The Path To Epiphany
Being a great entrepreneur means finding the path through the fog, confusion and myriad of choices. To do that, you need vision and a process. This book gives you the process. Its premise is simple: If you execute the four steps of Customer Development rigorously and thoroughly, you increase the odds of achieving success, and you can reach the epiphany.
Customer Discovery: Overview of the Process
Phase 1 is a rigorous process of writing a series of briefs that capture the hypotheses embodied in your company’s vision and business model. These hypotheses are the assumptions about your product, customers, pricing, demand, market, and competition you will test in the remainder of this step.
In Phase 2 you qualify those assumptions by testing them in front of potential customers. At this point you want to do very little talking and a lot of listening. Your goal is to understand your customers and their problems, and arrive at a deep understanding of their business, workflow, organization, and product needs. You then return to your company, integrate all you learned, update Engineering with customer feedback, and jointly revise your product and customer briefs.
In Phase 3 you take your revised product concept and test its features in front of customers. The goal is not to sell the product but to validate the Phase 1 hypotheses by having customers say, “Yes, these features solve our problems.”
At the same time you’ve been testing the product features, you’ve been also testing a bigger idea: the validity of your entire business model. A valid business model consists of customers who place a high value on your solution, and find the solution you offer is (for a company) mission-critical, or (for a consumer) a “have-to-have” product (product/ market fit.) In front of potential buyers, you test your pricing, channel strategy, sales process and sales cycle, and discover who is the economic buyer (the one with a budget). This is equally true for consumer products where a sale to a teenager might mean the economic buyer is the parent while the user is the child.
Finally, in Phase 4 you stop and verify you understand customers’ problems, that the product solves those problems, customers will pay for the product, and that the resulting revenue will result in a profitable business model. This phase culminates in the deliverables for the Customer Discovery step: a problem statement document, an expanded product requirement document, an updated sales and revenue plan, and a sound business and product plan. With your product features and business model validated, you decide whether you have learned enough to go out and try to sell your product to a few visionary customers or whether you need to go back to customers to learn some more. If, and only if, you are successful in this step do you proceed to Customer Validation.
That’s Customer Discovery in a nutshell.
Customer Validation: Overview of the Process
Phase 1 consists of a series of “getting ready to sell” activities: articulating a value proposition; preparing sales materials and a preliminary collateral plan; developing a distribution channel plan and a sales roadmap; hiring a sales closer; ensuring that your Product and Customer Development teams agree about product features and dates; and formalizing your advisory board.
Next, in Phase 2, you leave the building and put your now well-honed product idea to the test: Will customers validate your concept by purchasing your product? You will attempt to sell customers an unfinished and unproven product, without a professional sales organization. Failures are as important as successes in this phase; the goal is to answer all the sales roadmap questions. At the end of this phase, you have preliminary meetings with channel or professional service partners.
With a couple of orders under your belt, you have enough customer information to move to Phase 3, in which you take your first cut at an initial positioning of the product and of the company. Here is where you articulate your profound belief about your product and its place in the market. You test this initial positioning by meeting with industry pundits and analysts for their feedback and approval.
Finally, in Phase 4, you verify whether the company is finished with Customer Validation. Do you have enough orders proving your product solves customer needs? Do you have a profitable sales and channel model? Do you have a profitable business model? Have you learned enough to scale the business? Only if you can answer yes to all these questions do you proceed to Customer Creation.
Customer Creation: Overview of the Process
Phase 1 begins with a series of “getting ready to launch” activities: choosing a Market Type (and therefore the type of Customer Creation strategy) and setting year one Customer Creation and sales goals. As part of this process the company makes a serious effort to understand market size, total available market, and available customer budgets. Finally, the company writes down its strategy, goals, objectives, and milestones, and puts together the Customer Creation budget.
Next, in Phase 2 the company develops the company and product positioning messages. In Phase 3 the company launches its product; defines the audience, messengers, and messages; and establishes metrics for gauging success. Finally, in Phase 4 the company matches demand-creation activities (advertising, adwords, public relations, trade shows, etc.) to the sales roadmap.
Company Building: Overview of the Process
Company Building has four phases. In Phase 1, you set the company up for its next big hurdle, transitioning sales from earlyvangelists to mainstream customers, by matching the appropriate sales growth curve to hiring, spending and relentless execution.
In Phase 2, you review the current executive management and assess whether the current team can scale. In this phase you devote a lot of attention to creating a mission-centric organization and culture as an essential means of scaling the company.
In Phase 3, capitalizing on all the learning and discovery the company has done to date, the Customer Development team realigns into departments by business function. Each department gets reoriented to support the corporate mission by developing its own departmental mission.
Finally, in Phase 4, at the end of Customer Development, the company works to create fast-response departments for scale, speed, and agility. Here you use the military concept of OODA (Observe, Orient, Decide, and Act) by moving and responding to competitors and customers at a tempo much faster than your competition. This requires departments to have at their fingertips up-to-date customer information and to be able to rapidly disseminate that information across the company.