the Customer Development process helps scalable startups the most, each of these five startup types has entrepreneurship and innovation at its heart. And each improves its chances for finding the right path to success through the use of Customer Development.
Who Is This Book Not For?
There are cases where using the Customer Development methodology and this book is inappropriate.
Early-stage ventures fall into two types: those with customer/market risk and those with invention risk.
Markets with invention risk are those where it’s questionable whether the technology can ever be made to work, but if it does, customers will beat a path to the company’s door. (Think life sciences and cure for cancer.)
Markets with customer/market risk are those where the unknown is whether customers will adopt the product.
For companies building web-based products, product development may be difficult, but with enough time and iteration, Engineering will eventually converge on a solution and ship a functional product—it’s engineering, not invention. The real risk is in whether there is a customer and a market for the product as spec’ed. In these markets it’s all about customer/market risk.
There’s a whole other set of markets where the risk is truly invention. These are markets where it may take five or even 10 years to get a product out of the lab and into production (e.g., biotech). Whether it will eventually work, no one knows, but the payoff can be so large that investors will take the risk. In these markets it’s all about invention risk.
Startups solve customer and market risk by reading this book.
A third type of market has both invention and market risk. For example, complex new semiconductor architectures mean you may not know if the chip performs as well as you thought until you get first silicon. But then, because there might be entrenched competitors and your concept is radically new, you still need to invest in the Customer Development process to learn how to get design wins from companies that may be happy with their existing vendors.
Startups solve invention risk by using simulation tools (computational fluid dynamics, finite element analysis, etc.). Startups solve customer and market risk by reading this book. When the issues are customer acceptance and market adoption, this book shows the path.
Introduction
A legendary hero is usually the founder of something—the founder
of a new age, the founder of a new religion, the founder of a new city,
the founder of a new way of life. In order to found something new,
one has to leave the old and go on a quest of the seed idea, a germinal
idea that will have the potential of bringing forth that new thing.
— Joseph Campbell, The Hero with a Thousand Faces
JOSEPH CAMPBELL POPULARIZED THE NOTION of an archetypal “hero’s journey,” a pattern that recurs in the mythologies and religions of cultures around the world. From Moses and the burning bush to Luke Skywalker’s meeting Obi-wan Kenobi, the journey always begins with a hero who hears a calling to a quest. At the outset of the voyage, the path is unclear and no end is in sight. Each hero meets a unique set of obstacles, but Campbell’s keen insight was that the outline of these stories is always the same. There are not a thousand different heroes but one hero with a thousand faces.
The hero’s journey is an apt way to think of startups. All new companies and new products begin with a vision—a hope for what could be and a goal few others can see. It’s this bright and burning founder’s vision that differentiates an entrepreneur from a big-company CEO and separates startups from existing businesses.
Founding entrepreneurs are out to make their vision and business real. To succeed, they must abandon the status quo, recruit a team that shares their vision, and strike out together on what appears to be a new path, often shrouded in uncertainty, fear and doubt. Obstacles, hardships and potential disaster lie ahead, and their journey to success tests more than financial resources—it tests their stamina, agility, and courage.
Take a new path, often shrouded in uncertainty, fear, and doubt.
Every entrepreneur is certain his or her journey is unique. Each travels down the startup path without a roadmap and believes that no model or template could possibly apply. What makes some startups successful while others sell off the furniture often seems like luck. But it isn’t. As Campbell suggests, the outline is always the same. The path to startup success is well-traveled and well-understood. There is a true and repeatable path to success. This book charts that path.
A Repeatable Path
In the last quarter of the 20th century, startups thought they knew the correct path for the startup journey. They adopted a methodology for product development, launch, and life-cycle management almost identical to the processes taught in business schools for use in large companies. These processes provide detailed business plans, checkpoints and goals for every step toward getting a product out the door—sizing markets, estimating sales, developing marketing-requirements documents, prioritizing product features. Yet at the end of the day, even with all these processes, the embarrassing fact is that in companies large and small, established corporate giants as well as new startups, more than nine of 10 new products fail. It’s true in every product category—high-tech or low, online or off, consumer or business—well-funded or not.
Even after decades of similar failures, investors are always surprised when a new venture fails to execute its business “plan.” And still they continue to rely on the same product-introduction processes.
We now know what the problem is. Startups have been using tools appropriate for executing a known business. But startups are all about unknowns. To find the path to build a winning startup, entrepreneurs must try a new way:
Winners throw out the traditional product management and introduction processes they learned at existing companies. Instead, they combine agile engineering and Customer Development to iteratively build, test and search for a business model, turning unknowns into knowns.
Winners also recognize their startup “vision” as a series of untested hypotheses in need of “customer proof.” They relentlessly test for insights, and they course correct in days or weeks, not months or years, to preserve cash and eliminate time wasted on building features and products that customers don’t want.
Winners recognize their startup is a series of untested hypotheses.
Losers blindly execute a rigid product management and introduction methodology. They assume that the founder’s vision drives the business strategy and product development plans and that all they need to do is to raise funds for execution.
Founders, not employees, must search for a business model. The best way to search is for the founders themselves to get out of the building to gain a deep, personal, firsthand understanding of their potential customers’ needs before locking into a
