Customer discovery process startups

Building the ‘perfect’ tech startup: The ‘customer discovery’ process

Imagine that you are out one night, having your favorite beverage, when inspiration hits (as it sometimes does at these institutions) and you say out loud “It would be great if only people could do “xxxx” which would give them the benefit of “yyyy”. You have just told the universe your big plan for changing the world. Unfortunately you couldn’t find a pen in time to write it down and the moment and the thought passes.

Fortunate for you, the cognitive system (let’s call them Herbie), listening through your Apple watch, heard everything you said.

“Sounds good to me. Do you also want to know if anyone else also feels that this is a problem?” asks Herbie.

“Sure, and while you are at it, can you also let me know if there is anything that exists in the market today that solves this particular problem,” you respond.

“Cool, just give me a few minutes and I’ll let you know what I find,” and Herbie is off to research your great idea.

Herbie begins to systematically search every social media application from Facebook, Twitter, and Instagram to slideshare decks, YouTube videos, chat rooms and forums. It’s listening in on what potential customers and competitors are saying, analyzing the context of those conversations, drawing out insights about what problems they are experiencing. It’s trying to determine whether one of those challenges being discussed “sounds” like your problem, and the level of success they are having in trying to resolve it.

A few minutes later Herbie calls your watch and tells you that he has compiled a list of customer problems that your idea might solve, along with potential markets, target customers, preferred distribution channels and even preferred pricing models. You tell Herbie that you’d prefer the information was collated into your preferred cloud project management tool so you can review it, and Herbie begins to execute your request. Because Herbie has already taken the liberty of ranking each problem and solution based on criteria that you helped create, all you have to do now is review the information and tell Herbie which theoretical or hypothetical problem you would like help testing first. This is the future of collaboration enabled by collaborative systems

This is also the future of the customer discovery process. As the first phase of the Customer Development Process, it involves taking a founders’ vision and turning it into a series of business model hypothesis. These are then used to develop a plan to test customer reactions, with the ultimate goal of turning the theory into facts. When you consider that 9 out of 10 startups fail, it makes sense to take the time to do some hypothesis testing before you go too far down the track.

9 out of 10 startups fail so it makes sense to do some hypothesis testing before you go too far down the track. Click To Tweet

After all, it’s at the beginning of the startup process, where many founders make their biggest mistakes. Some fall so in love with their big idea that they rush to build something hoping that customers will come in the future. According to CB Insights, the number one reason startups fail, a whopping 42%, is because there’s no market need for their solution. There are still others who wrongly assume who their target customers will be, and develop a business model to suit the wrong market. A spear used for fishing in streams doesn’t work so well in the open sea. As a founder, you owe it to yourself and your future investors to constantly test your assumptions about your target market. Unfortunately, most startups skip this crucial step.

42% of startups fail because there’s no market need for their solution Click To Tweet

This is where having access to a cognitive system like Herbie can add tremendous value. With real-time access to virtually unlimited amounts of information, combined with the capability to contextualize, understand and learn from it. Herbie will help you experiment with new concepts that were previously either too expensive and or time consuming to pursue

Sound like the plot of next summer’s science fiction movie blockbuster? The answer is yes (I’ll be buying my advance tickets next week), but there’s more than a little bit of reality in these concepts.

Scientists have already created hypothesis generation software that finds new flavor combinations (pork and strawberries work a treat together, who knew?). And software like BrainSCANr is helping neuroscientists select and hypothesize research projects that may solve serious medical problems based on a range of seemingly disconnected information. These innovators have used the technology to sift through millions of recipes and research papers, to identify trends and clues about what flavor profiles work well together or what research gaps exist.

Cognitive systems can now filter information from much broader data sources, including videos, sentiment in social media and verbal conversations. With 80% of the world’s data now unstructured, and with technology become smarter everyday, it’s only a matter of time before they can bring all of this together to create more complex hypotheses.

It’s only a matter of time before #cognitive systems can create more complex hypotheses Click To Tweet

Once you have a hypothesis, the next step is to test it, refine it, and iterate on it until it’s ready for the next phase, customer validation. This involves getting out of the office and conducting hands on market research with your target customers. Herbie can help you execute a highly coordinated outbound marketing campaign in the most optimal time and cost efficient manner possible. Herbie will work with you to provide a list of probing questions to ask potential customers to help test the hypothesis. And if requested, Herbie can actually make the calls for you, ask the questions, record the responses, analyze the results and give you an opinion on what was and what wasn’t a good hypothesis. But I don’t know if I’m ready to advocate for the latter, as there’s no replacement for direct customer interaction (at least not yet).

