Every entrepreneur tries to develop a product or service that meets customers' needs and creates a profit.
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From basic service firms to high technology organizations, every new startup often has a product development road map that they use to define the features, benefits, and requirements for their new product or service. However, assumptions made by an entrepreneur about his/her customer's problem, is often times, no better than a guess. An often overlooked aspect of product development, yet an extremely important one, is customer development.
Customer Development is a process popularized by Scott Blank, a Silicon Valley entrepreneur and lecturer at Stanford and UC Berkeley. In its simplest form, Customer Development is a complimentary process to product development that requires entrepreneurs to validate their business and customer assumptions by engaging their customers before and during the product development phase. The core 4 phases of Customer Development (also known as the 4 Steps to Epiphany) are as follows:
Customer Discovery – Test your hypothesis of your customer's problems and evaluate how your business will help customers solve the problem.
Customer Validation – Customers validate the concept of your product by validating that your product will solve their problems. The customer problem and the customer solution are now known.
Customer Creation – Your product launch strategy and positioning in the market based on customer feedback during your customer discovery and validation phases.
Company Building – Scale your venture.
A great example of an entrepreneur leading a customer development strategy, was Scott Cook, the founder and long-time of CEO of Intuit. Before Scott even began to define the product requirements for Quicken, the popular personal finance software, Scott cold-called neighbors and consumers to validate his hypothesis ("Customer Discovery") that consumers hated balancing their checkbook and that a software program would be able to solve their problem with personal finance management. Scott didn't race into developing a product with out first validating his assumptions with customers and understanding the customer's problem in detail and verifying that the features he wanted to include in Quicken would solve the customer's problem ("Customer Validation").
Quicken positioned itself in the market as an easy to use solution for managing personal finances ("Customer Creation") and grew rapidly due to positive word of mouth. Scott and his team at Intuit knew they had a success and continued to leverage their customer development process leading to the development of several new versions of Quicken ("Company Building Phase") that eventually lead to their IPO. Intuit for a long time managed a "follow me home" strategy where they would follow customers home (with their approval of course) and watch them install and use Quicken to see first hand how customers used their product. Intuit has for a very long time been a company that has successfully leveraged and focused on customer development processes to develop industry leading software.
The core principle here is that focusing on the customer, and not the product, is a strategy that can lead you to develop the "right" product. Rather than make assumptions about the features that should be added, validate assumptions with potential customers and let customers be your product development guide. Understanding first hand your customer's problems will allow you as an entrepreneur to develop a product that will not only meet your customer's needs, but exceed them.