Customer Discovery & Development
On July 3rd we welcomed Shennice Cleckley, proprietor of My Dessert Bar to the Start Something, Columbia! studios with Larry Jennings of Capsure Studios to discuss Customer Discovery and Development. Here are the show notes:
Theme for the day:
Customer Discovery, Development, and Validation
Since there’s no 1MC this week, we have the entire show to dedicate to the topic. So YAY!
We are also starting a new book for July, so we’ll talk about that.
Our new book is The StartUp Owner’s Manual: The Step-by-Step Guide for Building a Great Company by Steve Blank and Bob Dorf. Here’s the Amazon link. It’s $7.39 in the Kindle edition and it’s not meant to be read cover-to-cover, it’s more of a Manual, like it says. So we took some recommendations about how to address the book in July and we’ve developed a schedule:
This week: The Customer Development Manifesto -- 14 guiding principles for building the business.
Next week: the business model hypothesis with Tom Ledbetter from Midlands Technical College
The next week, July 17th we’ll do “Pivot or Proceed” with Greg Hilton of SOCO Coworking Space
July 24th we’ll talk about Physical Channel Sales and Marketing with Ashlye Wilkerson of Wine & Design
And finally, July 31st Web and Mobile marketing with FGM Internet Marketing founder Fiona Martin.
So we’re taking the manual in pieces this month, really great shows lined up.
What do you think of the book approach? Is it a good way to generate conversation? A good way to talk about being an entrepreneur, by having these books to discuss processes and stories and wins and fails and all that?
The 14 Guiding Principles (share some or all as needed)
There are no facts inside your building, so get outside.
Founders gather firsthand experience.
Pair customer development with agile development
Rapid deployment, iterative development, and continuous discovery
Failure is an integral part of the search.
You’re searching, not executing, so there’s gonna be some bumps.
Make continuous iterations and pivots.
Iterations revise existing parts, pivots are substantive changes in one or more of the nine boxes of the business model canvas
No business plan survives first contact with customers so use a business model canvas so you can iterate and pivot as needed.
Design experiments and test to validate your hypothesis.
Agree on market type. It changes everything.
Existing, new, re-segmenting an existing
Start-up metrics differ from those in existing companies
Fast decision-making, cycle time, speed and tempo
Your bank balance declines every day. Make those choices fast.
It’s all about passion.
For start-up founders, their job is their life. These people are committed to chaos, uncertainty, and blinding speed.
Startup job titles are very different from a large company’s
Preserve all cash until needed. Then spend.
Maybe more related to those companies that raise a lot of money.
Communicate and Share learning
Customer development success begins with buy-in
Customer Development Methodology - helps you succeed where other startups fail by scoping out a customer base before putting your product on the market, contrary to the “customers will come” mentality
4 stage process that helps a startup have a successful startup:
Company Creation, and
Depending on where your business is with economics, projects stage of development will determine where and how a business decides to go into the “customer development” stage.
Pre-product to market = start at customer discovery
Product to market fit = start at customer validation.
Customer Discovery has three stages:
Problem-Solution fit: You validate with prospects that a specific solution will solve a known problem to such a degree that they will buy it.
MVP: You build a product that achieves (1) above and have validated it with prospects.
Sales Funnel: Through interviews, surveys and analytics you have crystallized a proposed "sales and marketing roadmap," which lays out the customer's buying process and the business activities you must undertake to move prospects through the process (funnel).
The processes of Customer Discovery and Customer Validation are iterative - very important not to forget that! Getting to know your consumers and developing sales strategies geared towards those customers to keep them engaged with your company is a never-ending process
Customer Discovery - the process of finding interested customers
4 steps - Who will represent your team?
Test 4 Hypothesis (problem, solution, price, go-to-market)
Test with customers
Questions to help during customer discovery and why they are important -
How did you hear about the product?
What process did you use to pick this product over the competition?
Why did you choose this product?
Which teams in the company use the product, and how has that changed over time?
How important is this product compared to other software?
How much do you pay?
Is it worth more or less than X product?
How quickly is the product evolving?
How satisfied are you with customer support and working with the company?
To whom would you recommend this product?
Problems with customer discovery and entrepreneurship:
In the Words of Keith Armstrong from Next,
“Customer Discovery simply begins with gaining empathy -- that is, developing a deep understanding of a customer’s needs and motivations. Often times, entrepreneurs are biased by their own envisioned solution, product, or ego, and end up searching for personal validation rather than remaining open to a real discovery process.”
How to avoid this? - Build customer segment personas, develop a customer contact list, and talk with potential customers
Probably a good time to talk about your own experiences (Larry and Shennice) with customer discovery and validating your products with customers.
Question and Answer about Customer Discovery and why it is so hard for Entrepreneurs:
Q: It seems like it should be intuitive, but why don’t startups naturally do customer discovery?
A: Entrepreneurs don’t like to be told that they’re wrong. They have this sense for what it is they think the world needs and so they want to execute on that sense. Customer discovery — the concept of going out and talking to people and opening yourself up and having them tell you where your idea is wrong is hard for anyone. It’s difficult to hear that kind of feedback and take it, consume it, and then use it to fuel you to the next stage. It’s really not an easy thing. It’s counterintuitive for entrepreneurs in general, because we tell them to charge ahead, and the customer discovery process is really an accelerator over the length of your business, but it’s not an accelerator at the beginning. We tell entrepreneurs to ‘go, go, go’ with their business, but with customer discovery, we’re telling them to slow down.
