Steven Blank reached his aha moment after building eight tech startups. He looked back at his successes and failures, and his interactions with whip smart venture capitalists, and came to the following conclusion: There’s a right and wrong way to launch a business. He documents the difference in The Four Steps to the Epiphany
The wrong way.
Nine out of ten new product introductions fail. Why? Because companies don’t attract enough customers willing to pay prices that cover expenses. Why? Because they develop products, give them away to a few beta customers, make a big splashy launch, and quickly ramp up marketing and sales efforts. They spend more and more, but customers don’t materialize. Soon they need more money, but don’t have the results needed to get it. Examples are everywhere, but Blank cites Webvan as the poster child. They raised $800 million, and blew it all within 24 months. As Blank puts it, “build it and they will come is not a strategy, it’s a prayer”.
The right way.
- Make some basic hypotheses (a.k.a. guesses) about what customers want.
- Design and build a minimum viable product, holding off on bells and whistles. At the same time, get out of the building, talk to prospective customers, and listen carefully to identify important needs.
- Conduct “customer discovery”. Find early adopters – targeted groups of customers who know they have a problem, are actively looking for a solution, and have sufficient budgets. Without modifying your product/features, find out how to get it into the hands of those early adopters, and see what happens as a result. Which customers are most interested? How many are there? What are they willing to pay? How can you reach them? The goal is to find matches between your product and customer segments, and to create a repeatable roadmap for how to market and sell to them in a way that generates profits.
If you’ve got additional insights from the book or from your own experiences, please share.
Nice summary. If you haven’t seen or read it yet, pick up a copy of The Entrepreneur’s Guide to Customer Development (Brant Cooper & Patrick Vlaskovits) which bills itself as “A ‘cheat sheet’ to The Four Steps to the Epiphany.” It, too, is a great summary, albeit with a few more steps. It’s designed to be used as a process guide and user manual in a way that makes the Four Steps far more accessible.
I’m not associated in any way with Steven Gary Blank or the authors of The Entrepreneur’s Guide. However, I have started and run six tech startups and mentored four years’ worth of startups in the Boulder TechStars program.