Customer Development/Lean Startup 092609 class 7 and 8

9/25/09 1

Customer Development in theHigh Tech Enterprise

Customer ValidationParts 1 & 2

September 26 2009

Steve [email protected]

Customer Development in the High-Tech Enterprise Fall 2009

Agenda

! Logistics/Questions! Review! Cases: HP Kittyhawk, Wildfire! Customer Validation

3

HP Kittyhawk


HP Kittyhawk Questions

! How well do they execute product development?! How competent was the development team?

! What Market Type could they chosen?Which did they choose?

! What revenue curve did that choice result in?

! What revenue curve did they commit to?

! What were the consequences?


Kittyhawk Case

! Classic “Innovators Dilemma”

" New Market innovation in a large corporation

" Needs large forecasts to justify developmentbudget

" Unrealistic because its unpredictable and alwaysslower growth

" May steal resources from mainstream products


Today: Customer Validation

CustomerDiscovery

CustomerValidation

CustomerCreation

ScaleCompany

• Develop a repeatable and scalable sales process

• Only earlyvangelists are crazy enough to buy


Customer Validation:

Phase 1Get

Readyto Sell

Phase 2Sell to

EarlyVangelists

Phase 4Business

ModelVerified

Phase 3Positioning

From DiscoveryTo Creation

CustomerValidation


Customer Validation

ProductPositioning

CompanyPositioning

Present toAnalysts &Influencers

Develop Positioning

Sell to “EarlyVangelists”Sell to

ChannelPartners

ContactVisionary

Customers

Sell to Early

Customers

Refine SalesRoadmap

Refine Channel

Roadmap

Prelim SalesRoadmap

Hire a “Sales Closer”

Articulatea Value

Proposition

Prelim Sales& Collateral

Materials

Prelim Distribution

Channel Plan

Align YourExecutives

Get Ready to Sell

FormalizeAdvisory

Board

Verify

Verify theBusiness

Model

Verify the Product

Verify theSales

Roadmap

Verify theChannel

Roadmap

Iterate or Exit


Sell to “EarlyVangelists”

Customer Validation

Prelim SalesRoadmap


Articulatea Value

Proposition


Materials

Prelim Distribution

Channel Plan


Get Ready to Sell

Sell to ChannelPartners

ContactVisionary

Customers

Sell to Early

Customers

Refine SalesRoadmap

ProductPositioning

CompanyPositioning


Develop Positioning

Verify theBusiness

Model

Verify the Product

Verify theSales

Roadmap

Verify theChannel

Roadmap

Verify

FormalizeAdvisory

Board

Refine Channel

Roadmap

Iterate or Exit

Inside the Building

Outside the Building


Phase 1:Get Ready to Sell

! Serious preparationbefore 1st sales" Another writing exercise" Aligning Executives

Phase 1Get

Readyto Sell

Phase 2Sell to

EarlyVangelists

Phase 4Business

ModelVerified

Phase 3Positioning


Get Ready to Sell! Value Proposition! Sales Collateral! Distribution Plan! Sales Roadmap! Sales Closer! Synchronize Execs! Advisory Board

Prelim SalesRoadmap


Articulatea Value

Proposition


Materials

Prelim Distribution

Channel Plan


FormalizeAdvisory

Board


Get Ready to Sell:Articulate a Value Proposition

! Create Value Proposition" Is it emotionally compelling?" Does it make or reinforce an economic case?" Does the it pass the reality test?

! Varies by Market Type


Get Ready to Sell:Preliminary Sales Collateral

! Create collateral roadmap" What you need and when you need it" Supports the sales roadmap" Ensure the collateral matches the internal audiences

! Create all selling materials" Presentations" Data sheets" White Papers

! How would collateral differ by Market Type?


Get Ready to Sell:Preliminary Channel Road Map

! Channel Food Chain and responsibility! Channel discount and financials! Channel Management! How would channel plan differ by Market Type?


