Tim Kastelle

Tag: Henry Ford

  • The How and Why of Customer Development

    The How and Why of Customer Development

    Henry Ford famously didn’t say:

    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.

    Business model 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:

    Interviews

    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:

    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:

  • Reading This Post Will Change Your Brain!

    Reading This Post Will Change Your Brain!

    Reading this post will change your brain

    I’m not sure if the change will be good or bad, but reading this will change your brain. I’m sure you’ve heard the arguments about the internet – google is making us stupid, and even more alarming – using the internet changes your brain!  That must be bad, right? Well, not necessarily.  The problem with this argument is that everything you do changes your brain.

    Using google changes your brain, eating a donut changes your brain, and yes, reading this post changes your brain. The correct question to ask isn’t “does doing X change my brain?”  but rather “what activities do the changes enable?” Nicholas Carr wrote the original article Is Google Making Us Stupid, and he understands this distinction.  His argument is that the rewiring in our brains caused by internet usage makes it harder for us to concentrate for extended periods, and that we are losing the ability to focus and follow complex arguments. Ironically, his argument is sophisticated enough that a lot of people seem to misconstrue it.

    My actual personal brain!
    My actual personal brain!

    Interactions change us

    So yes, using the internet does change our brain.  It makes it easier for us to do some things, and harder to do others. Personally, I’m not convinced by the evidence people have suggesting that internet use decreases our powers of concentration.  And as for google, well, we’ve been outsourcing complexity to various tools for centuries – I’m not sure how this is all that different.

    It was Plato that argued that writing things down was causing a horrible deterioration in our ability to remember things.

    That might be true, but it also means that the part of our brains that devoted to remembering stuff could now work on other activities – and some of those have turned out to be pretty useful.

    Who do you want your customer to become?

    The idea that interactions change us is the central issue driving Who Do You Want Your Customer to Become? by Michael Schrage.  Seth Godin outlines the implications of this question in his new book The Icarus Deception:

    Everyone you interact with is changed forever. The only questions are: How will they be different? and How different will they be? Author Michael Schrage wants you to ask, “Who do you want your customers to become?” At first this seems like a ridiculous question. Your customers are your customers. Your coworkers are your coworkers. This isn’t true.

    Connection creates change. Unless you are selling a standard commodity, the interactions you have with the market change the market. Zappos turned its customers into people who demand a higher level of service to be satisfied. Amazon turned its customers into people who are restless with online stores that don’t work quite as well or quite as quickly. Henry Ford turned his customers from walkers into drivers.

    When you disappoint someone (or exceed their expectations), that interaction is going to color all the interactions that person has tomorrow and next year. Apple is talked about more than any other company for one simple reason: They have huge aspirations for who they want their customers to become, and they deliver on them.

    … Answering Schrage’s question honestly gives you a chance to describe the change you want to see in the world. Not at the Henry Ford industrial-scale level, of course. No, but even if you connect with six people, you are changing them.

    Changing them how? Whom do you want them to become? I’d like you to become an artist. To make connections that matter. That’s my mission.

    By writing, Godin wants his readers to become artists.  And Schrage himself wants to change how we innovate:

    Significantly, they should become managers and leaders who are justifiably more confident that they are asking the right questions when they look to innovate and create new value in new ways. They should have the courage to take smarter risks and the ability to learn faster because they know they’re committed to treating their customers with empathy and respect. Most importantly, they should become more successful. Why? Because successful innovators know how to ask the right questions and create the most value for themselves and their customers. The Ask of this book is that you become an innovator who gets the best possible return on the innovation investments you make in your customers.

    Who will we become?

    I think that both Schrage and Godin miss an important point though.  Yes, when we send our ideas out into the world, they change the people with whom they interact.

    But sending these ideas out, and seeing how they interact with people changes us as well.

    Asking who you want your customers to become is a great way to clarify your value proposition.  Changing your answer can help you innovate your business model. I think it’s a transformative question, and Schrage’s book is definitely worth reading.

    But we need to pair this with another question – who do we want to be?  If we make our customers stupider, it makes us shallower.  If we make our customers more transactional, we’ll often end up greedier.

    Here’s the change that I’d like to see from our interactions over ideas: that together we figure out how to make work work better.

    For too many people, work is lousy.  Most organisations are mediocre, at best (maybe even 90% of them!)  We need to innovate how we manage, how we deal with our people, and how we deal with customers.

    If my writing this and your reading this helps us take even a small step in that direction, I’d be very happy.

    Reading this post will change your brain. Now let’s change our behaviour.

     

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