The Dark Side of Customer Development and Lean Startups

The customer development model is a tool to help you find a market (actual paying customers) for your idea. It is not a growth strategy.

It helps with the early part of the TALC (Technology Adoption Life Cycle). It is a tool to help you find early adopters and early customer segments that allow you to Cross the Chasm.

One of the hardest things about managing TALC is knowing where you are in it. I think maybe you managed to find an early market but didn't shift your operational strategy & tactics to reflect your progress.

I would suggest you read Geoffrey Moore's Crossing the Chasm and Inside the Tornado. They are very, very good books. I read them over 10 years ago and haven't found them to be wrong yet.

This is an alternative to building out like mad something that you have no idea if anyone wants to pay money for, and then doing it again and again at great expense of time, money and morale. Think ".com" mania.

I agree that Steve Blank needs to talk more about lean success/failure criteria and an exit strategy. If you've used lean to build a smallish business you need to leave it behind and go look for something else. This is challenging logically (how do you know if it's too small?), psychologically (given the sweat put into it) and financially (revenue is revenue after all and you get attached to it especially if you don't have other revenue to fall back on).

1. Lean Startups aren't cheap startups

http://steveblank.com/2009/11/02/lean-startups-aren’t-cheap-...

2. Lean Startups aren't small startups.

Steve Blank based much of his methodology on his experiences running E.Piphany. E.Piphany IPO'd before reaching a 4 Billion dollar market cap:

http://news.cnet.com/IPO-Update-Kana-Communications,-E.pipha...

The value of customer development is that it's a model for being more efficient with whatever resources you have as you search for a fit between your product and the market.

Imagine you have an idea for a new type of hotel. Would you build just two rooms and see if people liked the general idea then, if they did build 15 rooms and if those sold build 40 rooms and then eventually 100? If so, you would end up with a building whose core infrastructure was not designed to make it efficient to service and run a 100 room hotel. That is what can happen with a lean startup. You could argue that once you prove a market then you can always go back and rebuild the thing from scratch when you have more resources, but that too isn’t really true.

It seems to me he is, in part, talking about the idea of "right sizing". But it also seems to me that part of the point of starting lean and using customer development is to develop the founders -- their skills in dealing with the customer, their understanding of the product and market, etc. This piece talks like it is about "the product" but towards the end makes this comment:

Lean startups can be attractive because they minimize your chances of failure. They allow you to string along a mediocre business for years while keeping your day job and justifying the whole thing by saying you are lean.

The above comment brings it back to development of the founder as an entrepreneur. Perhaps the author is struggling to understand what went wrong and doesn't quite know how to frame it -- which would make perfect sense because if he already understood it well enough to frame it well, the odds are good he wouldn't have made the mistakes he is frustrated by. He would have done something else (and made some other set of mistakes/discovered some other set of pitfalls).

Video here: http://www.justin.tv/s/XMP0tQg/clip/8cb0037e984e6a1f

Slides here: http://www.slideshare.net/sblank/customer-development-past-p...

It certainly is not a set-in-stone one-size fits all approach as many seem to believe but is very much in development itself.

Sorry, but I don’t have any juicy arguments for you. I agree with most of the concerns you raised here. It would be foolish for any startup to build their business in the way you described in the hotel example. In my understanding of the suggestions put forward by those exploring the lean startup methodology, the point is to be lean, not starving.

If you have a repeatable sales model, based on actual customer activity, hell yeah… go for broke. It doesn’t make any sense to just grow a little bit. On the other end of the equation, it doesn’t make much sense to front load your sales and marketing team with a budget of $100million based on assumptions which don’t have customer actions to back it up.

All that to say, I don’t understand the point of leanstartup methodology as being cheap for the sake of being cheap. But rather, not dumping money and resources into aspects of the business which haven’t been verified by actual paying customers.

The question on my mind is whether it's too much of a greedy algorithm that moves you towards a local maximum but discourages real audacity?

flat out: you're doing something wrong. coding right is faster than hacking around. i guess that's what you are saying: at some point you have to redo all the previous buggy work you've done, and adding features is a nightmare, so all the "progress" you thought you were making was totally backwards.

i'm just surprised that "point" came to late in development. once you start having real customers, as opposed to testing an idea with gradually more tech-based mockups, how can you afford not to be doing things right? how you can make progress if every feature is introducing bugs? do you just ignore the bugs and keep pounding against the wall, brute force adding <crap> and trying to trick people into thinking everything is ok, keep the payments coming?

don't build your own grave. customers who expect to use your project for the long-view after you've built it require a REAL product. i sooooo wouldn't want to clean up after that mess.

- You have to be careful with product quality. In a lean startup, because you prioritize market discovery over all else, you build a culture of people used to saying "Oh, that bug only affects 1% of customers, so we can ignore it.", even after you have found your market.

- It's hard to give up steady growth to make the kind of long-investments you know you'll have to do. IMVU had a culture of running quick A/B experiments and throwing away the loser without any deep analysis. We had gotten stuck in a local maxima with stalled business growth, and it took replacement of most of the management team to fund a six-month project to rebuild our client UI from scratch. In our case, this was absolutely the right decision. Funding anything for six months straight would have been impossible with our previous "lean startup" culture.

I, too, would like to see more discussion of lean startup edge cases. There is definitely a point where you transition out of the lean startup approach and into full-scale production.

I suspect it's very similar to the game industry's preproduction vs. production distinction: http://www.gamasutra.com/view/feature/3847/beyond_scrum_lean...

The problem will bulking up at the beginning is that no one will invest in your product if it doesn’t exist and you’ll never get started on anything. The lean approach encourages you to get off your butt and just do it.

For our situation the lean startup approach is working very well. We got a working product out the door very quickly and we’re learning a lot from our first customers. Plus we’re having a ball! [http://twegather.com]

Building the smallest possible marketable product doesn't mean building a low quality product.