Steve Blank - Customer development
A business model is full of hypotheses. In order to advance customer development, you should visualize your own ideas. But it quickly becomes apparent that hypotheses, facts and real developments are often far apart. Finding the business model for customer development … Welcome to the real world.
When we had the idea for alugha, our target group was found relatively quickly: YouTubers who wanted a global reach. Nothing could be easier than that and we knew we would literally overrun the market. They would just rip the product out of our hands. The Post-its were on the wall and labeled so fast that we could hardly imagine it. When we were ready and the product had reached the first status to be usable, it started... it really started... soon it will start… The reality was sadly (or fortunately) different. We came to realize that we were able to win over YouTube producers, but the success was very manageable.
Back to the wall and thinking about what we lacked, what we still need to develop and who really was our target group. This process wasn't as easy as it might sound. Of course you can crack a nut with a sledgehammer and simply visit as many customers as possible and show the product, but this is both time consuming and costly. And here - I will certainly not reveal a secret here - most startup companies fail. Because no matter how ingenious the idea may be for us and how convinced we are, in the end we have to monetize it and what our customers want is what counts. It is therefore very important that as a founder, I participate actively in the market, take the sales department into my own hands and work on product development.
To make this possible, we need to consider some key factors:
Our target group
This may seem simple at first glance, but on closer inspection - and I would recommend this to EVERYONE - the target group in the course of product development is often different from the one we had on our radar. So it is very important to define the right target group in order not to burn the already limited resources. Let us take an example from the real world. We want to inspire certain customers in a big town for our special vegetarian Chili Sin Carne. For this to work, we make a big pot and go door to door, ring door bells and ask if they would like to taste it and if it would be something for them. Our city has 500,000 households. It is foreseeable that on the one hand we will need a very long time to tackle everyone- and on the other hand high costs will be incurred. How about if we get data and surveys (statistics … ) in which areas vegetarian food is mostly eaten, maybe that information is somewhere. Once we have them, we know (and this is just to illustrate this!) that of the 500,000 residents, about 7% are vegetarians and in the best case we have already been able to find the districts where most of them live.
Problem / Demand
Success depends very much on whether we solve a problem or satisfy a demand. An ingenious prime example of this is Apple and the iPhone. When Steve Jobs introduced it, there wasn't a real problem and the demand was not there. So how could he know that this would change the entire world market as much as a few other technical devices did before? I leave the question unanswered here and now, but pay my highest respect for it. I have produced a lot of videos (more than 500 on YouTube) and there was a great need for my viewers to understand them if German was not their native language. The problem was that YouTube simply did not and does not offer such a feature and in general does not have it. So I was in the fortunate situation that both existed. It is very important that we deal with this aspect as a matter of urgency.
Evaluation of the target group
It is a great thing to be able to find our target group. I'm taking up the Chili Sin Carne here again. We now know approximately where our customers live. But what is the service worth and how would our success look like? We start by evaluating the data and we have already dealt with the data relevant to us in advance. The customer tries our Chili and over time we ask one or the other question, look at how the clientele lives, for example: car, house, pets, clothes, furniture, garden, how many people in the household … This allows us to determine, among other things, how large the portions are, whether and how we can deliver, whether we string packages, how long a customer could use our service and so much more. We can learn much more in the digital world! The evaluation of the target group can save us a lot of money and time and be the key to success!
Solutions for the target group
Once we have collected all the information and prepared ourselves well, we can offer the target group a (as perfect as possible) solution. This is also called Product-Market Fit. We offer small, medium and large portions, also we have the family pack, the weekend pack, the party pot… For the elderly, the family, the party... we now have a very clear idea of how to place our product on the market.
I can only strongly advise you to believe the words from Steve Blanks' video. We have learned the hard way and I also know that this will happen to us every now and then. But since we understood where alugha was heading, we have been able to optimize the entire development, marketing and sales process. I travel a lot myself to actively participate in trade fairs, conferences and sales talks. I am always on the front line and I listen to the customers. In addition, I am very closely involved in product, UX/UI and software development. Today we have a much better product than we did three years ago. Take this to your heart! This is the boss' matter! Seek out someone who takes care of your mails, postings, calls … make and keep as much time as possible free for this.
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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