Thu | Jul 18, 2019

The customer may not always be right

Published:Sunday | March 2, 2014 | 12:00 AM
Francis Wade
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Francis Wade,  Sunday Business COLUMNIST

It's a conundrum.

As a Jamaican business person developing a new product or service, how much should you listen to customers?

The orthodox answer is that you should only focus on the voice of the customer - everything else is irrelevant. The opposite view, espoused by innovators like Steve Jobs, is that customers don't know what they want. Instead of telling you they want 'the automobile', they'll say they want 'faster horses'.

How do you resolve these opposing points of view, while making sure that your fresh, new idea doesn't become an embarrassing flop?

Steve Blank in his book, The Four Steps to the Epiphany, offers a powerful solution. It's made up of a new mindset and a four-step process that challenges companies to think about product development very differently. He should know.

As a serial entrepreneur with more than 30 companies, Blank has seen way more failures than successes. He argues that a new mindset is needed in innovative companies of all sizes.

CUSTOMER DEVELOPMENT MINDSET

Most companies have well-defined product development processes, in which the focus is on turning an idea or technology into a feasible product that customers will buy, given the right advertising and promotion.

He turns that idea on its head and argues that in addition, companies also need to be "developing" customers.

The idea sounds quite strange, if not downright heretical, at first. Isn't the customer always right? Doesn't their opinion come first? How can customers be developed?

Fact: most start-up products and companies fail from lack of customers, not because the products don't work.

Typically, most companies hire people who only talk to customers when the product is almost complete. They develop the advertising, PR, and sales materials to generate the momentum needed to be successful from the launch.

Instead, Blank proposes that companies start a dialogue that transforms everyone involved from the very beginning, reducing the risk.

This happens in four steps of a customer development process.

1 - Customer Discovery:

Customers can't be found within companies. By definition, they exist outside the walls of the firm. In this preliminary phase, your objective is to test two critical hypotheses: the first is that you are actually solving a problem they have, while the second is that the problem is important enough to make them willing to pay for it.

Unfortunately, you can't answer these two hypotheses with simple questions.

Before the iPad was introduced, tablets had already been brought to the market, only to be rejected by customers. In early 2008, if asked, they would have loudly agreed: 'We don't need tablets. For US$700? Really?'

In addition to asking subtle questions, you also need to observe customers in their daily lives, imagining what it would be like to have them actually use your product. All this interaction opens up a channel of communication, which will make all the difference in the following steps.

2 - Customer Validation:

Blank's recommendation for start-ups is to get the company founders in front of customers, selling them something - almost anything related to the product. There's a deep understanding that needs to be gained from watching someone as they weigh the cost of your product offer versus the price.

The fact is, your product may not even exist - you may be selling access to a beta version or pre-ordering an early version. It's okay at this point if you can only interest 'earlyvangelists' - the risk-takers who are willing to try something brand new.

In this phase, you can change the product you are selling to more closely address the customers' problems - in fact, you must. This information is used as powerful feedback to the product development team. In extreme cases, it might stop their work altogether.

3 - Customer Creation:

This phase involves the application of sales lessons, learned in the prior step, to a mass market. It's where the launch is conducted, and needs to be tailored to three specific kinds of markets which require different strategies.

In 'Existing Markets', the product needs to offer 'much more for less', so that existing loyalties are displaced.

In 'Resegmented Markets', an underserved niche is defined and targeted with offers that are unique.

In 'New Markets', a new kind of customer is created which never existed before.

4 - Company Building:

In this final phase, the start-up's founders may need to leave in order to allow the company to grow into a customer-facing powerhouse.

The skills needed to build a great company are quite different from those demonstrated by founders - few make the transition.

Our local executives would do well to heed Blank's advice and develop an early, interactive relationship with customers. It's one way to prevent a flop.

Francis Wade is a management consultant and author. To receive a document with a Summary of Links to past columns, or give feedback, email: columns@fwconsulting.com