This article is part of a series of articles, as an example how to use Customer Development in practice. If you didn’t read the introduction, please read it first.
In part 8, we decided to make a pivot. This article is part of a series of articles, as an example how to use Customer Development in practice. If you didn’t read the introduction, please read it first.
From part 8 the name of the project has been changed from “Co-founders wanted” into “Idea management”.
To make the project up-to-date, parts of some checklists needs to be updated. Below the update:
Checklist 1: Board and management Buy-in (see all checklist Co-founders wanted)
Discuss Market Type (initial decision)
- Existing, Re-segmented, New or Clone? [Idea management:] Clone
- First pass with board on initial agreement of Market Type [Idea management:] Only Re-segment, focus is generate idea’s for Lean Startup consultancy and services.
- First pass with board on different funding needs by Market Type [Idea management:] Re-segment, important to earn amp; learn from consultancy to develop a low-end service.
Checklist 3: Market size (see all checklist Co-founders wanted)
Goal: Estimate the total market oppertunity for the company
Estimated market size value:
- Total Available Market (TAM): Total market [Idea management]: Hard to find data, for Idea management there are more then 10 international companies that provide the software. In general every company would like to be more innovative. In the figure above there is the growth potential.
- Served Available Market (SAM): Total market that your channels can reach [Idea management]: Europe
- Target Market: Who will be your clients [Idea management]: € 0,3m (2014)
Estimate current product and follow up products
- Appropriate metric for measuring determined [Idea management]: number of clients, Brut margin per client (€)
- Units/euro’s/page views/other measures?
- Per member for subscribtion services/per page view for advertising-supported business?
- Research conducted to “size” the overall market [Idea management]: XXXX competitors (VC, incubators) will be part of the target market
- Read industry analysts reports, market research reports, competitors’ press releases, etc.
- Talk with investors and customers
- If assessing an existing or resegmented market, adjacent markets that customers might switch from are considered [Idea management]: no, only new co-founders are welcome. With financed startups we don’t com petite with VC’s but cooperate with them as partners.
- Will the startup’s product encourage switching?
- Only the switchable subset counted (Beware of long-term lock-ins from incumbents)
- If assessing a new market, the opportunities are estimated based on proxies and adjacent markets [Idea management]: it is not a new market
- Are there comparable companies?
- Have others grown as fast as the estimate?
- Why will this company perform similarly?
Exit criteria: Written sense of market size, estimate of how much the company can capture.
[Idea management]: Target market size is big enough to continue.
Checklist 4: Product vision
Goal: Team agreement on the long-term vision and 18-months schedule
Reference: Value proposition, part 1 the product/service its benefits and minimum viable product)
- What’s your long-term vision for your company? [Idea management]: Create a place where founders and intrapreneurs with a good idea can do customer development. When there is a significant number of clients (or equivalents like subscribers) the first MVP can be build based on bootstrapping or financed by a corporate. OR connect companies with startups, create intrapreneurs.
- What do you ultimately want to charge or solve? [Idea management]: Stimulate and help everybody who wants to start or just started an Internet Startup to keep the learning cycles as short as possible with minimal resources. But under the condition that the found will invest in the first MVP.
- Are you going to do it with a series of products? [Idea management]: Yes, every idea connected to an Internet Startup that passes the Validation Board (part 2) is welcome.
- How do you expand into adjacent markets? [Idea management]: Startup market is very big, first step is to find right niches/segments.
- Do you need to get people to change their behavior? [Idea management]: Partly, as a lot of “younger” startups are focusing on an Investor. It is easy to understand that Investments is not so important but in practice, founders need money to live from.
- What will the world look like 3 years after you arrive in the scene? Five years? [Idea management]: 3 years: In Netherlands, Germany, Poland and Nordic countries it will be an alternative or earlier step before an incubator or investor. 5 years: To keep the learning cycles as short as possible will be the standard. People in Europe who want to start and don’t need an incubator will prefer Idea management.
- Put together a short narrative in bullets about your strategy
[Idea management]: Strategy:
- Use existing Idea management communities and MeetUps
- Test various segments by networking, social media and “sponsoring” network events.
- (Freelance) professionals that want to setup a serious Internet Company
- Entrepreneurs from which first startup failed
- Entrepreneurs that “won” bootcamps
- Entrepreneurs who started a company and were focusing only to find an investor
- Indirect focus on software development resources, as this is an “easy” entrance and Idea management is very experienced in setting up and running Software Development Teams
- MVP Delivery date and features: [Idea management]: end of August (website), promote MVP during meetup.
