Identifying a sustainable business model is a critical but sometimes elusive step for many startups.
The “customer validation” process described by Steven Blank in his book, The Four Steps to the Epiphany, offers startups a way of developing the insights required to design your business model using Osterwalder’s Business Model Canvas.
Customer validation is the second step of the Customer Development Model (with the first step being “customer discovery.”)
Before you can design your business model, you must first develop your value proposition.
The customer discovery process will help you build and validate your value proposition as well as your target customer profile and product solution. Once this is done, you are ready to commence the customer validation process.
The objective of this customer validation process is to validate your sales process and the assumptions that underpin your business model.
In other words, customer validation is a critical step that needs to be undertaken before you grow your venture.
In his book, Blank describes customer validation as a “method that allows you to develop a predictable sales process” and suggests that you should not scale the business until you have developed a solid understanding of a repeatable sales process.
The nature and importance of customer validation strongly suggests that this is an undertaking that should involve the company’s top management. Customer validation consists of four phases, described below.
This first phase is about using the insights generated in the customer discovery process, starting with your value proposition. Make sure you prepare:
The purpose of this phase to is to land a handful of deals that validate your value proposition and sales road map. At this stage, your target customers are those Blank calls “Earlyvangelists”; Geoffrey Moore describes them as “Visionaries” in his book, Crossing the Chasm. It is important to bear in mind that just a few deals will provide sufficient validation at this stage. Regard any failures as an opportunity to learn more and improve the process.
The validation achieved in phase 2 will provide you with information that can be used to develop your positioning statement. Test your positioning statement on industry insiders for comments and constructive criticism.
As in the customer discovery process, the final phase in the customer validation process is designed to incorporate learning from the first three phases and have you examine the progress made so far. The main question to answer at this point is the extent to which you achieved your objectives for customer validation. The following will help you gauge your response:
The outcome of phase 4 can take you in one of three directions:
The output of the customer validation process is a sales roadmap that has been validated. The sales roadmap answers questions such as:
The insights developed as part of the customer validation process, can in turn be used to populate your Business Model Canvas.
Blank, S.G. (2005). The Four Steps to the Epiphany. Self-published: Cafepress.com.
Maurya, A. (2011). Running Lean. Self-published.
Moore, G. (1991). Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. New York: HarperCollins.
Ries, E. (2011). Lean Startup. New York: Crown Business.
Vlaskovits, P. and Cooper, B. (2010, July 29). The Entrepreneur’s Guide to Customer Development: A cheat sheet to The Four Steps to the Epiphany. Self-published.