NYU Startup School: Getting To Product-Market Fit Part II (Talking to Humans)

@NYUEntrepreneur
Startup School:
Getting to Product-
Market Fit - Part II
(Talking to Humans)
Frank Rimalovski
Executive Director, NYU Entrepreneurial Institute
Adjunct Faculty, Tandon School of Engineering
Instructor, NSF Innovation Corps (I-Corps)
September 27, 2016

@NYUEntrepreneur
Why are we here?
Share ideas, tips, tricks and
secrets on how to best do
customer discovery

@NYUEntrepreneur
Customer Development
Test assumptions
about customer
needs/problems
& develop MVPs
Seek validation
that people are
interested in
your product/
solution
Begins to build
demand &
improve
efficiency of
customer
acquisition
Drive growth
aggressively
& execute
business model
You are here

@NYUEntrepreneur
Your job is not to validate
your product…
Your job is not to validate
your product…
It’s to validate the
problem, who has it and
then how best to solve it?

@NYUEntrepreneur
“New ideas come
from watching
something,
talk(ing) to people,
experimenting,
asking questions
and getting out of
the office!”

@NYUEntrepreneur
The Business Model Canvas
Revenue Streams
Channels
Customer SegmentsValue PropositionsKey ActivitiesKey Partners
Key Resources
Cost Structure
Customer Relationships
Designed by: Date: Version:Designed for:
What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
is your business more
Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)
Value Driven (focused on value creation, premium value proposition)
sample characteristics
Fixed Costs (salaries, rents, utilities)
Variable costs
Economies of scale
Economies of scope
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
channel phases
1. Awareness
How do we raise awareness about our company’s products and services?
2. Evaluation
How do we help customers evaluate our organization’s Value Proposition?
3. Purchase
How do we allow customers to purchase specific products and services?
4. Delivery
How do we deliver a Value Proposition to customers?
5. After sales
How do we provide post-purchase customer support?
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
For whom are we creating value?
Who are our most important customers?
Mass Market
Niche Market
Segmented
Diversified
Multi-sided Platform
What type of relationship does each of our Customer
Segments expect us to establish and maintain with them?
Which ones have we established?
How are they integrated with the rest of our business model?
How costly are they?
examples
Personal assistance
Dedicated Personal Assistance
Self-Service
Automated Services
Communities
Co-creation
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
categories
Production
Problem Solving
Platform/Network
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
types of resources
Physical
Intellectual (brand patents, copyrights, data)
Human
Financial
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
motivations for partnerships
Optimization and economy
Reduction of risk and uncertainty
Acquisition of particular resources and activities
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
What bundles of products and services are we
offering to each Customer Segment?
Which customer needs are we satisfying?
characteristics
Newness
Performance
Customization
“Getting the Job Done”
Design
Brand/Status
Price
Cost Reduction
Risk Reduction
Accessibility
Convenience/Usability
types
Asset sale
Usage fee
Subscription Fees
Lending/Renting/Leasing
Licensing
Brokerage fees
Advertising
fixed pricing
List Price
Product feature dependent
Customer segment
dependent
Volume dependent
dynamic pricing
Negotiation (bargaining)
Yield Management
Real-time-Market
Hypotheses & the BMC
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis
Hypothesis

@NYUEntrepreneur
More than half of
your assumptions
are wrong!
7

@NYUEntrepreneur
Customer Discovery
u Apply the scientific method to
business model development
Modify
hypothesis
Observe
phenomena
Formulate
hypothesis
Test
hypothesis
via rigorous
experiments
Establish
theory
based on
repeated
validation of
results
PIVOT!

@NYUEntrepreneur
Goals of Customer Discovery
1. (In)validate problem/solution fit
2. (In)validate business model
component hypotheses
3. Begin to identify & test Minimum
Viable Products (MVPs)
u NOT to get statistical relevance, but
pattern recognition to get insight

@NYUEntrepreneur
Talk to Humans!
u GOTB: The #1
lesson of this talk
u In person is best
u You must gain
insight into your
customer & market
u You are doing pattern recognition…
Must have sufficient data points to see and
to test all elements of BMC!

