Here is the graphic, video and text of the introductory course we recently taught on Software and Startups.
The Rise of Software & Startups
Software is Eating the World
Software powered businesses, online services, and digital products are on the rise.
Software centric companies are challenging the leaders of many industries.
This trend will continue and will accelerate.
In This Overview We Will Look At:
Why software is becoming so dominant.
The Business Model Canvas which helps develop better companies.
Agile Development, which enables faster and cheaper product development.
Customer Development Model, which helps in the creation of the right product for the right market.
The Historical Rise of Software
PCs (~1990) put computing power into the hands of the many.
Internet (~2000) brought connectivity to millions.
Mobile – (~2010) brings constant connectivity to billions.
Some Factors for the Recent Software Boom
Massive connectivity creates new markets and disruptive opportunities.
Cheaper computing enables advances in data analysis and lowers product costs.
Digital formats of books, movies, music, etc. allow for easier access and delivery.
Amazon as an Example
Connectivity enabled the establishment of online catalogs and customer ratings.
Cheaper computing brought customized catalog pages and suggestions.
Digital books, movies and music enabled the building of personal digital libraries.
Businesses are Built on Three Foundations
The company, which includes its resources, processes and business model.
The products it offers.
The market of customers to which it delivers its products.
Software and startups have changed our understanding of these foundations.
Let’s take a look at some of these changes.
For the company, software has enabled business model innovations in all areas.
The Business Model Canvas provides a language to describe, visualize and assess a business model.
With regard to products, cloud based services and better tools have made software development faster and cheaper.
Agile Development is a methodology to increase the reliability and speed of software development.
The market for software based products has been vastly expanded by mobile connectivity.
The Customer Development Model assists in developing the right product for the right market.
Business Model Canvas
Consists of 9 elements
4 company elements, 1 product element, 4 market elements
Key Activities: the things the company must do to deliver its proposition.
Key Resources: the assets the company must have to compete.
Key Partners: the relationships that allow the company to focus on Key Activities.
Cost Structure: the major costs and how they can be reduced.
Value Proposition: What is compelling about the product offer? Why do customers buy and use the product?
Customer Segments: the customers and their thinking patterns.
Channels: How the products are promoted, sold and delivered.
Customer Relationships: How the company interacts with the customer.
Revenue Streams: How the business earns revenue from the products it sells.
Customer Development Model
The focus of the Customer Development Model is to find product-market fit, which is a product that fills a large market need.
Phase 1 is the search for product-market fit and a viable business model.
Phase 2 is executing on the model to create demand, close sales, and create a profitable business.
Search for Product Market Fit
In Customer Discovery, a business model is defined and potential customers are interacted with, in order to determine whether product-market fit can be achieved.
Customer Validation involves getting actual usage and orders to validate the product-market fit and to decide whether to pivot or proceed as planned.
Execute to Increase Sales and Profits
In Customer Creation, the product is launched into the defined target market, demand is created through marketing, and sales are made.
In Company Building, departments are established, a company culture is cultivated, and a mindset of being responsive to customers and changing circumstances is developed.
Agile Development has design, develop, and deploy cycles.
Design consists of sketching out your idea and talking to potential customers.
Developing is creating working software in short release cycles.
Deploying puts the software in the hands of customers to measure, learn and improve.
Get out of the building and talk to potential customers.
Sketch out scenarios of how potential customers will use the software.
Define the assumptions you are making in the design and determine how they can be tested.
Create the database which tracks the customers and their activities.
Program the interface which is how the customer interacts with the application.
Code the logic that connects the interface to the database and performs the application’s functions.
Make the software available to your customers
Measure how the customers are using the software
Implement any quick changes and then iterate into the next design and develop cycles.
In this overview we looked at some key components of the rise of Software and Startups.
In the future, we will go into more detail on the Business Model Canvas, Agile Development, and the Customer Development Model.
Thanks to Marc Andreessen, Steve Blank, Bob Dorf, Paul Graham, Alexander Osterwalder, Yves Pigneur, Eric Ries and Peter Thiel for their contributions to the field.