CUSTOMER DEVELOPMENT.pptx

CUSTOMER DEVELOPMENT Unit 3 1 Customer Development Process 2 3.1 What is Customer Discovery? 3.1.1 It’s All About Staying Lean The phrase “customer discovery” traces its roots back to two serial entrepreneurs: Steve Blank and Eric Ries. These two men are most widely known for t...

CUSTOMER DEVELOPMENT Unit 3 1 Customer Development Process 2 3.1 What is Customer Discovery? 3.1.1 It’s All About Staying Lean The phrase “customer discovery” traces its roots back to two serial entrepreneurs: Steve Blank and Eric Ries. These two men are most widely known for their contribution to the “Lean Startup” methodology. At the heart of the Lean Start-up is the process of utilizing customers very early on in the business development process–and that is precisely the theory behind customer discovery. Customer discovery “is all about questioning your core business assumptions.” Performed correctly, customer discovery is a customer-centric, scientific process that puts evidence behind an assumed product-market fit. 3.1.2 You Become the Scientist In customer discovery, you (the founder) take on the role of a scientist or detective, trying to let evidence lead you to a solution without letting any of your own bias get in the way. In fact, customer discovery ordinarily involves a process that closely follows the traditional scientific method: Observing and defining a phenomenon (problem or market need) Developing a hypothesis about a solution to the problem (business idea) Conducting an experiment to test the hypothesis (getting “out of the building”) 3 Steps of Customer Discovery Video: https://www.youtube.com/watch?v=FRzz9JJ6iiI 1. Step One: Define a Hypothesis The first step is to form a hypothesis that defines both the problem and the solution you are proposing. A simple way to frame this is to fill in the following sentence: My idea solves [insert problem] by [insert solution]. 2. Step Two: Define Your Assumptions In detailing your hypothesis, you will be forced to make some assumptions about your idea. These will include assumptions that: The problem you addressed is actually a problem The solution you propose will actually solve the problem The market you plan to target has this problem The market you plan to target will be willing to pay for your solution 3. Step Three: Ask (Good) Questions The next step is to “get out of the building” and ask some questions. You’re going to start by targeting people who you believe could be potential customers. If you’re running a college laundry business, you should not be asking your parents or professors questions. They are not going to be your customers. Ask the people that you anticipate asking to buy your product in the future. They hold the 4 answers. Steps of Customer Discovery 4. Step Four: Evaluate and Refine If you perform the customer discovery process correctly, chances are you’ll discover some things that you had not originally considered. At this point, you have the opportunity to return to the drawing board (Step One), incorporate what you’ve learned, and repeat the process. Once your customers’ responses match your hypothesis, then you can move on confidently, knowing that you are about to build something that your customers will actually want. It may seem frustrating to have to go back and revise your original idea, but think about this: it is far better (and cheaper) to revise your idea now–at the beginning–than after you have already spent significant time and money building a product or service around false (or partially false) assumptions. This gives you a distinct advantage over everyone else in the market. Someone else may be building the fastest product, but you will 5 end up building the best product. 3.2 Customer Validation Video: https://www.youtube.com/watch?v=ewEtBz9SST4 Customer validation is where you obtain hard evidence regarding the possible success of your business model. You cannot just assume that customers will buy your product – even if they tell you they might! Dealing in hypothetical scenarios does not help you affirm whether you have a solid business plan. This is why you must validate all of the information that you think you know. Customer validation proves whether your assumptions are correct before you spend too much money. According to Steve Blank, the reason that too many businesses fail in the future is because they work based on their assumptions. Customer validation helps you avoid building a product that no one wants. This is because it forces you to get out of the building and talk to real customers. Another key benefit of the customer validation step is that it allows you to change your methods early. Iteration is key in this model and it is okay to get it wrong. If you fail before you have launched or shipped, you will have inevitably have spent far less money than you might have otherwise and it gives you the opportunity to try again. Finally, customer validation tells you whether customers will really buy your product. Hearing customers say that they would buy your product is nice but it is ultimately meaningless. Your customers need to actually put their money where 6 their mouth is for this sentiment to be worth anything. 3.3 Customer Creation Businesses can move on to customer creation step after it has found its initial customers and made its initial sales. The main goal of customer creation is to provide an experience that drives market demand straight into the sales channel of the company. This is also the part of the model where businesses can start spending more on marketing. It helps prevent you from wasting time and money trying to position the business in the wrong market. Customer creation requires you to enlist your market’s major influences. You have reached out to early evangelists and adopters as they are valuable because they validate your value propositions. They also demonstrate that you do have a real customer base. However, once you have your product and knowledge of your customer, you need to find bigger industry influencers. Customer creation phase is about your overall strategy to reach your customers in a way that is meaningful. To make sure that this happens, the kinds of marketing opportunities that you chose should be7 directly in line with the market that the business is entering. 3.3.1 THE FOUR PARTS OF CUSTOMER CREATION 1. Year one objectives You need to be keenly aware of all specific and reasonable objectives you want to accomplish in your first year. For example, you cannot simply state that you want to be successful or profitable. You need to be able to define these goals. You need to be say what it means for your company to be successful. You need to be able to say how much profit you want to generate. 2. Company and Product Positioning You need to know how you will position your product and company within your market. These positioning activities are not a one-time event. Both activities will occur more than once, albeit infrequently. 3. Company and Product Launch Your product and company launch will usually only happen once. But you need to know what you want to get from your product and company’s launch. These goals will help you articulate your strategy. 4. Demand Creation Demand creation is a strategy that occurs continuously. To create a demand creation strategy, you will need the following things: An identified and validated market type An understanding of influencers and analysts in that market An understanding of how customers make purchasing decisions and how they purchase 8 products 4. Company Building Video: https://www.entrepreneurship.org/video/building-the-company-alongside-the- business Company building is when the business can transition from a start-up that is focused on learning and discovery into a fully-fledged business. This business will include formal departments and a scaled business development model. When these departments have been opened, the executives that lead then can move away from a learning and discovery methodology and towards a mission- oriented method. THE FOUR PHASES OF COMPANY BUILDING 1. Reach out to your mainstream customers-Mainstream customers, however, are pragmatists. They have a problem. But they do not want to be disrupted by a revolutionary solution. Instead, they look for evolutionary solutions. They do not want minor flaws. They want use to be straightforward, simple and reliable. 2. Review your current management In phase two, it is important that you look inward at your company. To do this, you will often ask the board of your company to review both the CEO and the executive staff that you have appointment. 3. Begin your transition to functioning Departments This is where you begin to set up your departments according to your mission statement and your strategy. Before these departments take shape, you must state what these departments do. This means that you need to create and write down goals for each department. 4. Maintain Your Moment with Agile Departments In9the last part of company building, you will ensure that everything that you have built thus far is agile, scaled and capable of being a “fast-response” department. References 1. Blank S and Dorf B.,( 2012), The Startup Owner's Manual: The Step-By-Step Guide for Building a Great Company (DIATEINO) Paperback. 2. Martin Luenendonk, (2019), Customer Development Model: Understanding 3. Ries E. (2011), The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses 10 THANK YOU 11