understand human-centered design approaches. In short, it doesn’t suffice to just use Photoshop when you have an entire product to build!
2. This role is especially important in the early days because without a product the hustler can’t sell and without a backend to tie into, the designer’s front-end is useless. Here are five things the hacker should be focused on:
3. The case can be made for single founders as well, but I'd argue that two is best and three, four or more is too many.
4. A Founder is the one with the original idea, scientific discovery, technical breakthrough, insight, problem description, passion, etc.
5. A founder typically recruits co-founders and then becomes part of the founding team involved in day-to-day company operations. (However, in some industries such as life sciences, founders may be tenured professors who are not going to give up their faculty positions, so they often become the head of a startup’s scientific advisory board, but aren’t part of the founding team.)
6. The founding team includes the founder and a few other co-founders with complementary skills to the founder. This is the group who will build the company. Its goal is to take the original idea and search for a repeatable and scalable business model– first by finding product/market fit, then by testing all the parts of the business model (pricing, channel, acquisition/activation, partners, costs, etc.)
7. The two tests of whether someone belongs on a founding team are: “Do we have a company without them?” and, “Can we find someone else just like them?” If both answers are no, you’ve identified a co-founder. If any of the answers are “Yes,” then hire them a bit later as an early employee.
8. Key attributes of an entrepreneur on a founding team are passion, determination, resilience, tenacity, agility and curiosity. It helps if the team has had a history of working together, but what is essential is mutual respect. And what is critical is trust. You need to be able to trust your co-founders to perform, to do what they say they will, and to have your back
9. dealistic founders trying to run a venture with collective leadership, without a single person in charge, find that’s the fastest way to go out of business.
10. In addition, the founding CEO thrives operating in chaos and uncertainty. They deal with the daily crisis of product development and acquiring early customers. And as the reality of product development and customer input collide, the facts change so rapidly that the original well-thought-out product plan becomes irrelevant. While the rest of the team is focused on their specific jobs, the founding CEO is trying to solve a complicated equation where almost all the variables are unknown – unknown customers, unknown features that will make those customers buy, unknown pricing, unknown demand creation activities that will get them into your sales channel, etc.
10. The reality distortion field makes people believe an insane idea might come true, and they’re willing to quit their jobs and join you on a quest.
11. “With an early-stage venture, things don’t go per plan,” he explains. “If you’re not comfortable operating and leading through that, you might be a good co-founder … but not a good CEO.”
12. “A ‘founder’ is somebody who you can say, ‘Would you have a company without them?’ ‘Is this the best person for the job?’ If no, they should just be employees,” he explains.
14. every team needs a hacker, a hustler and a designer. “These are the core skills. If you don’t have this, you’ll be at a competitive disadvantage,” says Blank, especially in the tech space.
15. “The hacker should be someone who’s great at writing code – better than anybody else, and the hustler tends to be the CEO person, with the reality distortion field, who can run experiments,” says Blank. The designer figures out user interface, which is especially important for both the web and mobile.
16. Blank says outside the tech industry, the exact specifications may vary a little bit (“If you’re building a drone, a designer isn’t a big deal,” he says) but the fundamental message is clear: members of a founding team should have complementary skills, rather than similar attributes.
17. “These are execution titles for companies with known business models and known customers and known pricing structures,” says Blank – very different from a startup, which has to constantly test new ideas, throw out the bad ones and figure out a solution that works. “If your founding team starts looking like IBM? You’re out of business,” he says.
18. In many cases, a startup is only as good as the people behind it. The success of a business can heavily depend on whether the people involved are doing their jobs well.
19. If you have a strong technical background but no experience with sales and marketing, hire someone who knows that area inside and out, and vice versa.
20.
Hustler
Every team needs a visionary that is really good at one thing: selling. Whether it’s selling the idea to investors, or pitching your product to customers, the hustler's role is integral to the success of any company.
