Successful Start-Ups After the Bubble
Polo Salinas
Issue date: 11/12/01 Section: News
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The Internet bubble is part of history, everyone knows that. But what to do now? What lessons can we take? On October 26, Steven Blank came to the GSB to talk about what the startup methodology should be for non-bubble economies. Mr. Blank is a reformed serial entrepreneur and survivor of eight startups in 23 years in Silicon Valley. Most recently he was the co-founder of E.piphany, a maker of enterprise software.
One of the lessons that he wanted to transmit was that an entrepreneur should think of how he or she should prepare to go to a battlefield before thinking of what to do once there. “Many times startups fail due to self inflicted wounds,” Mr. Blank said, meaning that developing a product without understanding the market is fatal to a startup.
Most companies have a well-defined product development process. It begins with the concept stage, then development of the product itself, then the Alpha/Beta tests and finally the product launch. But there are no processes to manage customer development in markets. Product development should go hand-in-hand with market development.
Ok. We need a market development process. But what should it look like? Market development is an iterative process. It is about understanding people’s needs, so it is impossible to accomplish without getting feedback and going back to correct the initial assumptions. It consists of four stages:
- Market Discovery
- Market Validation
- Market Creation
- Scale the market with sales
During market discovery, find out what the problems and the needs are. Develop a set of hypotheses about the problem and the solution. Define product, market, channels of distribution, the customer model, etc. This activity is the most important part of the process. It could take one week or up to a month and should be done by the founders or senior people of the company.
Then go sell. If you can’t (and chances are you won’t), go back to market discovery and change your assumptions. Then validate your hypothesis again. Mr. Blank's advice was to sell early and without a professional sales force. Customers at this stage will typically be “visionaries” because they are buying an unfinished product. According to Mr. Blank, a visionary is someone that had:
One of the lessons that he wanted to transmit was that an entrepreneur should think of how he or she should prepare to go to a battlefield before thinking of what to do once there. “Many times startups fail due to self inflicted wounds,” Mr. Blank said, meaning that developing a product without understanding the market is fatal to a startup.
Most companies have a well-defined product development process. It begins with the concept stage, then development of the product itself, then the Alpha/Beta tests and finally the product launch. But there are no processes to manage customer development in markets. Product development should go hand-in-hand with market development.
Ok. We need a market development process. But what should it look like? Market development is an iterative process. It is about understanding people’s needs, so it is impossible to accomplish without getting feedback and going back to correct the initial assumptions. It consists of four stages:
- Market Discovery
- Market Validation
- Market Creation
- Scale the market with sales
During market discovery, find out what the problems and the needs are. Develop a set of hypotheses about the problem and the solution. Define product, market, channels of distribution, the customer model, etc. This activity is the most important part of the process. It could take one week or up to a month and should be done by the founders or senior people of the company.
Then go sell. If you can’t (and chances are you won’t), go back to market discovery and change your assumptions. Then validate your hypothesis again. Mr. Blank's advice was to sell early and without a professional sales force. Customers at this stage will typically be “visionaries” because they are buying an unfinished product. According to Mr. Blank, a visionary is someone that had: