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Customer Development and Pivoting Dr Tendayi Viki ollow Me: @tendayiviki

Customer Development and Pivoting SP640

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The fourth class of the SP640 enterprise and innovation course delivered at the University of Kent for final year students. In this class, students learn about customer development methods, the mom test and pivoting.

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Page 1: Customer Development and Pivoting SP640

Customer Development

and Pivoting

Dr Tendayi Viki

Follow Me: @tendayiviki

Page 2: Customer Development and Pivoting SP640

Ash Maurya (2012)Running Lean

http://www.runningleanhq.com/

Page 3: Customer Development and Pivoting SP640

Ash Maurya (2012)Running Lean

http://www.runningleanhq.com/

Page 4: Customer Development and Pivoting SP640

The Scientific Method

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Customer Development is NOT the same as

market research or focus groups!

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Introspection

Market research methods are based on one major premise: • If you want people to tell you what they

think, just ask them!

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Introspection

This premise is based on one major problematic assumption:• People are able to introspect and

gain access into how they feel and communicate it to researchers.

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Introspection

People often don’t know what drives their thoughts and actions. • But if you ask them, they often have

something to say. • Psychologists call this confabulation.

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To Fully Understand Your Customers You Have to Go

Beyond the Focus Group

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It is a “hypothesis driven” process.

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12@robfitzhttp://momtestbook.com/

Page 13: Customer Development and Pivoting SP640

13@robfitzhttp://momtestbook.com/

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Specify who you are going to be talking to from the beginning. Be specific about your target sample.

If you talk to anyone who will talk to you: It becomes hard to distinguish signal from noise.

Running Successful Experiments

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Specify exactly what you would expect to find if your assumptions are correct. Hypotheses MUST be falsifiable. Set minimum success criteria.

Otherwise, there is no way to know if you have learned anything.

Running Successful Experiments

Page 16: Customer Development and Pivoting SP640

Running Successful Experiments

Ash Mauryahttp://www.ashmaurya.com/2010/09/lean-startup-is-a-rigorous-process/

Page 17: Customer Development and Pivoting SP640

Capture reliable data. Do not try to fudge the data.Avoid the confirmation bias.

Running Successful Experiments

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Anybody will say you product is good if you bug them for long enough.

People also often don’t know the factors motivating their own behaviour.

@robfitzhttp://momtestbook.com/

The Mom Test

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Never ask for opinions… Ask about specific things in their life. Ask about specific things they have done in the past.

Only ask questions that even your mom would tell you the truth about…

@robfitzhttp://momtestbook.com/

The Mom Test

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Do you think this is a good idea? Would you enjoying using this product? How many times would you buy such a

product? Would you buy this product? How much would you pay for this?

Examples of Bad Questions

@robfitzhttp://momtestbook.com/

Page 23: Customer Development and Pivoting SP640

How do you currently solve this problem? Tell me about the last time you solved

this problem? How much money does this problem cost

you? How much are you currently paying to

solve this problem?

Examples of Good Questions

@robfitzhttp://momtestbook.com/

Page 24: Customer Development and Pivoting SP640

The Process

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Alexander Osterwalder (2012)http://www.businessmodelgeneration.com/

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Talk about your business model. Identify the riskiest assumption. Describe one main problem. Transform that into a falsifiable problem

hypothesis. Develop two-three customer development

questions?

GET OUT OF THE BUILDING!!

Riskiest Assumption

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Ash Maurya (2012)Running Lean

http://www.runningleanhq.com/

Page 33: Customer Development and Pivoting SP640
Page 34: Customer Development and Pivoting SP640

The Anatomy of A Pivot

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Remember that at any point during the customer development process you might run into challenges. • People don’t have the problem you were hypothesising.

• People don’t like the solution you built.

• People don’t want to pay for the solution you developed.

• People use the product once and don’t come back.

Page 36: Customer Development and Pivoting SP640

If you run into any of these problems, you don’t give up on your idea.• However, you don’t just persevere “the plane into the

ground”. You can do a PIVOT. • Keep one foot in what you have learnt and then change one

other thing and test again!• This is why the companies that can run these tests quickly

and get to a plan that works, are more likely to succeed.

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Different Types of Pivots

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Zoom-in Pivot What was previously a single feature in a

product becomes the whole product. This is usually based on customer usage data.

Eric Ries (2011) The Lean Startup

http://lean.st

Page 40: Customer Development and Pivoting SP640

Zoom-Out Pivot

This is when a single feature is not sufficient. So what was once the product, becomes a single feature

of a much larger product.

Eric Ries (2011) The Lean Startup

http://lean.st

Page 41: Customer Development and Pivoting SP640

Customer Segment Pivot

This is when the company realises that their product serves a real customer need: But for a different customer segment to what they

originally thought.

Eric Ries (2011) The Lean Startup

http://lean.st

Page 42: Customer Development and Pivoting SP640

Customer Need Pivot This is when the company realises that

the customer need they were planning to serve is not real: But from talking to customers they realise that

there is another important need they can serve for that customer.

Eric Ries (2011) The Lean Startup

http://lean.st

Page 43: Customer Development and Pivoting SP640

Platform Pivot This represents a change in strategy

from an application to a platform and vice-versa. Usually starts as an application and then

becomes a platform (e.g. Twitter and Facebook).

Eric Ries (2011) The Lean Startup

http://lean.st

Page 44: Customer Development and Pivoting SP640

Business Architecture Pivot This represents a change in strategy

from a sales to a marketing business model, or vice versa. Low Margin, High Volume (Consumer) High Margin, Low Volume (B2B)

Eric Ries (2011) The Lean Startup

http://lean.st

Page 45: Customer Development and Pivoting SP640

Value Capture Pivot This represents a change in the way

the company captures value from its customers. Such changes in your revenue model can

have a significant impact on the rest of the business model.

Eric Ries (2011) The Lean Startup

http://lean.st

Page 46: Customer Development and Pivoting SP640

Engine of Growth Pivot This represents a change in the

companies growth strategy. Sticky Viral Paid

Eric Ries (2011) The Lean Startup

http://lean.st

Page 47: Customer Development and Pivoting SP640

Channel Pivot This represents a change in the way

you reach your customers to deliver the value proposition. For example, you could change from brick

and mortar to exclusively online.

Eric Ries (2011) The Lean Startup

http://lean.st

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Technology Pivot This is when a company discovers a

new way to deliver the same value using a different technology. This is more likely in established businesses. For example, newspapers are moving from

print to online outlets (e.g. tablets). Eric Ries (2011)

The Lean Startuphttp://lean.st

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A Pivot is:

It still needs to be tested...

NEW

ˆ

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Good Luck!