Class 5, Week 3 – Customer Segments and more lean startup experiments

Moving into the third week now of the startup accelerator, I’m starting to get more of a rhythm for how the business model canvas class is run. I first start with news items and updates. This is what I had to cover this week:

Updates

To get funding, I needed the teams’ articles of organization and certificate of incorporation, as well as the signed promissory note. It took a little while to get the legal issues sorted and the next iteration of the accelerator will be able to move faster since the documents are now all available.

Blogs/writing – the teams are writing a weekly blog but I would like them to start adding daily updates so I can track their progress and results from experiments closer to real time.

Mentor relationships – it seems like the teams aren’t making full use of their mentors to open doors and help out with the experiments. On the other hand, the experiments they are running are really aimed at potential customers and nothing beats actually talking with the real potential customers (rather than seeking advice from mentors).

Kanban board – I wonder if anyone starting using a kanban board after the agile class. There was a mixed reaction, which to me indicates I need to update that syllabus. The main feedback was that they needed more time practicing with it in class. I think if the teams continue to have trouble planning their daily tasks that we will revisit agile again. Multiple touchpoints are often critical!

Books – I learn a lot from books (here are some I recommend). I wanted to know if  anyone has time or interest in reading. I could assign books to the group as a whole or recommend books specifically for an individual. The class asked to have a group book to read. I started with “Nail it then Scale It” by Nathan Furr. We’ll be discussing the book to start each Thursday’s class.

Experiment results

After updates, we presented the results of the previous week’s experiments. The presentation format is borrowed from Steve Blank: Hypothesis – Experiment – Results – Action.

Once again, we found that a lot of the tests were not validated. This is to be expected as teams pivot far and fast in order to try and find product/market fit. One success turned out to be from Levaté, the wheelchair lift team. Elaine from i2e offered to fund their prototyping if they could get 50 people to commit to beta-testing the product with them. Levaté has previously tried to presell the lift, or take a deposit, with limited success. But once they started asking for full contact information and a commitment to use the device during a trial period, signups took off! The team got over 60 signups in the week following Elaine’s offer.

Discussion of customer segments

We then moved onto discuss the Steve Blank videos. Here are the questions I had prepared:

What did you get from the videos?
What have you learned about your customer segments?
What’s going on with market types: existing, re-segmented, new and clone
Different types of segments: users, payers, recommenders

The students focused in on the market types and tried to understand what kind of market they were playing in. We also talked about the different segment types, particularly from the perspective of following the money. The easy example is a teenager buying a car – the salesperson knows the money for the car is coming from the parent, and so she needs to cater to both the interests of the child and the interests of the funding source.

Drawing a day in the life

The exercise for customer segments, before updating the business model canvas, is to draw a day in the life of your customer. The better you understand what your customer is doing and what motivates them, the better you’ll be able to create a product or service that will solve their problems or fulfill their needs. The pictures don’t have to be fancy! I’m strictly a stick figure drawer myself. And there isn’t a set format either. Some teams do it in boxes like comics, some did it on sticky notes, some drew free form over the whole page.

My rule for marketing in general is if I could take away the name of your company and replace it with a different company, and the marketing would still make sense, then the marketing is too generic. So I challenged all the teams to dig deeper and be very specific about their customer, maybe even choosing one particular customer to follow. Levaté did a good job here, describing in detail a day in the life of Miss Wheelchair Oklahoma. Through the pictures and stories I got a really good sense of who she is and how she spends her time. Notice that this is not a product pitch – the story shouldn’t spell out exactly why the person needs your product! They should be (and already are) living a life independent of what you are developing.

In line with drawing a customer’s “day in the life” is the need to describe the customer archetype. To me these are two sides of the same coin, and if the team can draw the story, they can flesh out the archetype pretty well. The best way to get to know your customer better is to spend more time with them!

Updating the business model canvas

Each week the teams’ are responsible for updating their business model canvas, in particular the box that they studied that week. The teams have settled on using a jumbo size canvas covered in sticky notes. Assumptions that have been tested and invalidated are removed and replaced with new ideas. The canvas stands in for the overall project plan and helps keep the teams focused on making money by selling to customers.

BMC week 3

Next week’s experiments

In true accelerator fashion, I asked the teams to run two specific experiments this week. Week 1 and week 2 were to get the teams on the same page regarding the hypothesis-test model, using the business model canvas to track ideas, and building a weekly cadence. Now I need the teams to start making more progress faster with only two months till demo day! My primary motivation is I want them to have validated a real business model with actual customers by the time demo day arrives in July. To do that, they need to be running more tests and talking to more customers, to really validate a lot of hypotheses and assumptions. All of these experiments are being tracked on the teams’ blogs.

 

 

 

Posted in Education, Lean Startup, Startup, Testing ideas in the real world

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