THE FOUR STEPS TO THE EPIPHANY

Background

Steve Blank is a successful serial internet entrepreneur. In one deal he earned about $800 million. After that he decided that he had enough and should start educating other entrepreneurs. His first book is ‘The Four steps to epiphany’. His second book is also a must have: The Start-up owner’s manual’.

Mister Team Academy?

Maybe Steve Blank is not mister Team Academy –most probably he has never heard of it – but as far as I am concerned he is coming close. Het is one the people who really puts the customer completely in the centre. His books cover the basics for every step in the process toe learn about your customers and actually make them customers, it is therefor worthwhile to have a copy on your book shelf. I belief it is essential reading for the first year-second semester of the Team Academy students.

As it is extremely boring and unnecessary to give a complete summary, in this essay I will just focus on the highlights. My purpose is to invite FETCH to read this book.

Main Message: focus on customers

His main message us that the classic product development model is extremely dangerous as you only really start to work with customers after the full product has been developed and tested (Produce & Perfect):

Productdevelopment

 

He argues that we should Launch & learn:

–        start with learning: do not write a business plan but start with formulating a set of hypothesis which you start testing.

–        start with customer development, the process looks as follows:

Customerdevelopmentprocess1

 

Do note that each step is a circle, meaning you may have to reiterate the same cycle/process many times.

 

Each step contains a number of sub-steps as follows:

Customerdevelopmentprocess2

 

Note:  He does not argue that no product development is needed but that the customer development process is leading and that both processes should remain synchronized and operate in concert. The first step is:

 

  1. Customer Discovery.

 

Develop your product for the Few, not the Many. The process looks like this:

CustomerDiscovery

 

Ask yourself these 4 questions:

–        Have we identified a problem my customer wants solved?

–        Does our product solve these customer needs?

–        If so do we have a viable and profitable business model?

–        Have we learned enough to go out and sell?

 

 

The ideal first customers -Blank calls earlyvangalists- have the following characteristics:

earlyvangelist

 

 

  1. 2.     Customer Validation

 

The next step in the process is to validate the customers you envision. You need to answer questions such as:

–        Do we understand the sales process?

–        Can we prove that it is repeatable?

–        Can we get these orders with the current product

–        Are we confident we can scale a profitable business

–        Have we correctly positioned the product and the company?

 

 

The process looks like this:

  1. Get ready to sell
  2. Sell to visionary customers
  3. Develop positioning
  4. Verify

 

Or more extensive:

process

CUSTOMER CREATION

 

The customer creation process looks as follows:

  1. Get ready to launch
  2. Position company & Product
  3. Launch Company & Product
  4. Create demand

 

In this phase , it becomes essential to define the type of market you are in. It is essential because your launch strategy depends on it. Please check out the summary below:

4typesofmarkets

 

 

For more details please refer to the book.

 

 

Cost of market entry

Another eye-opener in this chapter is the cost of market entry. Blank uses the New Lanchaster strategy to develop the following table:

 

  Market Share Cost of Entry 1) Entry Strategy
Monopoly >75% 3x Resegment/New
Duopoly >75% 3x Resegment/New
Market leader >41% 3x Resegment/New
Unstable market >26% 1,7x Existing/Resegment
Open market < 26% 1,7x Existing/Resegment

1)     meaning that you need a sales & marketing budget x times the budget of the market leader’s budget.

 

In other words, you need in most cases an enormous amount of money to enter an existing market. If it is a monopoly or duopoly: don’t do it. And avoid targeting the market leader. Instead see if it is possible to resegment or even open up a new market.

 

COMPANY BUILDING

 

The company building process can be described in phases as follows:

  1. Reach mainstream customers
  2. Review/Manage/ create mission and culture
  3. Transition to functional departments
  4. Build Fast response departments

 

Not all start-ups may reach this phase. I will be brief, but like to highlight the chasm.

 

The chasm

The chasm is a well known phenomenon, however I belief Blank puts it higher up the agenda and sees it as one of the main issue to consider in the company building phase.

chasm

 

 

The issue is that in the previous phases you were able to build a business based on sales to visionaries. Now however you need to convince pragmatists to buy your product. That is something completely different, as these people may not be convinced by the visionaries. You may have to start your sales all over again. This part is of the book is worthwhile reading and considering as it may give you good insight depending on the type of company you are creating and the market you are focussing on.

 

 

CONCLUSION

This book is great for anyone who wants to start his/her own company. Start reading it and read it again and again on the way. It will help you to avoid all the unnecessary mistakes.

 

Those who start a company can only put it into practice. I will invite FETCH to do just that: to use it to make their plans when launching new initiatives.

 

 

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