Channel AlternativesPick One

YourCompany

YourCustomers

SystemIntegrators

DirectSales Force

Value-AddedResellers (VARs)

Dealers

Distributors

Retail/MassMerchants/Online

OEMs


Channel DiagramBook Publishing Company

AcknowledgeReturns

Sell BooksDeliver Orders

DetermineAllocations

-Establish Identity-Create Demand

NationalWholesaler Distributor Retailer

MerchandiseTitles

Dispose ofReturns

Stock BooksDeliver Books(from printer)

Publisher

Ship Books


Channel MarginsBook Publishing Company

35% 15% 10% 40%

$7.00 $3.00 $2.00 $8.00 $20.00

% ofRetail

$s

CustomerNationalWholesaler

Publisher Distributor Retailer


Get Ready to Sell:Preliminary Sales Road Map

! Built around key insights about the selling process! Answers

" Who decides the sale?" Influencers, recommender, decision makers Where is the

budget? How many sales call to the sale? To who? What isthe script for each?

! Consists of:" Organization Map" Influence Map" Customer Access Map" Sales Strategy" Implementation Plan


Early Sales

Has Has / Or can Acquire / Or can Acquire a a BudgetBudget

Has Has Put TogetherPut Together a Solution a Solutionout of Piece Partsout of Piece Parts

Has Been Has Been Actively LookingActively Looking For a Solution For a Solution

Has A Has A ProblemProblem

KnowKnow They Have a They Have a ProblemProblem

EarlyVangelistEarlyVangelist


Get Ready to Sell:Hire a “Sales Closer”

! Identify need for a “Sales Closer" Founders have experience “closing” business?" Do they have a “world-class” set of contacts?" Bet the company on their ability to close sales?

! If not, hire a “Sales Closer”" Do NOT hire a VP of Sales" Typical background would be a regional manager

! How does Market Type effect this hire?


Get Ready to Sell:Synchronize Your Execs

! Product Development" Schedule" Deliverables" “Good-enough” Philosophy

! Engineering’s role in sales, installation, post-sales support! Sales Collateral review


Get Ready to Sell:Formalize Advisory Boards

! Advisory boards are critical in nascent stages of a startup! To sell to industry specific customers requires an industry

advisory board! Multiple Advisory Boards

" Use at different times" Different purposes


Phase 2: Sell

! First sales! First channel sales! Scalable and Repeatable

Phase 1Get

Readyto Sell

Phase 2Sell to

EarlyVangelists

Phase 4Business

ModelVerified

Phase 3Positioning


Sell to EarlyVangelists! Contact Visionaries! Sell! Refine Sales Roadmap! Sell to Channel Partners! Refine Channel Roadmap

Sell to ChannelPartners

ContactVisionary

Customers

Sell to Early

Customers

Refine SalesRoadmap

Refine Channel

Roadmap


Sell:Contact Visionaries

! Looking for people with problems! They are few are far between! They need to become your

cheerleaders…while paying you to do so


Sell: Turn Visionaries intoEarlyVangelists

! Very few are early customers! Visionaries will emerge to buy an unfinished

product if it truly solves a painful problem! A lack of these early purchasers is a red-flag! Market Type effects ease of execution


