OVERVIEW: 4 Steps to the Epiphany, Steve Blank

4 Steps to the Epiphany, Steve Blank
OVERVIEW

 

“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:

1. Concept/Seed
   • Product, features, customers, channels, pricing.
2. Product Development
   • Engineering designs product and starts building.
   • Marketing refines size of market and business plan, including sales demo.
3. Alpha/Beta Test
   • Engineering works with small group of users to test bugs.
   • More fundraising.
4. 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:

1. 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.”
2. Customer Validation
   • Successfully sell the product repeatedly to early customers.
   • Proves you have a repeatable market who reacts to the product.
3. Customer Creation
   • Create end-user demand, more heavy marketing.
   • Depends highly on Market Type.
4. 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
Customers	(existing)	(existing)	New/new usage
Customer Needs	Performance	Cost Perceived need	Simplicity & Convenience
Performance	Better/faster	Good enough at the low end Good enough for new niche	Low in “traditional attributes”, improved by new customer metrics.
Competition	Existing incumbents	Existing incumbents	Non-consumption / other startups
Risks	Existing incumbents	Existing incumbents Niche strategy fails	Market adoption

 

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]