Lean Innovation | Startup

Customer Development and Start-up Models

I am sensing marked uptake on the concept of conducting serious customer research in order to jump start high tech start-ups.  It’s about time. There’s definitely buzz building around Steve Blank’s customer development methodology.  Ego dictates that whatever you’re thinking about must be what the world is thinking about and to that, I plead guilty.

But I wrote a post about an iterative, process-oriented approach to high-tech sales and marketing on 2.9.9.   Shortly thereafter, Andrew Beinbrink, CEO of the interesting San Diego start-up SportsTV, introduced me to Seal Ellis who introduced me to Steven Blank’s book The Four Steps to the Epiphany, which sounded an awful lot like what I had blogged about.  Whew.  Oh, and Steve’s even got a new blog.

Eric Ries melded Blank’s customer development with Agile product development methodologies and lo and behold, when it comes to Internet-based products, we’ve got a whole movement going on here.

My thoughts were initially guided by a paper I read in 2005, The Enterprise Sales Learning Curve (ESLC), written by Mark Leslie and Charles A. Holloway, subsequently published in the Harvard Business Review in 2006.   This was the first paper I had seen that clearly articulated the gap between high tech marketing and sales methods and well, reality;  the reality defined by customers. You know, the people with the money.   Let it be known that 1) you should read the paper, and 2) there was a decent amount of buzz in 2005/6; but now, not so much.  Will customer development have a similar fate?

There are some differences:

  • Scope: Blank’s customer development takes on a broader scope, i.e., not only sales and marketing, but a system for integrating customer input into all business operations.
  • Timing:  Adherents to Customer Development are primarily Internet-based businesses, which has an advantage in terms of customer outreach, as well as testing and implementation compared to software companies, who were the primary audience for the ESLC paper.

Sean Murphy kindly pointed me to several other sources of people thinking along a similar vein, including the  “Sell, Design, Build” model from the SyncDev team at http://www.productdevelopment.com/ and Bijoy Goswami’s “Demo, Sell, Build.”

I enjoyed Goswami’s bootstrapping video series and particularly appreciated his quoting E.P. Box regarding these types of models:

All models are wrong.  But some are useful.

The similarity between business models and scientific theories is that they both (may) accurately describe the past.  The difference, however, is that good scientific theories predict outcomes.  IMO, this is what is most interesting about the Internet based Lean Start-up model, is that we can produce a test of the theory that can be replicated, rather than merely construct a model that more or less describes the past.

That being said, we can never achieve the predictability of manufacturing models which served as the premise for both ESLC and customer development.  Humans, despite what the Invisible Hand aficionados wish to believe, do not behave in a way that approaches the definitiveness of mathematics.  Hence, all models based on such, will in some way come up short.

Not that key lessons can’t be learned.  What strikes me, however, about both the ESLC and Blank’s Customer Development, is the presumption that businesses deploying these models have not only been funded, but likely have finished product.  Again, the nice thing about the Internet model being played out today, is that this is not necessarily true.  Entrepreneurs, rejoice!

But what is scary, in my opinion,  is that businesses continue to get funding despite the fact there’s no real evidence that a market exists other than what was written down in the business plan.

Are you kidding me?

More on that in a future post.

To make a short story long, it is looking to me that for Internet-based start-ups, the Lean Start-up model is proving useful.