arch:efficiency_and_effectiveness_of_different_methods_in_customer_development [objectoriented.ru]

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By Dmitry Goncharov (dagoncharov_2@edu.hse.ru)

====== Efficiency and effectiveness of different methods in customer development ======

====== Introduction ======

Customer development is a formal methodology for building startups and new corporate ventures. It is one of the three parts that make up a lean startup concept which is composed of business model design, customer development and agile engineering. In general, customer development is a four-step framework, originally identified by Steve Blank, that is used to determine whether or not a product fulfills needs of the customers.

The framework consists of four distinct but connected steps [1]:

1.	Customer discovery 

2.	Customer validation 

3.	Customer creation 

4.	Company building 

If you don’t learn what customers really want, you’re at a very high risk of building something that no one wants to buy.

Customer development is a hypothesis-driven approach that helps to understand: who your customers are; what problems and needs they have; how they are currently behaving; which solutions customers will give you money for, even if the product is not built or completed yet; how to provide solutions in a way that works with how your customers decide, procure, buy, and use [1]. 

Even though Steve Blank developed and applied customer development only for startups, startups are not the only customer development beneficiaries. This is the main difference in lean customer development, which works with both startups and existing companies. 

Lean customer development is done in five steps [2]:

1.	Forming a hypothesis.

2.	Finding potential customers to talk to.

3.	Asking the right questions.

4.	Making sense of the answers.

5.	Figuring out what to build to keep learning.

That structure seems very simple and complex at the same time. Of course, the steps are clear, but how to work through them? Where should I start? What are the most efficient and effective methods in existence and how to implement them? These are the questions which immediately come to mind when you look at the steps. In this essay I would like to develop relatively short and clear plan of different methods which will help to realize every step of the lean customer development structure. Furthermore, the efficiency and effectiveness of every method will be explained.

====== Plan of using different methods in customer development ======

To do the first step, you should perform a method which includes three exercises. First, you should identify your assumptions. As well as your ideas about the product you have beliefs about how your potential customer acts, thinks and makes decisions. This exercise should be done whether you are making a startup or adding a new feature to an existing product. However, you could feel completely different in these two cases. If it is a startup you may start to hesitate and think that all the assumptions are just mad guesses and vice versa be confident if you are working on the new project at the enterprise. To tell the truth, it doesn’t matter because the main goal here is to just identify assumptions to thoroughly validate them afterwards. It’s not important that you’re right, it is important that you write down all your assumptions. As soon as you do that it will become clearer what other beliefs you hold about the product [3]. This will play a key role and will be very effective for finding customers and asking the right questions because at the end you will collect customers’ evidence which will validate or invalidate them.

Secondly, you should form your problem hypothesis. To do that, you need to understand, that your hypothesis must answer on five journalists’ questions, which are: who, what, how much, when and why. Who refers to the type of person who experiences the problem. What, how much and when refer to the type of problem that he is experiencing. Why refers to the type of task or constraint you’ll need to understand. With that being said, there are two main templates for writing a hypothesis [2]:

1.	I believe [type of people] experience [type of problem] when doing [type of task].

2.	I believe [type of people] experience [type of problem] because of [limit or constraint].

The main benefit of such structure that it speeds up the whole learning cycle. In case you are wrong with the hypothesis, you will be able to specify in which question the mistake is. That will play a huge role in your hypothesis modification, because each time you will have something to refer to instead of starting from the beginning.

The third task in that method is to make your target customer profile. To move further, it’s necessary to understand as clear as possible what does your customer look like and what makes him more likely to buy the product. To realize that you should start by asking yourself just two very simple question [2]: 

1.	What’s the problem you are going to solve?

2.	Who is experiencing that problem?

Answers on these two questions lie in your hypothesis, but unfortunately, they won’t form the actual profile. They may only represent the broad audience that will be somehow interested in your product. That doesn’t mean that all of them would buy or use your product especially at the beginning. In order to create a detailed picture of your customer, you should implement various techniques of technology adoption lifecycle. After that you will have a complete customer profile which will allow you to move to the second step in lean customer development, in other words, to start looking for customers to talk to.

At this stage, the main problem is that most people have no idea how and where to find the right customers to talk to, especially when they are making a startup and don’t have existing customers. In fact, there are vast variety of ways how to find them. First of all, you should rely on your friends or just familiar people. One of the most important things here is to define people, which are somehow relevant to the problem you’re trying to solve. That will significantly decrease the number of unnecessary interviews and as a result you won’t waste your time. Moreover, you may and should ask your connections to introduce you to their friends and familiar people, who are believed to have the same problem which you want to solve. That will greatly expand the number of potential customers. However, in most cases this is not enough, and you need other ways to find relevant people. If you are in that case, you should use various internet forums and tools such as LinkedIn, Quora etc. [4]. Furthermore, one of the most useful methods to find people is to search for them in the offline world. Roughly speaking, you should just go where they are. For instance, you would never find more gamers than in the computer club. The main drawback in that case is that you will have to interrupt people, but there are a lot of psychological tricks which will help to overcome that issue.

Ones you found your target customers, you should realize what questions to ask to detect the most valuable and efficient insights. There are five basic customer development questions [2]:

1.	Tell me about how you do //////// today…

2.	Do you use any [tools/products/apps/tricks] to help you get //////// done?

3.	If you could wave a magic wand and be able to do anything that you can’t do today, what would it be? Don’t worry about whether it’s possible, just anything.

