Many businesses, especially startups, spend a lot of time setting up the company, building structures, and making initial investments in things like renting office space, creating a company name, and designing a logo. However, few businesses truly focus on the core issue: a business can only survive and thrive sustainably if it has CUSTOMERS. If you haven’t yet figured out what you will sell, to whom, and how, failure is almost guaranteed.
Steve Blank and His Book: "Four Steps to Epiphany: How to Build a Successful Product"
Steve Blank revolutionized the traditional view of startup development by introducing the Customer Development Model, which includes four steps. If you observe the four stages below, you will understand why the traditional approach consumes time and energy without producing the desired results.
The Four Customer Development Stages
Initially, modern marketing theories put the customer at the center of business activities, but these theories typically focus on businesses that have already developed, with customers, and use their understanding of customer needs to expand products or improve customer care. However, for startups, there’s no theory that shows them how to develop in a customer-focused way to achieve long-term sustainability. Steve Blank points out that sales are a continuous creative process, one that evolves, and by understanding customers, you can create and grow your customer base. The revolution behind the lean startup method is that by “stepping out of the office,” you can discover your customers, confirm demand, develop customer relationships, and build a sustainable company. While developing a product might be easier to conceptualize (as the product is your creation and within your control), how do you develop customers?
Four Steps in Customer Development
Phase 1: Search (consisting of two steps: Customer Discovery and Customer Validation)
Step 1: Customer Discovery
This may be the most challenging stage in changing the mindset of the entrepreneur. Instead of staying confined in your office, you must go out into the world to observe, listen, and explore the needs and problems of your customers. Many startups skip this step and instead chase vague customer needs to develop a product based on their assumptions. The key in this first step is to view direct customer contact as critical to the business’s survival and never skip it. Always keep an open mindset when receiving feedback that contradicts your assumptions. Consider every discovery about your customer as a contribution to the future development of your product. After discovering customer needs, document, reflect, and create a prototype to gather feedback and validate the market. To limit the scope of customer reach, use the concept of a sales funnel. The funnel will vary by industry, but a simple sales funnel looks like this:
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At the first, largest stage: Estimate the total number of potential customers in the large market.
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At the second, smaller stage: Estimate a more feasible market size.
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At the third, smallest stage: Estimate the most realistic market size within your reach.
For example, if you provide car interior services, your simple sales funnel might look like this:
Step 2: Customer Validation
Once you’ve identified your product and customer, you move on to an important phase to ensure survival in the market.
At this stage, validating product-market fit is crucial. You not only need to develop the product but also continuously experiment and interview customers. The target group for these interviews are the early adopters, the first customers who are willing to try your product or service. These early adopters play a key role in providing feedback to help you improve your product and solidify the core value of your offering. This process may need to be repeated until you are confident enough to develop a business model that is market-validated and profitable. Once you have a relatively stable business model, you can then build a sales and marketing roadmap for further development.
Phase 2: Execution (consisting of two steps: Customer Creation and Company Building)
Step 3: Customer Creation
Having 100 initial customers might guarantee survival, but it doesn’t mean your business is ready for sustainable growth. At this stage, you must uncover latent customer needs – needs that customers may not even realize they have. Customer creation involves educating the market, raising awareness, and using marketing tools to meet these needs.
Once you have created customers, it’s important to organize your resources, set up an effective organizational structure, and ensure operations are aligned for expansion. Excessive growth without proper preparation poses a risk to startups, even when they have a good product and market.
Step 4: Company Building
At this stage, you need to organize your business structure for scaling, ensuring that your operations are capable of handling increasing demand. This step is essential for long-term sustainability.
Two Key Notes for Customer Development
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Customer development never stops: You may need to revisit the four steps at any time to ensure you're always updated on customer needs, refine your organization, adjust your business model, and create new customers. Stopping is stagnation. The startup mindset requires constant movement and observation.
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Who should be involved in customer development? Is it marketing or sales? The answer is neither. If you’re the founder, ask yourself: Have you ever stepped outside and sat down with a customer to discuss their needs and feedback? If not, your mindset needs to shift. Customer development is the responsibility of the entire company, and it starts with you. You can’t inspire and lead your organization to success if you can’t talk to a single customer!
Author: Nguyễn Đặng Tuấn Minh – Managing Director & Co-founder of KisStartup
