If you’ve been around entrepreneurial circles for a little while, you’ve probably heard the phrase “Customer Discovery” thrown around from time to time. It’s one piece of startup jargon that doesn’t make a whole lot of sense if you haven’t heard it before. Is Customer Discovery the process of walking around city streets asking people if they will be your customer?
Actually, it is–in a way.
The phrase “Customer Discovery” traces its roots back to two serial entrepreneurs: Steve Blank and Eric Ries. These two men are most widely known for their contribution to the “Lean Startup” methodology (Ries is the author of The Lean Startup (2010); Blank wrote “Why the Lean Startup Changes Everything” as the cover story for the Harvard Business Review in 2013). At the heart of the Lean Startup is the process of utilizing customers very early on in the business development process–and that is precisely the theory behind Customer Discovery.
Brant Cooper, author of The Lean Entrepreneur, puts it simply: Customer Discovery “is all about questioning your core business assumptions.” Performed correctly, Customer Discovery is a customer-centric, scientific process that puts evidence behind an assumed product-market fit.
In Customer Discovery, you (the founder) take on the role of a scientist or detective, trying to let evidence lead you to a solution without letting any of your own bias get in the way. In fact, Customer Discovery ordinarily involves a process that closely follows the traditional scientific method:
Following a scientific approach is essential in this very early stage of a startup, because there will be lots of opportunity to allow bias to color your impression of the market. In many instances, the only “science” employed by inexperienced entrepreneurs comes from asking around about others’ opinions of their idea before continuing. Whether this involves asking friends, family, or even teachers, the answers will be far from trustworthy.
For that reason, Customer Discovery requires a specific type of research method that eliminates as much bias as possible. You will still end up “asking around,” but your answers will end up far more reliable.
Customer Discovery is imperative if you want to create a product or service that serves the needs, pain points, and challenges of potential customers. Being a customer-centric process, Customer Discovery can be (and we encourage it to be) utilized at any point in a startup’s journey, however, the early stage discovery step is the most important. Spending time, money, and energy on an idea you never validated with potential customers is the biggest reason startups fail. Based on CB Insight’s Analysis of 101 Startup Postmortems, 42% of businesses fail due to no market need for their product. This is why validating your idea with Customer Discovery early on is important to provide proof of product-market fit.
Creating a value proposition can be a great goal for your early-stage Customer Discovery journey. Primarily used for marketing, a value proposition is a statement of the functional, self-expressive and emotional benefits delivered by the brand that provides value to the target customer. This statement is great for internal validation of your product or service as well. By taking what you learn from your Customer Discovery journey and creating a research-based value proposition, you’ll have turned your assumption into a concept that serves your target market’s needs.
“Airbnb exists to create a world where anyone can belong anywhere, providing healthy travel that is local, authentic, diverse, inclusive and sustainable.” – Airbnb’s Value Proposition
The vacation rental online marketplace developed their value proposition with the help of their unique Customer Discovery journey. They were able to identify exactly what people were looking for when traveling, and with a clear value proposition and business model, they’ve been able to generate billions of dollars in revenue year after year.
To get started on your own journey, here is our simple 4 step guide to performing Customer Discovery for your startup or idea.
[Be sure to check out our entire library of Customer Discovery tools, tips, and resources here]
Step One: Define a Hypothesis
The first step is to form a hypothesis that defines both the problem and the solution you are proposing. A simple way to frame this is to fill in the following sentence:
My idea solves [insert problem] by [insert solution].
A word of warning: pay very close attention to your assessment of your problem. Be as specific as possible. A good hypothesis addresses a single problem with a single solution. For example: Instead of saying, “My idea solves people’s need to do laundry by offering a laundry delivery service,” a better idea hypothesis might be, “My idea solves the inconvenience and large time commitment of maintaining clean laundry by offering a 24-hour convenient laundry delivery service.” The first addresses a vague problem that does not match the solution (a laundry service doesn’t solve the need for clean laundry), while the second directly addresses the heart of the issue and matches it with a corresponding solution.
Different kinds of hypotheses reflect different stages of your Customer Discovery journey. Breaking down your Customer Discovery journey to focus on one specific hypothesis will make your results more articulated and insightful. Here are four of the most common hypotheses you see in the Customer Discovery journey:
Whichever hypothesis you write will be tested in the next steps.
Step Two: Define Your Assumptions
When detailing your hypothesis, you will be forced to make some assumptions about your idea. These will include assumptions that:
A good way to lay out a number of these assumptions is to create a hypothetical customer persona (that is, a profile of who you think is the ideal customer for your business). Be specific–give this person a name, an age, a career, hobbies, interests, perspectives, and even quotes regarding your industry. See a good example of a customer persona below.
Step Three: Ask (Good) Questions
The next step is to “get out of the building” and ask some questions. You’re going to start by targeting people who you believe could be potential customers. If you’re running a college laundry business, you should not be asking your parents or professors questions. They are not going to be your customers. Ask the people that you anticipate asking to buy your product in the future. They hold the answers.
