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Saturday, April 9, 2011

The Four Steps to the Epiphany

The Four Steps to the Epiphany

by Steven Gary Blank

This book is an essential read for every 21st Century entrepreneur who wants to bring a product to market or write a business plan in preparation to do so. In his book Four Steps to Epiphany Steven Blank presents a step-by-step strategy for successfully organizing sales, marketing and business development for a new product or company. The book offers great insight into the factors that make some startups successful while others go bust. It is packed with concrete examples, which make it easy for entrepreneurs to enlarge their skill sets and shape up sales, marketing and business for eventual success.

The main takeaway of Four Steps to Epiphany is that it emphasizes rapid iteration, customer feedback and testing of the assumptions that underly a newly proposed business model. Although the book lacks a linear structure, the author basically presents five key factors that he thinks are decisive for the success of a startup business.

1. Get out of the building. This is classic advice but still very true. Few startups fail for lack of technology, they almost always fail for lack of customers.

2. Each market has its own characteristics. Never take assumptions about a market for granted.

3. The product as well as the company grow and mutate over time. The book takes its name from Blank's theory about the four stages of growth that any startup goes through.

Blank has called these steps:
- Customer Discovery (when you're trying to figure out if there are any customers who might want your product)
- Customer Validation (when you make your first revenue by selling your early product)
- Customer Creation (akin to a traditional startup launch, only with strategy involved)
- Company Building (where you gear up to Cross the Chasm to find a mass market). For more about Crossing the Chasm, see the book with the same name by Geoffrey Moore.

4. When engaged in product development, aim at finding the minimum feature set required to attract early customers. So don't try to please every customer. Customer development must limit itself in this stage to find a market, any market, for the product.

5. Learning and iterating vs. linear execution. In the beginning of the life of a startup, everyone is focused on figuring out what type of actions produce sales and revenue. In the 20th Century, the startup would launch, succeeding spectacularly or failing miserably. Only after a major, public, and expensive failure would the founders start again and try a new iteration. One of the problems with this model is that most people can't emotionally sustain more than a few of these iterations. As a result, the founders rarely get to be involved in the later tries, so that few lessons are learned.

The basic error in the old model is premature execution. The major insight of The Four Steps to the Epiphany is that startups need to spend some time in a mindset of learning and iterating before they try to launch. During this learning time, the intention is to collect facts and change direction. This can happen mostly in private, without dramatic and public embarrassment for their founders and investors. The book lays out a disciplined approach to make sure this period doesn't last forever, and gives clear criteria for when the founders know it's time to move to the next stage, execution. That is when you have a repeatable and scalable sales process, as evidenced by early customers paying you for your early product.

The Four Steps to the Epiphany is essential reading for anyone starting a new business in the 21st Century.

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