Many people think of this role as someone with an MBA, but nothing could be further from the truth. A hustler should be hungry, curious and willing to do anything and everything to move the business forward. Here are five things the hustler should be focusing on in the very early stages:
Designer
A designer in a startup shouldn’t just know what looks good. Designers today have to be technical in front-end development and understand human-centered design approaches. In short, it doesn’t suffice to just use Photoshop when you have an entire product to build!
Here are five things the designer should be focused on:
Hacker
Last, but certainly not least is the role some argue is the most important in a startup: the hacker. This is the person that is most technical. The hacker loves to chat about new technology stacks, he/she has been using GitHub since it’s early days and the most visited site on their computer is likely Stack Overflow.
This role is especially important in the early days because without a product the hustler can’t sell and without a backend to tie into, the designer’s front-end is useless. Here are five things the hacker should be focused on:
Every team needs a visionary that is really good at one thing: selling. Whether it’s selling the idea to investors, or pitching your product to customers, the hustler's role is integral to the success of any company.
Many people think of this role as someone with an MBA, but nothing could be further from the truth. A hustler should be hungry, curious and willing to do anything and everything to move the business forward. Here are five things the hustler should be focusing on in the very early stages:
- Customer Development - In the early days the hustler should be talking to customers and prospecting. Your goal should be to talk to at least 10 people everyday when you are doing customer development.
- Product Management - The hustler’s job is to relay customer needs to the technical team. He/she should be identifying “must have” features and plotting them on a product roadmap.
- Selling - After you’ve done customer development you should focus on selling your product or if you’re building a consumer app the focus should be on fundraising.
- Blogging - One of the best ways to drive adoption and build your sales pipeline is to blog about problems in your industry. Mint exemplified this strategy perfectly when founder Aaron Patzer started blogging 6 months in advance of the product’s launch. How Mint Grew to 1.5 Million Users and Sold for $170 Million in Just 2 Years
- Recruiting - Assuming that your business is growing, the hustler should be focused on recruiting. While this person may not be able to interview for technical skills they can set up interviews and decide whether applicants are a good culture fit during the first call.
Designer
A designer in a startup shouldn’t just know what looks good. Designers today have to be technical in front-end development and understand human-centered design approaches. In short, it doesn’t suffice to just use Photoshop when you have an entire product to build!
Here are five things the designer should be focused on:
- Building a Sexy Landing Page - I probably don’t need to tell you that the majority of people discover new products on the internet, but I will anyway. Because of that, it is incredibly important to build a landing page that shows what you’re building. The page should include a product description, beautiful images or screenshots, pricing (if applicable), an about page, a link to your blog and most importantly a place to capture email addresses of interested visitors.
- Design the Product (duh) - The designer should work with the hustler to design the “must have” features you decide on as a team. Often times this is done using a wireframe tool like Balsamiq, Prototyper by JustInMind or Keynote.
- Test those designs - Once the designer has built mockups, he/she should put those designs in front of real users or customers.
- Branding - After deciding on a company name and brainstorming a logo that represents your team and product, the designer should create that logo and all other brand assets.
- Get Technical - If the designer isn’t already technical (HTML, CSS, Javascript, AJAX, JSON) then get technical! There’s almost nothing more valuable to a company than a designer that can get their hands dirty.
Hacker
Last, but certainly not least is the role some argue is the most important in a startup: the hacker. This is the person that is most technical. The hacker loves to chat about new technology stacks, he/she has been using GitHub since it’s early days and the most visited site on their computer is likely Stack Overflow.
This role is especially important in the early days because without a product the hustler can’t sell and without a backend to tie into, the designer’s front-end is useless. Here are five things the hacker should be focused on:
- Product
- Product
- Product
- Product
- Product
Founder, Founding team, Founding CEO all have word “founder” in them but have different roles:
Founder has the initial idea. May or may not be on the founding team or have a leadership role
Founding team – complementary skills – builds the company
Founding CEO – reality distortion field and comfort in chaos – leads the company
References:
https://www.quora.com/What-is-the-perfect-startup-team
Sunday, September 20, 2015
Research about Product/Market Fit
Knowledge Sharing:
1. In many ways, finding Product Market fit quickly allows you to focus on company growth rather than spending a lot of time and money on iterating your product to find that fit.
