Rule 1: There are no facts inside your building, so get outside
Customer development, the founders gather firsthand experience about every component of the business model. Must be undertake by founders: the team can support the founders, but firsthand experience cannot be delegated.
Rule 2: Pair customer development with agile development
Customer development is useless unless the product development organisation can iterate the product speed and agility.
Startup engineering or using agile methodology designed to continually take customer input and develop product that iterates around an MVP
Rule 3: Failure is an integral part of the search
Startups go from failure to failure, not true failures rather integral part of the learning process.
Rule 4: Make continuous iterations and pivots
Embracing failure in Customer Development demands frequent, agile iterations and pivots.
Rule 5: No business plan survives first contact with customers so use a business model canvas
A business model describes the flow between key components of the company
Rule 6: Design experiments and test to validate your hypothesis
Need to test guesses in front of customers -> but what to test? - that "designing the experiments".
They're pass/fail tests. Strong signal/noise ration
Rule 7: Agree on market type. It changes everything
Descriptions of market type:
- bringing new product into existing market
- bringing new product into new market and:
- re-segment market as low-cost entrant
- re-segment market as niche entrant
- cloning business model that's successful in another country
Rule 8: Startup metrics differ from those in existing companies
Startup metrics should focus on tracking startups progress converting guesses and hypotheses into incontrovertible facts.
If venture-backed, management and investors must agree on set of metrics that truly matter, and work toward "dashboard".
- track pass/fail tests and iterations
- have customer problem/product features been validated?
- does minimum feature set resonate with customers?
- who is customer, have channels been validated through face-to-face interaction?
- financial metrics: cash-burn rate, number of months worth of cash left, short-term hiring plans, amount of time until cash-flow break-even
Rule 9: Fast decision-making, cycle time, speed and tempo
- speed matters ie amount of cash left
- reversible vs irreversible decisions
- tempo important: ability to make quick decisions
Rule 10: It's all about passion
- startup people different: driven, passionate people
Rule 11: Startup job titles are different from large companies
- comfortable with uncertainty, chaos and change
- open to learning and discovery
- eager to search for repeatable and scalable model
- agile to deal with change and operating without a map
- wear multiple hats, on same day
- comfortable celebrating failure when it leads to learning
Rule 12: Preserve all cash needed then spend
- goal of customer development is not avoid spending money, but to preserve cash while searching for the repeatable and scalable business model. once found, then spend like there's no tomorrow
- repeatable: not one-off revenue hits but rather pattern that can be replicated by sales organisation selling off list price
- scalable: need more than one customer, and how does adding sales people impact revenue
Rule 13: Communicate and share learning
- share everything learned outside the building with employees, co-founders and investors
- record via blog? -> less time than catch ups
Rule 14: Customer development success begins with buy-in
- everyone must agree Customer Development process is different to its core