Customer Development Deep Dive
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Bryan Guido Hassin, global cleantech entrepreneur and Entrepreneur in Residence at the Rice University Center for Engineering Leadership, walks through a case study of how his own startup has used lean startup customer development to validate its market, its product, and build up a huge sales pipeline before even launching its offering.
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Customer Development Deep Dive
- 1. Customer Development 2013-06-12 Bryan Guido Hassin Entrepreneur In Residence
- 2. Entrepreneurship Roadmap The Basics Designing a Business Developing a Business 2
- 3. It will take more than a business model to realize your venture “Strategy without execution is a dream.” -oft quoted business truism The rest of the quote: “Execution without strategy is a nightmare!” So congrats on at least having a strategy! 3
- 4. Even gnomes fail without proper execution 4
- 5. Remember that you start with guesses that are proven iteratively Guess Guess Guess Guess Guess Guess Guess GuessGuess 5
- 6. Get out of the building and test hypotheses with real clients • Stop selling, start listening • Test your hypotheses • Continuous Discovery • Done by founders Customer Discovery Customer Validation Company Building Customer Creation Source: Four Steps to the Epiphany 6
- 7. Let’s walk through a case study of my own startup venture 7
- 8. Wireless Mesh Smart Sockets Energy Management Dashboards Desktop Apps Mobile Apps Monitoring and Analysis Services Smart Monitors Smart OES reduces office energy consumption 25% without modifying the building 8
- 9. Client’s 20,000 sq ft, 3 story office building reduced energy 25% with payback < 2 years • Identified lights left on by janitorial staff, avoided $20k HVAC upgrade • Replaced most wasteful copiers • Automatically shut off power to unused devices nights and weekends • Employees changed behaviors to compete with each other for lowest energy use; productivity increased Source: Client Studies Measure 10% Manage 9% Motivate 6% M3™ Energy Savings Savings: $5k / year Cost: $5k + $1k / year 9
- 10. 20% 17% 16%15% 13% 12% 7% Energy Taxes Insurance Maintenance Administration Cleaning Other 2009: Goal to launch scalable CleanWeb startup addressing office energy efficiency • Energy is the #1 office building operational expense • Up to 70% of energy use in offices is simply wasted • $280 billion per year spent globally on office energy • Energy prices forecast to increase Office Building Expenses Source: Energy Information Administration 10
- 11. • team management Value Proposition Distribution Channel Target CustomerCustomer RelationshipKEY ACTIVITIES KEY RESOURCES KEY PARTNER COST CENTERS REVENUE STREAMS • Office building owners • High touch • VARs (ESCOs) • Reduce top operational expense (energy) by up to 25% • Make building more appealing • Increase building resale value • Asset sale of hardware • Channel management • COGS of hardware • Marketing / channel management personnel • Hardware/software supplier • Fundraising • Sales SOES Biz Model Canvas 2009 11
- 12. • Client interviews • Business partner discussions Initial hypotheses were based on market research so . . . We got out of the building! • Market research • Consultant reports • Speculation 12
- 13. Prime Building Owners Prime Building Tenants Other Building Owners Other Building Tenants We learned that our customers were really utility- paying office occupants, not owners • Retrofit solutions require $1M+ capital expenditures • 6+ years for typical payback on retrofits • Specialized personnel to install, maintain retrofits Retrofit Adoption Potential in Office Market $15 BILLION POTENTIAL MARKET for UTILITY-PAYING OFFICE OCCUPANTS Can Adopt Can Not Adopt Can Not Adopt Can Not Adopt Source: Client Surveys 13
- 14. • team management Value Proposition Distribution Channel Target CustomerCustomer RelationshipKEY ACTIVITIES KEY RESOURCES KEY PARTNER COST CENTERS REVENUE STREAMS • Utility-paying office occupants • Owner- occupied buildings • Submetered tenants • High touch • VARs (ESCOs) • Reduce top operational expense (energy) by up to 25% • Make building more appealing • Increase building resale value • Engage employees • Reduce CO2 / Green • Asset sale of hardware • Channel management • COGS of hardware • Marketing / channel management personnel • Hardware/software supplier • Fundraising • Sales SOES Biz Model Canvas 2010 14
- 15. We launched [paid] pilot installations to learn what customers really wanted Hardware Software Services Minimum Viable Product 1.0 Supplier Supplier SOES 15
- 16. We learned that we needed 4 “P”s to win the utility-paying office occupant market • Scalable, turnkey enterprise solution • Sticky employee engagement • Not embedded in building • Immediate: 1-2 years Payback Portability ProfessionalPeople 16
