Customer Development Insights

I’ve been working more on the Customer Development side of things and wanted to jot down things I’ve had on my mind.

I’ve been reading 4 Steps to Epiphany and learned that one of the things a startup should know is what the Market Type their company is in. The book lists 4 different market types:

1. New Market Type – It’s new and there is no established incumbent in this space. There’s probably a bunch of young upstarts though. Examples would be the oil industry in California in the early 1900s or the car companies when there were 200 car companies.

2. Existing Market Type – It’s already established, probably for a number of years. There are probably a bunch of players in the space already.

3. Low Entrant in an Existing Market Type – The only way to gain market share is by fragmenting this Market – otherwise known as low-end disruption. One way is to chomp at the bits and sell your product at a lower cost. In Clayton Christensens book, Innovators Dilemna, he uses the example of Toyota and how Japanese Car Manufacturers introduced low cost cars in the beginning. The bottom of the market usually suffers from low margins. He notes that the high end of the market is where you get higher margins and that it’s natural for an incumbent to gladly let a new entrant take care of satisfying the low end so they can focus on the high end since that’s where all the money is.

4. Niche Entrant in an Existing Market Type – Another way of gaining market share is by niching your product. For example, the iPod was originally a niche product. MP3 players already existed before, the Niche Apple focused on was MP3 jukeboxes, something Creative dominated at the time with the NOMAD. This is also where my product is in.

Once I figured out the market type, I then started to find those individuals who are most likely looking for a product that solves that job. I thought about how Apple did this with the iPod and this is what they could have done:

They had a vision of creating a device that handled music and since they’re Apple, they looked for an existing Market and decided to find a Niche. Apple mainly creates high end devices, and the high end consumer mp3 player at the time was the MP3 Jukebox. With this realization, they probably went and talked to a bunch of individuals who either used the NOMAD, or something similar. Their goal was not to get a feature list, but more about the issues, challenges, or failures of the current set of devices that was out there. The data they received could have boiled down to something like this:

1. I will have all my music on this device
2. It takes way too long to load songs onto my mp3 player
3. I carry my mp3 player with me all day
4. I’m using it everywhere – on the bus, at the mall, in the car, at home, etc.
5. It’s hard for me to organize my music or I want to be able to organize my music easily

At this point in my understanding, I think it would be safe to assume that you should look for the top 5 issues/problems that customers would want to solved. The first iteration of a product should not attempt to solve too many problems or engineering will get burnt out :p.

The feature lists for the ipod could probably be boiled down to something like this:

1. Need to load music onto Jukebox fast
2. Need to have large Hard Drive
3. Need to be small
4. Buttons need to be simpler, operated with one hand
5. Software needs to be simpler, access to music should be a few clicks (I heard somewhere Steve said it should take only 3 clicks to get to your song)
6. Need to last all day

Once the issues are clear then can I start doing execute on Product Development and build the first prototype.

It is important to note that Customer and Product Development should both work in tandem and that Engineers really should spend some time doing Customer Development instead of hiding in the Lab and guessing what people want :).

Lastly, if you’re working in a Distributed Team/Remote Team/Virtual Team I need to talk to you! Please reach out!

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