Q: What does customer discovery entail? How much do you need to do?
A: The basic premise is, identify the riskiest pieces of your business, create a theory for that, a hypothesis and then experiment. That process is, “I think that something is true. I will test to see if it actually is true.” The hardest thing about this is “confirmation bias,” where you believe anything they say reflects on what you’re doing positively. We constantly have entrepreneurs filtering in just what they want to hear.
Q: Is customer discovery a one-time thing at the launch of a startup, or is it something entrepreneurs need to do continually, even if they’ve already identified a market need?
A: It’s an all-the-time-thing. The key to it is that, as an entrepreneur, there has to be a balance between theory and reality. We’re not doing long, endless projects, we are trying to sprint through a bunch of things as fast as we can until we get to a point that we think something is doable or something is worth experimenting with. We have to build a business, we can’t just do customer discovery for the sake of doing customer discovery.
Q: Besides asking if a need exists for their product, what other questions should entrepreneurs ask in the customer discovery process?
A: Who is the customer? What is the value proposition that we provide to their problem? Where do they experience pain in what they do and what do they not want to do anymore? What can we do for them? It’s important to understand the situation they’re in.
Q: How much is too much or can one never do enough?
A: You can’t stop, but at the same time, you need to be able to execute. And when customer discovery gets in your way of executing — you have to strike a balance between customer discovery and execution. At the beginning, it’s very customer discovery heavy, and once you’ve found something, you need to go heavier on executing with the concept that we need to stay in front of our customers.
Q: What’s the difference between customer discovery and feedback?
A: Getting feedback from customers isn’t customer discovery. It’s feedback. Customers will tell you lots of stuff. They’re going to throw it out there as an option because they dream it up in their head. Customer discovery is almost a process of figuring out how to move a product forward without doing stuff. People who do it right figure out there are nine things out of 10 they can’t do. But there’s one thing — for their product to continue being that product that the customer uses — they have to do. That’s really the 1-out-of-10 feature you want to be looking for.
What Is Customer Validation?
Customer validation is the phase of the Customer Development model where you obtain hard evidence regarding the possible success of your business model.
What do you need to validate?
Common Mistakes during Validation:
Don’t have right target market,
trust people’s opinions too much,
don’t want to change products
Sell to Early Customers and product evangelists,
Entrepreneur Hold Up with Customer Validation:
A lack of customer insight means you’re more likely to launch something that does not have the necessary product / market fit. It also means an investor will refuse to fund you, either because you don’t have the smarts to recognize the importance of customer research, or because the risk is too high to invest, without some supportive data.
Ironically, most, if not all entrepreneurs know and agree with the advice that they get out of the building and go and talk to customers. Yet many delude themselves by maintaining that it isn’t actually necessary for their product because:
(a) They understand and know their target market. Firstly, if this is the case, then what’s the problem in proving you are correct? Secondly, in the words of Evan Williams, Co-Founder of Twitter
“Be a user of your own product. Hire people who are users of your product. Make it better based on your own desires. But don’t trick yourself into thinking you are your user, when it comes to usability.”
(b) Their friends, family and colleagues think it’s a great product. Sure they do. We tend to support and agree with those we like and care about. Credible evidence is independent evidence. Get out there and talk to people who don’t know and like you.
(c) It’s hard enough to get the damn thing out there let alone spend time trying to persuade others. This is more important than building a marketing plan or launching a website. If you don’t do this one thing, all else may be wasted time and money.
Eric Ries of Lean Startups fame, argues that “validated learning” about customers is even more important than revenue for a startup, since revenue, in isolation, doesn’t build traction. Products that are tested and proven, with customers that are ready to buy, are essential ingredients for success.
(d) I Don’t Want to Have to Change My Product. Product iteration is healthy and normal. If you are going to succeed, you will almost certainly have to revise your product and business model more than once. Better to make the changes earlier on rather than when it’s too late.
Fear, Tunnel Vision and Customer Validation
There are a number of other reasons why entrepreneurs resist doing the obvious. Fear of rejection is a big one. Our minds often ‘protect us’ by causing us to avoid those situations where we run the risk of rejection.
Equally, an entrepreneur needs ‘thick skin’ in order not to be deterred from taking risks by the many naysayers who line up to say you should be opting for the security of a 9-5 office job. This useful ‘thick skin’ can be unhelpful when it encourages the avoidance of customer validation.
Events of the week
With the holiday, this is a light week. No 1MC and No Women’s Business Center of SC activity, either. So spend time with your family and friends. Enjoy yourselves and celebrate America!
Q&A -- be sure to promote the phone number 799-8255; let people call in, tweet us, email them, collect them at 1MC, create a list of questions and answers
Final Sign Offs:
Next week, we’ll talk about the business model hypothesis with Tom Ledbetter from Midlands Technical College. Thanks again to Shennice for co-hosting today.