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Have you heard about customer development? Why it is so much important in product managers life. Startups often fail to develop the right product because they fail to identify the right target customer segment. But before product development, it is very important that we focus on the customer development part. Most companies fail from lack of identifying customers than from a failure of product development.
Definition by Wikipedia - Customer development is a formal methodology for building startups and new corporate ventures. It is one of the three parts that make up a lean startup (business model design, customer development, agile engineering).
There are lot of articles present over the internet on customer development. I will try to make them simple and focus on how it impacts product development.
The Customer Development framework was developed by Steve Blank as part of the Lean Startup methodology. The whole idea is to talk to customers/partners/vendors and follow a structured process which contains design, experiment, run tests, get data to have more insight to make final decision. The four steps of the customer development framework are: Customer Discovery, Customer Validation, Company Creation and Company Building. The first two steps forms the customer search part. It helps to build a scalable, repeatable business model. Last two steps construct are executing part of the business model. Lets deep dive on the four stages one by one. I will focus on the first two stages as they are the most critical in the customer development process.
1️⃣ Customer discovery – This is the first step where you get out of your seat and talk to customers to understand whether they have the same needs/pain points as you think. Understand your customers and their needs, because you need to know whether you have the capability to satisfy the needs. Here you also need to understand why I am mentioning the word 'Customer Needs'. There is a huge difference between customer requirement and customer needs. Sir Henry Ford said once- 'If I'd asked my customers what they wanted, they'd have said a faster horse.' This is also the phase where you validate or test the assumption you made on the customers identifies at the first stage. The assumption contains both the customer problems/needs and the solution which you have. Most of the time the hypothesis is not successful at the first iteration. There might be a number of iterations to identify the correct customers. The idea behind this scientific approach is to fail fast i.e., if the hypothesis fails, then quickly modify the assumption and validate again. Don't be surprised if you see multiple iterations to correctly identify the customer needs and whether your product will be able to satisfy the needs. You need to be patient and continue testing the hypothesis related to problems and solution respectively. Based on the result you decide either to proceed or not to proceed. The 'Not to Proceed' part is also called Pivot which is nothing but result of hypothesis testing and experimentation. This is also known as product market fit, where you are validating your value proposition and customer needs. Based on the customer inputs you will start with the MVP. At the end you need to define your Hypothesis and draw and business model canvas.
At the end I would like to say one comment from Steve Jobs who understood the customer needs very well. He said that to get closer to customers deeply, so that you will know their needs before they realize. In short, customer discovery is a four-step process:
- State the hypothesis.
- Test the problem.
- Test the solution.
- Verify or pivot.
2️⃣ Customer validation – So you already have good amount of customer feedback and you have understanding whether your business model is good enough to start selling. It is right time to test your product. Come up with a MVP and try it out. Based on your product you will get response as increased orders or increased users (this depends on your business model). Based upon the feedback you will realize whether to proceed with the product or pivot. Also, at this point of time you will understand what your customer segment is. Your product will have a position to a specific customer segment. Your organization will also need position itself to customers. In short, customer validation is a four-step process:
- Get ready to sell.
- Get out of the building.
- Developing positioning.
- Verify to proceed or not.
If you are pivoting here, you have to go back to customer discovery phase to recheck on your hypothesis.
3️⃣ Company creation – Time to create the end user demand and scale of your product. You start with the MVP and add feature and you continue.
4️⃣ Company building – You can grow your organization in order to support the demand for your product.
Hope the above details are enough to explain about the customer development process. For more details you can also checkout the video - Customer Development - Steve Blank
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