From the course: Product Management: Customer Development
Introduction to customer development
From the course: Product Management: Customer Development
Introduction to customer development
- Have you ever wondered why some companies or products seem to disappear almost overnight? You see news of a company raising a lot of funding, hiring quickly, and just like that, they're closing their doors? There are many examples of companies in the late '90s dot-com boom, like Webvan or pets.com which were a prime example. Companies that you see rise and fall quickly are often spectacular failures. In fact, a large number of companies fail before you ever hear about them. It's almost always because they didn't exercise customer development, and ran out of cash before finding product market fit. Customer development focuses on understanding customer problems and needs, developing a repeatable sales model, and refining your company to deliver on customer demand. It's how a small pizza shop with high wait times and high prices becomes Domino's. They have been around for decades, created a supply chain, and have sales volume that allows them to charge lower prices while also offering delivery services. Product market fit means identifying a compelling value hypothesis. It's the combination of the features you need to build, an audience who cares, and a business model that entices customers to buy the product. It's all about creating a product that solves a real need at a price point that customers are willing to pay. Product market fit is one of the most difficult aspects of starting any company or creating any product. When you find products' market fit, success is almost certainly right around the corner. But if a company tries to ramp up sales and marketing before finding product market fit, they'll burn through their cash trying to enter a market that doesn't want their product offering. Thankfully, customer development helps you quickly find products' market fit. By following this method and understanding that you're likely to fail several times before you find the right value hypothesis, you give your company or product the best opportunity for long-term success. Startups often try many approaches to find product market fit. Those iterations are how Stewart Butterfield pivoted two separate gaming companies into becoming the popular photo-sharing app Flickr, which was sold to Yahoo, and Slack, one of the fastest growing communication platforms on the planet. By following this model, your company keeps its burn rate low. This means the company won't be spending a ton of cash on sales or marketing while your team is figuring out what the market wants. There are many steps to customer development, but once you understand the process, you can perform many cycles in short periods of time. These rapid cycles of testing your assumptions with real customers are the fastest and cheapest way to finding product market fit. Once your company finds product market fit and validates its business model with paying customers, you can ramp up sales and marketing to really take advantage of the market opportunity.
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