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Why Product Managers Need Sneakers

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

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  1. Why Product Managers Need Sneakers Steve Blank www.steveblank.com Twitter: sgblank

  2. I Drew This CustomerDiscovery Company Building CustomerValidation Customer Creation Pivot

  3. I Called It:Customer Development CustomerDiscovery Company Building CustomerValidation Customer Creation Pivot

  4. I Wrote This

  5. A Few People Read It

  6. I Write a Blog www.steveblank.com

  7. Five Short Stories

  8. Not All Startups Are Equal

  9. Small Business Startups Small Business Startup • Serve known customer with known product • Feed the family

  10. 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

  11. 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

  12. Large Company Sustaining Innovation Sustaining Innovation Scalable Startup Transition Large Company • Existing Market / Known customer • Known product feature needs

  13. 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

  14. Scalable Startup Scalable Startup Large Company >$100M/year Goal is to solve for: unknown customer and unknown features

  15. 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

  16. 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”

  17. 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

  18. 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

  19. Doesn’t Need Sneakers Scalable Startup Transition Large Company Build Grow Product Management

  20. Needs Several Pairs of Sneakers Scalable Startup Transition Large Company Search Is very different here Product Management here

  21. Why Product Managers Wear Sneakers

  22. 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

  23. 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

  24. Metrics Versus Accounting The Execution of the Business Model Scalable Startup Transition Large Company • Traditional Accounting • Balance Sheet • Cash Flow Statement • Income Statement

  25. 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

  26. 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

  27. 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

  28. 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

  29. 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

  30. Engineering Versus Agile Development The Execution of the Business Model Scalable Startup Transition Large Company • Engineering • Requirements Docs. • Waterfall Development • QA • Tech Pubs

  31. 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

  32. 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

  33. 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

  34. 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

  35. 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

  36. 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!

  37. Plan versus Model

  38. 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

  39. No Business Plan survives first contact with customers

  40. So Search for a Business Model

  41. 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

  42. 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

  43. Business Model Generation Book

  44. How Do Startups Search For A Business Model? • The Search is called Customer Development • The Implementation is called Agile Development

  45. The Lean Startup

  46. Who Does This Search? The Founders Not Employees How?

  47. Customer Development

  48. Solving For Customer and Product Unknowns:Customer Development

  49. Customer Development The founders Get the Hell Out of the Building ^

  50. More startups fail from a lack of customers than from a failure of product development

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