Customer Development

Customer Development is a formal methodology for building startups and new corporate ventures. It is one of the three parts that make up a Lean Startup (Business Model Design, Customer Development, Agile Engineering).

The process assumes that early ventures have untested hypotheses about their business model (who are the customers, what features they want, what channel to use, revenue strategy/pricing tactics, how to get/keep/grow customers, strategic activities needed to deliver the product, internal resources needed, partners needed and costs.). Customer Development starts with the key idea that there are no facts inside your building so get outside to test them. The hypotheses testing emulates the scientific method – pose a business model hypothesis, design an experiment, get out of the building and test it. Take the data and derive some insight to either 1) Validate the hypothesis, 2) Invalidate the Hypothesis or 3) Modify the hypothesis.

Many burgeoning startup companies devote all of their efforts to designing and refining their product and very little time “getting out of the building.” The customer development model encourages that more time be spent in the field identifying potential consumers and learning how to better meet their needs. The Customer Development concept emphasizes empirical research.

Customer Development is the opposite of the “if we build it, they will come” product development-centered strategy, which is full of risks and can ultimately be the downfall of a company.

The Customer Development method was created by serial entrepreneur-turned-educator Steve Blank, father of the Lean Startup movement. According to Blank, startups are not simply smaller versions of larger, more developed companies. A startup operates in a fashion vastly different from that of a large company and employs different methods. While larger companies execute known and proven business strategies, startups must search for new business models. Customer Development guides the search for a repeatable and scalable business model.

Customer Development was developed by serial entrepreneur Steve Blank in the 1990s. While writing about his experiences as an entrepreneur in the Silicon Valley for his memoir, Blank began to notice patterns in the startups he was involved with. Recognizing that startups are not simply smaller versions of large companies, he observed that entrepreneurs need to have a systemized approach to guide their search for “repeatable and scalable business models.”

The revelation led to his first book, The Four Steps to the Epiphany: Successful Strategies for Products that Win, which served as the course text for his first class and heralded the birth of Customer Development, which in turn spawned the Lean Startup movement.

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