4.	Last time you did ////////, what were you doing right before you got started? Once you finished, what did you do afterwards?

5.	Is there anything else about ////___ that I should have asked?

These questions don’t change much from project to project. You can add just few custom questions sometimes and slightly change basic ones to adapt them for the product. The second important point here is that during the conversation, depending on the customer’s responses, some clarifying questions should appear [2].

The next step after defining the right questions is to make sense out of them. So, to get most out of the five basic customer development questions you should pay attention to the several factors that separate prospective customers from buying customers. To begin with, you should find out what is the potential customer already doing. It is heart of realizing the problem that you are to solve. It helps you to understand what your customers are capable of doing, what are they comfortable with and which decisions they are making. Secondly, you should see which constraints affect choices and actions of your customers. Having identified them, you would easily define which solutions will be more attractive and, as a result, more efficient. The constraints could be different, but the most common are: limited resources such as budget, time and environment; lack of awareness what technologies are in existence; problem is not considered as a problem  [5]. Third, but also important factor is to understand what frustrates and motivates your customer. You should admit that people are not rational in everything, and their decisions are not based only on logical and economic criteria. Motivation is what forces customers to buy products. In order to create the demand for your product, you have to clearly uncover what motivates your customer and what leads him to frustration. Last but not least, you should focus on how your potential customers make decisions, spend money and determine value. The main idea here is that the person who uses the product isn’t always the one who buys it. For instance, toys are purchased by kids, but are used by children. It’s also a very significant factor, that’s why you should try to mention and determine who somehow influences the choice of your prospective customer.

The last step in lean customer development structure is to figure out what to build to keep learning. Of course, after interviewing your potential customers you could and should revise your hypothesis. However, if you succeeded after the four steps, don’t celebrate the future success of your product. Unfortunately, the only proof that potential customers will pay for your product comes when they actually pay for your product. That’s why you have to build your Minimum Viable Product (MVP). The MVP helps to maximize learning with minimum risks and investments. As I’ve mentioned above, the only aim of the MVP is to validate your hypothesis along with the assumptions. It’s important to understand that your MVP doesn’t need to be perfect looking, fully featured, or even involve any code. Your MVP cannot be your final product at all because it’s impossible to create a final product before it even makes the first contact with real customers. The MVP helps to receive the answers on the following important questions [2]: 

-	Can we get this product in front of the right customers?

-	Are customers willing to pay for the value that this product offers?

-	How does the customer measure the value he gets from the product?

-	What pricing model aligns with customer value and the customer’s ability to pay?

In various situations, there might be different questions in priority. You should identify what information is most important in your case in order to choose and create the right and the most relevant type of the MVP [6]. 

====== Conclusion ======

So, after getting the answers on these four questions you either have made the perspective product or should fix something and return to the stage where you realized you had made some mistakes. That cycle could be infinite because you always can understand your failures and start from the beginning, but I hope that won’t happen to you. To sum up, the work-through plan of realizing the lean customer development steps was developed. It is full of different methods and all of them invest their effectiveness in the ultimate success of the product. There are way more sub methods that are also very efficient, but as I tried to make this plan relatively short, I skipped them and provided a heart of the plan. You will for sure need a lot of additional information to greatly perform the customer development of your product and I tried to do my best to determine what more you need to learn.

====== References ======

1.	Steve Blank (2021). The Four Steps to the Epiphany: Successful Strategies for Products that Win. [[https://www.google.ru/books/edition/_/rSQ3EAAAQBAJ?hl=ru&sa=X&ved=2ahUKEwj05-zbtNHzAhVBtIsKHWDeA4cQ7_IDegQICBAC|https://www.google.ru/books/edition/_/rSQ3EAAAQBAJ?hl=ru&sa=X&ved=2ahUKEwj05-zbtNHzAhVBtIsKHWDeA4cQ7_IDegQICBAC]]

2.	Cindy Alvarez (2014). Lean Customer Development: Building Products Your Customers Will Buy. [[https://learning.oreilly.com/library/view/lean-customer-development/9781492023784/index.html|https://learning.oreilly.com/library/view/lean-customer-development/9781492023784/index.html]]

3.	Steve Blank (2010). No Business Plan Survives First Contact With A Customer – The 5.2 billion dollar mistake. Article. [[https://steveblank.com/2010/11/01/no-business-plan-survives-first-contact-with-a-customer-–-the-5-2-billion-dollar-mistake/|https://steveblank.com/2010/11/01/no-business-plan-survives-first-contact-with-a-customer-%E2%80%93-the-5-2-billion-dollar-mistake/]]

4.	Mark Horoszowski (2014). 4 Easy Ways to Find Potential Customers on LinkedIn. [[https://customerdevlabs.com/2012/06/24/anybody-that-knocks-linkedin-does-not-know-how-to-use-it/|https://customerdevlabs.com/2012/06/24/anybody-that-knocks-linkedin-does-not-know-how-to-use-it/]]

5.	Tony McCaffrey (2012). Why We Can’t See What’s Right in Front of Us. [[https://hbr.org/2012/05/overcoming-functional-fixednes|https://hbr.org/2012/05/overcoming-functional-fixednes]]

6.	Startup Growth (2020). The Ultimate Guide to Minimum Viable Products. [[https://www.startupgrowth.com/the-ultimate-guide-to-minimum-viable-products/|https://www.startupgrowth.com/the-ultimate-guide-to-minimum-viable-products/]]