4 Steps to the Epiphany, Steve Blank
“Products with senior management out in front of customers early and often – win.”
Difference between “Fire, Ready, Aim” and “Ready, Fire, Aim”
Product Development: The Path to Disaster:
- Product, features, customers, channels, pricing.
- Product Development
- Engineering designs product and starts building.
- Marketing refines size of market and business plan, including sales demo.
- Alpha/Beta Test
- Engineering works with small group of users to test bugs.
- More fundraising.
- Launch/1st Ship
- Purpose of whole project.
- Building sales and marketing channels burns a lot of cash.
Issues with Product Development:
- Where are the customers?
- “Startups don’t fail because they lack a product; they fail because they lack customers and a proven financial model.”
- Focus on 1st Launch: Product development thinks it is “finished”! WRONG!
- Cost of getting product launch wrong is EXPENSIVE.
Important Differentiation in Startups (MARKET TYPE):
- New product into an existing market.
- New product into a new market.
- Low-cost product into a resegmented market.
- New product into niche resegmented market.
Premise of Customer Development model: “learning and discovering who a company’s initial customers will be, and what markets they are in.”
Customer Development: The Path to Epiphany:
- Customer Discovery
- Get outside the building and find out who the customers are.
- Find out what problem they actually have, and if your product is solving it.
- “The job is to see whether there are customers and a market for the vision.”
- Customer Validation
- Successfully sell the product repeatedly to early customers.
- Proves you have a repeatable market who reacts to the product.
- Customer Creation
- Create end-user demand, more heavy marketing.
- Depends highly on Market Type.
- Company Building
- From learning and discovery to formal departments and VPs.
- Prevents premature scaling – opposite of “send as much as possible on customer acquisition before the music stops.”
Pros: low cash burn rate, it’s ok to screw up if you learn, cycles through each step…
MARKET TYPE changes everything a startup does:
|Existing Market||Resegmented Market||New Market|
||Simplicity & Convenience|
||Low in “traditional attributes”, improved by new customer metrics.|
|Competition||Existing incumbents||Existing incumbents||Non-consumption / other startups|
In big companies: Product spec is market-driven. [that means you know your market, find a product for it]
In startups: Marketing is product-driven !!! [that means you know your product, now find a market for it]
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