The Customer Development Process
From his perspective, Steve Blank developed the concept of the ‘customer development process.’ This is a four step process consisting of customer discovery, customer validation, customer creation, and customer building.
The first two steps are part of the “search” objective of a startup. The first is customer discovery. This step is where the entrepreneur builds his/her hypothesis and he/she seeks to test the assumptions. The second step is customer validation where the entrepreneur sees if the proposed solution matches customer problems. This is often called product-market fit. One interesting point here is the concept of pivot. The pivot is a type of change designed to test a new version of hypothesis about the product, the customer, etc.
Source: Steve Blank. The Four Steps to the Epiphany. Successful strategies for products that win. K&S Ranch. 2nd edition (July 17, 2013).
The third step of the process is customer creation and the fourth step is company building. These two final steps are part of the objective of a startup; that is, when the entrepreneur finds the repeatable and scalable business model comes the moment in which he/she arrives at the execution phase. The execution phase comprises of creating end-user demand and building the organization to transitioning from a startup to a scalable business.
The concept of the pivot was introduced by Eric Ries in his book Lean Startup. Ries talks about the dilemma of knowing whether to pivot or persevere. The entrepreneur needs to make a decision: to keep the current assumption and product, or to make a major change or correction in order to test a new hypothesis about the product, the customer and so forth. Every entrepreneur eventually faces this challenge in developing a product: deciding when to pivot and when to persevere.
As mentioned by Blank, iteration in the “search” phase of the customer development process (i.e., customer discovery and customer validation) should be fast and should originate a learning episode that allows the entrepreneur to keep progressing with small changes (persevere) or to make a major change or correction (pivot). The issue of how quickly the entrepreneur learns is very important. Minimizing the cycle-time of iteration is crucial for behind it lies financial expenditure and also the psychological expenditure that the entrepreneur makes in order to keep motivated and active in her or his journey.