The OWMTI „ Guide Customer A"cheat sheet" to The Four Steps to the Epiphany Customer Customer Discovery Validation r pivot by Brant Cooper &Patrick Vlaskovits Foreword by Steven Gary Blank Disclaimer © 2010 Brant Cooper and Patrick Vlaskovits "CustomerDevelopment" isa term usedtodescribe business processes defined in TheFourSteps to the Epiphany, bySteven GaryBlank. The FourSteps totheEpiphanyused bypermission fromSteven GaryBlank. "Lean Startup" isa term trademarked byEric Riesand represents a combination of Customer Development, Agiledevelopment methodologies, and open source or lowcost development platforms. Product &MarketDevelopment, Inc.claims atrademark for"MinimumViable Product." All other trademarks and copyrights are the property oftheir respective owners. ISBN-10: 0982743602 ISBN-13: 978-0-9827436-0-7 Fonts include Trade Gothic and ITC Officina Serif. Design byGarth Humbert and the May team. Foreword Alothas happened withthe CustomerDevelopment process since Ipublished The FourSteps tothe Epiphany. When Ifirstconceived ofthe concept, Iwas attempting to articulate a common pattern Irecognized insuccessful startups. Idid this because Iwanted to change the waystartups were built-without completely depending on serendipity and at a much lowercost. Today, thousands ofstudents haveheard mylectures and morethan twenty thousand haveread mybookonCustomerDevelopment. Hundreds, ifnot thousands, ofstartups are practicing some elements ofCustomer Development today. Many inthe venturecapital communityhavecometoembrace the concepts,encourage and, insomecases, require theirportfolio companiesto adhere to the Customer Development principles. In additiontogrowing adoption ofCustomer Development, isitsadvancement.A formerstudent of mineand intrepidentrepreneur, EricRies,combined Customer Development with Agile development methodologies toform the powerful concept ofa "Lean Startup." In littlemore thanayear's time,thereare now over 3,500 membersinLean Startup Groups in27 citiesand 9 countries. Dave McClure's AARRR metrics represent the quintessential methodformeasuring progress through Customer Development for web startups. In aseriesofdeeply insightful blog posts, Ash Maurya extended my work by building aWeb Startup version of Customer Development. Before Ibegan writing andspeaking aboutthe Customer Development model, I thoughtitparadoxical that these methods were employed by successfulstartups, yetarticulatedby noone. Itsbasicpropositions were the antithesisofcommon wisdom yet they werefollowed bythose whosucceeded. "It isthe path that is hidden in plain sight." No longer is ithidden. Clearly, Customer Development has lita fire. WhatIfindperhaps mostgratifying isthis: CustomerDevelopment continues to be advanced bypractitioners, mentors, entrepreneurs and investors whoendeavor to buildsuccessful startups intoscalable businesses. CustomerDevelopment is notone book. It'snota religion. Itisa malleable, customizable,and bespoke methodology fordealingwith the chaosofthe real-world. And Iam proud to note, it isgrowing and evolving. Thisbook, The Entrepreneur's Guide toCustomerDevelopmentrepresents another milestone. Not only isitthefirst"thirdparty" book aboutCustomer Development, itraises thebar. Authors Brant Cooperand Patrick Vlaskovits have integrated the thinking ofleading Customer Development practitioners andevangelists soany entrepreneur can apply them to hisor herstartup. Theyhavedistilled Customer Discovery intoaseriesofsteps illustrated with clearexamples, concreteaction items, and traps to avoid. This isa must read forallstartups and their stakeholders. - Steven GaryBlank Menlo Park, CA April 2010 Acknowledgements Without Steve Blank and his book, TheFourSteps to the Epiphany,this book would have been, of course, impossible. Steve's shared "epiphany" of Customer Development practices and processes has inspired countless entrepreneurs, investors and other business leaders to take a hard lookat the waythey build new businesses. Notonlydo wewant to thank Steve forthe generous insights he has providedthrough his books,on his blogand inhisclassroom, but also forthe support and encouragement he has offeredus inourendeavor to writethis book. Wewould liketo acknowledge the leadingthinkers and supporters ofCustomer Development and its like-minded principles,specificallyEric Ries,Sean Ellis, Dave McClure and Andrew Chen. Wewould also like to thank those big-brained entrepreneurs and practitionerswhocontinuetodiscuss and debate these ideas on Rich Collins' Lean Startup CircleGooglegroup and elsewhere. Most importantly, these individuals puttheir ideasintoaction,sharetheirexperiences, and advance the Customer Development discipline vigorously:Ash Maurya, BabakNivi, Cindy Alvarez, Dan Martell, David Binetti,Giff Constable, KentBeck, Kevin DeWalt, RichCollinsand Sean Murphy. Discussingthe day-to-daytactics withthese peopleas they implementCustomer Development practices has been instrumental to our own thinking reflected inthis book. Further, thanks to the following individualsforparticipating inourCustomer Development efforts onthe book andfor providingvaluable feedback: Adam Harris, AnnMiura-Ko, Anne Rozinat, Ash,Giff, Bill Earner,DaveConcannon, Jeff Widman, Kevin Donaldson, Kyle Matthews, Matthew Gratt,and Pete Mannix. We would liketo single out HitenShah forinspiringus to undertake this task and forproviding usa constant stream ofencouragement, contacts, and wisdom. Finally, wewould liketothank FabriceGrinda,BruceMoeller, Ranjith Kumaran and Jeff Smith for sharing their stories with us. - BrantCooperand Patrick Vlaskovits Table of Contents Introduction Whythis book? Who Should Read This © Customer Development What Customer