8 Steps for a Customer Development and Lean Validation

A startup includes any human enterprise designed to create a new product or service under conditions of extreme uncertainty and an entrepreneur is anyone tasked with ushering in that change . The creation of a lean startup comprises a continuous process of learning validation. Learning validation starts with envisioning the business idea followed with the actions of validation.  Validation is a process of approving the business assumptions based on real market tests. Market tests basically contain defining and interviewing potential customers to confirm the problem,  solution, value propositions and commercial offering. In this article, I will explain the steps to develop customers and to subsequently validate a lean startup.

 

  1. Steps for creating a lean startup

 

Step (1)- Envision the business:

Processes:

  • Customer and value mapping: where customer’s pains are identified, prioritized, tested and matched with a tested solution( value proposition).
  • Problem/solution fit ( customer development): Where problem( pain) is matched with the solution ( value proposition) and tested with evidence with potential customers.
  • Product development and product/market fit( customer validation). It is all about creating customer value, develop a product/market fit and to meet customer needs.

Outcomes:

  • Idea concept development: Where a pain and solution are identified, prototyped, product/market fit and tested with evidences.
  • Product development (MVP).

 

 

 

Step (2)- Articulate the strategy:

ProcessesBuilding and testing the business model. Business model is how to develop, deliver and capture values.

OutcomesTested business model and validated product development (MVP).

Step (3)- Plan for acceleration:

Processes: Plan for startup acceleration.

Outcomes: Achieving the acceleration objective as through achieving a growing and profitable revenue.

2.  3 Leap tests for lean startup

 

 

Lean startup goes through 3 distinctive tests before a company is created. Tests are:

  • Test (1) for a problem/solution fit- customer discovery: through mapping the pains of target customers, testing with potential customers that these pains are accepted to them and developing a solution ( unique value proposition) that can be bought by a potential customers.
  • Test (2) for a product/market fit- customer validity: a product and commercial offering are developed and accepted to buy by the potential customers.
  • Test (3) for scalability test- customer creation: It is evidenced that a business has a record of a growing profitable revenue.

 

3.  Key steps to a customer development

 

Step (1)- Why do you need a customer development?

  • Customer development is different from traditional marketing research methods. It will help us to understand what are the customer needs and preferences and ways to test them. The processes involve running many tests at microscale in order to get the engine of growth running.  It saves a lot of time, effort and money.
  • By applying the customer development method, you can help confirm that you are on track to a business model that works and a product that people want to buy.
  • Customer development method is a hypothesis-driven approach to understand:
    • Who your customers are?
    • What problems and needs they have?
    • How they are currently behaving?
    • Which solution a customer will have a compelling need to buy?
    • How a customer can easily decide, procure, buy and use your new product/solution?
  • Lean customer development is done in 5 steps:
    • Forming a hypothesis
    • Finding potential customers to talk to
    • Asking the right questions
    • Making sense of the answers ( evaluate answers in line with set criteria)
    • Figuring what to build to keep learning (prioritize, change assumptions or proceed)
    • It will be done in a continuous, small-batch learning and validation.
  • Product development is answering the question ‘when and what to buy’ but, customer development is answering the question ‘will they buy it?’ customer development process goes parallel with the product development processes.

Step (2)- How do you identify assumptions?

  • Customer development can be for validating a new business idea, launching a new product or adding features to a new product or other.
  • Three main steps to start the customer development, which are identifying assumptions, writing the problem hypothesis and mapping the target customer profile.
  • Identifying your assumptions:

Writing all related information or assumptions on the business-model issues, such as:

    • Customer problem, segmentation, market size, willingness to invest to solve the problem, buying motivation, substitute products, buying influences, demography, professional background.
    • Channel distribution, competition, customer relationships.
    • Quantifying value propositions.
    • Pricing and revenue models.
    • Partners, key activities and resources required.
    • Cost structures
  • Writing your problem hypothesis:
    • What is task, pains and gain
    • What is the problem with specific details
    • What are the causes of the problem
    • Is it severe and compelling by customers
    • Description and sizing of target customers
    • Evidences supporting your problem hypothesis
  • Map your target customers:
    • Who are they and how to reach them
    • Description of their social and professional background
    • Estimating size and buying power
    • Priorities and concerns
    • Motivation and demotivation players
    • Value proposition expectation/desires
    • Characteristics for their level of risk averse
    • Characteristics for their buying decision and influences
    • Characteristics for their level of low-tech versus to tech savvy
    • Characteristics for their level of autonomy

Step (3)- How do you identify your target customers to talk to?

