The How and Why of Customer Development

If I had asked people what they wanted, they would have said faster horses.

People often use this quote to justify not talking to potential customers, because people don’t know what they want.

It’s true, people don’t know what they want. But you still need to talk to them. Why? Because they do know what their problems are.

Over the past year, I’ve been running (with help, of course!) a bunch of Lean LaunchPad programs with the Commonwealth Science and Industrial Research Organisation (CSIRO) aimed at increasing the impact of all the great research that they’re doing. This is the first post in a series reflecting on what we’ve learned through the course of six programs involving 40 research projects and more than 250 people.

The first thing that we’ve learned is that talking to people is essential.

Here’s the issue: when we develop a new piece of technology, there are an infinite number of business models that you can build on top of that tech – here’s one good case study. Lean startup tools are a great way to discover the right business model for your new thing.

Talking to people, or customer development, is the central tool in the Lean LaunchPad. It works really for building software startups, but it also works for commercialising research-based technology as well.

When we think about our new technology, we have a business model for it in our heads. For example, when Alexander Graham Bell invented the telephone, his belief was that it would be too inefficient for person-to-person use. Instead, he thought that people would use the telephone to listen to musical performances when they didn’t have an orchestra in their town.

In other words, the first business model in our head is made up of a bunch of guesses.

Bell found out his business model was wrong through trial and error. But this is dangerous, and risky. Lean LaunchPad is the tool for converting those guesses into knowledge about what actually creates value for people. To do this, we must talk to about 100 people.

This challenges most people, especially scientists. The process looks like this:

Before you talk to anyone, our level of uncertainty about our business model is usually zero – we’re like Bell and his concerts. Then when we start talking to people, our level of uncertainty about our business model shoots up, and we feel incredibly confused about what to do.

This confusion often makes people give up on talking to people, which is disastrous. The way to break through the confusion it to talk to more people. As we do, eventually we learn about what’s going on, and our level of confusion drops. In time it gets close to zero again – although if we’re smart, we always retain a bit of doubt.

Here are some common questions about customer development interviews:

How do we know if it’s working? We use Steve Blank’s Investment Readiness Level scale as a measure of how far we have advanced in building our business models (see Part 2 in this series). In our programs so far, progress on the IRL has been pretty close to directly proportional to interview numbers.
Why do we need so many interviews? There are a few reasons. One is that when we start out, we aren’t very good at interviewing – it’s a skill we need to build. The second is an idea in qualitative research called interview saturation. It is a state that you reach once you’ve talked to enough people that you stop hearing new ideas. The number of people you need to reach saturation will vary, but on average it’s around 25. To build a complete business model, we need to reach saturation on several different issues. You can see why we need 100 interviews to feel confident.
We’ll just focus on quality interviews, won’t that be better? No. First, you don’t know in advance which interviews will be the high-quality ones – especially when you’re starting out. The more people you talk to, the easier it is to figure this out in advance, but the only way to do it is to talk to a lot of people. Second, after you talk to a lot of people, you end up having a very high percentage of high-quality interviews from #60 on. The people that talk to me about quality over quantity have usually done less than 20 interviews, with maybe a handful of those being high-quality. The teams that have gotten up above 60 interviews usually have more than 20 high-quality interviews, which adds a lot of new data. In customer development, quality is an emergent property of quantity.
Steve Jobs didn’t do customer development, why should I? You’re not Steve Jobs. Also, the thing that Jobs did have was a very deep understanding of what problems people are trying to solve – customer development is the tool you use to gain that understanding yourself. The main idea is that we want to talk to people about what problems they have right now, and how they are currently solving them. As we learn about their problems, then we can figure out how to build a business model around our technology that will create value for them.

There’s one last big question: what questions should we ask? Fortunately, there are a lot of great resources for this:

Start with all the stuff from Steve Blank.
Cindy Alvarez has a great book on the topic called Lean Customer Development, and here is a post she’s written on what you should be trying to learn in your interviews.
Ash Maurya’s book Running Lean is excellent. Here’s his step-by-step guide to getting started with customer development.
You can get a free copy of Giff Constable’s book Talking to Humans from his website, and you should read it, especially is you’re a scientist yourself.
Finally, Justin Wilcox has all kinds of useful resources on his Customer Development Labs website – here’s a sample.

If you use these links, you can build a good set of interview questions for your own customer development work.

And you should do that, because it’s the best way to make sure that your great idea has the greatest impact on the world.

Note: Over the past year, I’ve been running (with help, of course!) a bunch of Lean LaunchPad programs with the Commonwealth Science and Industrial Research Organisation (CSIRO) aimed at increasing the impact of all the great research that they’re doing. This is part of a series reflecting on what we’ve learned through the course of six programs involving 40 research projects and more than 250 people. The other posts are: