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Why Product Managers Need Sneakers. Steve Blank www.steveblank.com Twitter: sgblank. I Drew This. Customer Discovery. Company Building. Customer Validation. Customer Creation. Pivot. I Called It: Customer Development. Customer Discovery. Company Building. Customer Validation.

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why product managers need sneakers

Why Product Managers Need Sneakers

Steve Blank

www.steveblank.com

Twitter: sgblank

i drew this
I Drew This

CustomerDiscovery

Company

Building

CustomerValidation

Customer Creation

Pivot

i called it customer development
I Called It:Customer Development

CustomerDiscovery

Company

Building

CustomerValidation

Customer Creation

Pivot

slide6

I Write a Blog

www.steveblank.com

small business startups
Small Business Startups

Small Business

Startup

  • Serve known customer with known product
  • Feed the family
small business startups1
Small Business Startups

Small Business

Startup

  • Exit Criteria
  • Business Model found
  • - Profitable business
  • Existing team
  • < $1M in revenue
  • known customer known product
  • Feed the family
small business startups2
Small Business Startups

Small Business

Startup

  • - Business Model found
  • - Profitable business
  • Existing team
  • < $10M in revenue
  • 5.7 million small businesses in the U.S. <500 employees
  • 99.7% of all companies
  • ~ 50% of total U.S. workers

http://www.sba.gov/advo/stats/sbfaq.pdf

large company sustaining innovation
Large Company Sustaining Innovation

Sustaining Innovation

Scalable

Startup

Transition

Large Company

  • Existing Market / Known customer
  • Known product feature needs
large company disruptive innovation
Large Company Disruptive Innovation

New Division

Transition

Large Company

Disruptive Innovation

  • New Market / Unknown customer needs
  • New tech / Unknown product features
  • Looks like a scalable startup
scalable startup
Scalable Startup

Scalable

Startup

Large Company

>$100M/year

Goal is to solve for:

unknown customer and unknown features

scalable startup1
Scalable Startup

Scalable

Startup

Large Company

>$100M/year

  • Exit Criteria
  • Business model found
  • Total Available Market > $500m -$1B
  • Can grow to $100m/year
  • Focused on execution and process
scalable startup2
Scalable Startup

Scalable

Startup

Large Company

>$100M/year

  • Total Available Market > $500m
  • Can grow to $100m/year
  • Business model found
  • Focused on execution and process
  • Typically requires “risk capital”
  • In contrast a scalable startup is designed to grow big
  • Typically needs risk capital
  • What Silicon Valley means when they say “Startup”
what s a startup
What’s A Startup?

Scalable

Startup

Large Company

Search

  • customer needs/product features found
  • i.e. Product/Market fit
  • Business Model found
  • - Repeatable sales model
  • - Managers hired

A Startup is the organization used to search for a scalable business model

what vc s don t tell you the transition founders leave
What VC’s Don’t Tell You:The Transition – Founders Leave

Scalable

Startup

Transition

Large Company

Build

  • Founders depart
  • Professional Mgmt
  • Process
  • Beginning of scale
doesn t need sneakers
Doesn’t Need Sneakers

Scalable

Startup

Transition

Large Company

Build

Grow

Product Management

needs several pairs of sneakers
Needs Several Pairs of Sneakers

Scalable

Startup

Transition

Large Company

Search

Is very different here

Product Management here

startups search and pivot
Startups Search and Pivot

The Search for the Business Model

Scalable

Startup

Transition

Large Company

  • Business Model found
  • customer needs/product features found
  • i.e. Product/Market fit
  • Found by founders, not employees
  • Repeatable sales model
  • - Managers hired
startups search companies execute
Startups Search, Companies Execute

The Execution of the Business Model

The Search for the Business Model

Scalable

Startup

Transition

Large Company

- Cash-flow breakeven

- Profitable

- Rapid scale

- New Senior Mgmt

~ 150 people

  • Business Model found
  • Product/Market fit
  • - Repeatable sales model
  • - Managers hired
metrics versus accounting
Metrics Versus Accounting

The Execution of the Business Model

Scalable

Startup

Transition

Large

Company

  • Traditional Accounting
  • Balance Sheet
  • Cash Flow Statement
  • Income Statement
metrics versus accounting1
Metrics Versus Accounting

The Search for the Business Model

The Execution of the Business Model

Scalable

Startup

Transition

Large

Company

  • Startup Metrics
  • Customer Acquisition Cost
  • Viral coefficient
  • Customer Lifetime Value
  • Average Selling Price/Order Size
  • Monthly burn rate
  • etc.
  • Traditional Accounting
  • Balance Sheet
  • Cash Flow Statement
  • Income Statement
customer validation versus sales
Customer Validation Versus Sales

The Execution of the Business Model

Scalable

Startup

Transition

Large

Company

  • Sales
  • Sales Organization
  • Scalable
  • Price List/Data Sheets
  • Revenue Plan
customer validation versus sales1
Customer Validation Versus Sales

The Search for the Business Model

The Execution of the Business Model

Scalable

Startup

Transition

Large

Company

  • Customer Validation
  • Early Adopters
  • Pricing/Feature unstable
  • Not yet repeatable
  • “One-off’s”
  • Done by founders
  • Sales
  • Sales Organization
  • Scalable
  • Price List/Data Sheets
  • Revenue Plan
customer development versus product management
Customer Development VersusProduct Management

The Execution of the Business Model

Scalable

Startup

Transition

Large Company

  • Product Management
  • Delivers MRD’s
  • Feature Spec’s
  • Competitive Analysis
  • Prod Mgmt driven
customer development versus product management1
Customer Development Versus Product Management

The Search for the Business Model

The Execution of the Business Model

Scalable

Startup

Transition

Large Company

  • Product Management
  • Delivers MRD’s
  • Feature Spec’s
  • Competitive Analysis
  • Customer Development
  • Hypothesis Testing
  • Minimum Feature Set
  • Pivots
  • Founder-driven
engineering versus agile development
Engineering Versus Agile Development

The Execution of the Business Model

Scalable

Startup

Transition

Large Company

  • Engineering
  • Requirements Docs.
  • Waterfall Development
  • QA
  • Tech Pubs
engineering versus agile development1
Engineering Versus Agile Development

The Search for the Business Model

The Execution of the Business Model

Scalable

Startup

Transition

Large Company

  • Engineering
  • Requirements Docs.
  • Waterfall Development
  • QA
  • Tech Pubs
  • Agile Development
  • Continuous Deployment
  • Continuous Learning
  • Self Organizing Teams
  • Minimum Feature Set
  • Pivots
startups model companies plan
Startups Model, Companies Plan

The Execution of the Business Model

Scalable

Startup

Transition

Large Company

  • Plan describes “knowns”
  • Known features for line extensions
  • Known customers/markets
  • Known business model
startups model companies plan1
Startups Model, Companies Plan

The Search for the Business Model

The Execution of the Business Model

Scalable

Startup

Transition

Large Company

  • Unknown customer needs
  • Unknown feature set
  • Unknown business model
  • Model found by iteration
  • Plan describes “knowns”
  • Known features for line extensions
  • Known customers/markets
  • Known business model
startups protect mavericks companies fire mavericks
Startups Protect Mavericks, Companies Fire Mavericks

The Execution of the Business Model

Scalable

Startup

Transition

Large Company

  • Pains in the butt
  • Always looking at something different
  • Doesn’t get with the program
startups protect mavericks companies fire mavericks1
Startups Protect Mavericks, Companies Fire Mavericks

The Search for the Business Model

The Execution of the Business Model

Scalable

Startup

Transition

Large Company

  • CEO of your company
  • Finds your next market
  • Pains in the butt
  • Always looking at something different
  • Doesn’t get with the program
startups don t last forever
Startups Don’t Last Forever

Scalable

Startup

Transition

Large Company

- Cash-flow breakeven

- Profitable

- Rapid scale

- New Senior Mgmt

~ 150 people

  • Business Model found
  • Product/Market fit
  • - Repeatable sales model
  • - Managers hired

You failif you remain a startup!

business plan
Business Plan
  • A document your investors make you write that they don’t read
  • A useful place for you to collect your guesses about your business
    • Size of Opportunity
    • Customers
    • Channel
    • Demand Creation
    • Revenue/Expenses/Profit
  • The template to look like everyone else when you present to VC’s/Management
what is a business model
What Is a Business Model?
  • Diagram of flows between company and customers
  • Scorecard of hypotheses testing
  • Rapid change with each iteration and pivot
  • Product Management-driven

* Alex Osterwalder

slide42

Business Model =

Keeping Score in a Startup

PARTNER

NETWORK

CUSTOMER

RELATIONSHIP

INFRASTRUCTURE

CUSTOMER

OFFER

CORE

CAPABILITIES

TARGET

CUSTOMER

portrays the network of cooperative agreements with other companies

explains the relationships a company establishes with its customers

VALUE

PROPOSITION

outlines the capabilities required to run a company's business model

describes the customers a company wants to offer value to

gives an overall view of a company's bundle of products and services

DISTRIBUTION

CHANNEL

VALUE

CONFIGURATION

describes the channels to communicate and get in touch with customers

describes the arrangement of activities and resources

sums up the monetary consequences to run a business model

describes the revenue streams through which money is earned

COST

STRUCTURE

REVENUE

STREAMS

FINANCE

how do startups search for a business model
How Do Startups Search For A Business Model?
  • The Search is called Customer Development
  • The Implementation is called Agile Development
who does this search
Who Does This Search?

The Founders

Not Employees

How?

customer development

Customer Development

The founders

Get the Hell Out of the Building

^

slide51
Then why do we have:

process to manage product development?

slide52
Then why do we have:

Process to manage product development?

None to manage customer development?

startup back of the napkin model
Startup - Back of the Napkin Model

Concept/Seed Round

Product Dev.

Alpha/Beta Test

Launch/

1st Ship

tradition hire marketing
Tradition – Hire Marketing

Concept/Seed Round

Product Dev.

Alpha/Beta Test

Launch/

1st Ship

- Create Demand

- Launch Event

- “Branding”

- Hire PR Agency

- Early Buzz

  • Create Marcom
  • Materials
  • - Create Positioning

Marketing

tradition hire sales
Tradition – Hire Sales

Concept/Seed Round

Product Dev.

Alpha/Beta Test

Launch/

1st Ship

- Create Demand

- Launch Event

- “Branding”

- Hire PR Agency

- Early Buzz

  • Create Marcom
  • Materials
  • - Create Positioning

Marketing

  • Build Sales Organization
  • Hire Sales VP
  • Hire 1st Sales Staff

Sales

tradition hire bus development
Tradition – Hire Bus Development

Concept

Product Dev.

Alpha/Beta Test

Launch/

1st Ship

- Create Demand

- Launch Event

- “Branding”

- Hire PR Agency

- Early Buzz

  • Create Marcom
  • Materials
  • - Create Positioning

Marketing

  • Build Sales Channel / Distribution
  • Hire Sales VP
  • Pick distribution Channel

Sales

Business

Development

  • Hire First Bus Dev
  • Do deals for FCS
tradition hire engineering product mgmt
Tradition – Hire Engineering/Product Mgmt

Concept

Product Dev.

Alpha/Beta Test

Launch/

1st Ship

- Create Demand

- Launch Event

- “Branding”

- Hire PR Agency

- Early Buzz

  • Create Marcom
  • Materials
  • - Create Positioning

Marketing

  • Build Sales Channel / Distribution
  • Hire Sales VP
  • Pick distribution Channel

Sales

Business

Development

  • Hire First Bus Dev
  • Do deals for FCS

Engineering/Product Mgmt

  • Write MRD
  • Waterfall
  • Q/A
  • Tech Pubs
customer development1

Product Development

Concept/Bus. Plan

Product Dev.

Alpha/Beta Test

Launch/1st Ship

+

CustomerDevelopment

CustomerDiscovery

CustomerValidation

Customer Creation

Company

Building

Customer Development
customer discovery
Customer Discovery
  • Stop selling, start listening
  • Test your hypotheses
  • Continuous Discovery
  • Done by founders

CustomerDiscovery

CustomerValidation

CustomerCreation

Company

Building

customer discovery1
Customer Discovery

Phase 3

Test

ProductHypothesis

Phase 4Verify, Iterate &

Expand

CustomerDiscovery

To Validation

Phase 1Author

Hypothesis

Phase 2Test

ProblemHypothesis

customer discovery2
Customer Discovery

Hypotheses

Customer& ProblemHypothesis

Distribution

& PricingHypothesis

Demand CreationHypothesis

Market Type

Hypothesis

Product Hypothesis

Competitive

Hypothesis

Test “Problem” Hypothesis

“Problem”Presentation

CustomerUnderstanding

MarketKnowledge

FriendlyFirst Contacts

Test “Product” Hypothesis

“Product”Presentation

Yet MoreCustomerVisits

SecondReality Check

First RealityCheck

Verify

Verify theBusiness Model

Iterate orExit

Verify theProblem

Verify the Product

customer discovery3

Customer& ProblemHypothesis

Distribution

& PricingHypothesis

Demand CreationHypothesis

Market Type

Hypothesis

Product Hypothesis

Competitive

Hypothesis

“Problem”Presentation

CustomerUnderstanding

MarketKnowledge

FriendlyFirst Contacts

“Product”Presentation

Yet MoreCustomerVisits

SecondReality Check

First RealityCheck

Verify theProblem

Verify theBusiness Model

Iterate orExit

Verify the Product

Customer Discovery

Inside the Building

Hypotheses

Test “Problem” Hypothesis

Outside the Building

Test “Product” Hypothesis

Verify

hypothesis
Hypothesis
  • Product
  • Customer/Problem
  • Distribution/Pricing
  • Demand Creation
  • Market Type
  • Competition

