Customer Discovery - Kit Needham

Let’s talk about Customer Discovery.

It is the most important thing that founders should do first. But most don’t.  And if they do it at all, they do it incorrectly. The incorrect way is to go around asking people what they think of their idea – or show them a demonstration/MVP/proof-of-concept/wireframes and ask for feedback.  Why is that wrong?  It is wrong because you are already working on your solution – before you have learned enough about your customer’s problem to know if you are solving the right one.

So what is Customer Discovery?  It has five components:

1. What is the pain/problem that the needs to be solved? (It may not be the one you are thinking about which is why we are going through this process).
2. Who is having the pain or problem? (These are your stakeholders e.g. your buyers/decision makers, the users who may or may not be your buyers, and influencers – both good and bad)
3. How bad is the pain or problem? (You want a really big problem. People don’t pay to solve small problems)
4. How are the “who” solving it now? (Anyway they are solving it now is the competition, including doing nothing)
5. How is that current solution working out? (You are looking for a really big problem where the current solution(s) suck)

Notice that there is NO question about your current solution.  This phase of Customer Discovery is 100% about making sure you are solving the right problem.

The correct way to conduct Customer Discovery is to start with your assumptions or hypothesis.  This is just like the scientific method.  What has to be true for your business to be successful? Write these down. Now think of questions you can ask potential customers – without talking about your idea – to learn whether or not your assumptions are correct.

Here’s the challenge.  It is easy to ask a lot of questions.  However, you need to prioritize the top 5-7 questions that are the most important to truly test your hypothesis.  You want to have more questions in case you have hit on a subject that is really a burning issue and the interviewees are willing to talk with you longer. But we found that most people will only be willing to commit to 15 minutes or ‘answer a few questions’.  So you need to be really strategic about what you need to learn and how to ask the right questions to do this. Three tips:

1. Make sure you follow up on what interviewees are telling you if it sounds important to them or like something you weren’t expecting. This is where you learn what was wrong with your assumption and thus your solution. Perhaps they’ll start talking about another problem that really bothers them more, talk about the problem differently than how you thought, or sometimes tell you about more solutions that you didn’t know about that are working just fine – and that there is no need for another solution.
2. These questions are not a checklist. They are more a prompt on things to explore.
3. You’ll need a different set of questions for each type of stakeholder.

You also need to ‘get out of the building’ and talk to real people.  You can do the interviews by phone or ‘Skype’ type calls, but in-person works best.  Maybe you could ask to shadow them to see how they work when the process is more complex.

One of the best resources on how to do interviews is to read Talking to Humans.  It is free and short - I read it over lunch – and it will save you HOURS of time because you’ll ask better questions. It also gives you hints on how to get the interviews with those key people who are likely total strangers.

How many people should you interview?  If you are really serious about this business, don’t do less than 100.  Does this number shock or scare you?  Think about it.  You are going to be spending a lot of time, money, and other people’s money on this -- do you really want to risk this time and money by starting something after talking to only 20 or 50 or even 75 people?  Before launching a new product or service, big companies do hundreds or thousands of interviews.  But as a student, you don’t have the resources to do that.  From my experience, 100 interviews seems to be the magic number.  From this, you will really understand your customer, the business they are in, who the players/stakeholders are, and what the competitive landscape truly is.  I work with over 100 startup founding teams each year. Since I have been coaching people on how to do Customer Discovery the right way, 100% end up doing something different at the end.

Lastly, try to do at least 30 interviews if you are entering a contest.  More times than not, judges will ask you about your Customer Discovery.  If you say that you plan to do that next, most judges (as well as investors), including me, will likely discredit your pitch since we believe you don’t really know your market. (This is as dumb as saying that there are no other competitors!)

If I caught your attention, go to this link on Olympus' Resource page to see the full presentation on Customer Discovery which includes more information on how to do this right, as well as 2 case studies.

Kit Needham is an entrepreneur-in-residence and the director at Project Olympus, providing students with startup advice, business strategy planning and connections to industry experts, advisors and the business community. She is a member of BlueTree Allied Angels and serves on their Screening Committee. She is an advisory board member of Chatham University's Center for Women's Entrepreneurship and teaches in their MBA program. In addition, she provides consulting services to promote economic growth to Chambers of Commerce, individual entrepreneurs and nonprofit organizations. Kit manages the Olympus Incubator Space on Henry Street, where student entrepreneurs spend considerable time on their new ventures. To get in touch with Kit, click here.