Steve Blank is the founder of e.Piphany - a 1999 IPO deal that allowed him to retire. His methodology is called “Customer Development” and involves iterating quickly based on customer feedback. The earlier variants of this method (or similar anyway) include Guy Kawasaki’s iterative development model and “fail fast, fail quickly” models.
I think what’s changed now (vs 1999, when we were doing NetFreight.com) is that the COST of failing is so much less. Back then, I think we were afraid to admit to our VC and other investors that we were wrong and needed to pivot and so we were actually afraid of customer feedback if it showed we were “wrong”. We probably spent close to $2M before we even had an “alpha” out the door!
Today, with the free services or at least low cost cloud services available on the web, you really can fail much more cheaply, afford to be wrong more often until you get it right, and investors are more expectant and tolerant that you will be wrong before you get it right.
Steve also has great guidelines on how you know you are right based only on smaller sample sizes and stresses that you can’t even think about scaling the business until you have a product/customer fit.
You also have to think about what kind of market you are in. Unless you are in an established market and are either trying to be the “best” or a cheaper or niche alternative, spending wildly to grow your sales typically won’t work, because there is no market there to spend it on (yet). This lesson was learned the hard way by many, many “pioneers” who ended up only with arrows in their back (think Palm, B2B markets, etc.)
The customer development model can be applied to more than just tech or web businesses as well. Right now in our renewable energy finance business, we are constantly trying to test different finance programs with different types of customers. Hopefully by the end of the process we will have products that fit each customer segment for each type of tariff and renewable technology. I also struggle with how to characterize say the “solar” market. Is it a new market that will still take time to develop or is it a segment of the overall established “energy” market where we will be “better” to some and “cheaper” to other. I don’t think many people in the industry think about it that way, hopefully we can gain an advantage if we can come to the right conclusions and execute on them.
Check out Steve’s latest lecture posted on his blog.
