The Customer Development Model (CDM), product development and technology startups
The Customer Development Model (CDM) was originally described by Steven G. Blank in his book, The Four Steps to the Epiphany. Blank, who is a lecturer in entrepreneurship at the University of Berkeley and Stanford University, based the book on his observations while working for a number of startups in the Silicon Valley area.
Blank defines the Customer Development Model as “a set of objectives and milestones that are meaningful for a startup.” Blank’s model is a way of questioning the assumptions underpinning a startup by systematically testing them in the marketplace.
The main objective of the CDM is to reach a deep understanding of customers and their problems. The depth of this understanding allows entrepreneurs to strengthen the focus of their product development as well as their marketing and sales activities.
The practical appeal of CDM has since formed the basis for an increasingly popular school of thought around how to start a technology business, aided by the writings of Eric Ries (The Lean Startup) and Ash Maurya (Running Lean). Ries and Maurya both attempt to integrate the CDM process with the principles of agile product development.
The Customer Development Model
The Customer Development Model is characterized by an iterative and flexible process that reflects the ambiguous nature of starting a new business and launching new markets.
CDM tests the key assumptions that underpin your initial ideas about your product and its market. Blank’s recommendation is to treat those assumptions as hypotheses that need to be tested and validated.
Through this systematic process, a learning and discovery loop will be created that will help you prioritize your work and improve the timing of when to launch and scale your startup. Given the fragile nature of most startups, a better understanding of who the customers will be, what problem you will solve for them and how they will buy your product are outcomes that appeal to entrepreneurs.
The CDM process consists of four distinct but connected steps:
Focus on understanding your customers, their problems, their preferences and their buying behaviour.
Develop a replicable sales process―an essential step in scaling a business.
Generate demand, and identify and tease out potential customers.
Focus on building your organization to scale and executing the business plan.
CDM: a step-by-step recipe
Each step of the CDM has a purpose and a set of specific deliverables.
By introducing a feedback loop, the CDM flexes to the unpredictable nature of new markets and allows entrepreneurs to iterate on product and market assumptions. Iteration is necessary both for incorporating and testing new insights as you go along, as well as for increasing the level of precision in your decisions around product and market.
The draw of the CDM is that it demystifies and democratizes the challenging and risky startup process by introducing a step-by-step “recipe” to identify a potential business opportunity and extend it to the point of building a business around that idea.
Despite the allure of having such a process, entrepreneurs should take care not to underestimate the challenges of engaging in systematic customer interaction during product development. Most will find that a learning process is involved to be able to conduct insightful customer interviews and identify pivot points.
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.
- How to create a pitch deck for investors
- Industry analysis and competition: Porter’s five forces
- How to estimate market size: Business and marketing planning for startups
- Competitive strategies in operational excellence, customer intimacy and product leadership
- Bargaining Power of Buyers: Porter’s Five Forces Analysis