Customer Development/Lean Startup 030210 class 7

3/2/10 1

Customer Development in the High Tech Enterprise

Customer Validation Part 1

Steve Blank [email protected]

Agenda

!  Logistics/Questions !  Review !  Case: Motive !  Guest: Max Ventilla from Aardvark !  Customer Validation

Today: Customer Validation

Customer Discovery

Customer Validation

Customer Creation

Scale Company

•  Develop a repeatable and scalable sales process

•  Validate your business model

•  Only earlyvangelists are crazy enough to buy

Customer Validation:

Phase 1 Get

Ready to Sell

Phase 2 Sell to

EarlyVangelists

Phase 4 Business

Model Verified

Phase 3 Positioning

From Discovery To Creation

Customer Validation

Customer Validation

Product Positioning

Company Positioning

Present to Analysts & Influencers

Develop Positioning!

Sell to “EarlyVangelists”!Sell to

Channel Partners

Contact Visionary

Customers Sell to Early

Customers Refine Sales

Roadmap Refine

Channel Roadmap

Prelim Sales Roadmap

Hire a “Sales Closer”

Articulate a Value

Proposition

Prelim Sales & Collateral

Materials Prelim

Distribution Channel Plan

Align Your Executives

Get Ready to Sell!

Formalize Advisory

Board

Verify!

Verify the Business

Model

Verify the Product

Verify the Sales

Roadmap Verify the Channel

Roadmap

Iterate or Exit

Sell to “EarlyVangelists”!

Customer Validation



Articulate a Value

Proposition


Materials Prelim



Get Ready to Sell!

Sell to Channel Partners

Contact Visionary



Roadmap

Product Positioning

Company Positioning

Present to Analysts & Influencers

Develop Positioning!

Verify the Business

Model

Verify the Product

Verify the Sales

Roadmap Verify the Channel

Roadmap

Verify!

Formalize Advisory

Board Refine

Channel Roadmap

Iterate or Exit

Inside the Building!

Outside the Building!

Phase 1: Get Ready to Sell

!  Serious preparation before 1st sales "  Another writing exercise "  Aligning Executives

Phase 1 Get

Ready to Sell

Phase 2 Sell to

EarlyVangelists

Phase 4 Business

Model Verified

Phase 3 Positioning

Get Ready to Sell !  Value Proposition !  Sales Collateral !  Distribution Plan !  Sales Roadmap !  Sales Closer !  Synchronize Execs !  Advisory Board



Articulate a Value

Proposition


Materials Prelim



Formalize Advisory

Board

Get Ready to Sell: Articulate a Value Proposition

!  Create Value Proposition "  Is it emotionally compelling? "  Does it make or reinforce an economic case? "  Does the it pass the reality test?

!  Varies by Market Type

Get Ready to Sell: Preliminary Sales Collateral

!  Create collateral roadmap "  What you need and when you need it "  Supports the sales roadmap "  Ensure the collateral matches the internal audiences

!  Create all selling materials "  Presentations "  Data sheets "  White Papers

!  How would collateral differ by Market Type?

Get Ready to Sell: Preliminary Channel Road Map

!  Channel Food Chain and responsibility !  Channel discount and financials !  Channel Management !  How would channel plan differ by Market Type?

Channel Alternatives Pick One

Your Company

Your Customers

System Integrators

Direct Sales Force

Value-Added Resellers (VARs)

Dealers

Distributors

Retail/Mass Merchants/Online

OEMs

Channel Diagram Book Publishing Company

Acknowledge Returns

Sell Books Deliver Orders

Determine Allocations

-Establish Identity -Create Demand

National Wholesaler Distributor Retailer

Merchandise Titles

Dispose of Returns

Stock Books Deliver Books (from printer)

Publisher

Ship Books

Channel Margins Book Publishing Company

35% 15% 10% 40%

$7.00 $3.00 $2.00 $8.00 $20.00

% of Retail

$s

Customer National Wholesaler Publisher Distributor Retailer

Get Ready to Sell: Preliminary Sales Road Map

!  Built around key insights about the selling process !  Answers

"  Who decides the sale? "  Influencers, recommender, decision makers Where is the

budget? How many sales call to the sale? To who? What is the script for each?

!  Consists of: "  Organization Map "  Influence Map "  Customer Access Map "  Sales Strategy "  Implementation Plan

Early Sales

Get Ready to Sell: Hire a “Sales Closer”

!  Identify need for a “Sales Closer "  Founders have experience “closing” business? "  Do they have a “world-class” set of contacts? "  Bet the company on their ability to close sales?

