Customer Discovery 201: Lesson Two
For Startups, Customers Matter Most
Successful innovation happens at the intersection of Feasibility, Viability, and Desirability. To make money, a founder must create something that works and is needed or wanted enough by people that they will purchase it. Yet, I observe a system that often supports founders—while engineering their product or service and in drafting the business plan to monetize it—before the founder has done the work to understand whether people will pay for it.
I believe far fewer resources exist to help founders discern whether a customer truly desires the thing enough to exchange something of value for it.
It’s not enough for a potential customer to say they’ll like a product. It’s not enough for them to actually like the product. They have to desire it so much that they’ll give you their hard-earned cash for it. Otherwise, you have an invention, not an innovation, and you can’t build a business without a path to revenue.
Effective Customer Discovery Is Essential to Business Success
Investors and founders alike believe customer discovery is essential to finding product-market fit, a critical stage in the business life cycle. As renowned investor Marc Andreessen has written:
Whenever you see a successful startup, you see one that has reached product/market fit — and usually along the way screwed up all kinds of other things, from channel model to pipeline development strategy to the marketing plan to press relations to compensation policies to the CEO sleeping with the venture capitalist. And the startup is still successful. (emphasis mine)
One can argue that customers are the ultimate arbiters of startup success, and therefore, the corollary: customer discovery must be effective for a business to achieve success.
Aside from potentially catastrophic market risk to the startup, another perilous phenomenon can occur when discovery is flawed.
Flawed Customer Discovery Can Allow Stakeholders Unsuitable Influence
Founders often describe their work as “a calling.” They often commit incredible energy and emotional dedication to their companies. Because it’s also common that startups are frequently underfunded, founders can feel vulnerable to those with outsized means who can help them achieve their goals, namely investors. This can be especially true when the need for financial resources is urgent and alleviates certain high-priority matters (e.g., making payroll).
Investors are an integral part of the startup ecosystem, and many have previously been operators. They have intelligence to share, and founders should seek their guidance (just as investors should provide it when appropriate).
But I’ve seen cases where the founder feels beholden to the investor — whether or not the investor overtly conveys such an obligation — and seeks their direction on product decisions. Unless the investor has created products for the same audience and problem as yours, you are likely to know your customers’ desires much better than they are. And who knows your customers’ desires better than anyone? The customers themselves.
Paradoxically, by allowing the investor undue influence, the founder exposes them to additional risk. To increase their odds of a return, investors seek to de-risk their investments as much as possible. Good investors want to see founders build a Desirable, Feasible, and Viable product, and reporting customer discovery Decision Activities can help them provide an appropriate level of guidance and influence.
Now that we know what’s at stake, let’s look at Customer Discovery 201, Lesson Three: The Many Ways Customer Discovery Can Go Sideways — coming in my next installment on Medium, and available at the ID website now.
Did you miss Lesson One? That’s here.
