Innovation Insights
 

The Customer Development Model

By Blake Landry

What is the Customer Development Model?
The Customer Development Model (CDM) is a four-step framework to help businesses discover and validate markets for new products and services. In 2005, Steve Blank, a serial entrepreneur and academic lecturer, originally described the CDM in his book The Four Steps to the Epiphany. He developed the model based on his observations while working with many startups in the Silicon Valley area, with the goal of understanding and articulating why many startups fail while others succeed. Blank came up with this framework to help business startups better understand their customers and their problems, and ultimately be more effective, efficient, and more focused in their product development and sales and marketing activities. CDM has since evolved into a school of thought about how to effectively launch new products and new markets.

The model consists of four interconnected steps: Customer Discovery, Customer Validation, Customer Creation, and Company Building.

The Customer Discovery step focuses on customers, customers’ problems, their interests and preferences, and their buying behaviour. Customer Validation focuses on developing a replicable sales process, which is essential in determining the potential for scalability in a business. The Customer Creation step focuses on generating demand for a product or service, and identifying potential customers, and the Company Building step focuses on building the startup as an organization to scale and executing on the business plan.

Customer development is not a linear process. Throughout these steps it is often necessary to revisit previous steps if it becomes apparent that the startup must refocus to better solve the problems and meet the true needs of the customer.

Why do you use the CDM?
The main reason why businesses should use the CDM in their product development, sales, and marketing activities is to test key assumptions a business makes regarding the business products, the customer and the market.

Without customer development, a business may not have a sufficient understanding of the customer’s problems, and may neglect customer preferences and other important nuances. This can be detrimental to the potential success of the business. Customer development helps mitigate risk and ensure that a company’s offering is best suited to the customer’s needs. It also minimizes product development, marketing and sales costs because it helps focus the business on what matters, and properly allocate resources.

CDM Examples
There are many examples of companies that successfully use CDM to help direct the development of new products, as well as marketing and sales activities. Some notable companies that continue to use the model include Intuit (the creators of TurboTax, QuickBooks, ProFile, etc.), and DropBox Inc. (the cloud-based file hosting service).

Lastly, customer development is not just for startups and small businesses. Other large corporations such as Toyota and General Electric are beginning to use customer development in creating, refining and launching new products.

For more information on CDM, I recommend the following websites:

http://www.marsdd.com/mars-library/the-customer-development-model-cdm-product-development-and-technology-startups/

http://market-by-numbers.com/customer-development/

As Senior Business Analyst with Innovate Niagara, Blake helps innovators, small businesses, entrepreneurs, and researchers access a variety of business support services such as advisory services, educational programs, networking opportunities, market intelligence services, business resources, and funding programs.

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