[Check out our Customer Discovery Worksheet, complete with sample questions!]
Next, you’re going to ask “detective” questions. This isn’t just “asking around” for people’s thoughts on your idea, though. In fact, you really shouldn’t mention your idea at all. This is because Customer Discovery allows you to let your customers build your product for you. That’s right. You thought you were in the driver’s seat, but you actually get to sit back and relax while your product gets built before your eyes (so to speak).
This is because Customer Discovery questions are open-ended and nonspecific about your idea. By letting the customer lead the conversation, you will end up letting them tell you about their ideal solution (instead of the other way around). Example questions might include:
In asking these questions, you allow the customer to tell you their exact opinions (or lack of opinion) about your topic of interest. If they feel extremely strongly about the problem, you’ll see pretty quickly by their body language and tone of voice. If they don’t see much of a problem, they may seem confused or complacent. Or, there might be some completely different problem that you hadn’t realized is more pressing than the one you originally wanted to solve. In either case, as you get more and more responses from potential customers, your product will start to either make more sense or less sense. Now is the time to check your bias at the door–because it could very well prevent you from uncovering the real potential behind your idea.
Step Four: Evaluate and Refine
If you perform the Customer Discovery process correctly, chances are you’ll discover some things that you had not originally considered. At this point, you have the opportunity to return to the drawing board (Step One), incorporate what you’ve learned, and repeat the process. Once your customers’ responses match your hypothesis, then you can move on confidently, knowing that you are about to build something that your customers will actually want.
It may seem frustrating to have to go back and revise your original idea, but think about this: it is far better (and cheaper) to revise your idea now–at the beginning–than after you have already spent significant time and money building a product or service around false (or partially false) assumptions.
This gives you a distinct advantage over everyone else in the market. Someone else may be building the fastest product, but you will end up building the best product.
[Be sure to download our 4-step Customer Discovery infographic to use a quick reference guides on these steps]
Now that you know the in-and-outs of the Customer Discovery process, it’s important you choose a format and distribution strategy that best fits your goal. Today, virtual versions of Customer Discovery are as common as traditional in-person methods. Even over a computer screen, face-to-face Customer Discovery can still be done, so make sure you consider all options when thinking about who you want to talk to. Here are some of the most effective Customer Discovery methods you can perform both in-person and online.
In-Person Forms of Customer Discovery
Virtual Forms of Customer Discovery
Virtual Focus Groups:
No matter what resources you have available to you, Customer Discovery is possible. There are many more options than just your traditional interview or survey, so get creative with your journey! Many startups will utilize different approaches for different assumptions based on the sample size needed to prove if their hypothesis is true or false. Remember, the Customer Discovery process isn’t just a one time thing. You should always be questioning your assumptions, even if you already have an operating business making profit.
The core of Customer Discovery – questioning your assumptions – is actually a practice that can and should follow throughout every stage of your business’s growth. Remember – you are a scientist trying to uncover evidence. Any scientist that assumes something is true without first proving it is a pretty bad scientist. Similarly, any entrepreneur that assumes certain traits about a problem or market segment without proof is asking for trouble.
It may be hard to restrain yourself from jumping right into the process of building your idea, but remember–laying a proper foundation upfront will make sure your idea lasts for years to come. Glossier, one of the hottest brands in cosmetics, spent years operating as a blog before releasing their first product. This allowed them to build a community and conduct ongoing Customer Discovery to better understand the needs and behaviors of their potential customers before crafting their first products built specifically for them. Dropbox, the billion dollar file sharing company, basically let their target customers build their platform through their Customer Discovery journey by feeding code to their early adopters.
Same thing goes for startups like Nerdy Nuts, which has built a robust Facebook group that allows them to conduct Customer Discovery daily, and YOURS, which uses an ongoing series of content to engage with potential customers and learn about their preferences, problems, and interests in the non-alcoholic wine space. For a more in-depth example of an early-stage Customer Discovery journey, check out this blog about Hangio founder Ayodele Aigbe’s Customer Discovery process.
By taking the time to understand their customers first through the power of Customer Discovery, these companies are creating vastly more efficient pathways to building something that their audience truly wants.
Technically, never. But at any stage of your startup journey, if you’re able to support your hypothesis with a sufficient amount of proof, you can consider that Customer Discovery experiment a success. Before you’re able to recognize patterns or themes that support your hypothesis, it’s important you repeat the process until you can.
There comes a point in the Customer Discovery journey where instead of making assumptions and hoping to prove them right or wrong – the patterns will clearly reveal themselves. Discovering these patterns is how you’ll be able to create an entire target market of people with a shared problem that your solution addresses. Sometimes, you’ll recognize a pattern or theme that wasn’t even the purpose of your experiment. Don’t ignore this discovery, embrace it! Many historic inventions, like Coca Cola or the pacemaker, came from an accidental discovery in a scientific experiment. Customer Discovery is no different.
With the right hypotheses, assumptions, and questions, your Customer Discovery journey is sure to lead you to creating a great product or service that serves the needs of your customers.
Ready to get involved?
Join our newsletter for updates