Development Is What Customer Development Is Not Three Levels of Learning Getting Started O Case Study: Naive Thinking O Concept Definitions EarlyAdopters/Early Evangelists Segmentation Market Type "Non-Traditional" Business Model Positioning Product-Market Fit Minimum Viable Product (MVP) Lean Startup Pivot Getting Out of the Building © Case Study: Multiple Pivots © Know Thy Business To the Whiteboard An Example KnowThyself © Case Study: On Customer-Centric Cultures © 8 Steps to Customer Discovery Overview Step 1. Document C-P-S Hypotheses Step 2. Brainstorm Business Model Hypotheses Step 3. Find prospects to talk to Step 4. Reach out to prospects Step 5. Engaging Prospects Step 6. Phase Gate ICompileIMeasureITest Step 7. Problem Solving Fit/MVP Step 8. Phase Gate II CompileIMeasure ITest © Case Study: Testing Towards a Scalable Business Model © Conclusion Summary Resources About the Authors Introduction Why this book? Steve Blank's book, TheFourSteps to the Epiphany,changes the game. Ina business worldfull of marketing "fluff," "get-rich-quick", self-help guides and analytical tomes that predict historywith undeniable accuracy, Blank's booklays out an actionable framework forstartingand building newstartups, based on the insightthat moststartups fail becausetheydidn't develop theirmarket,notbecause they didn't develop their product. Steve Blank published The FourSteps totheEpiphanyin2005 not as a "traditional" business book, but as a compilation of lecture notes for the business school classes he taught at Stanford Universityand UC Berkeley.Tens ofthousands of people havepurchased this "non-marketed" book. Itsdog-eared pages,highlighter-marked paragraphs and note-filled margins prove itsvaluelike fewother books because itdoesn't get put away- it remains on the desk, never quite reaching the bookshelf. The FourStepstotheEpiphany(referred toas The FourStepsthroughoutthis book) is nota grand, conquer-the-world strategy,ora set of"tried and true" tactics, orcollectionofcatchy business aphorisms. Itisa malleable processof testing, learningand iterating upon thefundamental businessassumptionsyou hold about yourproduct, customersand market. So,then, whythis book? Theobjectiveofthis "non-fictionnovella" isto remove the barriersto understanding and implementingCustomer Development(referred toas CustDev throughoutthis book) and take The FourStepsto another level. We hope to provide the following insights: 11 1. "Boil the content down" to an even simpler, morestraightforward, actionable guide to CustDev practices. 2. Summarize and unite the ideas of modern CustDev"thought leaders" who have emerged since The FourSteps was published. 3. Put a "stake inthe ground" to create standardswith respect to common CustDev terms and concepts. 4. Demonstrate the flexibilityofCustDevwhenapplied to any business model. 5. Make the CustDev process available inan ebook format. We havemade itourgoaltogettothe point, butalsonotgettothe wrongpoint. Whiledebate is healthy, and wecan onlyhopethat people will discuss this book, wehopeto minimize"paralysis byanalysis." Participation indebates over terminology, semantics, or history- particularlyin high-tech culture -often isan excuse fornottakingaction. We feel CustomerDevelopment does not need to be at the center ofsuch a debate. You can, ofcourse, take itor leave it. But more to the point, you canfurtherit,changeit,andeven mold ittoyour business,your vision, and your values. AsSteve Blanksays, "CustomerDevelopment isnotjust one idea, but the sum of Customer Development itself. It'smore thanonesmartguy sittingonthe beachin Hawaii writinga business book. Itiswhat it preaches." 12 Introduction Who Should Read This The Customer Development framework is not tied to a particular business type, market segment, or product category. Companysize, revenues, or location are im material, as long as the company is planning on launching a new product. Anyone can benefitfromCustomerDevelopment thinking. The philosophyapplies to all entrepreneurs even though specific Customer Development processes are typically associated withthose businesses just "starting up." Althoughour background isworkingwithhigh-tech companies and that has formedour primary frameofreference,the CustomerDevelopment model isbroad and flexible,and can be applied tovariousindustries and markets. This book focuses onthe firststep ofCustomer Development, namelyCustomer Discovery. Therefore, we will focus on startups. Thereality isthat Customer Development methodsbecomemore difficultto implement the "furtheralong" your businesshasbeenestablished.Thefurther along you are,the more difficult itistoquestion andtest fundamental busi ness assumptions uponwhich you may have already builtan organization. If, for example, you mustreport revenue growth toyour investors nextmonth, itmay be a difficult proposition tostopwhatyou'redoinginordertoquestionyour funda mental business assumptions. Even thoughtakinga "time-out" to gothrough a set ofprocessesthat might explain why yourgrowth isslower than projected might be exactlywhat youneed, yourboard islikely to think youtookthe wrongturn at Albuquerque and ended up inTaos! Sucha drasticstep typically requiresa little bitofdesperation and a lotofsympathetic Directors. Itmighteven besaid, that The Four Steps was born out of just such a predicament. Regardless ofthe stage your business isin,thoseofyou mostlikely to pickupthis book are significantlyinvolved ina startup technologycompany,either as a devel oper, product manager,orfounder. Fundamentally, this isa bookforentrepreneurs whoare willing and able to question their mosttightly-held business assumptions; it isfor this group of people this bookwillbenefit the most. 13