In the old days startups would begin with an idea, hire a bunch of engineers to build the vision, and then throw it to the public hoping customers would actually pay for it (sound familiar?). The mantra was “build it and they will come.” Entrepreneurs risked damaged resumes, their life savings along with dollars from relatives and investors. The mindset was that if we just worked hard enough, good things would happen.
For corporations, their mantra was different. It was “we already know our customers” (this is good, unless you really don’t know what you think you know!). Ideas were drawn on whiteboards, product teams put together and we were promised a beta before the next board meeting. Four months later, it was doing it all over again—this time with more gusto and shinier graphics.
In both cases, product teams looked good but customers were not impressed. Why? Because there was little or no empathy for the customer. Plans were constructed based on assumptions and gut instincts, and “testing” only meant QA and a beta release. Recently, a new paradigm shift has taken place that challenges our old ways of doing things and brings laser focus to customer needs. This customer-centered approach is accompanied by a no-waste policy and ferocious rapid product iteration.
“Business as usual” is slowing changing with the help of three methodologies: Design Thinking, Customer Development and Lean Startup. They are practices that provide a road map to building successful companies and products on purpose rather than by chance. These three methods have so much in common with each other that after learning about them for the first time, you can’t stop to wonder — “Aren’t they all talking about the same thing?”
Rather than giving a comprehensive review of each discipline, I thought it would be helpful to discuss their similarities, emphasizing this new chorus of ideas coming from academicians, designers, corporations and entrepreneurs.
Design thinking has received the most media coverage in the last year with several books out by well known design industry veterans like Tim Brown of IDEO and b-school revolutionaries like Roger Martin. Customer Development and Lean Startup are the new kids on the block, but are gaining attention quickly as tech startups in particular, strive to be more agile, faster to market and more innovative in a world that is increasingly competitive and hungry for all things tech.
While Design Thinking probably isn’t what entrepreneurs think of first when formulating their company’s plans, many larger companies such as GE and Procter & Gamble, and business schools like UC Berkeley and University of Toronto have adopted it and made it a part of their curriculum. Even non-profits are using Design Thinking in an effort to help local businesses pick up distressed cities hit hard by the recession.
Customer Development is a close cousin to Design Thinking. Customer Development is a business model for early stage companies first introduced by retired serial entrepreneur and UC Berkeley professor, Steve Blank. Customer Development is promoted as a risk reduction methodology for early stage startups. However, Customer Development isn’t only for entrepreneurs. Its four step approach of Customer Discovery, Customer Validation, Customer Creation and Customer Development can just as easily be applied to any product initiative.
Lean Startup is as the name suggests, about eliminating waste. Waste may be defined as “any human activity which absorbs resources but creates no value.” Lean Startup takes Customer Development and Agile development and combines the two to produce low-burning, fast-releasing, iterative product development. The term was first coined by Eric Ries (a student of Steve Blank) and was born out of three trends:
- The use of open source and free software services
- Agile development methodologies
- Rapid customer-focused iterations
Lean Startup can be used by startups as well as product development teams looking for an efficient, low-burn, customer-goal oriented methodology.
The three methodologies can be summarized as follows:
- Design Thinking – Innovate via customer empathy and rapid prototyping
- Customer Development – Test your assumptions
- Lean Startup – Stay quick and agile with low burn
While they might seem to be saying completely different things, the means to arriving at their messages is more or less the same. In fact, all three teach the following:
- Learning and Discovery
If all three practices have anything in common it’s that they are organized around continuous learning and refinement. Many startups might balk at the idea that their first priority be to learn. After all, who has time to learn when there’s a product to be built! They tend to approach it backwards by building the product or service first, and then learning. Unfortunately, by then they’ve probably burned through all their cash and it’s too late to take advantage of any lessons learned. All three methodologies put emphasis on defining what the issues are and for who, and doing research up-front before any product launch. The idea is to guide product design on the deeply understood needs, behaviors and attitudes of the customer, not on technology, business needs or on gut instinct. Bottom line: before any building begins, it needs to be proven that a product would solve a problem for an identifiable group of users.
- Direct Observation
Steve Blank calls this “getting out of the building”. You have to talk to and observe real people if you want to get real feedback on your business or product assumptions. While surveys and focus groups are helpful, there’s nothing that matches the benefits of being face-to-face with a complete stranger that matches your target audience. Surveys are helpful, but you’re missing all the hundreds of nuances and ways human beings communicate frustration or delight through body language and verbal cues.
