Building great products and leading a company has never been easy. As a CEO or Product Manager, you have to make plenty of decisions from day 0 when you decided to turn your idea into a working product.
There are thousands of issues you’re uncertain about and thousands of questions you have no answers to.
How to ask the right questions is the main thing you should concentrate on prior to investing a single dollar into your product development. The only available solution at this point is to deliberately and constantly ask questions and test your assumptions: about the product functionality, customer preferences, potential market size, opportunities and rules, business model you should use, ability to scale your business later on and organize the proper sale, marketing, and distribution processes. The process of asking the right questions to discover and validate your idea and its feasibility is called customer development.
“Get the hell out of the building”
Customer development was introduced as a concept by serial entrepreneur and professor Steve Blank. The concept itself consists of 4 steps that help you discover and validate your business idea, identify the main customer needs and how you can solve them. Customer development is a process of learning about your product and the market you can conquer with it. Done right, those four steps not only give you an understanding of the features your customers want to see in your product but also clarify which business model is the perfect fit for your company.
“What seems to be a great idea is nothing without proper execution, and a complete disaster without user testing and market research”
The four steps of successful Customer Development
- Customer discovery
- Customer validation
- Customer creation
- Company building
The whole process underlies in the idea of finding, testing and validating the business hypothesis you have. Customer development is a unique way to identify your advantages and pain points fast and act accordingly. It can be used by companies at any stage of product development, however, the earlier you start using It, the more resources you will save.
The goals of customer discovery are:
- Identify the solution that can solve your customer issues in a way suitable for them and good enough for them to buy-in;
- Validate the chosen solution with prospects and target users (MVP);
- Build a sales funnel and bake it up with a marketing strategy that would coordinate your leads through that funnel.
The goal of customer validation is to validate the MVP, as well as your sales and marketing strategies:
- Validate your MVP to the point when you understand what features your customer is ready to pay for, and what is the main value your product gives them;
- Validate your marketing and sales strategies: you need to identify your customer personas, optimize the sales funnel and understand how many dollars you earn on top of every dollar put in marketing and sales;
- Validate your business model: you need to confirm that your revenues exceed your costs and you can potentially scale your business.
During the customer validation stage, you can find out that the MVP you’ve built doesn’t bring that much value to your customers or that your sales and marketing strategies do not work properly or focus on the wrong things. That is the great moment to pivot your product, i.e. to change a strategy after getting the feedback from the market/target audience and start building completely new features or start targeting a new audience.
After successful validation of the MVP and testing your marketing strategy, the next step is customer creation. Customer creation is more about what to do after winning a new account. Your goal is to try out different techniques to understand which of them drives the best sales conversion. You should definitely spend a lot of time working alongside your sales and marketing teams because they directly influence the level of customer awareness of your product, their expectations and readiness to buy.
Last but not least, you need to build your brand by streamlining and organizing business processes and creating a number of images to gain desired reputation within your target audience and focus on scaling your business. It is time to execute everything you’d learned by now.
The whole customer development process is full of challenges and unexpected issues your team will be facing. Although none of the steps should be underrated, all of them will give you the most valuable insights into the potential users and the market itself. Being initially a part of the lean framework model, customer development implies that hypotheses should be tested fast but with a significant level of quality to allow for the informed and fact-based decision making.
The history knows many examples of products that were built and launched without any proper hypothesis validation or understanding of the customer development process. They include an infamous Google Wave (a communication platform) and Everpix (mobile photo sorting mechanism) that didn’t last long in the market. Wondering why? Mostly because their founders were too busy making their products and never found a spare minute to do field research and talk to their potential customers to understand whether they were building something relevant and meaningful. Product ideas by people who do not listen to the market usually convert to the products that are never used by real users or that pass into oblivion. You shouldn’t underestimate the power of customer feedback and the number of product issues that can only be unveiled thanks to in-depth customer research.
Customer development in IT outsourcing
Every project outsourced to a different development team should be treated as a product and should, therefore, go through the customer development journey. It doesn’t matter if you develop a mobile app or a web platform, if the development team responsible for this project is based in-house or is extended to the vendor. As a client, you should insist on proper customer development plan if it hasn’t been done by your team/outsourcing solution provider.
Professional outsourcing providers are those able to deliver value-based and ROI-driven scalable solutions. They normally cover customer development as part of their value proposition. If the development provider fails to offer customer development as a strategic solution to add value to your software development function, you better avoid partnering with it as you won’t likely be able to scale properly and build a long-term relationship with your vendor to benefit from down the road.
Having got the idea and hypothesis from you or your product team, the value-based outsourcing provider will build the customer development process efficiently to validate the product idea before starting to code. They can help you do the customer interviews and market research, collect all of the required insights and data, and pivot your project in a timely manner if your idea has failed to validate.
That being said, the true professionals will take care of your software product long before they start building it. Their superpower is exactly in saving your time and money by using the right methods within the customer development framework.