It is a method that outlines a procedural framework for entrepreneurs and startups of how to develop a product successfully, with very minimal risk in the market by having a comprehensive understanding of the customer.
The process of customer development is undertaken parallel to the process of product development, to create a relationship that is balanced between understanding customer’s requirements and developing the product.
There are two kinds of risks that influence the early stages of ventures. These are risk of invention and market or customer risk. The risk of invention is where there is uncertainty whether a product would be developed, which cannot be solved through customer development methodology. Customer development methodology shows the path and startups when the issues are market adoption and customer acceptance.
The framework of customer development is composed of blocks which include validation of the customer, discovery of the customer, building of the company and creation of the customer base.
Validation of the customer focuses on the uncertainty surrounding the development of appropriate sales model which can be scaled and replicated. Discovering of the customer primary focuses on understanding problems of the customer and testing hypotheses by ensuring that the founders interact with customers. Customer validation and customer discovery are the most powerful steps for search.
The components of customer discovery methodology are “state hypothesis, test the problem, test the solution and pivot or verification.”
At the state hypothesis stage founders are guided to state about a number of hypotheses about the future of its business model. The stage of test problem the founders are to get out and commence interviewing customers and testing their hypotheses. During the test solution stage, the founders talk with customers by presenting the solution. In the fourth stage the hypotheses that have been updated are tested and validated with customers, and depending upon the results they can be pivoted.
In the process of customer discovery the founders should deter themselves from pleasing all customers, but incline in developing the products for the few and not the multitude. In the process of customer discovery the primary thing is the startup searching for a solution of the problem i.e. products market fit which makes the value of the startup preposition match the segment of the customer. The sole reason of focusing a limited number of customers is to design the vision into MVP (Minimum Viable Product) to capture the interest of a limited number of initial customers.
The founders normally have the primary experience of each part of business model; hence, the process of business development should be undertaken by them. Failure is part of customer development process when searching for a solution. Therefore founders should not be scared to make constant iterations and finally pivot.
However this may be difficult, considering the amount of the loss in the development or product. Therefore discovery of the customer should be paired with, and performed parallel to development of physical product.
It is also imperative to settle with the kind of marked envisioned by the founders. The introduction of a product to an existing market with a known business model works with the traditional model of product introduction.
Many startups normally approach unknown markets and also the customers are usually unknown. This implies that every kind of market dictates almost everything a company undertakes and different kinds of market need absolutely different methods of discovery, Minimum Viable Products, marketing and sales strategies.
In a new market venture a company creates a unique asset that was not in existence before, that help and influnce customers to undertake things they could not perform initially. The assumption with new markets is that there no customers yet, and therefore there no one to comprehend how the product should be, what it should perform, or why customer should go for it.
Getting response from users and creating product demand is specifically difficult for unknown market and undefined product. Hence, it is prudent for a company to evade typical errors such as spending fast on marketing and sales prior to validation of the product with customers. The company should bear in the mind that the way to winning is locating large set of customers and persuading them that the new market vision of the company is real and provides a real solution to the problem in a special way.
Phase one of customer discovery: stating the business model hypotheses
This particular phase is primarily about deconstructing the founders’ vision into nine parts of the business model. These include;
Market size hypothesis
This helps startups to map out the size of the market, and recognizes the limits of their business model. This is because making estimation of the market size helps to establish one’s future capabilities.
Value position hypotheses
This part contains features of the product and its gains compared to the existing solutions. It elaborates the reasons why individuals will want to purchase the product.
The customers and problems, passions or needs are defined here.
This part explains the way a product will take to reach the customers from the company.
Competitive and market-type hypotheses
The type of market in which startup will choose to approach is described here.
Customer relationship hypotheses
Describe how customers can be gotten into sales channels, how to keep customers and how to grow additional revenue from customers after some time.
Identify external resources responsible for company success and how the company will give an assurance that the resources are available.
State the partners that provide products, capabilities, or services that the startup would prefer not to develop itself.
Pricing and revenue hypotheses
Here the quantity of sales, revenue model, value to charge and the business worth are explored.
Phase two of customer discovery: testing the problem
This process should follow the sequence; designing the tests, contacting the customer, understanding the problem, understanding the customer and having the knowledge market.
Phase three of customer discovery: testing the solution
This phase tests whether the solution grasps customer’s enthusiasm to buying the product. It consist of these steps; updating business model and team, creating product presentation, testing the solution with the customers, re-updating business model and first advisory with board members.
During this phase analysis of the modified hypotheses is done and decision to pivot or proceed is undertaken. If the prospective customers have validated the product, then the company can proceed to customer validation process. If the criteria were not attained, return to customer discovery or pivot can be considered.
So armed with this information its time to get started on building your product and discovering your customers.