When you meet with your customers, tell Herbie to listen and record the interview, and help guide you through the interview process. This might include putting together a list of questions like these; Do they feel the same way you do about the nature of the problem? What do they believe is the source of the problem? How much pain is this problem causing them both professionally and personally? And most importantly, how much would they be willing to pay to fix it?

During the course of the interview, Herbie sends a vibration alert through your phone with a new question to ask, based on the previously received responses. Herbie has been constantly evaluating your prospects responses, checking them against previously received responses, and relevant data sources in order to assist you in refining your hypothesis in real-time. As a result, a bigger picture begins to form on an alternative or more refined market application for your idea. It will suddenly be possible to have multiple “Ah-Ha” moments during this phase of the process. And what entrepreneur wouldn’t want to have multiple “big ideas” to choose from?

Consider a cognitive system like Herbie more like a business conscience than a market prophet. It can’t predict the future, but it can tell you the success potential of your ideas, based on the past and supported by the present. Herbie analyzes massive amounts of information, identifies patterns hidden within, weighs all available options, and offers plausible ideas. Herbie’s ultimate goal is to give you both the insight and the time to convert the best hypothesis into an actionable set of facts. This is the best way to begin your startup journey.

Cognitive systems can tell you the success potential of your ideas Click To Tweet

Of course, as much as we like the cognitive computing power Herbie bring us, it does have a few “kinks” in its innovative armor:

  1. It’s not easy to obtain or validate the petabytes of data required to properly feed this system. After all, not everyone will have a “data lake” in their backyard. As you may not have your own customers yet, you’ll need to access to a diverse set of publicly available data sources. Although I see a future where raw, validated market data may become generally available, I see challenges in the near-term. As a founder, it is also important to step back and look for information that may be relevant in new places. The Internet is awash with data, as over-sharing has become both a burden and a blessing. The challenge may be just finding where potential customers are voicing their problems and discussing potential solutions; and
  1. The challenge of active listening. Listening and responding to another person in a way that improves mutual understanding is difficult enough between humans. The communication between a passionate founder and Herbie may involve working through some trust issues, as natural human bias may color receptivity to “machine” feedback. It may take some time for Herbie to acquire both the data and the “experience” before a founder trusts their opinions. Until that day comes, it may be hard for the typical “control freak” founder to loosen their grip on the current reality and see things rationally.

By leveraging big data assets, machine learning algorithms and natural language processing, cognitive systems can quickly guide you through the first and most important phase of the customer development process. An effective Customer Discovery process builds a strong foundation that will allow you to build the strongest business plan and enterprise possible. After all, the most successful founders are 78% more likely to have created a formal business plan first. Don’t be the founder that builds their “dream” application first, only to then try and find no-one besides themselves actually wants it. Cutting this process down from months to a matter of days, allows an aggressive founder to quickly pivot, either forward or backwards, before betting “against the house” and begin their startup journey.

Successful founders are 78% more likely to have created a formal business plan first Click To Tweet

Now that Herbie has gotten you through the first phase of the Customer Development process, it’s time to take it to the next level. The level where you validate whether your business model is capable of being both repeatable and scalable. This will represent the first true pivotal moment for your startup.

Next stop? Customer validation.

I’d love to hear at least two valuable pieces of feedback from you. Do you think the “customer discovery” process is an effective way to begin your startup journey? Can you imagine the value of having a cognitive computing system like Herbie guiding you through this critical phase of the start-up process?

Welcome to the era of cognitive systems….

References

Blank & Dorf, “The Startup Owners’ Manual: The Step-by-Step Guide for Building a Great Company.”

http://www.economist.com/news/science-and-technology/21621704-new-type-software-helps-researchers-decide-what-they-should-be-looking

http://dupress.com/articles/2014-tech-trends-cognitive-analytics/

http://www.research.ibm.com/software/IBMResearch/multimedia/Computing_Cognition_WhitePaper.pdf

https://hbr.org/2015/07/what-every-manager-should-know-about-machine-learning

https://www.cbinsights.com/research-reports/The-20-Reasons-Startups-Fail.pdf

https://www.sage.com/na/~/media/site/sagena/responsive/docs/startup/report

http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-

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I am a serial high-tech entrepreneur with expertise in developing new markets (discovering, developing and scaling business ventures with high potential). Subject matter expert in Decision Management Systems, Complex Sales, Advanced Analytics, Cognitive Computing, Systems Integration, Product Development and Sales Team Enablement. Recently enjoyed In-region global market development experience across six markets including Hong Kong, Philippines, Africa, Canada, LATAM, and Brazil. I enjoy pursuing high risk/high reward business opportunities that offer a path to improved skills and knowledge.
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