Product #85

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The Four Steps to the Epiphany · Steve Blank · 2005

The traditional product development model is flawed for startups, as it prioritises execution over learning about customers and markets.
This model often leads to premature scaling and unrealistic expectations about product acceptance and deployment.
The Technology Life Cycle Adoption Curve can mislead entrepreneurs into premature focus on mainstream success.
Customer Development, which prioritises understanding customers and their problems early on, is a more effective model for startups.
Both models should be used in tandem, but with Customer Development leading the way to validate the market's existence and customers' willingness to pay.
Tesco became the world's largest online grocer by leveraging their existing retail stores to launch their online grocery service, using a fraction of the capital Webvan plundered. Tesco's success can be attributed to their adoption of the Customer Development model.

The Customer Development model includes four steps: Customer Discovery, Customer Validation, Customer Creation, and Company Building.

This iterative process allows for revisiting previous steps for learning and discovery.
The model emphasises learning, discovery, failure, iterations, and pivots over execution.
The ultimate goal is to achieve "escape velocity" for enough success to move to the next step.
Market Type choices, such as entering an existing market or creating a new one, affect how resources are deployed.
Each market type has unique characteristics that must be identified before engaging in sales or marketing activities.
Synchronising Product Development and Customer Development is crucial for startup success.
The Customer Development process is based on the best practices of winning startups.

Customer Discovery

Customer discovery turns a startup's initial hypothesis about their business model, market, and customers into facts.
It answers key questions about problem identification, product solution, business model viability, and readiness to sell.
The process is not about building feature lists but developing products incrementally for a small group of early customers (EarlyVangelists) who buy into the vision.
EarlyVangelists are customers who recognise they have a problem, are actively seeking solutions, have an interim solution, and have committed budget to solve the problem.
Customer discovery has phases: getting buy-in from stakeholders, capturing assumptions into hypotheses, testing these assumptions with potential customers, and revising the product.
The process involves creating product, customer, channel, pricing, and market type hypotheses.
Customer discovery also entails creating a product presentation, making more customer visits, meeting with product development for reality checks, and identifying first advisory board members.
The process concludes with verifying the understanding of customers' problems, the product solution, and the business model, and assessing whether to iterate or exit.

Customer Validation

Startups must verify product/market fit, understand and repeat the sales process, and ensure product and company positioning.
Customer Validation is about learning to sell to visionary customers, not about generating revenue.
EarlyVangelists, who are willing to buy an unfinished product, are the target for initial sales.
The value proposition articulates what your company and product stand for and why they are worth buying.
Sales collateral and a preliminary sales and distribution channel plan need to be developed.

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Validating the sales process → You need to know the answers to the following questions:

After selling to visionary customers, product and company positioning should be adjusted based on customer feedback.
The verification phase involves checking the product, sales roadmap, channel roadmap, and business model.
Customer Validation is gruelling, but you may need to iterate it again or even return all the way to Customer Discovery.

Customer Creation

The Customer Development model includes four steps: Customer Discovery, Customer Validation, Customer Creation, and Company Building.
Startups should select a market type (existing, new, or re-segmented) and set objectives for customer creation and sales accordingly.
For effective product launch and positioning, understanding customers' operations and problems is crucial.
The company and product launch type should depend on the startup's market type.
Customer creation activities should match the market type and are determined by the New Lanchester Strategy.
A PR agency can assist in positioning the company and its products, refining the audience, and communicating the message.
Company launch communicates what the company does, while product launch describes why customers should want the product.
Message crafting should focus on the pain points alleviated and the value delivered by the product.
Demand creation should be matched to sales goals, and its success should be measured to ensure the budget is used effectively.

Company Building

Transitioning from a startup to a larger company requires building a mainstream customer base, developing an organisation to support scale, and creating fast-response departments.
Market type (new, existing, or re-segmented) influences how a startup reaches mainstream customers and manages sales growth.
Different CEO characteristics are needed at different stages: entrepreneurial, mission-oriented, and process-managed.
Developing a mission-centric organisation and culture involves crafting internal, action-oriented mission statements.
Transitioning the customer development team into functional departments should align with department-specific objectives and be influenced by market type.
Building fast-response departments involves applying the OODA (Observation, Orientation, Decision, Action) loop model and fostering decentralised decision making.

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Book Highlights

Platform teams provide leverage because they allow for common services to be implemented once but used in many places. E.g. A platform team that is responsible for shared services such as authentication or authorization Marty Cagan · Empowered

We see this pattern of blaming others for bad outcomes and failing to give them credit for good ones all over the place. Annie Duke · Thinking in Bets

You don’t need to learn what customers say they want; you need to learn how customers behave and what they need. In other words, focus on their problem, not their suggested solution. Cindy Alvarez · Lean Customer Development

At Amazon, understanding what’s normal is the responsibility of the metrics owner, whether that’s an individual contributor or a manager of thousands. Many statistical methods, such as XMR control charts,3 can highlight when a process is out of control. For us, however, experience and a deep understanding of the customer most often turned out to be the best way to filter out the signal from the background noise. Colin Bryar and Bill Carr · Working Backwards

Quotes & Tweets

Customers are experts in pain, we are experts in solutions. April Dunford

People Don’t Buy Products, They Buy Better Versions of Themselves Unknown