Reverse How You Develop Your Business Model For Better Results
In contrast to the usual product development model, Steve Blank, in his book, The Four Steps To The Epiphany” describes his new approach to developing an efficient and effective path to developing a startup with a real chance of success.
Most startups lack a process to create, develop, and validate their business. They start by developing the product first because they know its such a good idea. They don’t realize that there are millions of needs and wants in the market and their view of need may not match the markets needs or wants. If you want to succeed, you can’t be founder-centered, you must be customer-centered.
His model has four steps:
- Customer Discovery. Focuses on finding product-market fit by determining if the product solves the customer’s needs and wants.
- Customer Validation: Develops a sales model that is repeatable.
- Customer Creation: Creates and motivates end-user demand,
- Company Building: The move from the learning phase to the business execution phase.
This model flips the “development model” on its head. Rather than developing the product and then finding the market, you do the opposite because it takes several iterations to get it right.. Plus, it’s a frugal way to find out if you have a viable, sellable product. It also keeps you from hiring sales, marketing, and other company development people too early.
Here is a little more on each strep
Based on your hypothesis, you need to go into the market and find out if the problem, your product, and your solution match what the customer wants. This combination will take several attempts and several iterations to your hypothesis. You can’t do this with focus groups; you need the interaction with the customer,
Also, this has to be done by the founder and the founding team. You can’t send out a salesperson to do this. You have to read the customer and determine if what the customer is telling you is correct and if you should modify the product as a result.
Don’t start the conversation with your product vision. First, find out what the customer needs, why he wants it, and what he didn’t like. You are there to learn from the customer, not sell him something at this time.
In this step, you are trying to build a repeatable sales roadmap for the team that will follow. This step proves you have found a market and customers willing to buy your product. It also validates, through field-testing, that your sales process is repeatable,
This step also confirms your business model, your market, customers, identifies your buyers, establishes pricing policies, and channel strategy.Once all of this checks out, you can begin to move to the next step, which is crossing the chasm into the mainstream market.
The goal here is to create end-user demand and drive that demand to the sales channel. But, don’t try to scale so quickly that you deplete all your financial resources. Crossing the chasm is a difficult step and can take some time.
Also, how you plan to do customer creation will vary with the type of startup and market type you are entering. For example, a new market with a new product or an established market or are you entering an established market with a low-cost product or coming with a new product in a hybrid market. Each of these has significant revenue and time considerations See the discussion on market types.
Customer building is the step where you transition from a “learning company” into a formal “operating company” with appropriate departments. Each department becomes mission-oriented within the overall corporate strategy.