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“The Startup Owner’s Manual: The Step-by-Step Guide for Building a Great Company”​ Review and Summary

West Stringfellow
Feb 7, 2017 · 14 min read

Author’s Note:

My 2017 New Year’s Action Plan is to spend my free time product managing the American dream. Along the way, I plan on sharing everything I know about innovation and entrepreneurship on we.st, to help everyone achieve their own American dream.

Book Review

The concept of The Startup Owner’s Manual is that it’s like a car repair manual but for startup owners. In this book, Steve Blank and Bob Dorf detail all the work (and fun) that needs to happen before launching a product. With so much information, it’s a big book. In fact, the size is probably how it most resembles an auto manual. “Don’t read too much at a time.” This caveat appears before the book even starts. Take it seriously.

West’s Notes

Getting Started (Chapters 1 & 2)

The authors remind us that the old product roll-out process is totally wrong for startups. That process is appropriate when customers are known and the market is well-defined. This is often not the case for startups.

  1. Customer Validation: test sales, see if people will buy, and see if you can scale up.
  2. Customer Creation: marketing.
  3. Company Building: transition to a sustainable enterprise.

Step One: Customer Discovery (Chapters 3–7)

You have to understand your customers; don’t make assumptions about them. One of the seminal points that Blank and Dorf make (as do many others) is that customers do not live where you work. In order to meet them at their level, you have to “[g]et out of the building.”

  • Customer Segments: Includes customer problems, needs or passions; customer types (for example, end users, influencers, recommenders, buyers, etc.); customer archetypes; a day in the life of a customer; and a customer organization and influence map.
  • Channels Hypothesis: For physical products, this includes a description of how the product gets to the customer. Think about the suitability of channels for your product, and the authors recommend that startups pick just one channel that has the most potential for your product. For web/mobile products, consider the advantages and disadvantages of different channels.
  • Market-Type and Competitive Hypothesis: Describes which market a product fits into: established market, new market, extension of an existing market, re-segmentation, etc. Once you know the market, you know something about the competition, and you can come up with a preliminary plan for that.
  • Customer Relationships Hypothesis: Describes how you will get, keep, and grow customers. For physical products, there are four “get” stages — Awareness, Interest, Consideration, and Purchase. Devise several different “get” strategies and test them. Customer retention programs come into play during the “keep” phase, and the “grow” phase focuses on selling more stuff to existing customers. For web/mobile products, the “get” phase has two stages, Acquire and Activate, which loop back on themselves. The “keep” phase might involve some of the same retention programs as for physical products, but might also include components like emails, digital support, etc. The “grow” phase involves getting current customers to spend more or bring other customers to the product.
  • Key Resources Hypothesis: Describes physical, financial, human, and intellectual property resources. This component also includes a dependency analysis: what are all of the things that have to happen that the company can’t control, and what are the risks if the things you’re dependent on end up failing? Contingency plans are important, here.
  • Partners Hypothesis: Involves listing all of the partners you’ll need and identifying what you need from them and what they’ll get in exchange.
  • Revenue and Pricing Hypothesis: Includes the following questions: 1) How many items will we sell? 2) What’s the revenue model? 3) How much will we charge? and 4) Is there evidence that this is worth pursuing?
  • Served Available Market (SAM): the people that can be reached via your sales channel
  • Target Market: those who are your most likely customers
  • How important the problem is to the customers, and exactly how many customers are talking about it
  • If the customers care enough about it to tell their friends
  • Get ready for customer contact: For physical products, contact potential customers that you can test your ideas on. For web/mobile products, this involves developing a low fidelity MVP, which could be as simple as a brochure or web page that states the problem, shows people your solution, and solicits customer feedback.
  • Test how customers perceive the problem: A problem presentation (not a product demonstration) for physical products that illustrates your understanding of the problem and your proposed solution. For web/mobile products, this is where you test your low fidelity MVP, validating your hypothesis and all your assumptions about the customer.
  • Understand customers: This goes beyond simply validating assumptions about customer problems; it entails understanding how customers go about their day/lives and how they are (or are not, as the case may be) currently solving the problem.
  • Get information on the market and competition: Understanding the environment in which a physical product is operating may involve going to trade shows, conferences, competitor lunches, etc. These tools also work for web/mobile products, as do traffic-measurement tools like Alexa.
  • Create a product solution presentation (physical) or high fidelity MVP test (web/mobile)
  • Test the product solution: See what customers think by asking them about everything, including features, channels, etc. And for web/mobile products, measure customer behavior.
  • Update the business model (yes, again): Using what you’ve learned from the solution tests, update the business model and decide (yes, again) whether to pivot or proceed. Low customer enthusiasm at this stage is a huge red flag!
  • Find board members: It’s good to get some friendly outside help.
  • Who are your customers and how do you reach them?
  • Can you make money and grow the company? Figure out if your solution is a winning proposition. Crunch the numbers and do a rough estimate to see if there’s any chance that you can make money with your new product.

Step Two: Customer Validation (Chapters 8–12)

Customer validation means test selling at every point in the process (all the while keeping costs low — it’s not the time to scale up yet). Blank and Dorf detail four phases in the customer validation process:

  • Phase II. Go live. Try to sell.
  • Phase III. Refine your product. Position your company.
  • Phase IV. Analyze. Pivot or proceed.

Phase I — Get ready to sell

Steps for this phase of customer validation really are different for each channel, so it’s helpful to consider each separately.

Phase II — Get out of the building and sell

In this phase, you are validating your business model hypothesis, but you are still testing (by making real sales). Don’t try to scale up yet — the object of your sales is to test your business model.

  • don’t over-test
  • tests should be controlled and follow accepted protocols
  • remember the value of the customer over their lifetime, not just for this one transaction

Phase III — Positioning phase

Your positioning should match your market. For existing markets, you want to be different, yet credible. You want to solve a problem that’s important to people.

Phase IV — Pivot and/or proceed

This is probably the most critical pivot and proceed you will have. Review and analyze all the material you’ve generated; make sure that there are solid answers to the hypotheses. Look at your business model and how it’s changed through this process. Do your metrics provide evidence that this is a scalable endeavor that could turn a profit? This is important, and the authors provide insight into “Metrics that Matter” (for example, total number of units sold, selling price, etc.).

West Stringfellow

Your biggest questions in your career and your company are…

West Stringfellow

Written by

Led innovation @ PayPal, Target, Visa & Rosetta Stone. SPM @ Amazon. Innovation will save 🌎. Learn how to innovate at https://HowDo.com. Me at https://we.st. ♥

West Stringfellow

Your biggest questions in your career and your company are answered precise, expert-focused content.

West Stringfellow

Written by

Led innovation @ PayPal, Target, Visa & Rosetta Stone. SPM @ Amazon. Innovation will save 🌎. Learn how to innovate at https://HowDo.com. Me at https://we.st. ♥

West Stringfellow

Your biggest questions in your career and your company are answered precise, expert-focused content.

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