  • The importance of earlyvangelists: people or potential customers who are having the relevant problem, aware of having a problem, actively seeking for a solution, put together a solution out of parts and can acquire a budget to buy the solution-product. Earlyvangelists will give your all details about their experience on the problem, their needs and their environment.  
  • Three things that motivate people:
    • Helping others
    • Sound smart
    • Fix things
  • How can I find my customers:
    • Ask connections (friends and coworkers) for introductions
    • Finding people on LinkedIn (be clear on why selecting a specific connection, state the problem and the ask)
    • Find people on Quora.
    • Find people on forums and private online communities.
    • Finding people in the offline world (i.e. customers, businessmen, professionals, investors, suppliers, researchers,..).
    • Using blog posts (i.e. Alltop.com; blogarama.com; blogs.com).
    • Using other social media platforms (i.e. twitter, Facebook, google plus, snapshot,…).
    • Using a land page (single sheet website) with AdWords and other google tools such as, google analytics, or using a hosted service like www.launchrock.com.
  • How should I conduct my interviews:
    • Visiting the customer’s home or office
    • In-person conversation in a neutral location
    • Phone conversation
    • Video chatting
    • Written messaging
    • Phone interview

Step (4)- What should I be learning?

  • Get started with these questions:
    • Tell me about how you do (idea) today?
    • Do you use any tools/app to help you get (idea) done?
    • If you have a magic wand, what would you do to get (idea) done better?
    • Last time you did (idea), tell us about your experience before, during and after the (idea) done?
    • Is there anything else about (project) that i should have asked?
  • Customers don’t know what they want
    • Customers know which culture, time and resources constraints affect them, but they don’t mention them unprompted.
    • Customers know what they have tried in the past that hasn’t work, but they won’t remember to tell you about.
    • Customers are aware of their capabilities and limitations, but probably won’t volunteer them.
    • Customers are proficient in the tools and processes they use, but it doesn’t mean they understand how they work.
    • Customers may not know what they want, but they can’t hide what they need.
  • What you should be listening for?
    • How customers are behaving today?
    • The constraints that affect the choices and actions that your customers take.
    • What frustrates and motivates your customers.
    • How your customers make decisions, spend money and determine value.

Step (5)- How do you conduct the interview?

    • The first minute: make the interviewee feel confident that she will be helpful, explicitly state the purpose of the interview.
    • The next minute: ask the first question and listen.
    • Keep the conversation flows.
    • Avoid leading questions such as, don’t  you think.., would you agree that…?
    • Digging deeper: apply the 5-why technique.
    • Stay focussed and dig for more relevant information.
    • Don’t forget to ask the magic wand question.
    • Be within the set time and propose for another meeting if necessary.

Step (6)- What does a validated hypothesis look like?

    • Is the customer saying something real or aspirational? You need to know the difference between want and will. The best predictor of future behavior is current behavior. You need to know if a customer confirms a problem and the need for a solution and has made efforts to solve the problem.
    • Collected information from interviewing customers should lead into an actionable decision whether to validate or invalidate an assumption.
    • To reasonably conclude a genuine opinion to validate or invalidate an assumption, it is recommended to interview 15-20 customers, of whom minimum 30% tell common information.
    • After making 2 interviews, you will learn if you are learning what you want to learn.
    • After making 5 interviews, you will encounter at least one person who is really excited about your idea.
    • After making 10 interviews, you will learn some repetitions or patterns.
    • Components of a validated hypothesis happens if a customer show evidence that he confirms the problem, the need for the solution, has tried to solve the problem and willing with compelling to buy your idea-product.
    • Validation processes will go through problem-solution test, product-market test and scalability test.

Step (7)- What kind of minimum viable product MVP should I build?

    • The goal of the MVP is to maximize learning while minimizing risk and investment.
    • Your aim for the MVP is to build a product-market fit product. A product that has sufficient demand and sellable for profit.
    • MVP doesn’t need to be a ready product but it is a lowest version of the product that will enable you to learn, reduce risk of failure and avoid a huge investments.
    • MVP will be produced based on certain assumptions or hypothesis. These assumptions will cover functionality, designing and commercial aspects of the product.
    • The most important questions that your MVP should answer are:
      • Can we get the product to the right customers?
      • Are customers willing to pay for the value that this product promises?
      • How does the customer measure the value she gets from the product?
      • What pricing model aligns with customer value and customer’s ability to pay?

Step (8)- What are the outcomes of the customer development?

  • Customer discovery: It is the outcome of mapping the pains of target customers, testing with potential customers that these pains are accepted to them and developing a solution ( unique value proposition ) that can be bought by a potential customers.
  • Customer validity: When a product and commercial offering are developed and accepted to buy by the potential customers.
  • Customer creation: When it is evidenced that a business has a record of a growing profitable revenue.

 

Should you need any further assistance, you please visit our website and have a look to Our Products. I will be pleased to answer your specific queries. You are kindly requested to send us your thoughts and how we can further assist you Contact Us.

 

Written by: Munther Al Dawood

Enterprise Development Services

www.growenterprise.co.uk

info@growenterprise.co.uk

 

Inspired by:

Alvarez, C. 2014. Lean customer development, O’Reilly, Boston, USA.

Blank, S. & Dorf B, 2012. The step by step guide for building a great company, K and S Ranch Inc., California, USA.

 

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