Customer& ProblemHypothesis

Distribution

& PricingHypothesis

Demand CreationHypothesis

Market Type

Hypothesis

Product Hypothesis

Competitive

Hypothesis

customer validation
Customer Validation

CustomerDiscovery

CustomerValidation

Customer Creation

Company

Building

Pivot

  • Repeatable and scalable business model?
  • PassionateEarlyvangelists?
  • Pivot back to Discovery if no customers
customer validation1
Customer Validation

Phase 4Business

ModelVerified

Phase 3Positioning

CustomerValidation

From Discovery

To Creation

Phase 1Get

Readyto Sell

Phase 2Sell toEarlyVangelists

customer validation2

Get Ready to Sell

Prelim Sales

& Collateral

Materials

Prelim

Distribution

Channel Plan

Articulate

a Value

Proposition

Prelim SalesRoadmap

Hire a “Sales Closer”

Align YourExecutives

Sell to “EarlyVangelists”

Formalize

Advisory Board

Refine

Channel

Roadmap

Contact

VisionaryCustomers

Sell to

Channel

Partners

Sell to

EarlyCustomers

Refine SalesRoadmap

Develop Positioning

Present toAnalysts &Influencers

CompanyPositioning

ProductPositioning

Verify

Verify theSales

Roadmap

Verify the

Channel

Roadmap

Iterate or

Exit

Verify theBusiness Model

Verify the Product

Customer Validation
the pivot
The Pivot
  • The heart of Customer Development
  • Iteration without crisis
  • Fast, agile and opportunistic
speeding up cycle time
Speeding Up Cycle Time
  • Speed of cycle minimizes cash needs
  • Minimum feature set speeds up cycle time
  • Near instantaneous customer feedback drives feature set
new product conundrum
New Product Conundrum
  • Product introductions aren’t predictable
    • Why?
    • Is it the people that are different?
    • Is it the product that are different?
  • Are there different “types” of startups?
three markets types
Three Markets Types
  • Market Type changes everything
  • Sales, marketing and business development differ radically by market type
three types of markets
Three Types of Markets
  • Existing Market
    • Faster/Better = High end
  • Resegmented Market
    • Niche = marketing/branding driven
    • Cheaper = low end
  • New Market
    • Cheaper/good enough = creates a new class of product/customer
    • Innovative/never existed before
market type changes everything
Market

Market Size

Cost of Entry

Launch Type

Competitive Barriers

Positioning

Sales

Sales Model

Margins

Sales Cycle

Chasm Width

Market Type Changes Everything
  • Customers
    • Needs
    • Adoption
  • Finance
    • Ongoing Capital
    • Time to Profitability
waterfall product management execution on two knowns
Waterfall / Product ManagementExecution on Two “Knowns”

Requirements

Product Features: known

Design

Implementation

Verification

Customer Problem: known

Maintenance

Source: Eric Rieshttp://startuplessonslearned.blogspot.com

agile customer problem is known existing company market
Agile - Customer Problem is KnownExisting Company/Market

“Product Owner” or

in-house customer

Unit of progress: a line of working code

Problem: Known

Solution: Unknown

Source: Eric Rieshttp://startuplessonslearned.blogspot.com

lean startup customer problem product features are unknown
Lean StartupCustomer Problem + Product Features are Unknown

Problem: Unknown

Solution: Unknown

Source: Eric Rieshttp://startuplessonslearned.blogspot.com

customer creation
Customer Creation

CustomerDiscovery

CustomerValidation

CustomerCreation

Company

Building

  • Creation comes after proof of sales
  • $’s for scale
  • Lean Startups are not cheap startups
company building
Company Building

Company

Building

Customer Creation

CustomerValidation

CustomerDiscovery

  • (Re)build company’s organization & management
  • Re look at your mission
summary
Summary
  • Founders can’t delegate customer discovery
  • Startups are about speed of pivots
    • Product
    • Customer
    • Channel
  • They are not about MRD’s and process
  • Product management can be an asset or an albatross in startups
  • You can make the difference…with sneakers
thanks

Thanks

www.steveblank.com