- Steve Blank in his book "The Startup Owner's Manual" talks about the steps needed to transition from being a startup to a great company. And a central element of that is customer development. Customer development is a process that consists of two parts.
- First of all, you're searching for a business model, and then secondly, once you find that model, you begin to execute it such that you're actually building a company. So let's talk about the first element of that, and that is really about, how do you discover customers, build theories about what customers will best benefit from your solution, and how do you validate that?
+ It's a process that requires iteration, and it's also a process that based on feedback from a customer, you may actually go back to the start of, because you don't have a real answer. So let's look at each one of the stages of the customer development process, starting with customer discovery.
+ Customer discovery is about creating theories that map the founder's vision for the product or solution to customers and markets that will best benefit from them. The answers that are required to actually move forward are really based around two things.
- One is, do you understand the customer problem and their need? And more importantly, do you understand how your product is a solution that actually fits that particular problem?
- If you do, you're ready now to move to the customer validation phase, and that's really where you start to have conversations with customers to get their feedback and to prove out whether your theories are wrong or right.
- So ultimately, what you wanna do is prove that the business is repeatable and it will scale. So here are the questions that you might ask to figure out if you're now ready to move to the execution phase. Is there a set of customers that are willing to buy this? In effect, is there a market for your solution? Is the product in its current form acceptable to the customers?
- And finally, when they talk about purchasing your solution, can you measure their real intent? If the answer to any of those is no, you may actually have to now pivot back to customer discovery. However, let's assume that the answer is affirmative, and let's talk about the next stage.
- The next stage is now really about entering the execution phase, starting to build out what the things that a company really needs. So now you're really thinking about building end-user demand and you're also thinking about scaling how you sell.
- So these activities that are typically associated with these two things vary based on what type of market you're going to enter. So there are three types of markets. One is, are you attacking an existing market that may already have existing competitors, but you know who the customer is? Are you defining a new market where you don't know who the customer is, but you don't have any competitors?
- Or is it sort of a hybrid, you're re-segmenting a market that exists such that you can now compete based on cost or you're able to provide functionality to a particular niche of buyers?
- Finally, once we figure out a business model and we're confident that we can scale it, it's now about transitioning our organization from truly being a startup to a company focused on execution. So mission accomplished. You've met your goal.
- So the three key take aways in this discussion is that the customer development process is essential for you to be successful as you transition from startup to company. It allows you to identify and develop your business plan. With it, you'll use the process to prove theories about customers and markets that will benefit from your product, and also, you'll think about how to best tap into mainstream markets that will give you the revenue you need to become a market-leading company.