Build the Organization Map

Our PotentialCustomer

Neil GarrettVP Database

Marketing

Suzanne KelloggVP Merchandizing

Karen RogersVP Marketing

Dave JonesCEO


One Step at A Time


= in house competition

Leslie EldersFinancial Modeling

Joe BlackDir. Sales Operations

Ben WhiteVP Sales


Marketing



Dave JonesCEO


Organization Map

Geoff SmithFinancial ToolsDevelopment

Phil WhitryDirector IT

Roger SmithCIO


= in house competition = issues to be addressed before a sale

Leslie EldersFinancial Modeling

Joe BlackDir. Sales Operations

Ben WhiteVP Sales


Marketing



Dave JonesCEO


The Influence Map

Functional Technical

High Executive 1

Low


The Influence Map


High Executive 1 2 CIO or Division IT executive

Low


The Influence Map



Low End Users 3


The Influence Map



Low End Users 3 4 Corp. IT staff or Division IT


The Sales Roadmap:Starts with Influence Map

Execs

EndUsers

Operational

High

Low

Educate & PresentSolution

Technical

CIO

ITStaff


The Sales RoadMap:Adds Access, Assessment & Strategy

Finance

ProductMgmt

Support

Corp.Mktg

Sales

IT

IntroMeetings

Execs

EndUsers

Operational

AccountStrategy

High

Low

Access AssessNeeds

Strategy Educate & PresentSolution

Technical

CIO

ITStaff


The Sales RoadMap

Finance

ProductMgmt

Support

Corp.Mktg

Sales

IT

IntroMeetings

Execs

EndUsers

Operational

ImplementPlan

ProposalAccountStrategy

High

Low

Access AssessNeeds

Strategy Educate & PresentSolution

Technical

CIO

ITStaff

Sell, Sell, Sell, Sell


RoadMap becomes The Sales Pipeline

13. Close!

2. Initial Meeting• Ask tough questions• Do Buy- In Demo 3. Qualify?

4. Understand Existing Situationa) Technologyb) Organizationc) Competition

5. Custom Pitch• Prepare!• Get NDA signed

6. Win Over IT• Tech deep dive

7. Define Problem• Develop Action Plan

8. ROI Pitch• Prove the Value!

11. Formal Pricing Proposal

• No surprises!

12. Negotiate• Sales• Finance• Support

10. SolutionSession

•• Detailed Tech discovery

1. Prepare• Hoovers, One Source, Web

9. Exec Session• Set expectations for this meeting early on.


Sell: Sell/Refine Channel Roadmap

! Early channel partners need to be “Visionaries”! Indirect channels/integrators have $ minimum! Indirect channels/integrators just fulfill! Market Type affects channel adoption


Phase 3:Company & Product Positioning

! Market Type driven! Company & Product! Based on real-world facts

Phase 1Get

Readyto Sell

Phase 2Sell to

EarlyVangelists

Phase 4Business

ModelVerified

Phase 3Positioning


Develop Positioning

! Product Positioning! Company Positioning! Present to Analysts &

Influencers! Builds briefs for demand

creation activities

ProductPositioning

CompanyPositioning



Positioning:Product Positioning

! Market Type affects positioning

Existing Market New Market Resegmented Market Product Positioning Statements

Compare your product to your competitors. Describe how some feature or attribute of the product is better, faster, cheaper, easier.

It’s too earlier fo r customers to understand what your products features will do for them. Instead, describe the problem your product will solve and the benefits that the customers will get from solving it.

Compare your product to your competitors Describe how some feature o r attribute of the product solves the problem your customer has in a way comparable products do not. Describe the benefits that the customers will get from solving their problem this new way.


Positioning:Company Positioning

! Market Type affectspositioning

Existing Market New Market Resegmented Market Company Positioning Statements

Compare your company to your competitors. Describe how your company is both different and credible.

It’s too earlier for customers to understand how different your company is, since in a new market there are no other companies to compare it to. Therefore, company posi tioning is about communicating a vision and passion of what could be.

Company positioning for this type of market communicates the value of the market segment you’ve chosen and the innovation your company brings to it. What is it that customers value and want and need now.


Phase 4:Verify, Iterate or Exit

! Market Type driven! Company & Product

Phase 1Get

Readyto Sell

Phase 2Sell to

EarlyVangelists

Phase 4Business

ModelVerified

Phase 3Positioning


Verify

! Product! Sales Roadmap! Channel Roadmap! Business Model

Verify theBusiness

Model

Verify the Product

Verify theSales

Roadmap

Verify theChannel

Roadmap

Iterate or Exit

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