Customer Development: Applying Techniques to Partner and Investor Development

How Do The Techniques Of Customer Development Apply To Partner And Investor Development, And How Dont They Are Failure Tolerance And Resilience Really So Important For Entrepreneurs?

In the contemporary world, the business audiences are getting harder to impress with each passing day. There is a glut in advertisements, emails, contents and products that has trained them in order to stop paying attention, until and unless they are confronted with something that is unexpected. It is the customers that make a product or a service successful. No matter who good, innovative, beautiful or reasonably prices a product or service is, without the willingness of customers to buy, it will ultimately fail. It is very important for the modern businesses to invest time and efforts in understanding their customers, their pain points and their needs in order to encourage them buying and deliver them the accurate and wanted solutions. This is called customer development. It is the way of reducing the risks for a business by means of challenging their assumptions regarding who their customers are, what actually they need and how and why they should buy something. According to Rahimi (2017), customer development is a significant change for majority of the organisations.

This essay shall elaborate on discussing about what customer development is and highlighting different concepts and theories that are being taught in the class in this subject in the first term. The main aim of this paper is to review and critically analyse the concept of customer development. Relevant links and references would be used in order to support the claims. Firstly, it shall present a brief overview of the concept and thereafter, shall critically discuss on diverse frameworks, tools and concepts. Secondly, the limitations of the theories shall be outlined followed by some set of recommendations and approaches for every framework. It shall finally conclude by pointing the key ideas of the entire paper.

According to Steve Blank, customer development is a four step framework that is aimed at identifying the potential customers and evaluating the ways of meeting their needs. He was the first to identify this concept in his book “The Four Steps to the Epiphany: Successful Strategies for Products that Win” (Blank 2007). As per him, this framework is a set of milestones and objectives, which are meaningful for a start-up. In this book, he has shared his philosophy of building some winning products, that is, customer development. Apart from him, Ash Maurya and other too have advocated that the approach of customer development is based on four key pillars and they are customer discovery, customer validation, customer creation and company building.

Technology Adoption Life Cycle Bell Curve

However, it is to mention such approaches and concepts are expanding with more researches in this field. It is therefore hard to assess and adopt all of them. This is why I think an entrepreneur must practice and take proper guidance on which model suits the business the best in order to result in a good and productive outcome.

A wide range of concepts and theories are being taught in the class in the module of customer development in the first term.  In this part of the paper, I shall be discussing on certain frameworks and concepts that were discussed in the customer development journey in class, in order to critique.

We were shown a graphical representation of the people by whom technologies were adopted. It is to mention that the technology adoption lifecycle seems to be as a bell curve. It illustrated the growth in the market by means of sorting down the adopters into five different categories-innovators, early adopters, early majority, late majority and laggards (O’Callaghan et al. 2018). The graph immediately catered my attention when I tried to reflect on my business and the ones who were my “early adopters”. I would like to mention that throughout the course, my viewpoints and idea of customer development changed as my customer segment kept on changing. My customer segments were the teachers, parents, children and the schools and therefore, it was quite hard for me to identify who would be my “early adopters”. However, when I reached at the end of the term, when we attended the conference of NESTA on future skills, I began to grow a strong enthusiasm and became enthusiasts. I started solving the issues on my own and finding out the alternative solutions for them. In my opinion, the graphical representation has enabled entrepreneur a percentage estimation of the rate of adoption of the share of market and this is quite useful for the fact that it provided a Total Addressable Market (TAM) for the beachhead market. I have learnt that for identifying the “early adopters” entrepreneurs need to determine their beachhead market and accordingly, must profile the persona.

Edward De Bono’s Hats is also called as “Six Thinking Hats” that help us to look at the problems from various different perspectives, but one at a time, in order to avoid any unnecessary confusion that take place for viewing a particular issue from different angles (Aithal, Kumar and Shailashree 2015). I must say that it is a very useful decision making tool that could be applied particularly in group situations, as in groups, everyone explores a particular situation from different perspectives at the same time.

De Bono’s Hats

This technique automatically forces an entrepreneur to move outside of his habitual style of thinking and to look at the things from diverse perspectives (Swamy et al. 2019). In this way, it helps in getting a more rounded view of the very situation. I think it is particularly more useful once the customer development process is started and insights of the customers are collected. It can also be used in parallel manner with the Lean Experiment Map and the Lean Canvas in order to flash out the different problems and help the entrepreneur in moving forward.

Each of the “Thinking Hat” is a different type of thinking as it is explained below

White Hat- With this hat, one focuses on the available data and look at those data and information in order to analyse the past trends and learn from them.

