The “Fallacy” of a Literal Interpretation

Ash Maurya recently published a post entitled a bit controversially, The Fallacy of Customer Development.  As the title indicates, he attempts to describe what he feels is a fallacy implicit in Customer Development.  There may be a fallacy (or many fallacies, for that matter) in Customer Development (and if there is, let’s find it and address it), but what Ash describes, well, that ain’t it.

(Sorry Ash.)

For clarity’s sake, let’s unpack the beginning of Ash’s post a bit:

The Fallacy

In order to build a successful product, you have to eventually find a scalable and repeatable way to reach customers.

For the record, I don’t like using the term “reach customers” because it is not clear whether he means customer acquisition or product distribution.  Clearly both are necessary for success and you often see startups get into real trouble when they confuse distribution via the web with acquisition via the web — which I think is Ash’s point:  One has to a) discover and b) build scalable customer acquisition channels.  In that, he and I both heartily agree.

There is an implicit expectation that customer development will uncover that path to customers.

He then suggests that Customer Development will surface those channels — I would only have a minor quibble here – namely, Customer Development is not a) deterministic but is b) dependent on the skill of the entrepreneur and that nothing is guaranteed, except, as they say, death and taxes.

My experience (with web based products) has been that it’s not as much the uncovering of the path but the building of the path that is troublesome. Some paths are obvious but hard, such as those built on referrals (word of mouth), SEO, etc. It’s comparatively a lot easier to find 30-50 people, validate you have a problem worth solving, build a MVP, even get them to pay you – all of which is a false positive if it was predicated on a customer acquisition approach that won’t scale or more importantly be applicable to how you acquire customers in the future.

Ash is 100% right — all of those he mentions could be false positives if one doesn’t discover and build scalable user acquisition channels that leverage and build of those insights.

The fundamental cause for this fallacy is rooted in an attempt to literally apply Steve Blank’s Customer Development techniques without consideration for specific business and channel types (of which I’m just as guilty).

The ostensible “fallacy” that Ash does describe (and admit to) is simply a paint-by-numbers, hyper-literal approach/interpretation of Customer Development as described in the The Four Steps to the Epiphany by Steve Blank.  This is a bit confusing for me as Steve Blank himself would never endorse or encourage anyone to take such a dogmatic approach wherein one doesn’t consider how channel types (or anything else for that matter) should be Cust-Dev-ed.

In fact, I fear that Ash is missing the forest for the trees.  (If I were unkind, I would say that Ash is making a strawman to knock down.)

Let me be crystal-clear:

If you think that Customer Development is a deterministic formula for magical startup success as described by Steve Blank wherein if you do X by the book, then Y happens — then yes, Ash has absolutely uncovered a massive, gaping hole of a “fallacy” in Customer Development.

If you think that, whatever you do, don’t do Customer Development – you’re only going to be disappointed when reality repeatedly smacks you in the face.

If you think that Customer Development is a set of cogent meta-principles* which make for an excellent way to mitigate market risk in the context of early-stage technology startups operating in the swirling, mad chaos of startup-land where failure is right around the corner, success is non-linear, and nothing is guaranteed, then keep on doing what you’re doing — hopefully, with a bit of luck, a lot of blood, sweat and tears + your entrepreneurial problem-solving instincts, you can maybe, just maybe, get to the nirvana of Product-Market Fit.

Maybe.  (Did I mention maybe?)

Ash goes on to write:

“The Four Steps to the Epiphany” was written for a specific type of business – Enterprise Software, and a specific type of channel – Direct Sales. While Customer Development is still the fastest way to learn, you have to adapt the tactical techniques for your business and channel to avoid hitting a wall after Problem/Solution Fit.

This is not controversial in any way, shape or form.  In fact, the rest of Ash’s post there is very little, if anything at all, that is controversial.  Better yet, with a few minor exceptions, it is almost all fairly decent advice.

Customer Development needs to be a continuous learning process

Customer Development is about establishing a continuous feedback loop throughout the product development cycle. Enterprise selling necessitates constant contact with customers throughout the customer lifecycle. This is NOT the case with web software. To fix this, you have to build appropriate customer touch points in the form of ongoing usability tests, customer feedback calls, interviews, etc.

Yes.

