Customer Development = The pursuit of customer understanding

Part of Customer Development is understanding which customers make sense for your business.  The goal of listening to customers is not please every one of them.  It’s to figure out which customer segment served his needs – both short and long term. And giving your product away, as he was discovering, is often a going out of business strategy.

The work he had done acquiring and activating customers were just one part of the entire buisness model.

via Killing Your Startup By Listening to Customers « Steve Blank.

I work on lots of new ideas for companies. I have developed the following tool that helps me (and it seems many others) to quickly develop and evaluate these ideas.

In the simplest form, it helps create an elevator pitch, (e.g. for www.gist.com – We focus on relationship centric professionals like sales, PR and recruiters (C) and, save them time (V) as they prepare for meetings, by creating dynamic full-contact dossiers (F) and charge them a monthly service fee (B).  It is not critical for this to be the marketing pitch, but it helps.

To get started on finding the “MVC” (minimum viable company), you need to start with the “smallest idea that is big enough” (a few customers, 1 value, 1 key feature and a clear biz model).

You need to identify real people you know (we built Gist for me and 2 sales guys, thx Kendall and Brandt) who can validate the idea, value, key features and their willingness to pay (which should be very high).  As you find representative people, you can abstract key attributes of them to start to generalize into “personas” which becomes your real target customer.  And from here you can start looking for the best beta users (more on that here)

You can then compare different parts of the model to see how well the idea works.  A few examples;

• C–V – does your target customer value what you are doing (e.g. saving time, qualifying leads, increasing revenue…) and how much (scale of 1-10)?  Is the value a real pain or just nice to have?  How do they solve this pain now?  How would they quantify value?
• V–B – is the value your delivering correlated to the business model?  If you save someone time, do you charge more depending on the amount of time you are saving?  Work hard to correlate these things by changing one of the other.  This ends up relating to ROI (return on investment).
• F–B – are the features you are building organized to support the different price points?
• C–B – does your customer usually buy in the model you are proposing?  What other services/products do they buy that are similar to yours and is the model similar for these products?  How much do they pay for related services?
• F–V – are the features you are building aligned with the value and in similar priority order?  If your value is saving time, do you consider each feature on how much time it can save the end user?

Today I participated in an annual call with The Corum Group, a Seattle based M&A group focused on trends and opportunities for 2012 across the broad software, internet and mobile spaces. I was part of a panel that included some friends and people I really respect, including;

• Dan Shapiro, Google — Social Domination
• Chris Bray, IBM — The Year Ahead
• T.A. McCann, RIM — Revolution in Mobile
• Peter Coffee, Salesforce — Cloud Strategies
• Steve Singh, CEO, Concur — SaaS in 2012
• Reese Jones — the Berkeley Lab Sage
• John Heyman, Actuate Partners — “Selling for a Billion”

I made the following key points about “revolutions in mobile” Read more

To create a great and successful company, marking and communicating your progress to yourself, your team and your supporters is critical. Here are a few things that have worked well for me;