The Golden Rules of Customer Development

There are several reasons why startups fail, but for sure the one that customers don’t care is not among them. Instead, as harsh as it may sound, is that you don’t! So you’d better work out what matters to your customers instead of complaining about them! Customer development comes to the rescue here and the MVP Academy Class of 2015 has learnt more about how to do it right earlier this week, in a workshop with Salim Virani, Founder of Decision Hacks and Founder Centric.

Serial entrepreneur, Salim has started Founder Centric, Leancamp and 5 other tech startups, his early successes ironically funding his later failures. He’s worked with a bunch of startup thought leaders, designed education programs for Europe’s top accelerators and universities such as UCL and Oxford. We’re thus grateful that he kindly accepted our invitation to join us in the MVP Academy pre-acceleration program and share his expertise on the customer development process.

But let’s start with the beginning: so what’s customer development all about?

Customer Development is a four-step framework used for:

  1. Customer Discovery: Discovering and validating the right market for your idea
  2. Customer Validation: Building the right product features that solve customers’ needs
  3. Customer Creation: Testing the correct model and tactics for acquiring and converting customers
  4. Company Building: Deploying the right organization and resources to scale the business

Steve Blank, Silicon Valley serial-entrepreneur and reputed academician, now lecturing at prestigious US universities such as Stanford, Berkeley, Columbia, or Caltech, among many others, developed the methodology that is known to have put the basis for the Lean Startup movement. For more information on the entire process check out some of Steve’s explanatory talks, as well as the Customer Development Manifesto, a series of blog posts he’s published on the topic.

Cust Dev Process

The startup development process

When talking about Customer Development, the biggest challenge for your early stage tech startups is to do the customer discovery and validation right in order to help you get through the three consecutive stages towards a successful business:

  • Problem – Solution Fit: Finding the problem that is important for your customers, as well as the best solution for it
  • Product – Market Fit: Turning your solution into a product in accordance with the market you find fit for it
  • Business Model Fit: Choosing the business model that will turn your product into a viable business

And of course the key to doing it right stands in communication: talk to your customers, understand their needs & wants and make product decisions in accordance to the results you find in this process. Unfortunately, this is easier said then done, and this is why Salim joined us to offer valuable advice and share some of the golden rules of customer development with the MVP Academy Class of 2015. So here are a couple of things to bear in mind if you want to do sort things out properly.

Listen and respect the point of view of your customers

Customer development isn’t sales! You don’t have to pitch your product, explain why it is great and how it will solve all the problems in the world. Instead, listen to what your customers have to say and be flexible in meeting their needs.

“When talking to customers, learn and respect their point of view, listen to the specific words they use and pay attention – that might help you build a better product to solve their problem, find a better angle for your pitch, or a better explanation of the true problem your product is solving for them”, advised Salim Virani.

Understand first, verify later

You’ve probably heard before the saying that “assumption is the mother of all failures”! Oh well, it is and it’s important to verify all your assumptions with your potential customers. Before making assumptions, however, you’d better understand your customers.

“Especially in pre-product interviews, it’s important to ask questions that allow you to UNDERSTAND your customers’ behavior, instead of looking to verify specific assumptions. This will give you better chances to find the best solution for the problem, and find the true and most painful problem of your customers”, said Salim.

Use the Mom Test

How much of what you believe about your customers is wrong? Generally, pretty much, and we’ve got some more bad news here: people are going to tell you what you want to hear, especially if you want to hear it. This is why you have to shape the conversation such that you ask questions so good, that even your mom will not be able to lie to you.

So what should you ask your customers about in order to pass the mom test?

  • Ask about the past – because nobody can predict the future. “How much did you pay to solve this problem before” instead of “How much would you pay for x”
  • Ask about facts – because opinions do change. “How did you solve this problem?” instead of “How would you solve this?”
  • Ask about specifics – because generalities hide the truth

And finally, remember that the burden of truth is on the observer so it’s up to you to get the information straight. We recommend you to check out The Mom Test, a book written by Rob Fitzpatrick, if you want to learn more on the topic.

Avoid talking about your product

This is extremely useful, especially in the early interview. Pre-product conversations are very valuable, so try to postpone talking about the product for as much as you can. If potential customers are genuinely curious, you can attempt to turn them into beta testers later in the process.

Listen to the signals

Conversation is a skill, rather than a process, and you’ll become better at it as time goes by. Listen to the signals your customers give you in order to identify potential opportunities and always pay attention to:

  • The obstacles they talk about. Problems and frictions indicate areas where you can be of help.
  • Their goals. These tell you where you fit into the bigger picture of their life.
  • Their actions. These give you a sense of whether they care enough to do something and, if they do, what their options are

When identifying these signals, use anchor questions to go into specifics and get them to talk more about it. These are questions and remarks such as “Interesting… tell me more about that” or “Can you help me better understand?”

 Make informed decisions with your team

The trick to making decisions as a team is to share insights and decide together. You should talk about things, build common knowledge, and discuss what’s not clear. This will not only help you make informed and assumed decisions, but it might also bring some extra questions that need to get answered in your next interviews.

“If you have multiple people running customer interviews, or if you have one person running interviews that needs to be in sync with the team staying in the office, you should gather all the meeting notes, put them on a table, ask everyone to read through, and point to the things they don’t understand”, recommends Salim.

Use the Product / Market Prism

And this is where Decision Hack, the guide Salim is working on, comes into play, helping you dislodge tough decisions & get your momentum back. What’s it all about? Oh well, you have to remember that your customers always have options available, so you’d better look at the following 6 things when making your product decisions:

  • Time: when do they need your product
  • Money: how much money are they able to spend for it
  • Different buying triggers: when do they generally buy stuff
  • Context: the setting where they generally decide to buy stuff
  • The general standards they look for in a product
  • General measurements they take into account

“In the end, you don’t get to tell your customers what their needs are, but they don’t get to tell you what your product is. Just try to design your business around customer behavior, not intention, since the first is measurable or recallable. And remember that if you’re in the mindset of a learner trying to understand the customer, you’re doing great!”, concluded Salim.

We do hope you found this useful and we’ll get back to you soon with more insights from the MVP Academy workshops. Next week we’re talking about sales and digital marketing, so stay tuned and subscribe to our newsletter to be the first to know the latest updates.

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