Customer Development for Startups
Startups I meet are sometimes too much focused on how much their idea is brilliant, not understanding that market validation gives always unexpected results. Moreover the majority of professional investors in Italy invest only when startups reach metrics showing a positive trend. To achieve this result I always suggest startups to study the Customer Development methodology.
Customer Development is a technique widely used by web startups to quickly iterate and test every part of their business model. The methodology was developed by Steve Blank (Four Steps to the Epiphany. K & S Ranch Press), a former serial entrepreneur who now teaches at Stanford University, in the heart of Silicon Valley.
Blank describes a startup as an organisation built to search for a business model that is repeatable, sustainable, and scalable.
The task of startup founders is to quickly validate whether the model is accurate by seeing if customers behave as it predicts. Most of the time customers do not behave as predicted. Customer Development is the process startups use to quickly iterate and test each element of their business model. According to Steve Blank, Customer Development involves four steps:
- Customer Discovery – creating a hypothesis about who your customer might be and then asking those customers what they want, how they work, what they hate, and what they want more of.
- Customer Validation – developing a repeatable and scalable sales process. This is based on the assumption that the customers in the first phase are early adopters who do not reflect the characteristics of the average customer.
- Customer Creation – after proof of sales, the strategy for creating new customers is established.
- Company Building – rebuilding the company’s organisation and management once the business model and client acquisition processes are consolidated.
Ash Maurya, CEO of Spark59, emphasises the importance and use of Customer Development in web startups and has slightly modified Blank’s schema, particularly the Customer Discovery and Customer Validation phases.