1. Business Models and
Customer Development:
How to FAIL Less
(hint: it’s not just a method for startups!)
Bob Dorf
allegedly retired serial entrepreneur, educator
Partner, K&S Ranch Inc.
www.steveblank.com
bob@kandsranch.com

2. ME: 7 startups, >20 investments, 3 vests…
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3. 7 IPOs, 6 disasters, Columbia B-School Prof.
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4. 608 pages….500+ startup misteaks
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5. Most startups fail to scale.
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6. More startups fail from
a lack of customers than from a
failure of product development
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7. …and passionate customers
are damn hard to find!
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8. Why Most Startups Fail…
Assume Customer Problem: known
Concept/ Product Alpha/Beta Launch/
Seed Round Dev. Test 1st Ship
Assume Product Features: known
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9. Startup Enemy #1:
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10. Wait a minute Bob…
We are hardly a Startup!
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11. I don’t care!
You should always be Innovating!
Constantly seek customer feedback
Always challenge your business model
Use the same approach, just not every
day
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12. No Business Plan
survives first contact
with customers!
…ask Webvan!
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20. When you’re done…
9 best GUESSES
…ask Webvan!
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24. TRANSLATE: Not a Startup??
…a 4-5 day customer vacation!!
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25. Where Discovery Begins:
Minimum Viable Product
• Google without ads (two years+)
• Zappos without any shoes
• Diapers.com without diapers
…Fewest possible features to make the point!
…When did a powerpoint last get YOU excited?
…YOU can use this process to test new ideas
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26. Customer Discovery
Customer Customer Customer Company
Discovery Validation Creation Building
• Stop selling, start listening
• Test your hypotheses
• Continuous Discovery
• …execute while running your current business
• …isolate the “startup” within your business 26

27. The Pivot
Search
Customer Customer
Discovery Validation
Pivot
• The heart of Customer Development
• Iteration without crisis
• Fast, agile and opportunistic 27

28. Just a few(of many) Historic Pivots
• Steve Blank: “Page 6”
• Perimeter: “there are 9000 of us”
• Groupon: the $12billion pivot
• Ning
• …and thousands more!
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29. Pivot Cycle Time Matters
Search Execution
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot
• MVP speeds up cycle time
•Speed of cycle minimizes cash needs
• Customer feedback drives the product! 29

30. How do you know when Discovery is “done?”
Key Partners Key Activities Value Proposition Customer Relationships Customer Segments
Who are our key partners/ suppliers Which key activities does the biz model What type of relationship does each For whom are we creating value
require What value do we deliver to the customer segment require of us
Complete regional overview  Populate life cycle data for performance  key distinctive product features &  product positioning/elevator pitch for each  identify key market segments
benefits for the target customer segment (geography/application) and customer
guarantees  Prospect roadmap: how to get face-to-face with segments (e.g. operator versus owner)
segment right person at prospects in each segment  how many customers in each segment
 Educate market on metric: $/kWh-day  total cost of ownership for segment  key competitors in each segment and their and estimated potential volume for
market share each customer
delivered over life of asset versus alternatives  key competitors' characteristics & dynamics
 why will segment buy Durathon versus  how do customers make money … key
 What outbound marketing/ advertising/ customer pain/gain points in each
 Establish strong partnerships with alternatives (i.e. value proposition) promotion activities are needed segment
 support tools required by segment (white
channel partners  minimum feature set (i.e. our launch papers, TCO calc., tradeshow)
 how are buying decisions made in
0 configuration) and ultimate feature set  pipeline of leads each segment - id process, hurdles,
 opportunities to claim IP or trademark / decision makers
 what does an Earlyvangelist look like in
Key Resources is there freedom to practice 25 each segment
Which key resources does the biz model  what regulatory/ certification/  who influences purchases in each
require transportation/ customs requirements Channels segment (trade groups, key resellers,
trend watchers)
 Integrated power system engineering – should be met or could be differentiator Through which channel does each
segment want to be reached
compatibility for retrofit and optimized
system solutions  which segments can only or best be reached
through a channel partner
 Financing options for Power services  which channel partners are important to optimize
operators sales in each segment
 what are channel partners' requirements and
cost to become a proactive sales channel
 initial channel partner response to value
proposition & customer segments
12 25 4 50
Cost Structure Revenue Streams
What are our cost drivers How much is each segment willing to pay and how would they like to pay us this amount
 Launch reliability  What are price /performance characteristics of competing technology
 What is the 2013 price target for 1 MM cells
 What is the 2015 price target for 10 MM cells
 what is optimum sales method for each segment (asset sale, lease, pay for performance, etc.) 3
X = number of in depth customer data points / data sources used to validate hypothesis
x
x red = low hypothesis confidence
yellow = medium hypothesis confidence 30
x
green = high hypothesis confidence

31. Customer Validation
Search
Customer Customer Customer Company
Discovery Validation Creation Building
Pivot Execution
• Repeatable and scalable business model?
• Passionate earlyvangelists?
• Pivot back to Discovery if no customers 31

32. Why Startups Aren’t Run By Accountants
Scalable Large
Transition
Startup Company
Alfred P. Sloan
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33. Founder of General Motors
Scalable Large
Transition
Startup Company
Billy Durant
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34. FIRED by General Motors Board
Scalable Large
Transition
Startup Company
Billy Durant
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35. Durant Versus Sloan
• Dies, rich, honored and famous
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36. Durant Versus Sloan
• Dies managing a bowling alley • Dies, rich, honored and famous
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37. Durant Versus Sloan
Accountant
• Dies managing a bowling alley • Dies, rich, honored and famous
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38. Innovators look out!
WE are here
Scalable Large
Transition
Startup Company
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39. “Get Out of the Building!!!”
bob@kandsranch.com
www.steveblank.com
ON SALE HERE…also in ebook 39