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Customer Discovery and Customer Validation for Developing Products

November 20, 2015

 

“Don’t sell what you can make; make what you can sell.”

― Alistair Croll, Lean Analytics: Use Data to Build a Better Startup Fast

 

You've got a great idea. You see a problem in the market and you know how to solve it. The formula for success is easy:

  1. Take your idea

  2. Raise some money (or invest your own)

  3. Build the product

  4. Sell the product

  5. Sip fruity drinks on a beach

But you'd be wrong.

 

You'd be wrong because you are assuming that your description of the problem matches the hundreds or thousands or millions of potential customer's description of the problem. You'd be wrong because you assume the solution you have found means as much to them as it does to you and that they'd be willing to pay the same amount. And you'd be wrong because you assume how you would want to buy this product is the same way they would want to buy it.

 

The real formula for success lies in listing out your assumptions and then testing them methodically on the market.

 

Steve Blank, professor at Stanford, is the original creator of this customer development methodology and his work and teachings are a starting point for anyone looking to create something new. He was also an adviser to Eric Ries, who took these ideas and built on them for the Lean Startup. I would encourage everyone looking to launch a new product to study their ideas and apply them. Essentially what they are saying is, before you can worry about building your company, you have to establish a product-market fit. For any resource-constrained organization, finding product-market fit is a race to find this fit and scale the organization before the resources run out. The lean startup methodology is designed to give you the best chance of finding a working solution by using small iterative steps to justify development of the succeeding steps. These iterative steps allow you to discover an improper fit quickly and change your approach before you waste resources on a solution the customer doesn't need, want, or will pay for. Product-market fit is a term used in traditional product sales, however, it's probably more accurate to use Steve Blank's terminology that you are actually searching for a working business model. The business model encompasses, not just the product and the market, but how you will reach that market, what are your sales channels, what are your costs and who are your key partners. This is expanded on in Alex Osterwalder's book, Business Model Generation, and in the Lean Startup series book Running Lean by Ash Maurya.

 

These concepts seem simple and obvious.

  • Check with your customer often to make sure you are building the solution they want

  • Prepare to change based on that feedback

  • Don't scale before know if you have a way to make profit

Check with your customer often to make sure you are building the solution they want. It takes a strong relationship with a customer to get them to take time out of their day to give you feedback on a product or service. You may even jeopardize the relationship with early adopters to find these answers. You can see this risk in the crowd sourcing projects,where companies change direction after receiving funding, much to the chagrin of the backers who supported them. The quest for data runs counter to most people's nature. While not always, most times you need to be selfish and bothersome to your customers to get the information you need. Often people look for an easy or passive solution for feedback, but the best feedback takes work, there are no shortcuts. You must get out and talk to customers, not just rely on marketing or analytical data to make judgments.

 

These concepts must also mean you may need to abandon your idea based on the feedback. Your goal must be to build a company, not sell any specific idea. Your original idea may come from some insight into an underlying problem, so ideally your solution will somehow solve this problem, but not necessarily. Your iterative process and customer development may reveal new problems or new competitors who are already working in the same market. As the CEO of a startup you feel you need to be a leader and a visionary. You do not want to be seen as weak or making mistakes by shifting your priorities or changing your market approach. However, this need for flexibility is key to your success. It's counter intuitive to what we think of as a leader and that's why it's difficult.  An iteration or a pivot may require throwing out thousands of lines of code or trashing design layouts, and that can be a hard thing to do. With appropriately sized iterations though, you can minimize this waste while showing that each change is actually moving you closer to your end goal. As a leader in the company, you must build this adaptive mindset into the team.

 

It is always a business goal to run as efficiently as possible. The Lean Startup methodology was designed to aid in this process by maximizing the resources for development. However, some of the concepts, particularly the concept of small batches, can be counter intuitive. As an example, you have performed your initial testing with an MVP and customers like your solution. You're product is a physical good and you need to move from pilot production and have molds made for your production development. You have three products you plan to release with minor variations to address the market. Your manufacturer informs you that your first mold will cost $5000 each, but if you order all three, they'll cut $1500 from the total. Presuming you have the capital, it would seemingly make sense to buy all three and save the $1500 (10% savings). However, this would be wrong. It would be better to pay only for the $5000 and verify that the design works with the larger audience before scaling to additional markets. Startups and growth companies should actually practice activities which don't scale to ensure customer satisfaction. Scaling too fast is a major reason companies fail and resisting this desire to reduce costs early is an important task for leadership.

 

Change is hard. Starting or growing a business is hard. Implementing a lean startup process and spending more time on customer development and customer validation can increase your chances of success, but they won't make things easier. There are no shortcuts, you must do the work.

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