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:

  1. problem statement document
  2. an expanded product requirement document
  3. an updated sales and revenue plan
  4. sound business and product plan


Customers:
1. Latent Need
2. Active Need
3. Customer
4. Ultimate Customer

Earlyvangelist customer characteristics

  1. The customer has a problem.
  2. The customer understands he or she has a problem.
  3. Thecustomer is actively searching for a solution and has a timetable for finding it.
  4. The problem is painful enoughthe customerhas cobbled together an interim solution.
  5. The customer has committed, or can quickly acquire, budget dollars to solve the
  6. 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






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