The Startup Owner's Manual Strategy Guide
The Startup Owner's Manual Strategy Guide by Steve Blank and Bob Dorf describes the Customer Development methodology that can be used by startups to search for a business model. The Customer Development model was developed because existing tools and strategies for established companies are designed for measuring execution of an existing business model but are wasteful when attempting to measure the search process for an unknown business model.
Customer Development Versus Product Development
Traditional product development in an established company follows a predictable waterfall process because the customers are already known. However, a startup is defined as "a temporary organization in search of a scalable, repeatable, profitable business model" and therefore does not yet know who its customers are.
Therefore startups must search for their business model and customers through the Customer Development process. Traditional product development models are not suited to finding and obtaining customer feedback because there is no existing product on which customers can base their feedback.
Therefore at first a quick low-fidelity minimum viable product must be created to obtain initial customer feedback. Customer feedback is used by the founders to validate hypotheses in their business model. Later, a high-fidelity minimum viable product is used for customer validation.
Nine Mistakes About New Product Introductions
The authors outline nine common flawed assumptions about product introduction when both the customer and business model are unknown.
- "I Know What the Customer Wants"
- "I Know What Features to Build"
- Focus on Launch Date
- Emphasis on Execution Instead of Learning and Iteration
- Presuming No Trial and No Errors
- Traditional Job Titles
- Sales and Marketing Execute to a Plan
- Premature Scaling on Presumption of Success
- Management by Crisis
Examples of each and analysis of where these go wrong in a startup are given. The gist is, you don't know your customers until you get out of the building (the authors use this term frequently) and start showing them something tangible.
Customer Development
Customer development is the process used by a startup to search for a repeatable business model. An important quote from the book:
Search versus execution is what differentiates a new venture from an existing business unit.
Agile development combines with customer development in a software-based business to organize and implement the business model search process.
The first step in customer development is customer discovery. Customer discovery is the process for transforming founders' vision into a series of the most important testable business model hypotheses.
The second step in customer development is customer validation. Customer validation tests whether the business model is repeatable and scalable.
A primary feature of the customer development process is that there are no functional departments until the business model is proven and moves into execution mode. Everything done during customer development is done by a cross-functional team working together to search for the business model.
Customer Creation and Company-Building
Once customer discovery and customer validation are proven, the company moves into execution mode (customer creation) then company-building.
Customer discovery and customer validation are explained with great detail by the authors. I will elaborate further in a later post that crosses lessons learned from both The Lean Startup and The Startup Owner's Manual Strategy Guide.