- 18-month product vision and delivery dates
[Idea management]: unfortunately time is shorter, maximal 6 months:
- Customer development, party done, end of august
- Website (MVP), end of August
- Promotion Social Media, Meetups, Appointments on going
- First client: October
Long term product strategy
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- Will your product create network effects? [Idea management]: Hopefully Word of mouth, promoted via Social Media (for example Idea management groups on LinkedIn)
- Can you price it with a predictable model? [Idea management]: Yes, client gets a package for the first MVP, including Lean Startup management, support, design and development. For next MVP’s there will be also fixed packages available.
- Can you create customer lock-in/high switching costs? [Idea management]: Yes, as soon as development starts it is hard to switch.
- Can you have high gross margins? [Idea management]: Not sure, the “big” profit will be the participation. So long term profits.
- Does or have organic demand versus requiring marketing spend? [Idea management]: Personal approach via networking. If there enough clients then experiment with sponsering of MeetUps and helpfull “Co-founder tools” on website of Idea management)
- List product enhancements anticipated up to 18 months enhancement. [Idea management]:
- (Free) tools on website
- “Own” Lean Startup software
- More dedicated consultants, who participate
- List key follow-on product enhancements [Idea management]: None
- Vision: [Idea management]: passed
- Narrative: [Idea management]: passed
- Long term product strategy [Idea management]: passed
- Update you Business Model Canvas [Idea management]: see part 6
Checklist 5: Product features and benefits
Goal: Explain what the product is and why people will buy and use it
Reference: Product Features/Benefits Hyphothesis and Low fidelity MVP Hyphothesis
What problem or need are you solving?
- What do you think the biggest pain is in how your customers work/play? [Idea management]:
- Founders can not find an investor because they only want to invest time themselves and not money
- Founders like to work with cheap outsourced freelancers in low labor costs countries but in practice it is expensive because MVP’s are not understand and not delivered well.
- Business minded people can not communicate with technical people
- If they could wave a magic wand and change anything what would it be? [Co-founders wanted]:
- Get money for their plans (as every founder thinks that his solution is the best)
- Get cheap freelancers creating what they want and above all freelancers would advice founders how to create the MVP from a business perspective.
- Explain the business to a technical employee/freelancers and it will work like explained
- How does the product solve those problems or needs? [Idea management]: It is a service, Idea management help founders to create MVP’s with the target to reach Product-Market fit with “own” money. At that stage it is easier to find an investor if it is still needed. Idea management tries to teach the founders and creators (developers, designers etc.) during creating MVP’s how to communicate, using Lean Startup methodology as the base.
- What do people do today to solve their problem? [Idea management]: networking, visit meetups, look for investors, look for “cheap” developers, try to do as much as possible themselves and gain the experience.
Product Benefits List
- List the benefits through the customer’s eyes [Idea management]: Experienced team that can solve the problem.
- Something new? Better? More? Faster? Cheaper? Etc. [Idea management]: Better and faster. The founder will move forward (in stead of spend time on looking for an investor and/or developer or gaining (technical) experience to do it themselves)
- Underneath the features above summary benefits for each [Idea management]:
- Better, because of less resources (focus on short Learning Cycles)
- Better, because of more structure (Lean StartUp method)
- In the end cheaper, because of less development and the development that needs to be done, will be made by the team in Poland
- Faster because of present struggle
- BUT difficult because client need to minimal take care about own salary and spendings
- Will these Benefits be accepted as such or do they need explanation? [Idea management]: Probably the solution needs an explanation
Describe the Minimum Viable Product (MVP) [Idea management]: Website to refer in pitch (on social media or MeetUps)
- What do you learn? [Idea management]: If segments are -in general- interested in the approach and why they are interested.
- From who? [Idea management]: Potential clients, so founders
- What is the smallest feature set? [Idea management]: Landingpage for one segment/niche, promotion via meetups
Create a One-Page user story: Include product vision, features, benefits. [Idea management]: Privately created
- Describe the product’s features and benefits. [Idea management] Founder doesn’t need to focus on looking for investor or developer but can do his Customer Development.
- Describe the MVP. [Idea management] Website for various segments (starting with landingpage for one segment), promoted via meetups and later Social Media.
- Create a User Story describing what job the product will do. [Idea management]: Privately created
- Update your business model canvas. [Idea management]: see part 6