Customer discovery (phase 1): State your hypotheses

 

This article is part of a four-phase process designed to help entrepreneurs develop their value proposition. This article describes the first phase in the process which is based on the method of “customer discovery” in Steven G. Blank’s book, The Four Steps to the Epiphany.

The other three phases are discussed in the following articles:

• Customer discovery (phase 2): Test your hypotheses
• Customer discovery (phase 3): Test your product concept
• Customer discovery (phase 4): Evaluate customer feedback and determine next steps

For more information, see The Customer Development Model.

 

State your hypotheses
A key feature of the Customer Development Model is to ensure you write down your most important business assumptions on the following:

• Product concept
• Customers and the problems they want to solve
• Distribution and pricing
• Demand creation
• Market type
• Competition

Documenting these assumptions (i.e., your hypotheses) is both practical and psychological. Having something in writing means that you can avoid the pitfall of mentally readjusting your hypotheses between or during conversations with customers (which would lead to poor testing and poor reliability of your hypotheses).

Summarize each hypothesis and your reasoning behind it. In cases where you lack some information, these briefs may be short. When documenting your hypotheses, employ these tactics:

• Do it as a team: Do not delegate the work of writing the briefs. Sit down as a team and ensure that what you document reflects a shared understanding of the issues you aim to test. The benefit of making this a group effort is two-fold. First, with this possibly being your first “team-building exercise,” those involved will feel a joint ownership of some of the most fundamental ideas that underpin your business. Second, since the onward journey might lead to discoveries that will require you to change your initial hypothesis, having a starting point that reflects the entire team’s opinions will make it easier for the team to understand what changes are necessary.

• Make it “testable”: When creating the briefs, include all the essential information you believe to be true about the different hypotheses you are about to test, and be as specific as possible. For example, you may assume that 15% of all hypertension patients forget to take their medication at the appropriate time and would benefit from a mobile app to remind them of the schedule and dosage. If your business plan is based on that number, this is the time to test whether that is true and the severity of the need, as well as any other specific features such an app must have. Question your assumptions carefully and determine the right questions to ask. Accuracy is key to arrive at information that will be of most use to you.

• Do it quickly: Time is perhaps the most important competitive factor for a startup. The underlying goal for an early-stage startup is to get a product to paying customers as quickly as possible, so do not spend too much time perfecting the initial briefs. Instead, spend the time with customers, asking questions and getting valuable feedback.

 

Once you have completed this phase of the customer discovery process, you are ready for the next phase, Customer discovery (phase 2): Test your hypotheses.

 

References

Blank, S.G. (2005). The Four Steps to the Epiphany. Self-published: Cafepress.com.
Maurya, A. (2011). Running Lean. Self-published.
Ries, E. (2011). Lean Startup. New York: Crown Business.
Vlaskovits, P. and Cooper, B. (2010, July 29). The Entrepreneur’s Guide to Customer Development: A cheat sheet to The Four Steps to the Epiphany. Self-published.

Tags: customers, early-stages, strategic-analysis, value-proposition