The Importance of Honest Customer Discovery

There is a myth in Silicon Valley that product-market fit comes from inspiration that strikes a magical person who then designs something wonderful, releases it to the public, and it takes off. This isn’t the way SaaS applications, infrastructure software or other business applications get built. Finding product-market fit takes time and diligent work. It consists of constant testing, feedback and learning, and it’s crucial for future growth. Most importantly, it requires entrepreneurs to restrain their desire to sell and instead to focus on objective exploration.

Customer discovery is the first step in finding product-market fit.

But, customer discovery for a 1.0 product is really tricky, because unlike a 2.0 product, you don’t have existing customers — their reactions, usage patterns, or comments — about key features they need. However, the most successful entrepreneurs I have worked with start with searching for the truth, rather than trying to affirm their hypothesis or evangelizing their solution as they have constructed it in their mind. Intellectual honesty is a prized trait at Costanoa and a must-have for product managers .

Even if you start with a preliminary hypothesis, test it against your prospective customers. I’d recommend that you concentrate most of your interviews on the core constituency and profile — but also intentionally include a mix of people from adjacent segments — big to small companies, people with a different technical stack, users from an adjacent function. You may have sparse data from the adjacencies, but it will give you broader context for the problem space. Talk to every customer you can get your hands on. No fewer than 30. Ask each customer if they have other colleagues in the industry you can speak to. Work LinkedIn. Ask your advisors.

Construct and test a persona-based hypothesis.

As the list of qualified users you interview develops, so should your categorization of them into personas. When you get in front of a potential user, try to understand, beyond title and company logo, who they are, how they do things today and what their biggest problems are. Your ultimate objective is to construct a persona-based hypothesis for your product.

A basic framework for testing your persona-based hypothesis starts with identifying and confirming the biggest problem each persona reports. While there are many ways to probe, open ended questions are useful in the earliest stages of product development. Leave your bias at the door. “What is the biggest problem you faced today?” “How about this month?” “How about this past year?” “Why?” Don’t hesitate in asking this question repeatedly and in multiple forms and ways. What a good interviewer is listening for is — unprompted — to have the user surface the pain that your hypothesis is based on. Be open. Listen. Avoid the temptation to “test” whether the user has the pain you hope exists.

Next, explore the user’s perspective of the current solution they use to solve this pain. What do they believe the strengths and weaknesses are for the primary solution they employ today? Again, resist the temptation to lead them. Ideally, ask them to show you what they do today. To help quantify the degree of pain, good interviewers ask users if they would change their current world at all. For example, “If I gave you a magic wand and you could instantly swap your current system or process — with no cost and no extra work — would you do it?” “Why?” “If you wouldn’t swap your current system, is there anything at all you would change about your current system or process?”

Finally, you will want to concept-test the product your hypothesis is based on.

A demo should be used as an aid to not only illustrate the concept, but most importantly, to validate the tradeoffs users might accept to live in a world where this concept exists. Merely presenting a user with something new as a way to get them excited and then asking them whether they “like it”, “want it” or “need it” — without any tradeoffs — can create a tenuous platform for basing a decision as substantial as whether to build a new product or company. The most important thing an interviewer seeks to learn with a concept test is whether the user is excited or inspired enough to accept this concept with real tradeoffs. There are always tradeoffs when deploying a new product and if users are unwilling to accept any to adopt your solution, this will create a difficult atmosphere for your new company to enter.

Part of the reason for having a persona-based hypothesis about your initial product is that it focuses your experimentation with a minimum viable product. Random experimentation isn’t nearly as useful as intentional experimentation. Seeing how cohorts of your new customers/users use the product (based on how they fit with your persona), can help you prioritize the next features/experiments. The faster you learn, the faster you grow.

By: Greg Sands, Founder and Managing Partner of Costanoa Venture Capital and Ed Albanese, Founder and CEO of Krypton Cloud