- Failing Fast
All three practices emphasize failing early and quickly. All three suggest an ideation period where you develop hypotheses and test them rigorously. This enables you to not only fail cheaply, but also to expand and refine ideas via multiple iterations and feedback from your end-users. The idea is to eliminate all the larger issues early while it’s still cheap to do so. Failing isn’t bad as long it’s done quickly and early in the process. In fact, not failing enough in the beginning could be a sign you’re not testing your assumptions well enough.
- Test Your Assumptions
Always test your assumptions. Why? Because the sooner you realize a hypothesis is wrong, the faster you can pivot. Eric Ries explains “by testing, each failed hypothesis leads to a new pivot, where we change just one element of the business plan (customer segment, feature set, positioning) but don’t abandon everything we’ve learned.” Many entrepreneurs and business leaders don’t like to test their hypotheses out of fear of being wrong, especially after having already committed several weeks of time and money. All three camps ask, “Why build a company or product on myths when it can be built on facts and knowledge? And anyway, what’s the point of building a product that nobody wants?” The lesson: test your assumptions every inch of the way and increase your chances for success exponentially. Any company that doesn’t test their assumptions on a continuous basis is simply rolling the dice. While you’re doing it, also test for customer validation, usability and feasibility.
- Iterative Development
Lastly, all three methods are in agreement when it comes to iterative development. Iterative development allows you to to improve a concept or product in short correcting cycles. Iterations are done quickly with the idea that a concept gains refinement over several re-designs. An example of an iterative cycle is: ideation-design-test-refine (repeat).
While there are many similarities to all three methods, there are also unique elements to both Customer Development and Lean Startup. In general, Customer Development focuses on providing constant feedback, while Lean Startup takes the feedback and goes a step further by applying it to the actual workings of a startup and their survival (e.g., technology choices and software development practices). With Design Thinking, the emphasis is mostly on innovation, not survival. Nevertheless, Design Thinking also works well on limited budget and resources and is excellent for solving “wicked problems” (survival being one of them).
Below are some takeaways unique to Customer Development and Lean Startup:
- Product and Customer Development Teams
Customer Development suggests that startups have two teams: one for customer development and the other for product development. In reality, they both feed each other to influence decisions, but with Customer Development what product people would normally call the “discovery phase” is done by the customer development team on a continuous basis. This frees-up the product team to focus on the user experience and build while the customer development team provides constant end-user feedback.
- MVP (Minimal Viable Product)
Both Customer Development and Lean Startup methods stress the importance of building a “minimal viable product” or one that fulfills the greatest number of customer needs with the least amount of features. If you’re a software engineer, this is music to your ears. The trick is finding the right balance. Too many features and you run the risk of burning through cash and burning out your product team. Too few features and you run the risk of not finding, disappointing or losing customers.
- Taking Advantage of Free Stuff and Agile Management Practices
In the past, companies relied on waterfall development practices and licensed software to build their products and services. To counter these time and money burning methods, Lean Startup advocates the use of Agile product development where product builds are done in “sprints” within days or even hours. It also encourages the use of open source technology.
The Four Steps to the Epiphany – Successful Strategies for Products that Win by Steve Blank
The Entrepreneur’s Guide to Customer Development by Brant Cooper & Patrick Vlaskovits
The Lean Startup – Low Burn by Design not Crisis by Steve Blank and Eric Ries
Achieving Flow in a Lean Startup by Ash Maurya
What is Lean about the Lean Startup by Eric Ries
The Promise of the Lean Startup by Eric Ries
Lean Thinking by James P. Womack and Daniel T. Jones
Fast Company: Design Thinking… What is That? by Mark Dziersk
Design Observer: What is Design Thinking Anyway? Roger Martin
Harvard Business Publishing: Why Design Thinking Won’t Save You by Peter Merholz
New York Times: Welcoming the New, Improving the Old by Sara Beckman
BusinessWeek: How to Nurture Future Leaders by Venessa Wong
Business Week: How Business is Adopting Design Thinking by Venessa Wong
Business Week: Design Thinking Can Be Learned Interview with IDEO cofounder, David Kelley
Design Thinking 101