@NYUEntrepreneur
Who do you want to learn from?
11
3A. Who Do You Want To Learn From (Inked)

@NYUEntrepreneur
Do not fear picking the
wrong market!

@NYUEntrepreneur
Customers are Humans!
User Influencer Recommender Decision
Maker
SaboteurEconomic
Buyer

@NYUEntrepreneur
u Who is your “enthusiast”/early adopter initial
target customer?
u List 5 characteristics of your early adopter
customer (from Ex. 1)
o Job(s), title, industry, demographics, hobbies,
sex, age, etc.
u Use LinkedIn or equivalent to identify
individuals who share these characteristics
u After: Email asking for intros to 5 people
they know who share these characteristics
Think small

@NYUEntrepreneur
Early Adopter Customer
Segment/Industry
Org Size
Geography
Demographics
Title/Job
Age
Sex
16

@NYUEntrepreneur
Early Adopter Customer
Segment/Industry Hospital
Org Size Large (>5,000)
Geography Urban/Surburban
Demographics Research/University
Title/Job Department Chair, Physical Therapy
Age 45-65
Sex M/F
17

@NYUEntrepreneur
Finding Interview Subjects5A. How Do You Find Your Interview Subjects (Inked)
18

@NYUEntrepreneur
Finding Interview Subjects
u At least one degree of separation
u Become a LinkedIn power user
u Make referrals happen
u Get creative…recruiting hacks
u Fish where the fish are…
u …In the wild
u Promise to be brief
u Enterprise customers are people too!
u Play the student/researcher card
19

@NYUEntrepreneur
Example Email
To: john.smith@mayflower.com
From: me@me.com
John,
I am participating in a program at NYU and I am studying how small businesses
owners are handling their expense report management workflows and the
frustrations they are experiencing.
I see from LinkedIn that you know James Smith at Pinto Boats. I understand
James has expertise in the area I am researching would love to speak with him.
Would you be willing to make an introduction to James so that I may have a 15-20
minutes conversation to ask him few questions about this?
Many thanks for your time and I look forward to hearing from you,
Jane Doe
20

@NYUEntrepreneur
Meet People You Don’t Know
u People you know will be nice and tell
you what you want to hear
u Those interviews are possibly harmful
u Let other teams use people you know
u People you don’t know have no
relationship to protect…Only they will
tell you the truth

@NYUEntrepreneur
Exercise 1
23

@NYUEntrepreneur
Cold Calling
1. Volunteer team
2. Volunteer expert (use earliest adopter)
3. “Cold call” expert
4. Get them to take the call
5. Start questioning them
6. Others offer suggestions
7. Rinse & repeat until successful
8. Discuss
24

@NYUEntrepreneur
Discuss: Observations,
challenges & questions
25

@NYUEntrepreneur
Pro Tips
u Practice, practice, practice
u NO email, focus groups or surveys
u Don’t start with your dream customer
u Being an entrepreneur means being
aggressive & persistent
u Leverage your network!
u Flatter subjects
u Be transparent
u Follow up/stay in touch
26

