My pal Kevin (Circle K) and I went to the sold out Chris Cornell show at The Orange Peel in Asheville. I had no idea what to expect. I didn’t even know it was going to be a solo acoustic set. He performed solo work, songs by Temple of The Dog, Soundgarden, and Audioslave. He also did several covers including songs from Mother Love Bone, and, “Billy Jean” by Michael Jackson. I decided I would catch just one song on video and it turned out to be this one. Another interesting thing from the show is that Cornell, for two songs, used instrumental vinyl records as accompaniment. He had a turntable to the side, would put the needle on, sing the song, and then take the needle off. Nice.
I was obsessed with Aussie garage rock bands when I was much younger, and Beasts of Bourbon was one of the best. I didn’t realize they carried on as long as they did. The Axeman’s Jazz is a great record and right now I’m freaking out that I can’t find it in my collection. Who is the evil “borrower”?
The more we work on strategy at AVLM HQ the more I become aware of the overlap of Blue Ocean Strategy and Customer Development. Both are attempts to get at what customers really want so you can develop products they will really buy.
Customer Development interviews for us, so far, have followed Ash Maurya’s methodology of asking potential customers to react to, and rank order what we hypothesized as the main pain points for marketing their businesses. We also ask them if they have other challenges we haven’t listed. The process from there involves creating a “minimum viable product,” getting feedback, possibly through follow-up interviews, and then iterating over and over. That’s a major over-simplification, but good enough for now.
Blue Ocean Strategy is possibly less “greenfield” than Customer Development (as I understand it) in that it begins by looking at the typical “value curve” for a given business category and aims to diverge, significantly. The value curve is a simple chart created by plotting various customer buying criteria such as price, features, etc. on a high-to-low axis. In a nutshell, you want to approximate the industry norms, then create a value curve of your own that diverges by eliminating what customers don’t want and adding what they do.
You get to this new value curve by answering four questions. From the book Blue Ocean Strategy:
Which of the factors that the industry takes for granted should be eliminated?
Which factors should be reduced well below the industry’s standard?
Which factors should be raised well above the industry’s standard?
Which factors should be created that the industry has never offered?
This is where I think the Customer Development process of interviewing prospective customers can help. At least that’s how we’re approaching it. Real world prospects are telling us what they must have and will pay for, and what they don’t care about. That’s fantastic, but the “create” question is where I think the real value will be uncovered.
Customers may not be able to tell you what they really want because they haven’t even imagined it yet. As helpful and Customer Development and Blue Ocean Strategy are, I’m certain that creating any world-changing value innovation is going to take more than using the prescribed frameworks. Timing? Luck? Vision? Any of those will certainly help.
Google, Salesforce.com and Sequoia Capital just contributed to a $32 million funding round for HubSpot, a Cambridge, Mass., developer of online marketing software.
Company founders Dharmesh Shah and Brian Halligan have said they were influenced by the book Blue Ocean Strategy. Whether they have actually created a “blue ocean,” or uncontested market space, with their product remains unclear to me, but obviously some smart folks have decided to invest in the business.
Red Oceans are crowded with bloody cutthroat competitors. Operating in a Blue Ocean means your “value innovation” has broken through traditional market barriers. You’re not fighting for market share. You’ve created a new market and attracting customers that didn’t previously exist.
Value Innovation is the cornerstone of Blue Ocean Strategy and according to the authors it occurs only when companies “align innovation with utility, price, and cost positions. If they fail to anchor innovation with value in this way technology innovators and market pioneers often lay the eggs that other companies hatch.” As the business cliche goes “pioneers are the ones with arrows in their backs.”
Most companies choose one of two paths:
The high end: Differentiation by creating greater value at higher cost.
The low end: Broader appeal through reasonable value and lower cost.
Blue Ocean Strategy means Value Innovation, or simultaneous differentiation and low cost. So there’s the rub. How do you deliver more for less?
If you want to make your competition irrelevant you’ll have to create a new way to meet a market need, and create a new market in the process.
The authors have studied scores of companies and their competitors across over 30 industries as far back as 1880. The bottom line is that businesses with a Blue Ocean Strategy are much more likely to be profitable and successful long term.
There are various analytical tools and frameworks to help create a Blue Ocean Strategy or possibly to identify companies with such a strategy that may be worthy of investment. In some upcoming posts well discuss those. Sound good?
Check out this short video where SAXX Apparel founder Trent Kitsch explains how he got free national TV coverage by throwing a pair of boxers to Richard Branson at a live MTV event. As interviewer Andrew Warner, “How far would you go to get promotion for your company?”
Yesterday Kevin and I “got out of the building” and conducted our first “customer development” interview with someone we know, who has a business in a market we are targeting as part of our growth strategy.
My short, simplistic explanation of Customer Development is “asking prospective customers what they really want and then giving it to them, initially in the simplest version of the product worth doing.”
Much of our education on the topic came from two great ebooks:
Customer Development is a four-step framework to discover and validate that you have identified the market for your product, built the right product features that solve customers’ needs, tested the correct methods for acquiring and converting customers, and deployed the right resources to scale the business.
We are doing this because we’re trying to develop a product that is genuinely innovative in meeting our customers’ needs. Up to this point we’ve put a lot of thought into customer development, created our hypotheses to test, made a list of friendly contacts to interview first, and carefully composed our script for the meetings.
From our very first interview we learned that we may not even be asking the right questions. Moreover, prospective customers may not care at all about what we are already working hard to deliver. For example, in-depth reporting and analysis may put them to sleep and the metrics they care about may be much simpler to monitor.
Our hypothesis contained what we believed were the three major pain points our “minimum viable product” would attempt to alleviate. But this interviewee considered one of them irrelevant. Oof! I mean, great! Now we won’t waste time on that. If we get similar responses over the next several interviews we will “pivot,” to use a term from the “lean startup” movement, and point our next Minimum Viable Product in a different direction.
Like Mike Tyson said: “Everybody has a plan until they get punched in the face.” Our first interview was a haymaker that connected. But if we hadn’t put together a testable hypothesis in the first place, and got in the ring we wouldn’t have learned anything. Scarred but smarter.
The authors of The Entrepreneur’s Guide to Customer Development say that if you learn only one thing from their book it should be: “Question your assumptions.” We are definitely doing that, and I can’t wait to get more input from other prospective customers.
We’ll be posting more about customer development, our experiences with it, and related topics like “Blue Ocean Strategy” in the near future.
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