Friday, November 13, 2009

Merits of Customer Development

I wouldn't be a card-carrying product manager without some thoughts on product management.

My latest product management interest has been following a trend known as Customer Development, advocated by Steve Blank. It's a business model for developing new products, mostly applicable to startups but I think it also applies to more established companies.

The main message is actually fairly intuitive: you develop a successful product by continually iterating it in a tight feedback loop between developing the product, getting customer input, and then making changes. Rather than spend a lot of time upfront in creating the product, you develop a minimum viable product (MVP): the product with just the necessary features to get money and feedback from early adopters. Then you let your early adopter customers tell you what works well and what needs to be changed.

This model sounds intuitive but by far the most prevalent development model for Silicon Valley startups looks something like this:

1. Get excited about an idea. Start doing some research regarding markets, customers, pricing, etc.
2. Build the product, along with accompanying sales tools (demo, PowerPoint slides, data sheets, etc.). Start building a sales force to sell the product.
3. Work with a small group of alpha/beta customers. Enlist a PR agency start building "buzz."
4. Officially release the product in a public launch event, hopefully getting lots of attention from a site such as Digg or Techcrunch. Go full steam ahead in selling and marketing the product.

Steve Blank calls the model I just described as the Product Development model, and he labels it "the leading cause of startup death". You can read more about why on his blog, starting with this link.

I've started reading Steve's book, Four Steps to the Epiphany. I first heard about the book on Marc Andreessen's blog. I was intrigued by his recommendation because Marc has some really great thoughts on the idea of product-market fit - the idea that what matters most in determining the success of a product is how much it fits what the market needs. It turns out that Marc was borrowing concepts from Steve Blank's book!

The book is laid out more like a manual but from what I can tell, it has great content.

In fact, I don't know why we don't hear more about Steve Blank and Customer Development. The model makes so much sense because it basically says that entrepreneurs may have vision but they aren't fortune tellers. They can't predict exactly what people need so there is a constant need to go back and iterate.

Maybe this model isn't so popular because it flies in the face of conventional wisdom? Imagine if all startups started to follow this model of starting with a minimum viable product and holding off on enlisting the professional sales force, marketing team, PR agency, etc. upfront. This would certainly change the economics of the startup industry in regions such as Silicon Valley.

Here's another fascinating article inline with the idea of Customer Development. It seems almost strange that a Web site could make 50 changes in their production system every day, but if you take the time to read through the article, it makes a lot of sense.


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