2. Yet we all know your product isn’t going to fit the entire market from day one! So while the MVP is critical, it’s missing its dance partner, what I call the Minimum Viable Segment (MVS).
3. At FREEjit we’ve mapped out a primary vision but we continue to explore other huge opportunities we could pursue once we have some traction to leverage. Each new fact adds credence to some potential pivots and reduces the viability of others. Eventually we’ll need to focus on one vision, but the right vision will crystallize over time. Even while we explore these opportunities, our current execution is very focused on the MVP needed to get traction. And the MVP maps well to each of the big opportunities we’re considering.
4. But surprisingly, app publishers were more interested in the structured insights we uncovered than the traffic we were sending.
5. By concierge MVP, I mean that we were manually categorizing write-in answers to how people used an app. Now that we’ve validated demand for this product we are working on a more automated way to provide it.
6. Successful entrepreneurs are constantly collecting data -- and constantly looking for bigger and better targets, adjusting course if necessary. And when they find their target, they're able to lock-onto it -- regardless of how crowded the space becomes. When Nat and Zach first came to us with the idea for Invite Media, it was focused on algorithms for ad targeting.
7. Algorithm.
8. When Nat and Zach first came to us with the idea for Invite Media, it was focused on algorithms for ad targeting. But once they got into the market the team saw a bigger opportunity -- the DSP space -- and they locked-onto that target with a successful outcome. We funded VideoEgg back in 2005 with the goal of creating tools to manage online video -- but Matt and team quickly adjusted course and have now become a leading media network for brand advertisers. When we first met Lance and Jia in 2006, they had a cool photo-hosting application called RockMySpace -- but they quickly found the opportunity was much larger than photo-hosting, and RockYou has since became a leading provider of social networking and gaming applications.
9. And while bigger markets might pose more challenges than smaller markets, the risks involved in targetting a $1B market are not 100x greater than those involved in $10M market. Choosing the right market is critical, because the market you choose determines the targets that are available for the heat-seeking missile to hit.
10. So today we tend to focus on a company's product vision, rather than on the specific implementation of a pre-launch product.
11. Do they have a data-driven philosophy or a gut-driven philosophy. Why did they make the choices they made?
12. At the end of the day, I've really come to believe that you can't predict success based on where a missile is pointed pre-launch. Instead you have to assess the quality of the targeting system (the team) and the density/size of targets (the market). And hope that the missile you launch finds a true target -- rather than a decoy...
14. This mirrors my experience at multiple successful startups. Most maintained a very low burn in the first year, investing funds carefully to create a valuable product. Only after early users validated that it was a must-have product, did we start loosening the purse strings. Speed of execution to fully capture the opportunity became the primary objective. At this point, most of the companies were able to successfully attract additional financing (often very large rounds).
15. Perhaps the most important realization that I’ve made as a result of this debate is that: Lean Startup principles are most critical in the early stages of a startup before product/market fit. If you have not created a “must-have product” your ability to attract future rounds of financing will be limited if not impossible. Your best chance of survival is to create a must-have product on your first round of financing – with the overwhelming majority of funding going into R&D. Once you have created a must-have product, it will be much easier to raise enough money to capture and lead the market.
16. Once you can prove an ability to scale cost-effective growth for this must-have product, smart VCs will be knocking down your door to invest as much as you can realistically absorb – and often more.
17. Your marketing spend should be very minimal until you validate that you have created a product that people want or need (an important exception is for network effect products, which I’ll cover later). I would suggest 95/5 ratio between product and marketing. You don’t necessarily need a marketing person on the team to do this early validation.
18. Once you’ve validated that people want or need the product, you should spend as much as you possibly can on customer acquisition as long as the value of each user exceeds the cost of acquiring them.
19. Often this requires raising additional funding, but if you can present proof of profitable, scalable marketing channels then it should be easy to raise the additional funding.
