This article is written with a primary reference to the book: Blank, S. 2013. The Four Steps To The Epiphany and to the book: Moore, G. 2013. Crossing the chasm. I believe that these two books have greatly contributed to the science of entrepreneurship in general and the customer development model in particular. By introducing this customer development model, the perception and practices for launching a new product has been drastically changed toward focusing on the market and customers instead of the product. This customer development model is a must-read reference to entrepreneurs and startup practitioners.
The Product Development Model
- It encompasses: concept, product development, alpha/ beta test and launch/ the 1st shipment.
- The product development model is not a workable business model, due to the following reasons:
- It doesn’t take in consideration to the customer development.
- The focus on the first customer ship date.
- It emphasizes on execution instead of learning and discovering.
- It lacks of meaningful sales, market and business development milestones.
- It uses the product development methodology to measure sales and marketing objectives.
- It is a premature scaling.
- The cost of getting the product launched is devastating.
- It doesn’t take in consideration different types of startups.
- It will lead into unrealistic expectations.
- What is the alternative solution? It is the following approach:
- The technology life cycle adoption curve, where encompasses the phases: innovator, visionary, pragmatic, conservative and skeptic. The startup will face 4 different groups of customers during its development. There is a big chasm between the visionary (early adopter) and pragmatic (mainstream early ) group of customers.
- The customer development model, illustrated in this book the four steps to the epiphany.
The Customer Development Model
- It is the process for discovering customers, validating assumptions and growing a business.
- It encompasses searching group of processes (customer development and customer validation) and execution group of processes ( customer creation and company building).
- Customer discovery: it aims at discovering your customers (who are they and how to reach them) and testing your business concept (problem-solution fit and value proposition).
- Customer validation: it aims at validating your sales model (product-market fit and sales roadmap) and achieving repeated sales.
- Customer creation: it aims at creating demand and driving the distribution channels.
- Company building: it aims at transforming the company, including building formal organizational and management structure, hiring staff and management.
The Customer Discovery
- It presents proofs of a workable business vision. The business vision is made by a founder and summarizing the conceptual product or service, why and how customers will buy it.
- The outcomes of customer discovery are: identifying the problem, the solution, profitable business model and learn how to sell.
- Customer discovery begins with searching and speaking to the earlyenvangelists, who understand the pressing problem and pressured to find solution and financially capable to buy it. Earlyenvangelists are the target customers for testing assumptions and learning on customer discovery.
- The customer discovery will go through 4 steps: vision and writing assumptions; testing the problem (is it compelling?), testing the solution (product features & benefits is it accepted to buy by relatively a big group of people) and pivot or proceed.
- Step (1): stating the vision and writing the assumptions on:
- Product: features, benefits, IP, delivery schedule, cost, dependency analysis (partnership with suppliers, if any).
- Customers: who are they? What is the pressing problem? Customer influencers, ROI, minimum features set, a day in life of a customer.
- Pricing and channels: what are the channels and proposed pricing sets.
- Demand creation: how to develop a sales roadmap and communication plan.
- Market type: is it a new market or existing with niche and low-end segmentation.
- Competition: define the competition basis, who are your competitors and their competitive advantages and how your product will be successful in competing and penetrating the market.
- Step (2): testing and qualifying the assumptions:
- Customer contacts: begin with 50 customer list and search for the earlyenvangelists.
- Customer problem presentation: present the problem in a simple and visible way and get information about your understanding and how compelling is this problem and explore possible solutions.
- In-depth customer understanding: who is your customers, the job they do, pains, desires and how to reach them.
- Market knowledge: collect information about the market, including the competition, channels, prices, adjacent markets, segments, shares, trends, key unresolved needs, key players,…
- Step (3): test and qualify the solution (product concept):
- First company reality: check and refine all assumptions based on the outcomes of testing assumptions.
- Product presentation: demonstrate the product as through prototype (descriptive drawing) to help customers understand your product concept, features and benefits and get feedback of the customers on the product and its features.
- 2nd company reality check.: refine the assumptions made so far based on the outcomes of testing product solution.
