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By brantcooper, February 3, 2010 12:10 pm

Because of the overwhelming response and great feedback for the the Customer Development image I recently shared, I decided to share another from our upcoming book. Please let me know what you think.

Figure 2. Ries' Lean Startup: Customer and product development interrelatedness

*CPS = Customer-Problem-Solution

As shown in Figure 2, customer development and product development are two distinct, but interrelated and iterative processes. As Eric Ries describes, the Customer Development team works on testing the problem-customer-solution assumptions, while the Product Development team tackles the solution.  The product development process receives input from customers indirectly through customer development, and (in the web world) directly through measurement of product usage.  The product development process actively iterates on the product, releasing new or different functionality directly to the customer as quickly as possible.

The customer development process receives input from customers indirectly through product development reports on feature usage, but also directly from customer development processes and analytics.  The customer development process iterates on core business assumptions, product functionality, and acquisition and conversion assumptions, resulting in updated hypotheses, honed messaging, positioning, marketing tactics, and feature requirements.

In the Customer Discovery context, a lean startup is not one that necessarily uses lean manufacturing precepts per se, but rather one that uses fast, iterative development practices in conjunction with customer development methodologies in order to:

1)       Validate core hypotheses (customer-problem-solution),

2)       Produce an MVP,

3)       Achieve Product-Market fit,

4)       Produce a development and marketing roadmap for scaling.

Creating a proper iteration loop requires you to predefine success and failure for each stage, and a means to measure your progress.  For example, in the web-based world, Dave McClure’s AARRR metrics (Acquisition, Activation, Retention, Referral, Revenue) might be applied to measure the stages from concept to product-market fit.

(BTW, if you are interested in being notified when the book is published, sign up here.)

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By brantcooper, January 29, 2010 11:03 am

A new way of looking at sales and marketing

Have you ever viewed a world map where South is up? It’s a useful frame of reference, since our Eurocentric view of North as “up” and South as “down” is really just an arbitrary one (a sphere has no top or bottom – nor left or right for that matter). Perspective affects our perceptions…

But what if we turn the funnel upside down?

For most entrepreneurs, the top of the [sales] funnel represents the world-at-large.  It’s unfiltered; it’s not segmented.  In a traditional funnel, the mouth at the top is wide open for attracting both suspecting and unsuspecting potential customers (aka suspects) into the sales process.  Marketing’s job is to find and lure live bodies into the top, while sales is responsible for to pushing ‘em through.  Continue Reading

How to avoid being blinded by the idea aura

The glow of a new, sure-fire idea is a wonderful feeling. You feel you’ve discovered something (or some angle) that no one has ever imagined before.  As you expose that idea to the light of the day and begin vetting it and taking it to market, though, that enthusiasm can dim…Your product or solution fights more than just competitors. It also battles all of the other problems your prospective customer faces. While your awareness of the problem and the weight you grant it is relevant, that doesn’t accurately predict how important it is to others – even if they ‘fit your profile.’

you must conquer the “status quo coefficient”

In fact, one of the most difficult dilemmas entrepreneurs face is determining whether fading excitement is part of the natural decay of the creation process or because the idea – ultimately - is a bad one. Continue Reading

The hidden secrets of market research

The last time I checked, the world’s population was around 6.8 billion.  If only 0.1 percent were to visit your website… and if you were to convert only 1 percent of those to paying customers… and they each paid $2 for a Thneed, for example, then revenues would be over $135M. (And everyone knows you could get way more than 2 bucks for a Thneed, which everyone needs!)

I can prove anything by statistics except the truth.

To some, market research only goes as far as finding a really big revenue number to put on the TAM (Total Available Market) slide of their business plan or investment pitch… Continue Reading

Is social media worth your marketing dollars?

As social media has reached mainstream consciousness this year, businesses have been inundated with the message that they must immediately get on board or risk doom and calamity. The hyperbole (and the frenzied buzz it creates) is confusing and many businesses could use a practical guide on how to evaluate social media and how to engage – if it’s appropriate.

It’s amusing to hear that “Word of Mouth” is new.

So the first benefit of using social media in your marketing efforts (and the first thing to keep in mind) is that social media systems are designed to facilitate person-to-person communication, as opposed to traditional media and most first generation web efforts, which are predominately one-way communication.  Continue Reading

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By brantcooper, January 13, 2010 2:32 pm

Based on input from Steve Blank and others, I updated the Customer Development image I created a few weeks ago.  Steve suggested I attempt to structure the image so that it was business model-independent.  So it is, but with a web-based model serving as an example.  Image has explanatory tool tips, as suggested by Valto in comments.

Click to Enlarge and see tooltips

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By brantcooper, January 9, 2010 1:59 pm

One of the more intriguing dynamics in startups and business in general, is customer communication. Customer Development is, of course, all about talking with customers to test fundamental business hypotheses, match product solution to customer problem, and in general, learn as much about them as possible in order more efficiently and effectively market and sell to them.

The tension comes from learning when to ignore your customers and when to take heed. Custdevguy reminds us that customers have their own agenda, which might not coincide with your own. Steve Blank reminds us that Customer Development is not just collecting web metrics and it’s not about focus groups. I’ve written before that Customers own the pain, Founders own the vision, meaning that as an entrepreneur, you must tailor your vision to solve the customer’s pain. That is the objective of speaking with your customers.

Sean Ellis perhaps says it best, describing the process as “honing in” on the “signal” that is the core value proposition of your product to your customer. What’s valuable about this description to me, is that rather than looking at what you need to ask each customer, it provides a high-level perspective on what your objective should be and how to get there.  It’s talking to enough customer and asking whatever questions necessary to hone in on the core value of the product.

Continue reading 'Treat Your Customers Like Children (or your Children like Customers)'»

Comments (12)

By CustDevGuy, January 3, 2010 9:12 am

Success and Cognitive Bias

One thing that often strikes me about conversations regarding start-up success is the pervasiveness of the narrative fallacy and hindsight bias.

We can go to Wikipedia’s entry on Taleb for a definition:

Narrative fallacy: creating a story post-hoc so that an event will seem to have an identifiable cause.

Allow me to illustrate.  What caused YouTube to grow at phenomenal rates in 2005/2006, eventually leading to a $1.65 billion acquisition by Google in 2006?

Was the cause:
Continue reading 'Cognitive Biases, Positive Black Swan Events and Startups'»