Start building and testing a path to customers from day one

Seasoned entrepreneurs know that building a significant enough path to customers is one of the hardest aspects of building a successful product. I always get at least one question from the audience during my talks/workshops on “finding prospects”. I used to answer this question with the canned response of “make a list of people you know, start there, ask for referrals, interviews will reveal the path to customers”. Now, I slant my response more heavily towards finding prospects by way of testing the actual channels you intend to use for reaching your future customers.

Don’t get me wrong. Talking to anyone is still way better than talking to no one. If you have no idea how to reach early prospects or if the channel takes time to build, start with your 1-degree network. But, don’t declare Problem/Solution Fit unless you’re able to recruit a fair number of your interviewees using an actual channel you will use.

Sure.

It’s also equally important to point out not to fall in the trap of prematurely optimizing this channel. You may not have a problem worth solving or have to pivot to a different customer segment. Premature optimization is a form of waste.

Agreed.

Your first objective should be driving just enough traffic to support learning. During Customer Discovery, that means enough traffic to yield 30-50 interviews.

Uhm, maybe?!   Minor quibble:  how about 42?

Some examples –
1. Write a blog post that ends with a call for participation in an interview
2. Create a landing page and drive SEM traffic with a call-to-action ending in an interview (not a survey)

Those could be great ways to test user acquisition channels that scale…or not.

Start building and testing your selling process as soon as possible

While Customer Development does NOT magically scale even for Enterprise software, the learning from the interviews can more easily be applied towards building a repeatable and scalable direct sales process. Selling a product over 15-20 minutes in an interview is very different from selling a product in 5-8 seconds on a landing page. Again early interviews are helpful in identifying what’s important (your unique value proposition) but you need to start testing that in the right format (e.g. landing page) as soon as possible.

Some examples –
Run customer interviews in a usability test format.
1. Instead of verbalizing the unique value proposition, show them a landing page and test positioning.
2. Instead of getting a letter of intent, watch them sign-up to your service and note where they get stuck.

Here is where Ash and I part ways.

All the things Ash writes are true — however, his examples may or may not be applicable for your startup and my sense is that he is being much too prescriptive.  A Letter of Intent may be the best way to get deep understanding about your customer or it may not.  A Letter of Intent may be the worst thing you could ever do and a complete waste of time.

I don’t know because I am not your customer and I am not building your product and I am not you.

What Ash isn’t addressing is something that Sean Murphy very astutely brought up in the comments of the previous post that prompted this one. Namely,

…”system of simultaneous equations” that a startup team must solve to find a viable location in a market space….

Bingo!

Great analogy.  What Sean** is saying is that if you flip a variable in one equation, let’s say, something I will call the product equation – e.g. increase in price — it likely changes all the other variables in the other equations,  e.g. who the customer is, what messaging they respond to, how they acquire your product etc etc  You have arrived at Product-Market Fit when you have successfully solved for all the variables in all of the equations.

An easier way to think about this is that finding success in a startup is it is like solving a massive sudoku puzzle.   You cannot write one number and expect the others to say unchanged – neither can you shoehorn or wish your way into solving them.

A literal interpretation of The Four Steps to the Epiphany is like playing sudoku and filling it out with what you wish the numbers should be, but not actually doing the math to make sure all the rows and columns balance out.  And then when you see they don’t — complaining about the “fallacy” of sudoku.

Ash is 100% right, one shouldn’t take a literal approach to The Four Steps to the Epiphany, but that doesn’t make for a fallacy built into the Customer Development process.  One must adapt the meta-principles to your specific context/startup  – that is what Ash, and anyone else, should have taken away from a close reading of The Four Steps to the Epiphany.

———————————–

*BTW the meta-principles I reference above are:

0)  There are no rules.

1)  Question and test your assumptions.

2)  Get out of the Building.

3)  Iterate.

However you do that is entirely up to you.

**BTW Sean if you are reading this — please picture me shaking my fist at you in anger as you beat me to the punch on this idea.  :)


The Fallacy

In order to build a successful product, you have to eventually find a scalable and repeatable way to reach customers. There is an implicit expectation that customer development will uncover that path to customers. My experience (with web based products) has been that it’s not as much the uncovering of the path but the building of the path that is troublesome. Some paths are obvious but hard, such as those built on referrals (word of mouth), SEO, etc. It’s comparatively a lot easier to find 30-50 people, validate you have a problem worth solving, build a MVP, even get them to pay you – all of which is a false positive if it was predicated on a customer acquisition approach that won’t scale or more importantly be applicable to how you acquire customers in the future.

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