Customer Development Process With Start-ups: Key Success Principles


Posted on January 8, 2017 in Innovation, start-ups

This is the first article of a series of articles for Start-Ups with physical products or systems, where the focus will be on the crucial customer development process. Moreover there will be a few articles to complete the subject.

The number of start ups succeeding in their objectives are only a small fraction (less than 10 %). The main reasons are:

– The most of the start ups do not have process to test faster their business model and they run out of money.
– The number of start ups is exploding.
– Competition is becoming global.
-The traditional product creation process offers no real feedback till working prototypes are available.
– Lack of experience of the founders without access to good mentors to learn.
– Lack of the right customer development process and partners.

With the acceleration of Innovation due to faster Digital Networks, 3D Computer Simulations , Exponentially growing new technologies (Cloud computing , Data Analytics , 3D printing , Smart Sensors , Mobile , Social networking ,… ) and proliferation of information the business environment became even faster and more competitive . The old product creation process starting with customer requirements followed from design and rigid implementation is not agile and is inadequate for the faster and faster changing market. The main issue is that the current process does not involve the customers and community early and iteratively enough although the tools available have never been better (social networking, blogging, on line communities and Platforms, You Tube, Kickstarter like companies, tools for fast prototyping, 3rd party leverage ,..… ) .

To be able to succeed we need to adopt different thinking and mindset on how we build, run and finance start ups. For this the following principles are key to enable the necessary mindset shift:

1. Define a company Purpose/Mission (think big is vital in the 21st century as well as a purpose that resonates with all stakeholders)

2. Plan a product or system/platform at least 10X better than the status quo. A product/system easy to experience and/or frequently used.

3. Start by targeting a small initial market segment and establish from day one a process of Interaction with the targeted early adopter customers and relevant on line communities that are vital for innovation.

4. Match flexible interaction with customers/community with agile development process

5. Failure is an integral part of the process

6. The focus is on Business model attributes especially finding as fast as possible a profitable and scalable go to market strategy among others.

7. Design iterative experiments with prototypes and customers, community to validate various hypotheses as well as improve and expand the User Experience.

8. Leverage as much as possible 3rd party assets. There are so many third parties to help with fast prototyping, web assets , networking ,…..

9. In early stages the success metrics are not the traditional big company metrics (revenue, gross margin, profit ) but hit product creation milestones , monthly cash burn rate , how many early adopters customers we want to experiment with, how many community suggestions are implemented , ….

10. Passion for experimentation, fast decision making and speed

11. Choose people that are comfortable with uncertainty, chaos and change.

12. Ensure frequent Communication with the whole team to share learning

 

The new process is involving the customer iteratively within the process, is rapidly testing assumptions and makes corrections fast. It involves a number of phases which will be described in the coming articles and solves the old product creation issues.

The new process is searching for a repeatable, scalable and profitable business model based on a number of steps, iterations and major changes when we find out that our hypotheses is wrong.

The follow up article will be within a few days

I welcome questions and comments

Mike Mastroyiannis is Business, management & Executive Coach and Consultant for among others Exponentially Disruptive Innovations. He has served as CEO of business units in Multinationals, founded or lead start ups and serves in advisory boards. He can be reached through LinkedIn or email at mike@link4success.com

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