- 17. We also learned that no suppliers could provide us with all four “P”s Smart OES (Needs) * * * * Honeywell * JCI * Siemens * SiteControls * * Enistic (UK) * * * Energy Hub * * People Power * * * Powerhouse * * Payback Portability Professional People Select Energy Efficiency Providers 17
- 18. So we would need to build our own hardware and software Hardware Software Services Minimum Viable Product 2.0 SOES SOES SOES 18
- 19. • team management Value Proposition Distribution Channel Target CustomerCustomer RelationshipKEY ACTIVITIES KEY RESOURCES KEY PARTNER COST CENTERS REVENUE STREAMS • Utility-paying office occupants • Owner- occupied buildings • Submetered tenants • High touch • VARs (ESCOs) • Rapid payback • Portable • Professional • Reduce top operational expense (energy) by up to 25% • Engage employees • Reduce CO2 / Green • Asset sale of hardware • Subscription to website • Energy management services • Product engineering • User engagement • Marketing • Channel management • Service • COGS of hardware • Marketing / channel management personnel • Cloud operations • Hardware / software supplier • Initially engineering suppliers before we bring in house • Remote energy management staff • UI design • Hardware design • Effective energy management • AI barrier • Brand barrier • Low cost scale manufacturing SOES Biz Model Canvas 2011 19
- 20. We tested our marketing strategy by signing up real Value-Added Resellers VAR Reality • ESCOs not as suited for our new target • Property Management firms a possibility • VARs won’t work for small clients Our Idealized VAR Network 20
- 21. We validated much more effective near- term sales channels for our target market 2012: Direct Sales Validated with paying pilot customers 60-day sales cycle 80% trial conversion to $100k average customer 2013: Inbound Web/Viral Marketing Validating with ongoing online campaigns $100 cost to acquire $5,000 average customer 2014: Resellers 10 VARs already joined waiting list Rapid expansion within existing client bases 21
- 22. • team management Value Proposition Distribution Channel Target CustomerCustomer RelationshipKEY ACTIVITIES KEY RESOURCES KEY PARTNER COST CENTERS REVENUE STREAMS • Utility-paying office occupants • Owner- occupied buildings • Submetered tenants • High touch • Light touch through web engagement • Excellent service, communication • Direct • Inbound • VARs (ESCOs, Property management firms, Business solutions providers, LEED consultants) • Rapid payback • Portable • Professional • Reduce top operational expense (energy) by up to 25% • Engage employees • Reduce CO2 / Green • Asset sale of hardware • Subscription to website • Energy management services • Product engineering • User engagement • Marketing • Channel management • Service • COGS of hardware • Marketing / channel management personnel • Cloud operations • Initially engineering suppliers before we bring in house • Remote energy management staff • UI design • Hardware design • Effective energy management • AI barrier • Brand barrier • Low cost scale manufacturing SOES Biz Model Canvas 2012 22
- 23. • team management Value Proposition Distribution Channel Target CustomerCustomer RelationshipKEY ACTIVITIES KEY RESOURCES KEY PARTNER COST CENTERS REVENUE STREAMS • Utility-paying office occupants • Owner- occupied buildings • Submetered tenants • Light touch through web engagement • Excellent service, communication • Direct • Inbound • VARs (ESCOs, Property management firms, Business solutions providers, LEED consultants) • Rapid payback • Portable • Professional • Reduce top operational expense (energy) by up to 25% • Engage employees • Reduce CO2 / Green • Asset sale of hardware • Subscription to website • Energy management services • Solution As A Service? • Demand Response? • Product engineering • User engagement • Marketing • Service • COGS of hardware • Marketing / channel management personnel • Cloud operations • Initially engineering suppliers before we bring in house • Remote energy management staff • Utilities? • UI design • Hardware design • Effective energy management • AI barrier • Brand barrier • Low cost scale manufacturing • Financing? SOES Biz Model Canvas 2013 23
- 24. Smart OES has raised $400K to validate its technology and business model with paying clients 24 Prototypes Proven ResultsPilot Installations •Hardware components “off the shelf” but from UK •“Glued” together with Smart OES software •Plugged into proprietary M3™ methodology •25% savings ongoing > 1 year •$500K / year savings •Payback < 2 year •5 other offices •$46M sales pipeline
- 25. Breakout • How will you validate each area of your business model? – Customer surveys? – Google AdWords? – Product testing? – Supplier research? – Competitor research? 25
- 26. Customer Development 2013-06-12 Bryan Guido Hassin Entrepreneur In Residence