20. Hopefully a great team gets you at least an OK product, and ideally a great product.
21. Great products are really, really hard to build.
22. Markets that don't exist don't care how smart you are.
23. In my experience, the most frequent case of great team paired with bad product and/or terrible market is the second- or third-time entrepreneur whose first company was a huge success. People get cocky, and slip up. There is one high-profile, highly successful software entrepreneur right now who is burning through something like $80 million in venture funding in his latest startup and has practically nothing to show for it except for some great press clippings and a couple of beta customers -- because there is virtually no market for what he is building.
24. A great team is a team that will always beat a mediocre team, given the same market and product.
25. it also doesn't really matter how good your team is, as long as the team is good enough to develop the product to the baseline level of quality the market requires and get it fundamentally to market.
26. The only thing that matters is getting to product/market fit.
27. Product/market fit means being in a good market with a product that can satisfy that market.
28. You can always feel when product/market fit isn't happening. The customers aren't quite getting value out of the product, word of mouth isn't spreading, usage isn't growing that fast, press reviews are kind of "blah", the sales cycle takes too long, and lots of deals never close
29. And you can always feel product/market fit when it's happening. The customers are buying the product just as fast as you can make it -- or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can. Reporters are calling because they've heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck's.
30. I believe that the life of any startup can be divided into two parts: before product/market fit (call this "BPMF") and after product/market fit ("APMF").
31. Look for larger schools of fish nibbling at your product but not buying. Solve their problem.
32. At this point the spend ratio generally tips toward marketing. I’ve seen it as high as 80% to marketing and 20% to product.
33. The exception for network effect businesses mentioned earlier is for the following reason… The user experience for a network effect product improves with each additional user. You may need to reach a critical mass of users before you can validate that the product is important for users.
34. Great products aren’t anointed by product gurus. Only customers can decide if a product is great.
35. Customers will decide your product is great if you can map it to their motivation for changing to your solution. All customers change from something. Generally they either switch from a competitive solution or from just tolerating a problem without a solution. New products should decide on one of these markets. Trying to serve both markets generally leads to failure.
36. One way to decide which market to serve is to ask yourself: “when we are generating $100m in revenue, which type of customer do we think will contribute the majority of this revenue?” Your guess is usually the market you should serve.
37. If you decide to target “greenfield” people (those without a current solution), then your product roadmap should be focused on simple, effective execution of their desired task. Simplicity is usually much more important for greenfield users than being feature rich.
38. Common gripes include price, reliability, poor customer service, lack of key features, etc. You’ll need to both message this differentiation and also deliver on the promise. A “false promise” will cause a high churn rate (people who stop using your product).
39. You’ll know you have created a great product when users tell you they can’t live without it. Unfortunately the “cult of great product” occasionally forgets about these critical components of building an indispensible product.
40. the fact is marketing is not appropriate for startups in the initial stages of customer development.
41. His recommendation is to form a customer development team led by a “head of customer development.” The team should include the CEO and spend a considerable amount of time in the field with prospective customers validating/refining hypotheses about their target customers and the problems they are solving. He says this team “must have the authority to radically change the company’s direction, product or mission and the creative, flexible mindset of an entrepreneur.”
42. After five years in the VP Marketing role at LogMeIn, I too recognized that the initial stages of customer development are very different from marketing in the later stages of a startup or especially a large established company. In fact, I concluded that much of my success as a later stage VP Marketing (both companies filed for IPOs) was the result of momentum we had built in the early stages of customer development. I decided that going forward I would specialize in early stage customer development.
43. I was first introduced to Four Steps to the Epiphany when I was Interim VP Marketing at Xobni during the first half of 2008. I had been looking for resources to help me understand how to drive adoption of this innovative market-creating product (a very different challenge than we had at LogMeIn which disrupted an existing market). The book provided a great framework to follow as we worked to drive early customer adoption. Since then I have helped to accelerate market adoption at two additional startups, while continuing to advise at Xobni.
44. The second twist is that I add a customer development specialist when the Validation Step begins, which is the role I fill with startups. I belive eventually many people will specialize in this critical stage. Without a specialist, startups waste critical time and resources deciding where to execute. It’s surprising how similiar the process of uncovering the critical information needed to drive customer adoption across different types of startups.
