How does your product get from your company to your customer?
8x Entrepreneur, Author, Customer Development Expert
The old business model was physical products sold by direct sales force.
In the mid-1990s, we could distribute physical products through virtual channels for the first time.
The second industrial revolution: distribution of virtual products via the internet.
Lesson: Channels & Partners with Steve Blank
Step #1 Channels: How does your product get from your company to your customer?
Today we're going to be talking about distribution channels. How does your product get from your company to your customer? You're all familiar with the business model canvas. We've already talked about value propositions and we've talked about customer segments in the last two lectures. But today, we're going to talk about channels. So let's take a look at our business model canvas. Channels is just one of the nine boxes in the canvas and it's a series of hypotheses of how does our products get from our company to our customer.
Now, when companies first started, there were essentially manufacturing concerns and they hired agents, outsiders to be their sales channel. And the first type of companies we had made physical products and therefore had physical channels, sales people, stores etcetera. But with the emergence of the web, we now have web and mobile channels and so a choice for us is picking the right distribution channel. We're going to talk about physical versus web mobile channels.
So one of the best ways to understand channels is to think about how business first started. We first started distributing and making physical products; cars, food, utilities etcetera and we distributed them through direct sales force. That is people you shook hands with, you looked in the eye and met and it wasn't until the mid-20th century that we actually started selling virtual products; things that didn't quite exist physically like insurance, stocks and bonds, enterprise software, shrink wrapped software started to be distributed through physical channels but they didn't exist in the real world. But it wasn't until the mid-1990s with the emergence of the internet that we were able to distribute physical products through a virtual channel.
Think of Amazon or Zappos or Netflix, even consumer electronics sold through the web. And what's happened in the beginning of the 21st century is we now have products that don't exist at all. Facebook, Twitter, Google, they're all bits and they're also distributed via the web. This virtual-virtual distribution channel allows for easier customization, optimization and allows you to change both product and channel almost on the fly. Through the rest of this lecture, we're going to show you which channels might be optimum for your startup and allow you to choose which one to pick.