- Appoint first advisory board members.
- Step (4)- Verify assumptions:
- Verify the problem: summarize the testing findings on the problem and conclude the problem statement document.
- Verify the solution or product: summarize the testing findings on the product/solution including the features, benefits and unique value propositions and conclude the solution statement document.
- Verify the business model: refine all assumptions at the business model and reproduce the updated business model.
- Iterate or exist: you reassess if your modified hypotheses provide a sound foundation for moving forward or modify your assumptions and test before you move forward.
The Customer Validation
- It aims at verifying product/market fit, understanding of sales processes, prove repeated sales, prove salability of the product, workable distribution channels and sales and profitable business model.
- In summary, the customer validation is about proving the sales roadmap of your business.
- It encompasses phases: get ready to sell, sell to visionary customers, develop a market positioning for the company and product and verify findings.
- Step (1)- get ready for selling:
- Articulate your unique value propositions as on what your products do and why should customers care or buy.
- Prepare a preliminary marketing collateral plan as on how to write the value propositions and to communicate to internal and external stakeholders.
- Preliminary distribution channel plan as on choosing the channels and presenting management and financial aspects of it.
- Develop a preliminary sales roadmap as on showing details of how to access to customers, sales strategy and implementation plan.
- Hire a sales closer.
- Align your executives.
- formalize your advising board.
- Step (2)- sell to your visionary customers:
- It will validate your ability to sell your product and assumptions on customers and business model.
- It encompasses actions on contacting earlyenvangelists, sell to earlyenvangelists, refine sales roadmap and refine channel roadmap.
- Step (3)- develop positioning for the company and the product:
- Product positioning: it is the process of comparing your product with the competitor’s ones and develop the unique value propositions. It should be accurate, customer based information and informative.
- Company positioning: it is the process of gathering information on the benefits of the company, why it exists and how it is different than competitors.
- Make a presentation and communicate the product and market positioning to external and internal stakeholders.
- Step (4)- verification:
- Verify product solution: product-market fit.
- Verify the sale roadmap: customer access, sales strategy and implementation plan.
- Verify channels plan
- Verify the profitable business model
- Iterate, return or exit.
The Customer Creation
- Customer creation represents the marketing activities to help customers learn about a product and buy it.
- It encompasses steps: year one objectives, positioning the company and the product, launch the company and product and demand creation.
- Step (1)- get ready to launch, including conducting a market type questionnaire ( collect information about the market, customers, competition and trends); choosing the right market and segment and setting 1st year sales objectives.
- Step (2)- position the company and product, including preparing the positioning collaterals, selecting the PR agency, conducting positioning audit and matching positioning at the selected market.
- Step (3)- launch the company and product, including selecting the launching type (on slaughter or niche type); selecting the customer audiences to first reach the launching to; selecting the messengers and tools to deliver messages to the audiences; crafting the message, choosing the media and finally measuring the success.
- Step (4)- create demand, including articulating the demand creation strategy ( activities to achieve the 1st year sales objectives); setting demand creation measurements (such as sales funnel and conversion rates) and iterate or exit.
The Company Building
- It encompasses steps including building a mainstream customers, building the company organization, management & culture, manage staff and department.
- Step (1)- building a mainstream customer, including searching for the mainstream customers that follow earlyenvangelists and successfully crossing the big chasm between the earlyenvangelists and mainstream customers. A good reference to better understand the technology adoption life cycle, is to read the book Crossing the Chasm by Moore.
- Step (2)- building the company’s organization and management, including the management system and appointing top management to lead the formal transformation processes. Most importantly, it is building supportive leadership cultures that encourage teamwork, listening to employees and externals, encouraging delegation and independency and other business values and practices.
- Step (3)- creating fast-response departments, including appointing, developing and managing staff and departments.
Call for Action:
You please feel free to feed me back with your comments and suggestions. Should you need a training or mentorship or advising assistance on entrepreneurial businesses, You please contact us. For more details, you visit our website http://www.growenterprise.co.uk.
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Written by: Munther Al Dawood
Enterprise Development Services