First things first: Make sure you have a support network around you;
Answer the fundamentals for lean canvas:
1.Who are the customers?
2.What are their problems, needs or desires?
3.How do you solve them?
4.What is the value that you create for the customer?
5.How do you reach the customer?
6.Who do you compete with (think beyond just direct competitors – what are the current solutions that you will need to displace)?
7.What are your advantages over the existing solutions?
Which idea to choose? Optimal stopping problem – 37% rule (You cannot be always right, but this way you will be less wrong.)
Understand what to build: Product versus services versus solution
Product is a tangible item that can be consumed in some way by the customer. Costs are deterministic, thus the pricing can be pre-determined and is based on usage or features. Costs scale at a lower rate than revenue. Usually requires investment upfront to then derive value later. Should always be reused with new or different customers with no or minimal changes. Usually based on engineering output.
Services is an intangible item that is performed to or for the customer. It can have a standard process/approach, but it does require tailoring for each individual case. Costs cannot be determined ahead of time, only work-unit rates and, at best, an estimated effort. Costs scale linearly with the revenue. Usually has low upfront setup costs. Can rarely be re-used with new or different customers. Usually based on human capital.
Solution is an outcome of applying a product or services to solve a customer problem. Focus is on benefits, rather than features. Pricing is based on the value created, delivered or captured, rather than costs.
Lean Canvas model
Two most important risks for an early business:
Market risk – is there a market for your product?
Product risk – can you actually build the product?
Lean Canvas is not box-ticking exercise – Only once your thoughts have been organised into a structure, can you understand what you are testing your hypothesis against
If you are unable to concisely define each field by distilling it into two or three bullet points, chances are that you have not yet fully understood the area and need further insight
The dirty business secret: most of the time, reports are initiated and paid for by the company that is praised the most in it.
‘good artists copy, great artists steal’. It took a lot of energy for your competitors to be in the position they are in today – use their work as a shortcut to learning market needs, industry keywords and product metrics.
Identify exactly what metrics really matter to your growth and the success of the product. Then, learn how to measure them with as little noise as you can. Finally, be obsessed about constantly improving them.
Chapter 2 highlights the customer vacuum: if you’re not addressing real customer problems (with the right message, product, market, channel, implementation, process, value proposition, etc), your startup is extremely likely to fail.
Business development is exactly that – a repeatable process that helps you to understand your customers.
The Business flywheel. It is a fundamental, cyclical part of the company process. Each step takes input from the previous one and amplifies it as an output for the following step.
The best way to make sure it does not slow down is to understand what metrics matter at each stage of the process and measure them meticulously. ‘If you can’t measure it, you can’t improve it’
Ideas do not matter as much as the right execution does. In fact, if through this process you do not find already existing competitors, or discover someone else who is working on exactly your problem, something is wrong.
The reality is that getting to your first ten enterprise customers requires you to focus on business development, not on sales, not on that old startup bullshit of ‘just talking to people and seeing what happens’.
What’s the difference between business development and sales?
Business development is a process of discovering WHAT and WHERE. Sales is a process of taking the WHAT and WHERE and making it SCALE.
Business development is all about finding your innovators, understanding what works and then checking your hypothesis with early adopters.
Sales, on the other hand, is all about applying and adopting already-learned lessons to the early and late majorities in order to scale your business.
There is a big gap between those groups, known as ‘The Chasm’.
Early stages are very unscalable – but by skipping it we will not have anything to scale, or worse, will try to scale the wrong thing.
One question from us:
Which of your products are in business development and which are in sales?
Another week, another chapter from The Founder HandBook – this time Chapter 1 – a short chapter with some punchy insights on why startups fail. We pulled the reasons – thanks to Crunchbase…over the next few weeks of sharing insights, we’ll outline how be less wrong….and get to success.
Focus on being ‘less wrong’ rather than ‘right’
‘Everybody has a plan until they get punched in the mouth’
Never full picture – rapid planning based on customer feedback and iteration
goal is not to go for the right answer, but rather to minimise the wrong choices while learning.
Failure to pivot / no financing / run out of time / failed expansion / poor marketing / poor sales execution / no market need, are only manifestation/outcome of poor business dev (i.e. not understanding your customers).
One question from us
What challenges do you have ahead that could lead to failure?