Customer Development Process: from Idea to Validated Business Model

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Customer Development Process

The Customer Development Process is described in The Four Steps to The Epiphany by Steve Blank and is the precursor to the book The Lean Startup by Eric Ries.

The Customer Development Process ensures that you create a product or service for which there is a real demand from the market.

The Customer Development Process is divided into 4 phases:

  • Customer Discovery: test the customer’s problem, your solution and your business model.
  • Customer Validation: set up a scalable sales funnel.
  • Customer Creation: create demand for your product or service.
  • Company Building: evolve into a thriving company.

I will explain the different steps to you:

Customer Discovery

The Customer Discovery phase is all about finding and testing problems that your customer has. Only when you are sure of the customer’s problems and have enough data to support this, you start realizing a product or service to solve these problems.

When you have realized a product or service, you can start testing whether it actually solves the customer’s problems.

Customer Discovery Process
Customer Discovery Process

1. Get buy in

  • Establish your mission, vision and core values.
  • Decide with all key stakeholders that you will follow the Customer Development Process or choose another methodology.

2. State your hypothesis

  • Write out all your hypotheses and make sure it is possible to test them, or in other words, make it measurable.

Tip: work with Experiment and Learning Cards.

3. Test problem hypothesis

  • Test all your assumptions with the customer and process the results.

4. Test product hypothesis

  • Go test with the customer whether your product/service actually solves the problem they have, provide proof.
  • The goal is not yet to sell your product, just test the concept and features.

5. Verify

Ensure that:

  • You are sure of the customer’s problem
  • Your product or service solves the customer’s problem
  • The customer is willing to pay for your product or service
  • The business model can ultimately be profitable

If any of the above is not clear or cannot be proven then you go through the Customer Discovery Process again. If everything is correct then you move on to the Customer Validation phase.

Customer Validation

In the Customer Validation phase you will focus on sales, the end result of this phase is a scalable sales funnel.

Customer Validation Process
Customer Validation Process

You don’t necessarily focus on selling, but on the learning aspect and finding a scalable sales process.

6. Get ready to sell

  • Define a value proposition, which is one clear sentence that explains why you are different from your competition and why customers should buy your product.
  • Draw up a sales plan that clearly shows how you will sell your product or service.

7. Sell to earlyvangelists

  • Sell your product or service to 3 to 5 customers, make sure you don’t make the product or service too dependent on 1 customer.
  • Set up a scalable sales funnel.

8. Develop positioning

  • Now that you have feedback you start working on positioning your company, product and/or service.

9. Verify

  • Make sure you have a scalable sales funnel and that you are sure that your business model is profitable. If you can prove that everything is allright than you can move on to the Customer Creation phase, otherwise you go through the Customer Discovery or the Customer Validation phase again.

Customer Creation

In the Customer Creation phase, you’re going to make sure you go from a startup focused on discovering and learning things to a scalable company. You do this by creating demand for your product or service.

Customer Creation Process
Customer Creation Process

10. Get ready

  • Decide which of the following 4 markets your business will be in:
    • New market
    • Existing market
    • New segment in an existing market
  • Set sales and marketing goals for the coming year.

11. Position

  • Research how you, your customers, analysts, influencers and media see your business.
  • Choose how you want to position your company and your product or service.

12. Launch

  • Provide the materials to launch your product or service.
  • Create a strategy to launch your product or service and execute it.

13. Create demand

  • Define a strategy to create demand for your product or service.
  • Establish criteria to determine when the strategy has been successful.
  • Execute the strategy and determine if it was successful. If it was successful you can move on to the Company Building phase, otherwise you will re-run the Customer Creation phase.

Company Building

In the Company Building phase, you’re going to turn your start-up or scale-up into a mature company. You’re going to do things completely different.

Company Building Process
Company Building Process

14. Mainstream customers

  • Determine how you will go from early evangelists to mainstream customers and how you will approach “Crossing the Chasm“.
  • Get a solid sales, marketing and business development plan with enough budget to execute it.

15. Management / cultural issues

  • Evaluate the ability of the current management team to fill the new roles.
  • Evolve the management style from that of the founders to one that can effectively scale the company.

16. Functional departments

  • Define mission-driven goals for the new departments.
  • Provide departments that fit the type of market you are entering.

17. Fast response departments

  • Establish trust and communication across departments.
  • Lead by delegation, create a mission-driven culture.
  • Verify that your company has entered the mainstream and that the management team can grow the business.

Conclusion

Before I was familiar with the Customer Development Process I didn’t have quite a structured way of working. My own way worked for me too, but I noticed that when I started applying the Customer Development Process everything went much more efficiently and effectively.

So I can say that the Customer Development Process did help me build my business in a structured way.

I’m curious if you apply the Customer Development Process or what working methodology you use to build your business? Let me know in a comment below!


P.S. would you like some help? Then send an email to [email protected] or leave a comment.

Gust de Backer
Gust de Backer

I try to help business surpass their growth ceiling with my content.

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