The key to not building garbage products - understanding customer discovery and its importance
You and I have a million ideas running in our heads right now. One of us is even brave enough to assemble a star-studded team with the most artistic of designers, a ninja engineer, a slick sales force, and a huge influx of capital to execute the vision. After toiling and wrestling with the development of a solution for months — it’s finally ready and it’s perfect! It finally gets into users hands and reality hits you in the face. You aren’t selling as many and the ones you did sell are receiving abysmal feedback and most of your customers are requesting refunds. Sounds like a nightmare? Well, it surely is and is one of the best-told stories in Silicon Valley of how not to innovate and build products. Make way for Juicero, a start-up which raised $118 million to build the ultimate $400 juicer that squashed packets of pre-cut fruits and vegetables and converted them to, well, juice. Read the entire story here.
Let’s examine the facts -
Was the product not good at squashing the packets? — it was probably one of the most sophisticated machinery ever built to squash juice.
Was it not convenient to use? — you could argue that it was a fancy way to make juice. That wasn’t the problem either.
The real issue with Juicero was that it had a solution for a non-problem. After its release into the market, users started mocking the product by squashing the packets with their hands (which obviously produced similar results).
Where did Juicero go wrong? They didn’t test their hypothesis for the need to have a mechanical machine to make juice. They didn’t do their customer discovery. This article series is our attempt to explain what customer discovery is, why it’s important, and some tips on how it’s done. Read on!
What is customer discovery?
All right, before we explain what customer discovery is and why it is important, let’s pause for a moment to think about why products or various services exist on earth. Yeah, let’s start with the basics because it is pertinent to what we are about to converse for the next 5 minutes. Not a day goes by without encountering a product or utilizing the service offered by Fortune 10,000+ companies of this modern world (unless you are living a tribal life in the amazon or the Andaman. Anyways, the chances are less if you are reading this article which makes you a legitimate modern human being. We are stopping our jabber here! Keep reading). So, why do products or services exist? Simple answer- to fulfil our plethora of layered day to day needs.
Okay, now, what is customer discovery?
Every business is built on a bunch of assumptions (for example — the airline industry is built on a key assumption that people will travel by air around the world). Customer discovery is the process of validating those key assumptions before even building a business on a large scale.
In other words, during customer discovery, we are trying to find answers to two key questions:
1. Does my target group of users (people who use the product or utilize the service) really have an unmet/underserved need (an unsolved problem)?
2. If I solve their unmet/underserved need, will they pay for it?
“The best user researcher we have worked with made a conscious decision to cultivate a learner’s mindset. As Jeff says in his book Talking to humans (paraphrased): ‘Your job during customer discovery is to Learn. Learn about people. Their challenges, their motivations, their deep desires, their goals.’ Get ready to be amazed by people!”
Who does ‘customer discovery’?
Is it something a bunch of aspiring entrepreneurs does? Do even big enterprises do customer discovery?
Anyone who wants to innovate a new product (or re-innovate an existing product) should be doing customer discovery. Usually, in start-ups, the founding members take the leads on this. Alternatively, in big enterprises, typically the product team led by ‘user researchers’ (or ‘design researcher’) do customer discovery. Now, let’s talk about the most important part: Why is customer discovery important?
Why is customer discovery important?
1) Evaluating product-market fit
The outcome of customer discovery is the validation of product-market fit. So, what is product-market fit? The best definition of the product-market fit we’ve found to date is by Dan Olsen in his book titled ‘The Lean Product Playbook’.
“Breaking down the two constituting words, the ‘Market’ consists of the target customers and their underserved needs and the existing products ‘trying’ to address those needs.” In other words, product-market fit is the answer to the two guiding questions of customer discovery: Is there an unmet need? If so, how much will people pay for it?
Olsen explains that — “when you look at it in this light, it’s easy to see that product-market fit is the measure of how well your product satisfies the market.”
