Some business ideas are born during a fun night out with friends. The scribbling on the napkin with your first idea for a business model lays the foundation for a project. You are so passionate about your own idea that you could convince anyone of your future success.
Every day people have great ideas. Some even found a company and dream of being successful; however, the truth is that 90% of start-ups fail.
Nevertheless, there are ways to hedge for your venture’s success. Using a methodology such as customer discovery increases the chances of your success. Or at least saves your money and energy when you realize that you miscalculated along the road. We assume that every early venture has untested hypotheses about its business model, whether explicit or implicit. You probably thought about who your customers are, what features they might enjoy, and how you would reach them. Similarly, you probably also have some ideas about your strategy, revenue, or pricing and maybe which partners you need.
Of course, you could sit down with your team and spell out your understanding of your venture’s surroundings. However, there are no facts inside your building, so we urge you to get outside and test your assumptions and hypotheses.
In a sense, the customer development method emulates the scientific method. Design an experiment for every business model hypothesis, conduct it, and derive insights from the data you accrued.
The results will validate your hypothesis, invalidate it, or force you to modify it if the results are inconclusive.
The Customer Discovery Process
The customer discovery process consists of four repeatable steps designed to help your venture avoid common mistakes and emulate successful business strategies.
- When you start, spell out the founders’ vision for the venture and formulate a set of hypotheses. Each hypothesis should refer to an aspect of your proposed business model.
- In the next step, you develop a plan to test the customers’ reactions to your hypotheses and transform your assumptions into facts. Based on your newly found facts, validate whether your business model is repeatable and scalable. If that is not the case, adapt your hypotheses and get back to testing.
- After customer validation, you can move on to customer creation. The third step kicks off the execution of your business model. The aim is to build manifest end-user demand for your product or service and to fill up your sales channel.
- The fourth and final step of the customer discovery process is transforming from a start-up to an established company which executes a validated and well-functioning business model.
FAQ
Sounds easy and straightforward! Well, obviously, it is not as easy in the end. Consequently, we compiled some frequently asked questions regarding customer discovery and tried to answer them.
Why should I use customer discovery?
The goal is to understand your potential customers and whether your product or service has any appeal. You are looking for your first paying customer, so-called innovators according to the diffusion of innovation theory, not the broad masses. Use customer discovery to avoid bringing an idea to the market that does not attract customers.
How many interviews are necessary to evaluate a hypothesis?
It all depends on the personas you have developed. The goal is to have enough qualitative data to decide. Generally, the design research rule of thumb recommends interviewing between 8 to 12 persons, which should cover up to 85% of possible insight. You will notice that a few things will surprise you after several interviews. That is the best indicator that you are done.
How long should the interviews be?
Do not spend a lot of overtime on interviews. You do not have to ask 45 questions in each interview. The more interviews you conduct, the more compact they will become. Generally speaking, 15 to 20 minutes are often sufficient to gain the necessary insights. Also, remember that people’s time is limited, don’t take more time than you need.
How long does the process take from start to finish?
The environment for your venture is constantly changing. The market is persistently volatile. Your customers’ habits, ideas about products and preferences are changing continuously. Try to keep your business model up to date and continue to lead interviews to grow your viable business model. We understand customer discovery as a circular process until you achieve the status of an established company.
Additionally, we recommend you read the customer development manifesto developed by Steve Blank, an American entrepreneur and adjunct professor of entrepreneurship at Stanford University.
If you still have some questions, do not hesitate to contact us and book an innovation consultation to figure out your next steps!