Red Hat- Wearing this hat, one looks at the problems by means of using his or her intuition, emotion, reaction and gut. With the same, he or she also thinks of the ways in which others react in emotional manner.

Black Hat- Wearing this hat, one looks at the potential negative outcomes of a decision and look at the same in defensive and cautious manner. It helps in making the plans “tougher” and more resilient.

Yellow Hat- It helps in thinking positively and is the optimistic viewpoint, which helps an individual in seeing all the advantages of a decision and values it.

Green Hat- It represents creativity and develops a creative solution to a particular problem.

Blue Hat- It represents the process control and is worn by the people who chair meeting.

The four step model of customer development is:

Company Discovery- This step is all about figuring out who the customers are and it takes lot of research. In this step, the target market and customer are identified.

Customer Validation- This step is all about creating a map to reach the customers. In case if it fails to work, the team should start all over again with the first step.

Customer Creation- It encourages different businesses to avoid extra spending on marketing.

Company Building- It transitions an organisation from a start up to a company that is focused on the execution of validated model.

This framework by Steve Blank is not linear and this non-linear nature of this model is the key to success. This is due to the reason that it does not force any team to move forward with its idea if the data and information of the customer is available for supporting the same. I think this model is designed in a way to make the user fail at least twice before they move forward. It is to mention that the first stage, which is called the “search phase” is very important. It is not simple and takes a lot of research for identifying the target customer or market. Blank have recommended that we need to “get out of the building” for finding out the target customers and market and this include avoiding the paid focus groups and focusing on researching on the real world with real customers in order to gain a better understanding of what is happening around. I think this recommendation of Blank goes hand in hand with the Lean Canvas developed by Ash Maurya, the PPPs (Progress, Problem, Plans), the Value Proposition Canvas developed by Peter J Thompson as well as the Lean Experiment Map (Johansson 2017). These models can be used in the very stage of the customer development journey.

The Four Step Customer Development Model and Lean Experiment Map

It is to mention that a team make hypotheses and leap of faiths assumptions right from the day one. It is very important for these concepts to be introduced right from the very beginning so that the entrepreneur could easily get an idea of the risky assumptions and can test then accordingly, thereby, making informed decisions. I would like to mention that I have giving these advices on the basis of my own experience. Although I was testing my assumptions that whether customers want to invest in a non-governmental personal saving centres, right from the beginning of my customer development journey, I found the process to be quite slow and was very confusing for me. I was confused on how to test the “leap of faith” assumptions in effective manner (Link 2016). For example, majority of the customers want to invest in governmental organisations only. I did not receive any solid idea on the cons of non-governmental personal saving centres. This ultimately resulted in a long array of interviews taking place with the participants who were not my customer segment. Ultimately, I failed to make my decision fast and also failed to establish well-focused and structured maps of experiment. Finally, the Lean Experiment Map helped it out in understanding the concept of test-measure-learn and fails fast (Armstrong 2017). It has helped with a validated learning loop for identifying the “leap of faith” assumptions and pinning down my hypothesis while determining the KPIs while making some quick decisions.

Although these concepts are non-linear and strong, according to certain researches, the customer development model as well as the lean start-up have the tendency to fail. Tanev (2017) in this context have claimed that the idea of Blank lacks in attention to detail. For example, Blank have opined that we should generate our hypotheses and thereafter, test them often while measuring and evaluating them until we can identify any course of action. But, Edge (2019) in this regard have claimed that testing hypotheses is dependent on some rigorous statistical thinking and therefore, the data gathered from the intuitive testing of Blank is prone to failure as they are comprise of inaccuracies and biases. Furthermore, Karabulut, Jaramillo Cherrez and Jahren (2018) in this context have opined that the customer development process might fail when we do not apply the concepts accurately.

When the course was on-going, I was introduced to the “Do-ability” framework. This framework incorporates all the elements mentioned above at high level. In my opinion, it is a very useful framework and this framework I keep in mind whenever I pivot and test new ideas. Throughout my journey of customer development, I started off with different ideas that I was passionate about but did not meet the market, personal and the value feasibility test. This framework has helped me in assessing the situation and making quick decisions. However, I think it could be expanded and complemented with all the assessments on the skills, weaknesses and strengths of the teams and the personal in order to ensure self-awareness and reflection.

