Customer Development must be tailored to what type of business you are and where you are as a business. All businesses, not just Internet-based ones, can benefit from customer development principles, but the ease/difficulty varies quite a bit depending on product, business model, and your knowledge of the market, etc.
Clearly an Internet based product has advantages both in terms of customer development and fast-iteration product development, over software applications. I’ll go out on a limb here and rank difficulty based on product type this way:
b2c internet -> b2b internet -> b2c software -> b2b software -> hardware
No great revelation here. I’m going out another limb and say the significance of customer development increases as you go from left to right, while the significance of fast-iteration product development runs from right to left. This is not to diminish applying both principles as much as possible in all cases, but that the nature of the product determines which will predominate.
Products toward the left are less expensive to develop and deploy and customer learning is more inherent in their nature. The cost/failure is lower. If you haven’t practiced customer development principles, e.g., interviewing customers about a particular issue’s pain level, you will learn soon enough whether your product solves a real problem. Practicing Eric Ries’ lean startup principles can serve in lieu of practicing some of the customer development steps. Further, many assumptions are actually facts. IMVU’s customers are online. They can be reached online, they use web sites to learn about products, they reference online users who are similar to themselves, and they buy online. You don’t have to interview your online customers to determine those basic facts as you must for other product types.