Steve Blank and Eric Ries: “Customers! Customers! Customers!”

Retired serial entrepreneur Steve Blank was joined by IMVU co-founder Eric Ries last night at Startup2Startup in Palo Alto to discuss how startups should couple customer development with product development from day one.

Blank began by describing how the product development process used by most entrepreneurs is ill-conceived. Instead of continually reassessing their product designs in light of customer feedback, companies tend to follow a linear development path that takes them through four main stages: 1) conceptualization, 2) product development, 3) beta testing, and 4) launching.

Ries argued that this strategy only makes sense when both the problem and the solution to that problem are fully understood. Most startups, however, cannot readily conceive a good solution to the problem they’ve identified. And many others don’t even have a clear idea of the problem they are trying to solve. Particularly in the latter case, startups must continually reevaluate both the problem and the solution by consulting their potential customers and developing a thorough understanding of those customers’ needs and behaviors. And this reevaluation leads to lots of product iteration that turns the development process into more of an ongoing cycle.

While we tend to think that the technology behind a startup determines whether it succeeds or fails, most startups actually fail from a lack of customers. This is especially true on the web where the risks to technology are relatively low, while the risks to customer acquisition and retention are relatively high. Therefore, it’s crucial for a web startup to incorporate processes that help it to develop a promising customer base while it builds out its technology.

Blank emphasized that there are no magic solutions for customer development; it simply takes a lot of focus on customers and the market at hand from the very beginning. When startups continually focus on their customers, they tend to fail fast and often because they discover a need to realign their efforts. But this is a good thing since lean startups with the ability to adapt (and “get outside of the building” to talk with customers) end up creating products that customers are actually willing to pay for. After all, earning revenue from the start is the best signal that you’ve stumbled upon a real solution to a real problem.

Here are the slides from the presentation by Steve & Eric:

Here is a recent presentation by Eric Ries on “The Lean Startup, Step-by-Step”, from his webcast earlier today via O’Reilly:

Here is a schematic from Eric on the Lean Startup feedback loop / iteration process:

Here is a brief pre-event interview with Steve Blank, conducted by Startup2Startup co-founder Leonard Speiser:

Here is the full recorded webcast of Steve & Eric’s talk below, courtesy of uStream: