Startups done right: How to co-create your product with your customer.

Founders take what they know (and what they assume) about how established companies and teams operate, and then overlay that onto startups.

And the result is almost always catastrophic.

Why?

Established companies operate in a world of knowns.

To launch a new car, Toyota uses Product Development.

They know who buys cars.

They know who buys THEIR cars.

They know who buys cars with hatchbacks, cars with beefier engines, cars with third-row seats, compact cars, SUVs, memory seats, heated seats, and more.

They can look at their massive dataset on customers, form reasonable hypotheses about products that will resonate, and develop them.

Because they have the data.

In anything innovative, we have little-to-no data.

Not only is our product unknown, but the market for it is, too.

We can’t form strong hypotheses from the outset. So we have to use a process of co-creation, where we develop both the car and the customer at the same time.

It’s called Customer Development. It’s 4 steps.

STEP 1: CUSTOMER DISCOVERY

We have to get out of our heads, get out of the building, and go talk to real people to discover their wants, needs, fears, and jobs to be done.

Are there customers out there who have the problem?
What’s the size of the market?
What’s the size of their pain?

Don’t waste time solving a problem that doesn’t exist.

STEP 2: CUSTOMER VALIDATION

The problem is real, but do we have the right solution?

There are many ways to skin a cat, so we have to put small prototypes and little experiments in front of customers to ensure they will want what we’re selling. Will they pay how and what we want them to? Can we build a good business out of this?

Don’t waste time building the wrong solution to the problem.

STEP 3: CUSTOMER CREATION

We have the right solution to a real problem, so it’s time to start operationalizing this. It’s time to start turning this into a real business.

Instead of finding customers:

Can we get customers to come to us?
Can we build demand?

This is when we switch from conversations to sales.

STEP 4: COMPANY BUILDING

It works! Now for the boring part: scaling this into a real company.

We’re proven that it works, so it’s time to staff up, get efficient, and build a Toyota-like company on top of all of the evidence we gathered.

That step comes last — never first.

It’s not: if we build it, they will come.

But, if they come, we will build it.