Singularity.vc

Customer Development & Lean Startups, a Primer

Aaron White -

Customer Development:

According to Steve Blank, a startup should travel through four distinct stages,

  1. Customer Development
  2. Customer Validation
  3. Customer Creation
  4. Company Building

Stages one-through-three are about creating your money-making machine, and stage four is about fueling it. The classic mistake Steve rails against is attempting to do all four stages at once; you can’t efficiently fuel a rocket that doesn’t have a well-known heading, you can’t consistently create demand and a sales-pipeline for something that is open to radical revision, and you can’t prove that people will pay until you know what they are willing to pay for.

You sequentially work through each stage, usually more than once, until you’ve satisfied its exit-criteria:

  1. CD - Evidence (from potential customers) suggesting that your product actually solves their real problems at a price they will pay. This isn’t your call - it’s theirs, so be sure to LISTEN, not sell.
  2. CV - A scalable and repeatable sales process is in place. (CPA < LTV anyone?) Actually collect some $$.
  3. CC - Fuel that demand

A company that creates a great product that people pay for, has a way of finding customers, as well as the means to do so, is in a great position… and… no longer a startup. It’s officially a business.

So prior to stage 4, you primary activity is learning & tuning and I’d boldly classify your efforts as something like ‘experimental learning’. Let’s save the term business for the money-machines, and aspire to create one. Not by fiat, but by evidence & traction.

The Lean Startup:

Eric Ries coined the term 'lean startup’ to refer to the low-burning, agile-development-practicing, lean-thinking startups that practice Blank’s Customer Development model. Take your vision, implement a Minimum Viable Product, iterate the snot out of it, until you’ve solved a problem people are willing to pay for. Eric provides some great insights backed up by some serious thinking; is code good if it’s not used in production? It’s not, it’s waste. Is a product good if your conversion page doesn’t convert? It’s not, it’s waste. (Think “Toyota Way” for tech-startups: pull-driven, waste-eliminating activities)

Where Steve provides the strategy, Eric provides the tactics.

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