The Why and How of Customer Development

As strategic advisors using the Models of Impact method for business model design, we work with thousands of entrepreneurs to guide them on how impact and revenue can come together to both make profits and give back. The method introduces game elements into the business model design process and identifies opportunities, risks, and testing methods for validating the viability of the venture. Among those critical testing activities is lean customer development. Why customer development and how do you do it?

What is Customer Development?

First of all, customer development differs from user research, market research, and product development in the sense that this activity is specifically about what your customers really want. Through a hypothesis driven approach we explore:

  • Who the customer really is 
  • What problems and needs they have
  • Which solutions customers will give you money for (even if the product has not yet been built)
  • How to provide solutions in a way that works with how your customers make decisions, procure, buy, and use. 

The First Challenge

Change is difficult for many new and established businesses. For many organizations with years of experience selling to their audience, there may be a great deal of assumptions and intuition about what the customer wants. You may have found success previously but what if market conditions change or you enter a new category altogether? This changes all of that. Lean customer development is about taking a step back and validating all of those assumptions. It means taking a scientific approach to scaling a business and reducing risks in the process. So for many, getting buy-in on these new strategies can be the first hurdle. 

Customer Development is Not Just for Startups

With drastic changes in markets and technology, large firms cannot guarantee that their business model will remain static indefinitely. In fact, if you look at the volatility of the S&P500 over the last 100 years you will notice that the average lifespan of an S&P company has dropped from 67 years in the 1920s to 15 years today! And according to Richard Foster from the Yale School of Management, 75% of S&P firms will be replaced by new firms by 2027. That means nobody can sit still while the world rushes past it (cough cough... Radio Shack).

Lean Customer Development in 5 Steps

Knowing whether or not your thinking is correct begins by asking human beings how they feel about your product or service. Here are five steps toward achieving your own customer development methodology. 

  1. Form a hypothesis! 
  2. Find potential customers to talk to. 
  3. Ask the right questions. 
  4. Turn their answers into key insights. 
  5. Figure out what to build or continue learning. 

Looking for a partner in building out this strategy? Great! 
Our team of strategic business designers can help you scale your idea.