@NYUEntrepreneur
What do you want to learn?4D. What Do You Want To Learn
27

@NYUEntrepreneur
What do you want to learn?
28
The Business Model Canvas
Revenue Streams
Channels
Customer SegmentsValue PropositionsKey ActivitiesKey Partners
Key Resources
Cost Structure
Customer Relationships
Designed by: Date: Version:Designed for:
designed by: Strategyzer AG
The makers of Business Model Generation and Strategyzer
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
strategyzer.com
What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
is your business more
Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)
Value Driven (focused on value creation, premium value proposition)
sample characteristics
Fixed Costs (salaries, rents, utilities)
Variable costs
Economies of scale
Economies of scope
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
channel phases
1. Awareness
How do we raise awareness about our company’s products and services?
2. Evaluation
How do we help customers evaluate our organization’s Value Proposition?
3. Purchase
How do we allow customers to purchase specific products and services?
4. Delivery
How do we deliver a Value Proposition to customers?
5. After sales
How do we provide post-purchase customer support?
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
For whom are we creating value?
Who are our most important customers?
Mass Market
Niche Market
Segmented
Diversified
Multi-sided Platform
What type of relationship does each of our Customer
Segments expect us to establish and maintain with them?
Which ones have we established?
How are they integrated with the rest of our business model?
How costly are they?
examples
Personal assistance
Dedicated Personal Assistance
Self-Service
Automated Services
Communities
Co-creation
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
categories
Production
Problem Solving
Platform/Network
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
types of resources
Physical
Intellectual (brand patents, copyrights, data)
Human
Financial
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
motivations for partnerships
Optimization and economy
Reduction of risk and uncertainty
Acquisition of particular resources and activities
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
What bundles of products and services are we
offering to each Customer Segment?
Which customer needs are we satisfying?
characteristics
Newness
Performance
Customization
“Getting the Job Done”
Design
Brand/Status
Price
Cost Reduction
Risk Reduction
Accessibility
Convenience/Usability
types
Asset sale
Usage fee
Subscription Fees
Lending/Renting/Leasing
Licensing
Brokerage fees
Advertising
fixed pricing
List Price
Product feature dependent
Customer segment
dependent
Volume dependent
dynamic pricing
Negotiation (bargaining)
Yield Management
Real-time-Market

@NYUEntrepreneur
Don’t Assume You
Understand the Problem!
bit.ly/2czMbCJ

@NYUEntrepreneur30
“(The great
entrepreneurs)
fall in love with
the problem,
not the
solution.”

@NYUEntrepreneur
Who cares?
u Crafting good hypotheses is hard!
u Good hypotheses leads to good
experimental design
u Good experimental design is
important to properly validate or
invalidate
u Key to getting to PMF & a MVP
u Seek help from mentors & coaches!

@NYUEntrepreneur
Hypotheses Must Be…
uQuantifiable
uRelevant
uSpecific
uTestable
32

@NYUEntrepreneur
Design a Test
u All tests start with: get out of the
building and talking to people
u Do not try to be statistically valid,
but do seek quantification
u Do not stop once you get an
answer
u Avoid premature capitulation

@NYUEntrepreneur
Ensuring effective interviews6B. How To Ensure An Effective Session (Draft)
34

@NYUEntrepreneur
Do not sell!
u No demos! No presentations! No tech talk!
u Get stories, not speculation
u Ask open-ended questions
u Ask how they do their job, about their
problems, & how they solve them today
u It’s about them. Not you. Not your product.
u Ask why? Then why? They why again!
u Create a guide (not a script)
36

@NYUEntrepreneur
Ensuring Effective Interviews
u Beware of confirmation bias
u Do it in person, one at a time
u Get subjects to tell a story
u Look for solution hacks
u Understand their priorities
u Follow your nose & drill down
u Listen and shut up!
u Have someone take notes
37

@NYUEntrepreneur
Exercise 2
38

@NYUEntrepreneur
Your Last >$100 Purchase
1. Write description of item on top of page
2. Find a partner next to you & swap pages
3. Create interview guide: ~5 questions
o Explain what you bought and why?
o What was the process from desire to acquisition?
o What other options/alternatives did you consider?
o How did you decide to buy it? Who/what did you consult?
o How did you decide where to buy it?
4. 5 minute interview…take notes
5. Switch

@NYUEntrepreneur
Discuss: Observations,
challenges & questions
40

@NYUEntrepreneur
Focus on actual behavior
Not speculative or
abstract feelings
41

@NYUEntrepreneur
Art of Multi-Person Interviews
bit.ly/2dqfugI

@NYUEntrepreneur
Documenting Interviews
u Assign someone to take notes
u Write down key a-ha’s as they happen
u Note questions that worked & use
them again!
u Take pictures or videos!
u Write up & share key insights with
your team ASAP!

