Bob and Pat talk with Stanford professor Steve Blank about the theory and methodology of Customer Discovery, an approach that is redefining how founders build startups in Silicon Valley and beyond.
Prof. Blank lays our what makes Customer Discovery work, how do you know you’re doing it right, why it’s an art not a science, his Lean Launchpad online class, and much more.
After founding 8 startups, Prof. Blank “retired” to teach entrepreneurship Stanford University, UC Berkeley and Columbia University, wrote the highly-regarded book, “Four Steps to the Epiphany” and is widely considered to be one of the key thinkers of the Startup economy.
During the interview, we also discussed at length his brand-new and highly anticipated book, The Startup Owners Manual.
This particularly awesome interview was made possible by Michigan Lean Startup Conference slated for May 17th – If you can get there, you should be there.
This time around, Bob and Pat talk briefly after the interview about Customer Discovery and why this stuff is absolutely key if your startup is going to succeed.
Thinking about doing a MicroConsult with Bob Walsh? Stop by 47hats.com and let’s chat a bit about your startup as a first step. I hold free “online office hours” Monday-Friday 4-6pm PST UTC -8. Details at 47hats.com. Or, send me your startup question via AskBob, and let’s get a conversation going!
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URLs mentioned/relevant to this show:
- Steve Blank’s web site.
- Order in the U.S. the Startup Owner’s Manual (now shipping).
- Order outside of the U.S. the Startup Owner’s Manual.
- Articles about Steve Blanks in the New York Times: here, here and here.
- Presentations by Steve Blank on SlideShare.
- About the Lean Launchpad Class and here.
- The Michigan Lean Startup Conference 2012 on May 17th.
Pat’s notes on the show:
- Customer Development: There are no facts inside your building, so get the heck outside. Seems obvious when you think about it
- Key Mistake of the past: We were treating startups as small versions of large companies
- — Big companies are about execution
- — Startups are searching
- — Distinction between searching and execution is huge – and you have to get out of the building to search
- I’m thrilled that people are using at all, and I’m thrilled Eric Ries has spread the word so effectively
- Customer Development goes in phases – it’s really hard
- It’s not just data and insight – it’s an art
- Customer Development is a lot harder than it sounds in the book
- You know you’re doing CustDev right when you start to realize that some of your cherished hypotheses are wrong. It’s both depressing and exhilarating
- Entrepreneurs have to be driven and passionate while still having that voice in the back of your head saying “maybe you’re wrong”
- Pivot vs Iteration
- — Pivot – Fundamental change in the business model (e.g, going from freemium to some other model)
- — Iteration – a step-wise change in some element of the business model (e.g., changing the specific price)
- Entrepreneurship is still an art – following a specific book or methodology doesn’t guarantee success – it just increases the odds
- How many people to talk to? Depends on size. If it’s a million-dollar enterprise software package, 5 customers might be enough of a signal to start scaling. If it’s an Internet business, you need a lot more than 5
- You’re trying to get enough data to show patterns – do you have enough information to bet your kid’s college fund on?
- Another important idea – is the market large enough so that you can scale the business if everything works?
- Do you have a local maximum or a global maximum – have you discovered 50 customers out of a possible 300 or out of a possible 300,000?
- Does your product solve a need?
- The purpose of your customers is not to buy your product – the purpose of your company is to solve a customer’s problem or need. Your job is figuring out what that product/market fit is.
- The real problem on the web is getting customers. Customer acquisition. Getting people to come to your site is step 1. Activating them is step 2. If you don’t build value, you can get people to your site, but they won’t activate, they won’t buy.
- The Startup Owner’s Manual goes through this process step-by-step with your customers
- Going straight to the solution instead of focusing on the problem is a common problem for entrepreneurs. Unfortunately, 99% of the time, you’re wrong – we’re trying to encourage a process of maintaining that drive and vision while nurturing the little voice telling you that you might be wrong.
- Entrepreneurs are “crazy” people who are driven to work through this process. When we fail, we just pick ourselves up and try again
- There are people who succeed without doing these things, but there’s a lot of luck involved
- This is not a checklist that will guarantee your success. It’s a method that will help you reduce the stupid mistakes you make
- These concepts tend not to resonate with 20-somethings who “don’t need no stinkin manual.” Fine – go do it. This is for the other 99.99% of us.
- These concepts also tend not to stick with corporate execs who say, “we need to be entrepreneurial.” You can’t just plug this stuff in. You can’t assign it to somebody.
- Entrepreneurship is not a job. It’s a calling. It’s like volunteering for the Marine Corps.
- We used to have this thing called a telephone … calling people you don’t know is scary. Customer Discovery is like asking your first date. It’s awkward. It takes time to learn how to make eyeball-to-eyeball contact
- You can’t just do this online. You have to get the nuances that come with being in person
- Correlate your big survey data with interviews where you “see their eyeballs dilate in person.”
- What do you show people during Customer Discovery? This differs wildly in the physical vs digital channels. If you’re building something physical, you have to build a prototype. The tactile response to a physical product changes how your mind works. You could probably right a PhD thesis on this. It doesn’t have to be functional – it just has to be physical.
- For a website, it can be low-fidelity or high-fidelity. On the low side, you could have mockups, wireframes, etc. A high-fidelity MVP could have polished features, but it doesn’t have to be complete. It should walk people down the main path in a fairly polished way. The Startup Owners Manual goes down this path step-by-step
- The beginning of Customer Develop is not about getting orders or users. It’s about understanding whether my core hypothesis is on the same planet of what customers are thinking about.
- Lean Launchpad is a new class based on The Startup Owner’s Manual (and leveraging concepts from Business Model Generation, Lean Startup, and others – these form the basis of an entrepreneurial “education stack”) – it will be about 10 courses, and anyone can take it from anywhere in the world! There will be tie-ins with programs like Startup Weekend so that you can complete it in teams.
- You could go to business school and learn how to be a great corporate executive. It’s only been in the last 3-5 years the creation of a toolset for entrepreneurs
- When building a second product, ask yourself – is this a product line extension or a new customer segment? If it’s a new customer segment, then you have to invest in all new learning about your channel and customer segment. If you come up with a new product that has new customers, you have to do all that stuff over again.
- For example, IBM didn’t use their mainframe market to sell PCs. Fairchild Semiconductor was selling transistors like crazy when they came up with the integrated circuit, a groundbreaking discovery. Yet when it came out, their VP of Sales delayed the launch because he knew it would hurt their sales of transistors. ICs took a completely different selling model. Developing that would cost a lot of money. They tried to sell it with their existing force, and it didn’t work
- If you have a new product for new customers, you need a new sales force.
- If you want proof that this stuff works, you’re not going to get it. There are no numbers on this stuff. If this doesn’t make sense to you, then don’t do it. I’m not recruiting anybody, and I’m not selling anything. I’m retired. If it’s not obvious to you, then don’t do it.
- About the book – it’s heavy. It’s big. There is a web version coming out eventually, but the print version is the MVP. Also, it’s not a novel – it’s a reference. You’re startup is not likely to unfold just like the book. All we can do is give you guidelines. If you have a business where your biggest problem is figuring out where to put the stacks of money, then throw this book off the roof! This is a book for when you’re confused. It’s not the bible. I suspect this is just the beginning of a ton of books for helping entrepreneurs succeed