45. The good news is that I’ve found ambitious, analytical recent college graduates to be ideal candidates. They are easy to find and their salary and equity requirements are also much lower than a VP Marketing – freeing up resources to bring in a customer development specialist.
46. Once the startup has discovered how to drive customer adoption and begins building momentum, it should be easier to attract the long-term VP Marketing (or promote the head of customer development).
47. Not only are engineering marketers more capable of getting the essentials done, they can use their reserve of time and creative energy to be scrappy about building marketing experiments. And of course the experiments they build on their own can be much more interesting than us non-engineers.
48. One way I have worked around my engineering deficiencies has been to hire the skills onto the marketing team. For example, in my last long-term VP Marketing role I hired a front-end designer/engineer to design and code landing pages and a dedicated DBA to build reports and run ad hoc queries.
49. Very few people have all three skills, and even if they come close, they are rarely in perfect balance. In modern business Steve Jobs is probably the only person who even comes close, which arguably took him 25+ years.
50. Many of these differences are ingrained - some mentally, but mostly from our education systems which stream students early and don't actively encourage the mixing of hard science, arts and commerce.
Challenges:
1. So many startup theories come to play
2. So many unproven process.
3. There is no rule to succeed; Everything is possible, and not regulated.
Signs of Product/Market Fit.
1. A pipeline of supplies are coming and waiting
2. The AAARR is working from end to end.
3. Customers are happy
4. We are making money
Signs of Product/Market Not Fit:
1. Have difficulty to get customers
2. The product is not getting viral
3. Customer doesn't care.
References:
http://web.archive.org/web/20070701074943/http://blog.pmarca.com/2007/06/the-pmarca-gu-2.html
http://www.startup-marketing.com/the-startup-pyramid/
http://www.startup-marketing.com/category/vision/
http://www.startup-marketing.com/vision-synching-in-a-lean-startup/
http://redeye.firstround.com/2010/08/heat-seeking-missiles.html
http://www.startup-marketing.com/category/product/
1. In many ways, finding Product Market fit quickly allows you to focus on company growth rather than spending a lot of time and money on iterating your product to find that fit.
2. Yet we all know your product isn’t going to fit the entire market from day one! So while the MVP is critical, it’s missing its dance partner, what I call the Minimum Viable Segment (MVS).
3. At FREEjit we’ve mapped out a primary vision but we continue to explore other huge opportunities we could pursue once we have some traction to leverage. Each new fact adds credence to some potential pivots and reduces the viability of others. Eventually we’ll need to focus on one vision, but the right vision will crystallize over time. Even while we explore these opportunities, our current execution is very focused on the MVP needed to get traction. And the MVP maps well to each of the big opportunities we’re considering.
4. But surprisingly, app publishers were more interested in the structured insights we uncovered than the traffic we were sending.
5. By concierge MVP, I mean that we were manually categorizing write-in answers to how people used an app. Now that we’ve validated demand for this product we are working on a more automated way to provide it.
6. Successful entrepreneurs are constantly collecting data -- and constantly looking for bigger and better targets, adjusting course if necessary. And when they find their target, they're able to lock-onto it -- regardless of how crowded the space becomes. When Nat and Zach first came to us with the idea for Invite Media, it was focused on algorithms for ad targeting.
7. Algorithm.
8. When Nat and Zach first came to us with the idea for Invite Media, it was focused on algorithms for ad targeting. But once they got into the market the team saw a bigger opportunity -- the DSP space -- and they locked-onto that target with a successful outcome. We funded VideoEgg back in 2005 with the goal of creating tools to manage online video -- but Matt and team quickly adjusted course and have now become a leading media network for brand advertisers. When we first met Lance and Jia in 2006, they had a cool photo-hosting application called RockMySpace -- but they quickly found the opportunity was much larger than photo-hosting, and RockYou has since became a leading provider of social networking and gaming applications.
9. And while bigger markets might pose more challenges than smaller markets, the risks involved in targetting a $1B market are not 100x greater than those involved in $10M market. Choosing the right market is critical, because the market you choose determines the targets that are available for the heat-seeking missile to hit.
