The Lean LaunchPad at Stanford—Class 4: Customer Hypotheses

4/4/11Follow @sgblank

(Page 3 of 3)

D.C. Veritas, was the team building a low cost, residential wind turbine that average homeowners could afford. From a slow start of customer interaction they made major progress in getting out for the building. This week they refined their target market by building a map of potential customers in the U.S. by modeling wind speed, energy costs, homeownership density and green energy incentives. The result was a density map of target customers. They then did face-to-face interviews with 20 customers and got data from 36 more who fit their archetype. They also interviewed two companies – Solar City and Awea in the adjacent market (residential photovoltaic’s.)

If you can’t see the slide presentation above, click here.

The teaching team offered that unlike solar panels which work anywhere, they’ve narrowed down the geographic areas where their wind turbine was economical. We observed that their total available market was getting smaller daily. After the next week figuring out demand creation costs, they ought to see if the homeowners were still a viable target market for residential wind turbines.

Autonomow, the robot lawn mower, came in with a major Pivot. Instead of a robotic lawn mower, they were now going to focus on robotic weeding and drop mowing as a customer segment. (Once you use the Business Model Canvas to keep score of Customer Discovery a Pivot is easy to define. A Pivot is when you substantively change one or more of the Business Model Canvas boxes.)

Talking to customers convinced the team that the need for robotic weeding was high, there was a larger potential market (organic crop production is doubling every 4 years and accelerating,) and they could make organic produce more affordable (labor cost reduction of 100 to 1) – and could possibly change the organic farming industry! And as engineers they believed weed versus crop recognition, while hard, was doable.

During the week the team drove the 160 miles round-trip to the Salinas Valley and had on-site interviews with two organic farms. They walked the fields with the farmers, hand-picked weeds with the laborers and got down into the details of the costs of brining in an organic crop.

They also talked by phone to organic farmers in Nebraska and the Santa Cruz mountains.

They acquired quantitative data by going through the 2008 Agricultural Census. Most importantly their model of the customer began to evolve.

If you can’t see the slide above, click here.

Our feedback: could they really build a robot to recognize and weeds and if so how will they kill the weeds without killing the crops? And are farmers willing to take a risk on untested and radical ideas like robots replacing hand weeding?

The Week 4 Lecture: Customer Relationships

Our lecture this week covered Customer Relationships (a fancy phrase for how will your company create end user demand by getting, keeping and growing customers.) We pointed out that get, keep and grow customers are different for physical versus virtual channels. Then different again for direct and indirect channels. We offered some examples of what a sales funnel looked like. And we described the difference between creating demand for products that solve a problem versus those that fulfill a need.

If you can’t see the slide above, click here.

———

The biggest lesson for the students this week was the entire reason for the class – no business plan survives first contact with customers – as customers don’t behave as per theory. As smart as you are, there’s no way to predict that from inside your classroom, dorm room or cubicle. Some of the teams were coming to grips with it. Others would find reality crashing down harder a bit later.

Next week, each team tests its demand creation hypotheses. The web-based teams needed to have their site up and running and be driving demand to the site with real Search Engine Optimization and Marketing tests.

Steve Blank is the co-author of The Startup Owner's Manual and author of the Four Steps to the Epiphany, which details his Customer Development process for minimizing risk and optimizing chances for startup success. A retired serial entrepreneur, Steve teaches at Stanford University Engineering School and at U.C. Berkeley's Haas Business School. He blogs at www.steveblank.com. Follow @sgblank

Single Page Currently on Page: 1 2 3 previous page

By posting a comment, you agree to our terms and conditions.