!  If not, hire a “Sales Closer” "  Do NOT hire a VP of Sales "  Typical background would be a regional manager

!  How does Market Type effect this hire?

Get Ready to Sell: Synchronize Your Execs

!  Product Development "  Schedule "  Deliverables "  “Good-enough” Philosophy

!  Engineering’s role in sales, installation, post-sales support !  Sales Collateral review

Get Ready to Sell: Formalize Advisory Boards

!  Advisory boards are critical in nascent stages of a startup !  To sell to industry specific customers requires an industry

advisory board !  Multiple Advisory Boards

"  Use at different times "  Different purposes

Phase 2: Sell

!  First sales !  First channel sales !  Scalable and Repeatable

Phase 1 Get

Ready to Sell

Phase 2 Sell to

EarlyVangelists

Phase 4 Business

Model Verified

Phase 3 Positioning

Sell to EarlyVangelists !  Contact Visionaries !  Sell !  Refine Sales Roadmap !  Sell to Channel Partners !  Refine Channel Roadmap

Sell to Channel Partners

Contact Visionary



Roadmap Refine

Channel Roadmap

Sell: Contact Visionaries

!  Looking for people with problems !  They are few are far between !  They need to become your

cheerleaders… while paying you to do so

Sell: Turn Visionaries into EarlyVangelists

!  Very few are early customers !  Visionaries will emerge to buy an unfinished

product if it truly solves a painful problem !  A lack of these early purchasers is a red-flag !  Market Type effects ease of execution

Build the Organization Map

Our Potential Customer

= in house competition

= issues to be addressed before a sale

Neil Garrett VP Database

Marketing

Suzanne Kellogg VP Merchandizing

Karen Rogers VP Marketing

Dave Jones CEO

One Step at A Time




Leslie Elders Financial Modeling

Joe Black Dir. Sales Operations

Ben White VP Sales


Marketing



Dave Jones CEO

Organization Map

Geoff Smith Financial Tools Development

Phil Whitry Director IT

Roger Smith CIO




Leslie Elders Financial Modeling

Joe Black Dir. Sales Operations

Ben White VP Sales


Marketing



Dave Jones CEO

The Influence Map

Functional Technical

High Executive 1

Low

The Influence Map


High Executive 1 2 CIO or Division IT executive

Low

The Influence Map



Low End Users 3

The Influence Map



Low End Users 3 4 Corp. IT staff or Division IT

The Sales Roadmap: Starts with Influence Map

Execs

End Users

Operational

High

Low

Educate & Present Solution

Technical

CIO

IT Staff

The Sales RoadMap: Adds Access, Assessment & Strategy

Finance

Product Mgmt

Support

Corp. Mktg

Sales

IT

Intro Meetings

Execs

End Users

Operational

Account Strategy

High

Low

Access Assess Needs

Strategy Educate & Present Solution

Technical

CIO

IT Staff

The Sales RoadMap

Finance

Product Mgmt

Support

Corp. Mktg

Sales

IT

Intro Meetings

Execs

End Users

Operational

Implement Plan

Proposal Account Strategy

High

Low

Access Assess Needs

Strategy Educate & Present Solution

Technical

CIO

IT Staff

Sell, Sell, Sell, Sell

RoadMap becomes The Sales Pipeline

13. Close!

2. Initial Meeting • Ask tough questions • Do Buy - In Demo 3. Qualify?

4. Understand Existing Situation a) Technology b) Organization c) Competition

The im

5. Custom Pitch • Prepare! • Get NDA signed 6. Win Over IT

• Tech deep dive 7. Define Problem • Develop Action Plan

8. ROI Pitch • Prove the Value!

11. Formal Pricing Proposal

•  No surprises! 12. Negotiate

• Sales • Finance • Support

10. Solution Session

• •  Detailed Tech discovery

1. Prepare • Hoovers, One Source, Web

9. Exec Session • Set expectations for this meeting early on.

Sell: Sell/Refine Channel Roadmap

!  Early channel partners need to be “Visionaries” !  Indirect channels/integrators have $ minimum !  Indirect channels/integrators just fulfill !  Market Type affects channel adoption

36

Motive Case

March 2, 2010 www.motive.com 37

What happened?


o  Closed 5 Lighthouse Customers (April 1998) #  Netscape #  Disney #  CompuCom #  JD Edwards #  Microsoft*

o  Public launch April 1998 #  All 5 customers participated, #  Remedy, Vantive, Scpous, Tivoli, Software Artistry announced

partnerships with Motive

o  Shipped Motive System 1.0 in June 1998

o  $60M in sales bookings over next 18 months


Lighthouse Customer Program


Lighthouse Customer Program

26+ Customers 8-10 Customers 3-4 Customers

Learning Validation (Today) Partnership

•  75% of time on data gathering •  Process slow & inaccurate •  Data captured is imprecise •  Inaccurate historical capture •  Ad-hoc knowledge base tools •  No live diagnostic tools