10. So today we tend to focus on a company's product vision, rather than on the specific implementation of a pre-launch product.
11. Do they have a data-driven philosophy or a gut-driven philosophy. Why did they make the choices they made?
12. At the end of the day, I've really come to believe that you can't predict success based on where a missile is pointed pre-launch. Instead you have to assess the quality of the targeting system (the team) and the density/size of targets (the market). And hope that the missile you launch finds a true target -- rather than a decoy...
14. This mirrors my experience at multiple successful startups. Most maintained a very low burn in the first year, investing funds carefully to create a valuable product. Only after early users validated that it was a must-have product, did we start loosening the purse strings. Speed of execution to fully capture the opportunity became the primary objective. At this point, most of the companies were able to successfully attract additional financing (often very large rounds).
15. Perhaps the most important realization that I’ve made as a result of this debate is that: Lean Startup principles are most critical in the early stages of a startup before product/market fit. If you have not created a “must-have product” your ability to attract future rounds of financing will be limited if not impossible. Your best chance of survival is to create a must-have product on your first round of financing – with the overwhelming majority of funding going into R&D. Once you have created a must-have product, it will be much easier to raise enough money to capture and lead the market.
16. Once you can prove an ability to scale cost-effective growth for this must-have product, smart VCs will be knocking down your door to invest as much as you can realistically absorb – and often more.
17. Your marketing spend should be very minimal until you validate that you have created a product that people want or need (an important exception is for network effect products, which I’ll cover later). I would suggest 95/5 ratio between product and marketing. You don’t necessarily need a marketing person on the team to do this early validation.
18. Once you’ve validated that people want or need the product, you should spend as much as you possibly can on customer acquisition as long as the value of each user exceeds the cost of acquiring them.
19. Often this requires raising additional funding, but if you can present proof of profitable, scalable marketing channels then it should be easy to raise the additional funding.
20. Hopefully a great team gets you at least an OK product, and ideally a great product.
21. Great products are really, really hard to build.
22. Markets that don't exist don't care how smart you are.
23. In my experience, the most frequent case of great team paired with bad product and/or terrible market is the second- or third-time entrepreneur whose first company was a huge success. People get cocky, and slip up. There is one high-profile, highly successful software entrepreneur right now who is burning through something like $80 million in venture funding in his latest startup and has practically nothing to show for it except for some great press clippings and a couple of beta customers -- because there is virtually no market for what he is building.
24. A great team is a team that will always beat a mediocre team, given the same market and product.
25. it also doesn't really matter how good your team is, as long as the team is good enough to develop the product to the baseline level of quality the market requires and get it fundamentally to market.
26. The only thing that matters is getting to product/market fit.
27. Product/market fit means being in a good market with a product that can satisfy that market.
28. You can always feel when product/market fit isn't happening. The customers aren't quite getting value out of the product, word of mouth isn't spreading, usage isn't growing that fast, press reviews are kind of "blah", the sales cycle takes too long, and lots of deals never close
29. And you can always feel product/market fit when it's happening. The customers are buying the product just as fast as you can make it -- or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can. Reporters are calling because they've heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck's.
30. I believe that the life of any startup can be divided into two parts: before product/market fit (call this "BPMF") and after product/market fit ("APMF").
31. Look for larger schools of fish nibbling at your product but not buying. Solve their problem.
32. At this point the spend ratio generally tips toward marketing. I’ve seen it as high as 80% to marketing and 20% to product.
33. The exception for network effect businesses mentioned earlier is for the following reason… The user experience for a network effect product improves with each additional user. You may need to reach a critical mass of users before you can validate that the product is important for users.
34. Great products aren’t anointed by product gurus. Only customers can decide if a product is great.
35. Customers will decide your product is great if you can map it to their motivation for changing to your solution. All customers change from something. Generally they either switch from a competitive solution or from just tolerating a problem without a solution. New products should decide on one of these markets. Trying to serve both markets generally leads to failure.
36. One way to decide which market to serve is to ask yourself: “when we are generating $100m in revenue, which type of customer do we think will contribute the majority of this revenue?” Your guess is usually the market you should serve.