PPP is one of the best practice management processes for recurring the team progress and the status reporting. Every team member report about three to five key goals, challenges and achievements known as Progress, Plans and Problems for the reporting period. It is one of the simplest most approaches of reporting, tracking and managing the status. This approach has completely changed my way of practicing entrepreneurship and in this way, has helped me in structuring all my actions while expressing my issues and finding out solutions while being creative.

Business Canvas or business Model Canvas is a strategic management and lean start-up template that is used for the process of development and documentation of the existing business models. It is great tool for understanding a business model in a structured manner. This framework has helped me in expressing my start-up idea into written form. It has given me a structured framework for putting my thoughts in proper order and at the same time, a short background of my overall business plan. Notwithstanding these facts, there are also certain limitations of this framework. For instance, as per Ladd (2018), business canvas model does not comprise of the performance measures. On the other hand, the Lean Canvas “does not give the expected approach when the solution of the initial problem becomes unrealistic or extremely difficult to realize”.

In my opinion, both the frameworks are same in terms of persona, paying customer, end user, decision making unit and the influencer. This is why, an entrepreneur must also focus on complementing both these frameworks by making use of the other frameworks that are suggested in the module (Hermann and Bossle 2019). Also, it must be kept in mind that none of these mentioned frameworks should be used without proper guidance and in isolation. Entrepreneur must choose to use a holistic approach for minimising the failures, avoiding the biases and increasing efficiency and transparency.

During the module, we have learnt about many more methods that are similar but they are a quite different angle:

Five Days- Understand-Diverge-Decide-Prototype-Validate

MVP Pyramid- Functional-reliable-Usable-Emotional Design

It is to mention that not everyone embrace these concepts. Bandera, Passerini and Bartolacci (2019) have criticised the customer development and lean start-up model in her article: “Lean Startup, and how it almost killed our company”, and concluded “their best application is in larger companies looking for a more effective way to manage their innovation portfolio”. She has also applied her lean start-up concepts while building MVPs for her company “Gamevy”. Notwithstanding this, here the MVPs had failed as her opinion failed to apply to the business model as well as the market segment. Apart from her, Kidder and Wallace (2019) too have supported this claim saying “by means of making running lean and end, you may lose your opportunity to win the market”. On the other hand, the owner of PayPal, Peter Thiel believes that entrepreneur must not have any formula and he dismisses these methodologies like MVP and other lean methodologies.

There are certain pitfalls of customer development process. I believe that for realising the full vision of Eric Ries of Lean Start up, the Customer Development process need to scale.

It cannot be applied at the ends of head and tail of the development of product cycle. It is required to be ingrained in the process of product development cycle.

It cannot be applied for finding an issue that is worth solving and in developing a MVP. However, it needs to be a significant part of the on-going process for the way different features are developed and validated (Aulet 2017).

It cannot be limited to the interviews only. It needs to be incorporated into other different forms of qualitative learning as well as the techniques for reaching the customers.

The process of customer development also requires enough resources, attention and time and this might lead to entrepreneurs to run out the patience and pulling the plug out (Picken 2017).

There is a lack of well-structured discipline and process.

Below are mentioned certain recommendations in order to try avoiding the pitfalls mentioned above:

Entrepreneurs must first prioritise their hypotheses before anything and deign their experiments accordingly.

They must establish certain set of metrics prior to getting out, observing, talking and carrying out their experiments.

While planning their hypotheses, entrepreneurs or teams must first target the small groups of customers where they can easily do deeper in the interview in order to gain better understanding of the reason behind the phenomenon.

Entrepreneurs must ask for help, advices and support from their mentors and advisors for providing their unbiased opinions on the issue.

They must never stick to any one approach or framework and must take a holistic approach. They must make use of different analogue and antilog during the completion of lean canvas and thereafter, make use of the PPPs for the completion of Lean Experiment Map.

Entrepreneurs should never waste their time taking interview of wrong people and must always choose right participants for gaining accurate feedback on the issue of concern. They must try to create short and to the point questionnaires by means of using a combination of open and close ended questions.

They must always make planning before talking to the customers in order to ensure that they do not need to revert back again to the potential customers.

Conclusion

Hence, from the above analysis it is to conclude that the above essay has presented a wide range of concepts and frameworks that were taught in the module of customer development module in the first term. An entrepreneur can choose any one from them. However, there are certain critics who have provided their viewpoints on these concepts, some have supported and some have rejected. However, the key to success is that entrepreneur must always plan in advance and must not dig deep enough while interviewing his customers. He or she should not be biased while selecting the target market or the target customers to interview. Also, they should always keep practicing and seeking help while reflecting. They must choose a holistic approach. Being disciplined and systematic is necessary in the process of customer development.

References

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