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Steve Blank - Customer vs. Product Development
A good and well-engineered product is something good. But even if that’s not the case, it’s rarely the reason why startups fail. The reason is rather missing customers.
Who has a greater willingness to take risks than startups in Silicon Valley? Exactly...no one. And there is no other place in the world where so many startups are born and also die as quickly as they came into existence. Was the idea bad? Was it implemented poorly? No, in fact, this is rarely the case. And this is where the Mecca of high-tech startups doesn’t differ from any other place in the world. The problem is that we didn’t get people to buy our product. We weren’t able to generate customers and users. Obviously, it’s fairly simple to find customers that use the product for free, respectively don’t pay anything for it (as you know, there is no such thing as a free lunch). But if you don’t want to be dependent on investors at the end of the month, you eventually have to strive for what man holds dearest: his money. We have to be compensated/paid in some way. And with that, the greatest possible obstacle and failures best friend are already in sight.
When you imagine that we spend a lot of time, money and resources to develop a product but our sales department is rather unimaginative and put in second place, then it is quite alarming. It’s usually like this: you hire a sales manager who promises a lot and bandies his contacts around. To this day, we haven’t developed a formal process to actually analyze customer needs. So we will cover this very topic in more detail in the next articles and videos.
Customer development consists of two fundamental pillars. We are searching for possible customers for our product, we develop a business relationship with them and, for the second pillar, we acquire them as paying customers. To achieve this, we have to know how to acquire a customer and how to evaluate every single one of them. Note: every customer is important, but some are more important. We can do this with a so-called “agile engineering process”. Here, the focus is on the “AGILE” part. A good example is “extreme programming”. It is built around the idea of iterations and incremental delivery of a product. This is ideal for software development. You can develop module after module that build upon each other and can be distributed through updates. It’s a great idea from many various angles. If a feature/update isn’t accepted by the customers then it doesn’t affect the entire product and development doesn’t have to start over. Those who release updates please their customers and keep them happy...and...are in many cases able to acquire loyal paying customers. And if you then also listen carefully to your customers you will receive market-oriented ideas virtually for free right on your doorstep, which will give you some significant advantages.
Software is often cluttered with features that only a handful of customers really need. Those are also willing to pay extra for that. However, the other customers are angry that they have to pay for features they are never going to use. Through extreme programming, you can respond to these specific customer wishes and develop modules for various needs.
It’s vital for the vision and CEO of a startup to get oneself into this kind of development. Money runs out faster than you prefer. And it doesn’t matter how good the idea is, if you don’t find paying customers, you will go down.
This article is written by our CEO, Bernd Korz. With his experience as an entrepreneur, he shares his vision about the lessons provided by Steve Blank. Join us every week for a new article on Steve Blank’s lectures.
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