37. If you decide to target “greenfield” people (those without a current solution), then your product roadmap should be focused on simple, effective execution of their desired task. Simplicity is usually much more important for greenfield users than being feature rich.
38. Common gripes include price, reliability, poor customer service, lack of key features, etc. You’ll need to both message this differentiation and also deliver on the promise. A “false promise” will cause a high churn rate (people who stop using your product).
39. You’ll know you have created a great product when users tell you they can’t live without it. Unfortunately the “cult of great product” occasionally forgets about these critical components of building an indispensible product.
40. the fact is marketing is not appropriate for startups in the initial stages of customer development.
41. His recommendation is to form a customer development team led by a “head of customer development.” The team should include the CEO and spend a considerable amount of time in the field with prospective customers validating/refining hypotheses about their target customers and the problems they are solving. He says this team “must have the authority to radically change the company’s direction, product or mission and the creative, flexible mindset of an entrepreneur.”
42. After five years in the VP Marketing role at LogMeIn, I too recognized that the initial stages of customer development are very different from marketing in the later stages of a startup or especially a large established company. In fact, I concluded that much of my success as a later stage VP Marketing (both companies filed for IPOs) was the result of momentum we had built in the early stages of customer development. I decided that going forward I would specialize in early stage customer development.
43. I was first introduced to Four Steps to the Epiphany when I was Interim VP Marketing at Xobni during the first half of 2008. I had been looking for resources to help me understand how to drive adoption of this innovative market-creating product (a very different challenge than we had at LogMeIn which disrupted an existing market). The book provided a great framework to follow as we worked to drive early customer adoption. Since then I have helped to accelerate market adoption at two additional startups, while continuing to advise at Xobni.
44. The second twist is that I add a customer development specialist when the Validation Step begins, which is the role I fill with startups. I belive eventually many people will specialize in this critical stage. Without a specialist, startups waste critical time and resources deciding where to execute. It’s surprising how similiar the process of uncovering the critical information needed to drive customer adoption across different types of startups.
45. The good news is that I’ve found ambitious, analytical recent college graduates to be ideal candidates. They are easy to find and their salary and equity requirements are also much lower than a VP Marketing – freeing up resources to bring in a customer development specialist.
46. Once the startup has discovered how to drive customer adoption and begins building momentum, it should be easier to attract the long-term VP Marketing (or promote the head of customer development).
47. Not only are engineering marketers more capable of getting the essentials done, they can use their reserve of time and creative energy to be scrappy about building marketing experiments. And of course the experiments they build on their own can be much more interesting than us non-engineers.
48. One way I have worked around my engineering deficiencies has been to hire the skills onto the marketing team. For example, in my last long-term VP Marketing role I hired a front-end designer/engineer to design and code landing pages and a dedicated DBA to build reports and run ad hoc queries.
49. Very few people have all three skills, and even if they come close, they are rarely in perfect balance. In modern business Steve Jobs is probably the only person who even comes close, which arguably took him 25+ years.
50. Many of these differences are ingrained - some mentally, but mostly from our education systems which stream students early and don't actively encourage the mixing of hard science, arts and commerce.
Challenges:
1. So many startup theories come to play
2. So many unproven process.
3. There is no rule to succeed; Everything is possible, and not regulated.
Signs of Product/Market Fit.
1. A pipeline of supplies are coming and waiting
2. The AAARR is working from end to end.
3. Customers are happy
4. We are making money
Signs of Product/Market Not Fit:
1. Have difficulty to get customers
2. The product is not getting viral
3. Customer doesn't care.
References:
http://web.archive.org/web/20070701074943/http://blog.pmarca.com/2007/06/the-pmarca-gu-2.html
http://www.startup-marketing.com/the-startup-pyramid/
http://www.startup-marketing.com/category/vision/
http://www.startup-marketing.com/vision-synching-in-a-lean-startup/
http://redeye.firstround.com/2010/08/heat-seeking-missiles.html
http://www.startup-marketing.com/category/product/
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