Getting Out of the Building: Customer Development
You must collect data when you get out of the building. But analyze it with a critical eye. Don’t just add up the columns. Look for insight!
So the question is what is customer development. What do we want to think about when we hear that word? And what customer development really is is a formal process of how you test all of your hypotheses. Remember as a great entrepreneur what you’re really trying to do is build the darn thing and get out and sell it. But what we now know is that most of the time when you do that you’re going to be wasting an enormous amount of time and money. Because your hypotheses, the things you believe, usually tend not to be right. And customer development is done almost entirely outside the building in front of customers and partners and other stakeholders in the business model as you’re testing your hypotheses with a series of experiments to figure out whether they are correct or not. And if incorrect what types of iterations, small changes, or what types of pivots, large changes, to your business model do you need to make?
What you’re trying to do with customer discovery is answer a set of questions about who the customer is, what the problem is, what potential solutions might solve their problems. And not only are you doing that for potential customer segments, you’re also doing that for potential partners, trying to understand pricing. And so customer discovery is a whole series of conversations. And later on they get formalized in the form of experiments. Did I acquire the number of customers I expected? Did I activate the number I expected? Did they get off my landing page? Did they use the product? Did they ask for a demo? Did something happen that I wanted to have happen? Customer discovery is this process of asking those series of questions and designing those experiments.
And one of the seductive things to do is say well, I get it, let’s hire a VP of sales and outsource this stuff to our sales VP and he or she will come back and report back to us about what they found in customer discovery. If I’m on your board you don’t get to hire a VP of sales, not at all. First people going out of the building either physically or virtually are you, the founder. This is your idea. You could do something that no proxy, no VP, no hire, not anyone else can do. What you could do is ask a series of questions that could make you pivot or iterate on the spot. And only the founders could do that. So what this means is in the beginning of a startup, you want the founders outside the building leading a customer development team. With the founders having the authority to take that information from customer feedback and create iterations and pivots in realtime. Major distinction between a salesperson whose job is execution, and a founder’s job whose job is learning and discovery.
So one of my favorite examples is a student team out of Stanford. They decided that the world’s best thing they could think of building is a robotic lawnmower, maybe doing it on large campuses or something else. And they were actually pretty good computer scientists. They understood machine vision and understood all of this other stuff. But they didn’t quite understand how it would fit as a business. So their first hypotheses were all about robotic mowing. And they got out of the building and started talking to potential customers, who all said, you know, how much is your device going to cost. They said oh, about a quarter million dollars. And they said we pay somebody $8 an hour to sit on the John Deere and go do this, why would we want this. And they came back after the first couple weeks incredibly depressed. They had done a whole bunch of customer discovery, but the customer segment they had thought about was telling them it’s the dumbest idea they had ever heard. So the teaching team nicely suggested that, you know, in California we actually have agriculture outside of Silicon Valley, about 60 miles away is Salinas Valley. We said if you could recognize grass could you maybe recognize plants or weeds. And they went yeah, maybe we could. So they got out of the building again, this time talking to farmers, asking them would it be any value to actually be able to tell the difference between a weed and a plant and maybe some way to automatically kill the weeds. Now it turns out in California we grow a lot of organic crops where you can’t chemically kill the weeds. You actually had to hand pick them. And we were using hundreds, if not thousands, of migrant workers in the fields to do this. And when farmers heard about a robotic solution for what’s called precision agriculture they started to get excited. To make a long story short, after talking to 85 customers this team completely pivoted. That is changed their assumptions about their customer segment, about the features that were important, even pricing. The farmers taught them they shouldn’t be selling the machine, they should be leasing it based on the density of the weeds. Who would have figured that out sitting in a building? And this is just one example of a team that started with a series of hypotheses that they fervently believed in and as they got out and discovered, learned a completely different set of facts.
Founders School || The Lean Approach || Getting Out of the Building: Customer Development || Impact Guide (PDF).
Blank, Steve and Bob Dorf. The Startup Owner’s Manual. The Step-by-Step Guide for Building a Great Company. Pescadero, CA: K&S Ranch, 2012. Chapters 3, 4, and 5.
Blank, Steve. The Four Steps to the Epiphany. Successful Strategies for Products that Win. Pescadero, CA; K&S Ranch, 2013 Chapters 3 and 4.
Blank, Steve. Blog Post. “Nail the Customer Development Manifesto to the Wall“.
Blank, Steve. Blog Post. “Building a Company with Customer Data – Why Metrics Are Not Enough”.
Blank, Steve. Blog Post. “Watching My Students Grow“.
Cespedes, Frank V., Thomas Eisenmann, and Steven G. Blank. “Customer Discovery and Validation for Entrepreneurs”. Harvard Business School Background Note 812-097, November 2011. (Revised August 2012.)
DeWalt, Kevin. Blog Post. “Accelerate Your Customer Development“.
Osterwalder, Alex. Blog Post. “Achieve Product Market Fit”.
Blank, Steve. Stanford Entrepreneurship Corner, Video. Acting on Customer Discovery.
Blank, Steve. “It Must Be A Marketing Problem”.
Questions for You
What insights can I gain about who my customer is, what problems they have, and what the potential solutions are?
Where can I find my potential customers?
What are my hypotheses about customers, customer needs, my product, and the market?
Do I understand the market?
Am I building the right product?
Will customers buy it?
Tools and exercises
Blank, Steve. Slideshare. The Tactics of Conducting Customer Discovery.
Blank, Steve. Founders Workbook. A companion to the Startup Owner’s Manual. (Website: Zoomstra.com/foundersworkbook)