Manifesto design for the client: the causes of the revolution (part one)

Steve Blank is the guru in the field of startups, the founder of the concept of customer-oriented development, the author of the cult book — The Four Steps to The Epiphany and The Startup Owner's Manual, founder of eight startups. This article reveals the reasons for deciding to abandon the traditional approaches to building a startup.

After 20 years of working in startups, I decided to stop and look at the model of product development (Product Development Model), which was to understand why it was unsuccessful in regard to our work, out of office sales, marketing and business development.

Every startup has some methodology for product development, launch and lifecycle management. In the ideal case, these processes provide detailed plans, check-points and milestone for each phase of the product output to the market: identifying market size, estimating sales, developing marketing plan, prioritize features of the product. But in the end, despite all these tools, 9 of 10 products fail.

So what is the problem with the model of product development? The first clue is in the name of the model. It is a model for the development of product! Not a marketing model, not a model for hire salesmen, not a model to attract users, and not even the financial model (which in itself is sufficient weak model for product development). Startups have traditionally used this model (product development) to control and set the tempo not only technical processes, but not technical.

In this article I will describe the flaws of such a model. In following articles I will describe in more detail how this model misrepresents sales, marketing and business development in startups. And how can thinking about the solution to these flaws led me to a new model — the development model under client (Customer Development Model), which offers a new way to work "outside the office". I'm also going to write about a similar model Eric Rice (within the concept of "Lean Startup") for product development "inside the office" and how he carefully integrates the development of client-and the "flexible methodology".

1. Where are the customers?

To start: the model of the product development completely ignores fundmentally the truth about startups and new products. The main risk in a startup and, therefore, the main reason for the failure is not process risk, and the risk associated with customers and markets. Startups fail not because they lack product. And due to the fact that they are not enough customers and a profitable business model. This alone is a good hint about what goes wrong when the model is used for product development as the sole guide in all things, what you need to do a startup. Look at this model and you will be surprised, where are the customers?

The reality for most startups today is that the model for the development of the product focuses all attention on the job, which is "inside office". Despite the fact that the source data from consumers can be a check-point or a reference point in development, they are not included.

2. Focus on the first delivery date

Using the model of product development is forcing sales and marketing to focus on the endpoint of the process — on the date of the first delivery. Most of these managers hired a startup, first look at that date, then on the calendar on the wall, and working "bottom up" by calculating how to do their work in time for the fireworks started to launch the product.

The flaw of this approach is that "the first customer delivery" — it's just the date when the techies think they have finished developing version 1.0 of the product. date of the first delivery does not mean that the company understands its customers, how to position ourselves in the market to sell the product and how to build a profitable business. Read the proposal again. There are a lot of sense.
Even worse, investors also start in their financial millstone from that date.

The model of product development is so focused on creating and delivering the product that it completely ignores the process of checking your basic assumptions about the business model (customers, channel, pricing) to supand not a test of these assumptions beforehand is fundamental and, in many cases, a fatal mistake that most start-UPS.

Why? Because before the first delivery to the client startup cannot detect that their hypothesis were just wrong (for example, customers do not buy; the cost of distribution too high, etc.). In the result the young company is already burdened with expensive and large sales, bewildered and trying to sell them a losing sales strategy and a marketing Department desperately trying to create demand without a clear understanding of customers ' needs.

And while marketers with the salespeople revolve in search of a sustainable market, the company burns your most valuable asset — money.

3. Focus on execution instead of learning and discovery

The development model of the product implies that you know the needs of consumers, know what features must have the product and the business model is also known. If we assume that it is an undoubted fact, it is quite logical that a startup hires a team of salespeople and marketers to simple execution the business plan. You're interviewing with future top managers to determine whether they have the relevant experience and the right cards in their collection, and hope that they will be able to play scenario worked in their previous company.

Usually, this is a bad idea. No one will ask: "Why do we perform like we know what we're doing? Where did this assumption in our business plan?" Whether the hypothesis about the model of sales of real checks out of office? Or is it a set of plates, combined late night over a beer to convince the investor that it is a good deal?

None of the newly hired top Manager of not telling the founder, "My previous experience may not be relevant for this start-up." Superior salespeople and marketers are doing their job perfectly. And this is the reason why you hired them. But previous experience may be irrelevant for your new startup. A new company needs to test a number of hypotheses before it will be able to find a repeatable and scalable sales model. Startups creating a new market or an existing resegmentation, is not only simple version but also to learn and discover new, and this activity is critical to the success or failure.

4. Focus on performance instead of flexibility

Diagram of product development has a linear current from left to right. Each step happens in a logical sequence, which can be shown PERT-method milstone and resources designed to complete each step.

Anyone who ever brought a new product to market to potential customers, can you confirm that in the real world it doesn't fucking work. Good results in work with clients: two steps forward, one step back. In fact, the best way to describe what happens outside the office — recursive circles. Recursion to illustrate the iterative nature in which they study and discovery. Information and data about customers and the market going gradually, step by step. But sometimes these steps let you on a false trail or even lead to deadlock. You find yourself in a situation when you call the wrong consumers, do not understand why people are willing to pay, what features are really important. Sometimes potential customers may offer a new way to use the product, new positioning or even a better idea.
the Ability to learn from mistakes, identify new opportunities and quickly change direction, what distinguishes a successful startup from those that have disappeared and whose names are forgotten.

5. Authorising obligations of the founder

Model product development separates the founder from deep understanding their customers and market. Responsibility for the validation of the hypothesis originally belonged to powdery, is delegated to employees — the team of salespeople and marketers.

This means that the founder is isolating itself from the direct voice of the consumer, which can be pleasant, unpleasant, or nasty. Even worse, if the founder did not actually really wants to understand whether to buy consumers and if so, which features — prior to the first delivery.

Resourceful and flexible when the founder leaves the office and hears the umpteenth time that the product windproof, he is aware, is rebuilt and changes its direction. It is very important initially to organize the process so that the founder was constant communication with customers.

6. Focus on the finished product instead of a minimum set of features

The passion of the entrepreneur paired with a chart of the development of the product makes you believe that all you need to do is create a product (with all the splendor of the feature) and the consumer will come to you. A cascading development model reinforces this nonsense. The reality is somewhat different. If you are on an existing market (creating an improved version of an existing product is bought by consumers), then you will find that your hypothesis about the features that consumers want, has nothing to do with what they really want. Most of the written code will be in a garbage can.

7. Investors focus on the wrong model

Ask a venture investor, why he uses a model of product development to manage a startup and you will get the answer from the series: "This is the way my company has always enjoyed. Why change something that worked fine for the past 30 years?" or "Look at our profits! In our case it works" or sometimes even more sincere response "Managing partners believe that this is the only option".

Some companies right indicate that they want, if 8 out of 10 companies will not succeed, but the remaining two will return the invested money in 20 multiple size. This is a more desirable outcome than having 10 out of 10 successful companies, but with a twofold return on investment. So they really want startups to come.

Mistake to think that the model of product development is the most efficient model for new ventures: not now, not last year or last decade or not when the first startup I met with my first investor.

Venture funds have been successful, not because used the model of product development, and in spite of it. The truth is that most successful startups have abandoned this model as soon as they faced real consumers.

Today's startups that are using the model of product development, learn and discover new things, by money investor. When the money runs out, they close the business or adapt more effective model.

Friends, I urge everyone who is passionate about startups and know English to join the English translation of interesting articles! I have many of them) output: pumping English, expanding horizons and respect from those who can't afford to read them in the original. Write to the PM!

Bonus: The Startup Owner's Manual by Steve Blank &Bob Dorf

Article based on information from habrahabr.ru