•  Validate Motive approach •  Fine tune value proposition •  Understand whole product needs

•  Identify Lighthouse customers

•  Joint product development •  Impact final product specs •  Early product use •  Reference customer


Goals

o  Learn about the target market #  problems, tools, methods, etc.

o  Identify the core value proposition #  business drivers, metrics, payback

o  Validate the Motive product #  feature, function, benefit & targets

o  Establish 3-4 reference customers #  real product use prior to launch

o  Generate early revenue #  just because we should ...


Bus. To Bus.

Borland Compaq Computer Moms Dell HP Printers Intuit I2 JD Edwards Microsoft Netscape Oracle PeopleSoft Redbrick Star-tek Trilogy

Corp. Support

Citicorp Disney Fannie Mae IBM Intel Merrill Lynch Motorola Netscape Northern Telecom Power Computing Swiss Bank TI Traveler’s US Postal

Outsource/SI

Outsourcers CompuCom EDS IBM ISSC MCI/SHL SAIC

SIs BSG PSW Perot

ISPs NetCentric AOL

24 out of 39 completed

Categories & Targets


ID & entitlement

data gathering & investigation

solution

relevant activity

25% 50% 25%

problem occurs

known problems

trouble ticket

“open this file… run this command…”

“name - rank - serial number”

“re-boot or re-install”

Ask the Expert...

????? Type a few lines...

Time and Motion Study

70% problems config. related


LHC Status: “Round Two”

Microsoft: Approach on Zero Admin & Backoffice initiatives. Strategy mtg with Maples sr. Schedule 2nd mtg.

Netscape: Lost ground due to re-org. Restarting with VP of NA Sales/Services. 2nd mtg in mid Sept.

Actuate: 1st mtg 8/6. Expressed interest. Need to revisit and close. Schedule 2nd mtg. B

us. 2

Bus

.

Disney: 2nd mtg 8/27. Wants to be LHC. Willing to take Alpha code in Jan. Asked for a proposal.

Travelers: 1st mtg 8/14. Wants to be LHC. Next step is tech. Demo and pilot project definition.

Power Comp.: Need to schedule 2nd mtg. Cor

p. IT

AOL: 1st mtg 8/27. Wants to be LHC. Sees unique uses of product. Asked for a proposal.

Perot: Schedule 2nd mtg.

CompuCom: Schedule 2nd mtg. Out

sour

ce


Milestones

Milestone Location Date

Proof-of-Concept Demo Customer 10/1/97

Pilot project selection Customer 11/1/97

Technology Demo MOTIVE 12/1/97

Alpha code drop Customer 1/1/98

Pre-Beta status mtg MOTIVE 2/15/98

Beta code drop Customer 3/30/98

Pre-FCS status mtg Customer 4/15/98

FCS Customer 6/30/98


Company building


Timeline

o  May 1997 Company founded

o  July 1998 Motive 1.0; 5 lighthouse customers

o  1999 $60M in sales bookings against $12M target

o  June 2000 European operations established

o  September 2000 Software deployed on 10 million endpoints

o  November 2000 First of eight technology patents received

o  October 2001 Asia-Pacific operations established

o  November 2001 Software deployed on 15 million endpoints

o  January 2003 BroadJump, Inc. acquired

o  September 2003 Software deployed in 30M+ products/services

o  June 2004 Initial Public Offering (NASDAQ:MOTV)

o  2004 $100M in revenues


Support as a “Feature”


End User Perspective

For end users, service needs to feel more like ATM's and

pay at the pump -- less like a web search


Service Provider Perspective

For service providers, automation must reduce costs and improve

customer retention


Product Traction

Market Entry 1998

Motive

to date

Market Entry 2001

Self-Management for

Consumer Technologies

•  10M PCs •  20M Broadband Connections

Self-Management for

Data Center Technologies

•  10K Servers, Storage •  10K Enterprise Software

Applications


And then…



After the IPO…

Q2 2004: Awesome results; biggest bookings quarter ever (>$35M)

Q3 2004: Awesome quarter; beating estimates

Q1 2005: Awesome quarter: Raised guidance

Q2 2005: Missed the number

Q3 2005: Missed the number again; need to restate Q1

Q1 2006: Replaced Scott Harmon as CEO; Scott Abel and Brian Vetter leave

Q2: New CEO decides to delay filing; Motive de-listed

Education

Customer Development/Lean Startup 030210 class 7