@NYUEntrepreneur
What About IP?
u Never sign an NDA
u Never ask people to sign an NDA
u If you are describing your tech in
detail, you are doing it wrong
u Focus on the what & not the how

@NYUEntrepreneur
How do you make sense of what you learn?7B. How Do You Make Sense Of What You Learn
(Draft)
45

@NYUEntrepreneur
Gaining Insight
u Facts are interesting…Insights are your goal
u Be honest…Don’t be too quick to validate or
too slow to disprove your hypothesis
u Don’t just scratch the surface, dive deep
u Find the hidden motivations
u Ask why? And why? Then why again?
u Don’t fear picking the wrong market
u Depth of understanding always leads to
insight

@NYUEntrepreneur
What’s an insight?
(the a-ha’s along your journey)

@NYUEntrepreneur
in•sight |ˈinˌsīt|
noun
the capacity to gain an
accurate and deep intuitive
understanding of a person or
thing

@NYUEntrepreneur
in•sight |ˈinˌsīt|
noun
something you’re so excited
about you tell strangers on
the train

@NYUEntrepreneur
Create an Interview Guide
u A guide, not a script
u Helps to keep you organized & on point!
u Appear more professional, & ensure you get
most important questions early
u Test your Customer Segment & Value
Proposition hypotheses
u List 5-8 questions to test your Value
Proposition hypotheses with your initial target
Customer Segment(s)
50

@NYUEntrepreneur
Sample Questions
1. How would you describe your role as a
____________?
2. What does success in your role look like to you?
3. What is the hardest part about achieving that?
4. When was the last time you tried to solve that?
5. Can you tell me about the last time it happened?
6. Why is it a problem for you?
7. How did you find your current solution?
8. What is not ideal about this solution?
51

@NYUEntrepreneur
Learning Is Paramount
u The knowledge you gain in customer
discovery is critical to the success or
failure of your business
u >Half of your assumptions are wrong
u You must not try to validate what you
already think or want to be true
u Leverage mentors & coaches to help
synthesize insights & identify patterns

@NYUEntrepreneur
Pro Tips
u Focus on actual behavior, not
speculative or abstract feelings
u If they’ve made an MVP…ask to see it!
u Listen, don’t talk
u Follow your nose & drill down
u Parrot back or misrepresent to confirm
u Ask for introductions
u Write up your notes ASAP
u Avoid premature conclusions

@NYUEntrepreneur54
“It's grueling
listening to
customer
feedback. And
if it isn't, you're
probably
doing it
wrong."

@NYUEntrepreneur
Required Reading/Viewing
TALKING
TO HUMANS
Success starts with understanding
your customers
GIFF CONSTABLE
Pre-release edition
with Frank Rimalovski
and illustrations by Tom Fishburne
bit.ly/llpcdvstalkingtohumans.com

@NYUEntrepreneur
What did you say?
57
slideshare.net/NYUEntrepreneur
youtube.com/user/NYUEIMedia

@NYUEntrepreneur
Helping startups start up

@NYUEntrepreneur
Tuesday 10/4, 4pm
Sizing Up Your Market & Competition
59
1 Attend next week’s
Startup School
bit.ly/nyustartupschool

@NYUEntrepreneur60
2 Meet with a Blackstone
Launchpad coach
Say you went to Startup School!
entrepreneur.nyu.edu

@NYUEntrepreneur61
3 Apply to the NYU
Prototyping Fund
Up to $500 to build your prototype!
Deadline is Sep 30!!!
bit.ly/PrototypingFall16

@NYUEntrepreneur62
4 Enter the $300k NYU
Entrepreneurs Challenge
Training & coaching for your startup!
Deadline to Enter is Oct 6!
bit.ly/NYU300k

@NYUEntrepreneur
Questions?
entrepreneur@nyu.edu
@nyuentrepreneur
entrepreneur.nyu.edu
16 Washington Place
63

NYU Startup School: Getting To Product-Market Fit Part II (Talking to Humans)

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