Ever wondered why no one takes on Microsoft Office to build an Excel like desktop spreadsheet application(which has an estimated 800 million total users)? Excel is versatile, comprehensive (although thousands of its features are never used), and truly addresses the needs of their users. So if you’re attempting to compete with Microsoft to build a spreadsheet application, in order to achieve product-market fit, you need to validate your hypothesis by going through the customer discovery process and identify what are the needs that are currently underserved by Excel that can be met with your product before even attempting to write your first line of code. Let’s say, you have decided to build an electronic spreadsheet software like Microsoft Excel, how do you know what to build? Keep reading!
2) Garbage in, garbage out.
Some of us want to build the next Amazon and Spotify of the world. However, without a doubt, almost all of us have a favourite brand we admire and are loyal to. Is there any tech mortal out there who is not amazed by Google’s search engine? How about the saloon 5 miles away from where you have been getting your haircut for the past 14 years? Or, how about the travel agency who designed your memorable honeymoon trip? Have you stopped and thought: ‘How did these companies build just the right product/experience for me? How did they understand my problems so well? How are they able to empathise with me so deeply?’ The answers to all of the above questions is a properly done customer discovery. A half-hearted research phase to check the boxes in the new product development process will lead to building garbage products. Without doubt, all of us are looking for opportunities to Innovate — create new value for customers. We believe that the foundations for these opportunities to innovate are built-on the deeper understanding of customers’ problems we learn during customer discovery.
“Shortly, insights from customer discovery act as the input for product development or service design. In essence, we understand the right ingredients that can make a product great. Also, remember that Customer discovery is all about being in the PROBLEM space and not in the SOLUTION space.”
We know what to build, and let’s assume we have assembled a team to start building. How do we build efficiently?
3) Optimising Resources
Every business starts with a mental frame of assumptions on how the business would function. Our job during customer discovery is to validate those assumptions to reduce the uncertainties. You might be surprised that most often at least 50% of the initially stated assumptions might be false when we get out of the building and talk to people about it. Validating the critical business assumptions early on helps us prioritize and channel resources (time, money, emotional energy) to the best. Also, customer discovery illuminates hurdles we may face down the lane if we decide to start building a business. This way, we can plan for ways to overcome those hurdles and even rethink the business model, if necessary.
Think like this: “We could have done a million other things instead of building this product. So, let’s build something that our customer would pay for and be an ambassador for down the lane.”
Lastly, if you are a first-time entrepreneur, there is a pivotal benefit through the data we collect from customer discovery. What is that?
4) Approaching investors for future funding
If you’ve ever watched an episode of Shark Tank — you know what this is about. For the uninitiated — Shark Tank is a reality TV show consisting of 5 entrepreneurs who’ve been mighty successful in building their business empires and they listen to budding entrepreneurs who want to realize their dreams by pitching their ideas for investment for an equity stake in return.
One such entrepreneur was Mary Ellen Simonsen who pitched her idea (Attached Notes) for a $9.90 retractable board that can be stuck to either side of a laptop monitor on which you can stick post-it notes, asking for $100,000 in exchange for 20% stake. Kudos to her — she saw a problem (organizing your notes) and came up with a solution. But that’s not enough — the way the product works is just one piece of the entire puzzle — and while she had a functional version to demonstrate its use, it was lambasted by the sharks and labelled one of the worst pitches on the Tank. Why was it rejected? Well, when quizzed about how much sales she had to-date — she said ZERO, nor was there any evidence that the product had any demand and that consumers were willing to buy it.
While having a paying customer base increases the probability of funding from investors multifold, having solid data on your customers' willingness to pay for your product concept too increases your probability of getting funded(especially the case for hardware products which need a large investment to even build the first prototype).
In our following article, we will be talking about the customer discovery process in detail. Here’s a sneak peek of what’s to come -
1. Have specific learning goals while doing research
2. Learn the problem space through domain research
3. Write down risky business assumptions
4. Learn from your customer
5. Synthesize the data
6. Analyse to spot the insights
7. Translate the insights to Product requirements
Bonus: We’ve also got some tips on dating for your guys.
See you all soon!
~Rahul vignesh Sekar and Rahul Sridhar
References:
Two great resources to start with: We learnt most of the insightful content and the process of customer discovery from these two books.
Talking to humans (click here to buy the book)
Handbook of people research — deriving value by asking questions(click here to buy the book)
