A product manager’s guide to customer development "Product people - Product managers, product designers, UX designers, UX researchers, Business analysts, developers, makers & entrepreneurs September 09 2021 False Customer Development, Customer Needs, Customer Research, Prioritised Members' Content, Mind the Product Mind the Product Ltd 2200 Product Management 8.8

A product manager’s guide to customer development

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The Customer Development framework was developed by Steve Blank as part of the Lean Startup methodology. But what is it? Who’s involved and what are the secrets to success? We spoke to Steve himself to find out. Discover the answers to these questions and some simple dos and don’ts.

In brief

  • Customer development uses many of the same techniques as user research, but it’s about creating the best, most viable and sustainable business model. You want to develop a relationship that will help you to develop the business.
  • Customer development is not just for startups. Keep it going in an established business.
  • Don’t make the …

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The Customer Development framework was developed by Steve Blank as part of the Lean Startup methodology. But what is it? Who's involved and what are the secrets to success? We spoke to Steve himself to find out. Discover the answers to these questions and some simple dos and don'ts.

In brief

  • Customer development uses many of the same techniques as user research, but it’s about creating the best, most viable and sustainable business model. You want to develop a relationship that will help you to develop the business.
  • Customer development is not just for startups. Keep it going in an established business.
  • Don’t make the process complicated, because it doesn't need to be — interview specific customer types and keep your research questions open.
  • Make sure that people with authority to make decisions, and pivot if need be, are involved and that they hear the information gathered first hand.
  • Don’t ignore what you’re told and be aware of confirmation bias.

What is customer development?

Customer development is the practice of finding customers first – understanding their problems, how they behave, and what they’ll pay to solve – and then bringing them with you as you build a product that meets their needs and that they will pay to use. In the early 2000s, serial entrepreneur Steve Blank created a four-step customer development framework that launched the lean startup movement (Steve taught a course on startups at Stanford that Lean Startup author Eric Ries attended). The framework demands that you discover and validate that you have identified customers needs, built the right product to satisfy those needs, tested the correct methods for acquiring and converting customers, and then deployed the right resources to meet demand for the product. The four steps to the framework are as follows:
  1. Customer discovery – Understand customers and the needs they have that you may be able to satisfy.
  2. Customer validation – You have a product that will satisfy your customer’s needs, and that the market is large enough for a viable business to be built
  3. Company creation – You determine whether your product will satisfy all the customers needs, and that the business is scalable through a repeatable sales and marketing roadmap
  4. Company building – You can grow your organisation in order to support the demand for your product.

Customer development is different from user research

We spoke to Steve about his work on customer development. He says the framework is equally applicable to established companies as it is to early-stage companies and startups — but it assumes uncertainty and that you should question your core business assumptions. It gives an established company, with its repeatable processes in place and people who manage those processes, the permission to pivot and change. Steve says: “When you put minimum viable products, those iterative and incremental things, in front of people, you might find out you have the wrong customers, or more importantly, the wrong features. And this allows you to pivot. It allows you to change the product, or the customers or anything, before you ship it. It gives you permission to change which you never had before.” Customer development in an established company should help the business to use its resources better and to avoid costly mistakes. Cindy Alvarez, director of customer research at Github and author of Lean Customer Development, says she’s often asked why customer development isn’t just user research. It may employ the same techniques, she says, but the intent is different: user researchers are tasked with creating the best experience for the customer, but customer development is about creating the best, most viable and sustainable business model that also creates value for the customer. “You validate the problem before you’ve built the product,” she says. “You’re validating whether it’s a problem that people are willing to pay for or go through friction to solve.” Cindy points out that customer discovery is also conducted with a note to building a community of people, those early adopters who will help you get the word out about a product. She says: “In user research, it's relatively rare that I talk to the same user again. But in a customer development relationship, you'll generally ask at the end of every interview if you can contact them again.” She adds that one of the researchers at Github working on a new version of issue tracking has recently made good use of this technique, “he was very intentional about it,” she says. He found early customers with a very specific pain point, built their trust and now goes back to them time and again. And equally, because they have a relationship with the researcher, the customers haven’t felt the need to lobby for everything at once. “It just allows you to move so much faster,” says Cindy. So far so straightforward, but of course businesses make lots of mistakes and most startups fail: they might build a poor product, it might not work or be either too complex or too simplistic to meet the needs of users, they might misread or not listen to the market, they might not get their marketing messages right, or any number of other missteps.

The dos and don'ts of customer development

Below are some dos and don'ts from our customer development experts to help you steer clear of trouble and ensure a clear and effective customer development process.

Don’t make it complicated

Put simply, you pick up an audience and ask them questions about how they approach the issue you’re interested in. Cindy says the first step is to work out who you think the customer is. Then make sure you talk to just that specific customer type, otherwise any patterns will be slow to emerge. “I see companies make this mistake,” she says, “one example was a startup working on a product for business financials. They talked to CFOs of startups and the person running the books at small family businesses and equated them. But the needs and problems of a 50-person company that's been a 50-person company for eight years, and plans to be a 50-person company for the next eight years are very different from a 50-person startup that was 12 people two months ago.” You’ll know within a few interviews if your assumptions are wrong: “You’ll hear polite yeses that are really nos,” says Cindy, “then you’ll know this is either the wrong customer or they don’t have the problem.” You’re asking basic and fundamental questions about a problem  - how could life be easier for you, what do you wish you could do that you can’t and so on - so you don’t need to spend hours working on an in-depth script. And you should abstract questions up a level - rather than “tell me about your web analytics” for example, say “tell me about how you measure things for your business”. Cindy says you want to be able to listen to responses carefully and work out where you want to dig deeper rather than follow a script. “People talk about what they care about,” she says. Cindy often saves one question for the end of an interview, once she has established a rapport: “I ask, ‘If you could wave a magic wand and have anything - it doesn’t have to be possible - what would it be?’.” She says people often blurt out the root of the problem when she asks this question.

Do involve the right people in customer development

Make sure you involve someone with the authority to pivot, advises Steve. Don’t send proxies rather than decision makers to do customer development work, they won’t want to tell you that your baby’s ugly. “It happens all the time,” he says, “people hire a junior person to go out and collect the data, or a market research firm to do a survey. And no one wants to report bad news to the boss. So if you don't have the authority to make a change, then don't bother to do this process.” Equally, dealing with stakeholders who are invested in a product can be difficult to manage. Cindy advises that you set expectations upfront that you might be dealing with unpopular truths, find out what would make them confident, and what would allow them to change. Take them through the questions you want to ask potential customers and find out if there are any questions they would like to ask. It will make them feel part of the process. And if, as sometimes happens, a stakeholder asks for quantitative data then Cindy will look for existing data that supports her interviews.

Do get out of the building

Customer development doesn’t work effectively with second hand data. You have to hear the data first hand, so get out of the building, says Steve. “As a leader of a product or project, you should be spending 10% of your time outside the building,” he says. Steve says in one of his companies his co-founder and head of engineering would come with him to visit some critical potential customers: “We agreed that when I heard something interesting from a potential customer he’d get in the car with me and talk to them.” Make sure you make enough visits to customers. If you’re not seeing 10 or more potential customers a week at the start of your research then you’re probably not doing it right, says Steve. [caption id="attachment_25229" align="alignnone" width="980"] Customer development means speaking to customers directly and not relying on second-hand data (Image: Shutterstock)[/caption]

Don’t treat it the same way as a focus group

Customer development must inform the founders’ vision, and that’s not the intention of a focus group. Says Steve: “There’s a level of complexity about what you’re doing and what you're asking. Otherwise it’s like trying to paint a picture of a garden without sitting outside and looking at the garden.” It’s not a giant focus group for you to collect features: “Embarrassingly when I was a product manager I would argue we needed whatever features our competitors had, and then five more. But the idea is not to maximise features, it’s to minimise features,” says Steve.

Don’t ignore what you’re told

The biggest problem for customer development is confirmation bias, says Cindy. “It’s very hard not to try to confirm your biases.” The trick to deal with this is to stick to the 5 Ws and open questions. Avoid questions that demand a yes/no answer. Steve lost a business by ignoring what customers were telling him. In the mid 90s he co-founded a company called Rocket Science Games. Customer discovery told the founders that potential customers hated the product, but they chose to ignore this and ultimately the business failed. “When you say the phrase ‘they just don’t get it’, that’s when you know you’re going out of business,” he says.

Do keep it going

The generative research you do for customer development should be ongoing -  data has an expiry date, markets change, customers change, so products should change with them. The cadence you adopt depends on the type of product and how much natural interaction you have with customers.

Customer development in action

What about the experiences of product leaders who put a priority on customer development? Yi-Wei Ang is Chief Product Officer at Talabat, the leader in food delivery in the Middle East and part of the Delivery Hero group. He comments that product people often talk to customers on specific topics but fail to have generic conversations with them. “It’s something I really encourage people to do,” he says. “When I was at TradeGecko we would often call customers - these were small businesses - and just chat to the CEO about their brands.  I would have a very standard set of open-ended questions  - can you tell me about your story? How did you come up with the brand? What was your first sale like? Tell me about the journey.” It enables you to build a picture of your customers, of what they share and what they don't, he says. It helps to build intuition about what your customers want and that helps you to make decisions faster. As Talabat’s CPO, Yi-Wei no longer makes granular product decisions, but he still sets aside about two hours each week to speak to four or five customers. “We have a pool of customers we can call. I ask questions like, ‘tell me about yourself, I just want to know about you and your family background? Who are you? When did you move to the country?.’ I have no agenda, I’m using a story to understand where people are and what people do.” For Yi-Wei, customer development is all about generating stories. “What distinguishes customer development from discovery for me is that you’re really putting yourself in your customers shoes, and it's about stories. As product managers we think about things like data and conversion metrics, but I find stories are much more powerful.”