Translating Customer Needs Into MVPs

@NYUEntrepreneur
Translating
Customer Needs
into MVPs
Frank Rimalovski
Executive Director, NYU Entrepreneurial Institute
Managing Director, NYU Innovation Venture Fund
Instructor, NSF Innovation Corps (I-Corps)
November 14, 2015

@NYUEntrepreneur
What makes for a successful
startup?

@NYUEntrepreneur
Commercialization Myth
Basic &
Applied
Research
Scientific
Discovery/
Invention/
IP Creation
Venture
Formation
& Growth

@NYUEntrepreneurThe “valley of death”
Basic &
Applied
Research
Scientific
Discovery/
Invention/
IP Creation
Customer
Discovery &
Prototype
Dev
Business
Model &
Team
Formation
Venture
Formation
& Growth
• Customer/market discovery
• Engineering/prototypes
• Mentors & advisors
• Collaborative spaces
• Business leadership
• Legal counsel
• Capital
Commercialization Reality

@NYUEntrepreneur
(At least) Three Parts to
Building a Successful Startups
1. Advancing the product/technology
2. Beginning to build a team
3. Finding a repeatable business model
u Most focus on #1 and/or #2
u Successful efforts require all three
5

@NYUEntrepreneur
It’s Bigger Than the Revenue Model
u Testing hypotheses makes substantive changes to
biz model before you do science/design
o Define clinical utility
o Who core & tertiary users/buyers/payers are
o Sales & marketing process required for initial
revenues and downstream commercialization
o Data required for future partnerships/collaborations
o Intellectual property risks
o Regulatory pathways
o Reimbursement strategies
u Affects your biological & clinical hypotheses
6

@NYUEntrepreneur
Need to do this before
finishing the science or
building/designing the product

@NYUEntrepreneur
Evidence-based
Entrepreneurship
(aka the Lean Startup)
8

@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:
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.
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
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!
10

@NYUEntrepreneur
Customer Development
Test assumptions
about customer
needs/problem
& 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

@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!
You are here

@NYUEntrepreneur
First test the problem,
then test the solution
13

@NYUEntrepreneur
Value Proposition
What Problem Are You Solving?

@NYUEntrepreneur
Value Proposition
describes the benefits
customers can expect
from a bundle of
products and services

@NYUEntrepreneur
Key Questions for Value Prop
u Problem Statement: What is the problem?
u Technology / Market Insight: Why is the
problem so hard to solve?
u Product: How do you solve it today?
u Competition: Who is delivering that solution?
u Clinical utility: What level of improvement
in efficacy/safety/cost/etc. is needed?
u Market Size: How big is this problem?

@NYUEntrepreneur
Customer Segment
Who Cares?

@NYUEntrepreneur
Customer Profile
u Who are they and
why would they
buy?

@NYUEntrepreneur
Define Customer Archetype
u Who are they?
o Position / title / age / sex / role
u How/where do they buy?
o Discretionary budget (name of
budget and amount)
u What matters to them?
o What motivates them?
u Who influences them?
o What do they read/who do they
listen to?

@NYUEntrepreneur
Problem-Solution Fit
Fit

@NYUEntrepreneur
So where does my
technology come in?

@NYUEntrepreneur
It’s not about your technology!
22
bit.ly/1MFD3YJ

@NYUEntrepreneur
So where does my
technology come in?
Customers don’t care about technology
They are trying to solve a problem
Customer discovery is about identifying that
problem & exploring how you could solve it

@NYUEntrepreneur
put yourself in
the customers’
shoes

@NYUEntrepreneur
Customer Interviews
(aka Talking to Humans)
26

@NYUEntrepreneur
“You can’t just
ask customers
what they
want and then
try to give that
to them.”

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

@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
2B. Story

@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
Secret: This is why we
brought all the mentors in!
32

@NYUEntrepreneur
What do you want to learn?
33
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!

@NYUEntrepreneur
What do you want to learn?
u Do not sell! No demos! No presos!
u You are there to learn!
u Get stories, not speculation
u Ask open-ended questions
o Learn about their problems and how they
solve them today
u Ask why? Then why? They why again!
u Create a guide (not a script)
35

@NYUEntrepreneur
Ensuring an Effective Interview
u Beware of confirmation bias
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 STFU!
u Have someone take notes
36

@NYUEntrepreneur
Gaining Insight
u Facts are interesting…Insights are your goal
u Don’t just scratch the surface, dive deep
u Find the hidden motivations
u Ask why? And why? Then why again?
u Depth of understanding always leads to
insight

@NYUEntrepreneur38
“It's grueling
listening to
customer
feedback. And
if it isn't, you're
probably
doing it
wrong."

@NYUEntrepreneur
The Minimum Viable Product
39

@NYUEntrepreneur
Help start the process of learning
as quickly & cheaply as possible
The Minimum Viable Product
40

@NYUEntrepreneur
What is this?
41

@NYUEntrepreneur
What is this?
42

@NYUEntrepreneur
What is this?
43

@NYUEntrepreneur
What is this?

@NYUEntrepreneur
Why create an MVP?
u Answer questions & generate new ones
u Validate your assumptions
u Compare alternatives
u Fail early & cheaply
u Visualize your ideas & share with others
o Team
o Customers
o Investors
45

@NYUEntrepreneur
Why use this approach?

@NYUEntrepreneur
1. Find go-to-market strategy…
47

@NYUEntrepreneur
…and do it more quickly
48

@NYUEntrepreneur
2. Design an MVP
49
Start the process of
learning as quickly &
cheaply as possible
Minimum Viable Product

@NYUEntrepreneur
Questions?
entrepreneur@nyu.edu
@nyuentrepreneur
entrepreneur.nyu.edu
16 Washington Place
50

@NYUEntrepreneur
Helping startups start up

Translating Customer Needs Into MVPs

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