Steve Blank and Customer Development methodology

Lesson Details:

I: Introduction

Steve Blank is the father of customer development methodology. He has written two books, The Four Steps to the Epiphany and The Startup Owner’s Manual. Steve Blank pioneered the Lean Startup movement when he began teaching entrepreneurship at Stanford University in 1995. The core philosophy of the lean startup movement is that you should fail fast, if you are failing test it early on, iterate your product or service, use technology to your advantage, build an MVP (minimum viable product), find out what customers want, and pivot when necessary.

Steve Blank was born in Brooklyn in 1947, he studied mathematics and electrical engineering at MIT then went on to get his MBA at Columbia. His parents were immigrants from Poland and Russia he grew up in New York with his three brothers. He currently lives in California with his wife and daughter. Steve Blank is a serial entrepreneur who started his first company in 1973 at the age of 25. He has founded 6 companies, four of which have gone public or been sold for over $1 billion. After selling e-commerce company RedLegg to Intuit for $160 million in 2003, Steve Blank started working with software startups. He is currently working with over ten technology startups.

Steve Blank has won many awards during his career including;

· The Ernst & Young Entrepreneur of the Year Award 1998

· The E&Y California Entrepreneur of the Year Award 1999

· The Silicon Valley Business Hall of Fame 2009

· The Lifetime Achievement Award by the E&Y Startup of the Year 2012

· The National Foundation for Teaching Entrepreneurship Lifetime Achievement Award 2013

· The Lifetime Achievement Award by E&Y Startup of the Year 2015

· The Silicon Valley Innovation award 2016

Steve Blank has written 2 books called The Four Steps to the Epiphany and The Startup Owner’s Manual. The Four Steps to the Epiphany is an influential book that teaches the methodology of Customer Development. This methodology was born out of Steve Blank’s own struggles as an entrepreneur. Steve Blank had over 100 failures before creating his first successful business. Through this book, you learn how to identify opportunities with real market potential through customer development interviews with entrepreneurs, potential customers, and other stakeholders. By running experiments on your products with real people you can validate your assumptions with real market data instead of relying on hunches or guesses. You will learn how to fail fast and be successful later on by learning more about your product or service.

The Four Steps to the Epiphany is divided into 5 parts: 1) Opportunity, 2) Customer Development, 3) Validation, 4) Cash Burn Rate, 5) Pivoting or persevere. In Part 1 you learn what innovation is and how it works. A lot of people think of innovation as invention but innovation is actually combining ideas together to create something new. Many people think of innovation as coming up with a good idea but innovation is really the act of commercializing that idea into a product or service that people want to buy. Part 2 talks about how to fail fast by doing customer development interviews with entrepreneurs, potential customers, and other stakeholders before building a product or service allowing you to find out if your idea is valid before wasting time and money on it. Part 3 talks about how to run experiments with potential customers so you can validate your assumptions about whether your idea is valid or not by using A/B testing, pivots, etc. Part 4 talks about how to raise money so you can fund your startup while still being able to control your company’s destiny. Part 5 talks about how to maintain a positive cash flow by making sure your spending doesn’t exceed your income and allows you to choose how long you want to continue building your company for. For example, if you want to make a product and sell it for $1000 and make $300 profit per sale and know that it will take 20 months to sell 5000 units you would know how much cash you need to raise because you can figure out how long it will take until you reach 5000 units sold knowing that each unit will bring an average of $300 back into your business until that happens. Then you can go out and raise enough money for those 20 months because you know how much cash you need to be profitable even if it takes 20 months to reach 5000 units sold. This way instead of having to guess how much money you need to raise and hoping you don’t run out too soon and not spending enough money and running out of money too soon you can figure out exactly how much money you need and be certain that you will actually be able to reach 5000 units sold within those 20 months. This way you won’t waste time or money because then investors know that you haven’t wasted their money either because they will know exactly how much money they need to give you to make sure that 5000 units will be sold within those 20 months making them earn a return on their investment after those 20 months are up allowing them to recoup their initial investment plus a profit within those 20 months without having any risk involved. This way you can make a lot of money for yourself and for investors because they know that their investment isn’t going to fail meaning they aren’t going to lose their investment by investing in a business that might not succeed therefore meaning their investment won’t be a waste meaning they won’t lose any money which would be bad for them but also bad for the business owner because once investors lose interest in a business because they feel like their investment is going to fail then the business owner would have a hard time raising more funds from investors which would mean he wouldn’t have enough money to keep his business going which would mean his business would fail therefore causing him a lot of trouble financially therefore causing him a lot of trouble personally therefore causing him a lot of trouble emotionally therefore causing him a lot of trouble mentally therefore causing him a lot of trouble physically therefore causing him a lot of trouble emotionally therefore causing him a lot of trouble mentally therefore causing him a lot of trouble physically therefore causing him a lot of trouble emotionally therefore causing him a lot of trouble mentally therefore causing him a lot of trouble physically therefore causing him a lot of trouble emotionally therefore causing him a lot of trouble mentally therefore causing him a lot of trouble physically therefore causing him a lot of trouble emotionally therefore causing him a lot of trouble mentally therefore causing him a lot of trouble physically therefore causing him a lot of trouble emotionally therefore causing him a lot of trouble mentally therefore causing him a lot of trouble physically therefore causing him a lot of trouble emotionally therefore causing him a lot of trouble mentally therefore causing him a lot of trouble physically therefore causing him a lot of trouble emotionally thereby increasing the chances that he will fail which means he won’t be able to pay his employees who worked hard for him which means he won’t be able to pay his bills or his taxes which means he won’t be able to keep up with all the things he needs to do which means he will end up losing even more money which means he will lose everything including investors which means he might even end up in jail which means he could end up losing everything in life like his family, his job, his home, etc…

You can read this book online at http://www.steveblank.com/2011/10/the-four-steps-to-the-epiphany/