The Customer Development Manifesto is written by Steve Blank (at least that is what I expect) in his book the Startup Owners Manual.
A Startup Is a Temporary Organization Designed to Search
for A Repeatable and Scalable Business Model (Steve Blank)
The Customer Development Manifesto is one of the guidelines you need to keep in mind when you create a startup or when you are introducing a new product, as a spin off of your company. In this blogpost, I copied the 14 rules from the book The customer development manual and gave my opinion based on the experience I have with creating startups and introducing new products.
Rule 1: There are no facts inside your building, so get outside
In our experience it is very an hard experience to bring in practice. If you start a company or a new project you would like to create. Actually you are so convinced that your new product or service is something your potential client needs, it is growth market you are entering and all the market research reports are verifying this. The only thing that is missing is your product. So the only thing you need to do is create the product. And then…
Nobody wants to buy your product or at least your sales are far below your estimations. It is almost standard so what you need to do.
Get out of the building and talk to your potential clients. Preferable before you created any product or even Minimum Viable Product. Do it yourself as a founder, do not delegate this customer development to your employees or to external consultants. Employees and consultants will not tell you the hard feedback your potential clients give you.
Rule 2: Pair customer development with Agile development (see figure)
In rule 1, you learned to get out the building. Do no start any creation of a product before you know what to create. Less is more. But is you know what to create, then do it agile. Not only agile software development (scrum) but involve the software development into the agile customer development. Make as many as possible releases (as described in contentious deploying by Eric Ries) and test it with your (potential) clients.
Rule 3: Failure is an integral part of the search
Creating new products or services within a new company means many failures. You are convinced to know what your client wants but the client does not want to buy. It is failure but it is not so bad as it looks like. It was an experiment that failed. It is learning. The challenge is to keep the learning cycle as short as possible, use as less as possible resources and keep the time as short as possible. Less is more.
Rule 4: Make continuous iterations and pivots
It is already mentioned in rule 3 and before. Iterate, create experiments, learn, create new experiments all within limited time and resources. Pivot all the time till you reached the product market fit. If you reach product market fit then use all your cash and resources to scale the business.
Rule 5: No business plan survives first contact with customers so use a Business Model Canvas
Steve Blank’s advices to use the Business Model Canvas (BMC) by Alexander Osterwalder. Personally I think it is good to combine the BMC with the Lean Canvas from Ash Maurya and the Validation Board from the Lean Startup Machine. And don’t forget to use the Kanban Board for Agile Customer Development.
Rule 6: Design Experiments and Test to validate your hyphotheses
Create a startup is all about guessing. A “guess” is the base for an experiment. An experiment contains a hyphothresis with the right metrics to validate the leanings.
Decisions are fact based and not faith based!
Rule 7: It is very important that you analyze the right market types.
The market changes everything. It is quite obvious but you need to realize it. Below the markets Steve Blank defined in his book:
- bringing a new product into an existing market
- bringing a new product in a new market
- bringing a new product into an existing market and trying to
- – re-segment that market as a low-cost entrant OR
- – re-segment that market as a niche entrant
- cloning a business model that’s successful in another country
In the Manifesto is exactly described what are the differences in the describes market types.
Rule 8: Existing companies are based on the balance sheet and lost-profit account.
Define the metrics that are important for your startup and put them in dashboard. Most important metrics are:
- Customer problems and features validated
- Who is the customer: value propositions, customer segments, channels
- Customer valaidation questions: avarage size order, average time to first order, customer lifetime value, rate of sales, pipeline growth, revenue per salesperson
- Financial: cash burn rate
- Financial: number of months worth cash left
- Financial: cash flow break even
- Financial: cash per learning cycle
Rule 9: Fast decision making, cycle time, speed and tempo
Creating a startup is all about validated learning. Create experiments to learn with minimal resources. If you keep the cycle time as short as possible you reduce the resources and learn faster.
Rule 10: It is all about passion
What can you say more. To be a (co)founder is not it is a job it is your life.
Rule 11: Startup job titles are very different from large companies
In a start-up it is all about “the team” for Customer Development. Everybody from the team is involved in the Customer Development from the beginning till the end although everybody has it specialization. After the startup reach the product-market fit, you may create functions like sales, marketing etc.
Rule 12: Preserve all cash until needed. Then spend.
No cash is the end of the startup. Keep it in mind. But when the startup reach the product-market fit, it is time to scale up. If you really reached a product market fit in a significant market cash will be a commodity. On one side the startup generates cash on the other side investors will stand in the queue to invest in your “predictable” startup that only need to be scaled.
Rule 13: Communicate and share learning
Involve all your stake holders and communicate on a daily and agile base.
Rule 14: Customer development success begins with Buy-in
Customer Development re-invents the Business Model on the fly. There is no business plan to execute anymore. The Customer Development process is stressing learning, discovery, failure and iteration in the search for a successful business model.