Customer Development is the Product Development

It is a common occurrence to come across founders who, despite their intelligence and passion, fail to grasp a crucial aspect of a successful startup journey. They often neglect the importance of engaging with customers as early as possible during the product development process.

Recently, I had a meeting with a founder who wished to discuss the state of their product development journey and seek ideas for the next steps. To my surprise, the founder's initial question was, "How can I efficiently produce 1000 units of my product?" I assumed that the founder had already started selling the product and was now seeking to scale their operations. However, upon further inquiry, I discovered that not a single unit had been sold, and the founder lacked any customers using their product. Despite this, the founder, armed with their technical knowledge as an engineer, had built and tested a product with a single user who provided positive feedback. Based on this limited validation, the founder believed they were ready to manufacture 1000 units of the product.

As our conversation progressed, it became evident that the founder's product faced stiff competition from similar products already available in the market, manufactured in India, and priced at Rs. 1000, whereas the founder proposed a price of Rs. 5000. I inquired, "How do you know if buyers would be willing to pay such a high price when there are lower-priced competing products?" The founder claimed that their product offered superior features and quality, justifying the premium price. I then asked, "Have you consulted potential buyers to determine if they find these additional features and the higher price acceptable?" The founder responded with a blank stare.

This is not the first time I have witnessed founders adopting such an approach to build their companies. Eventually, they learn the hard way when they attempt to enter the market and discover why spending excessive time perfecting a product, according to their own vision, with little consideration for price and market size, was a mistake. They overlook an important concept: product positioning.

By undertaking proper positioning exercises, founders can address many of these questions. Working with a few customers using a minimum viable product is an excellent approach to achieve effective positioning. Factors such as price, quality, features, sales and support strategies, and the specific niche the product targets are all influenced by how the product is positioned in the marketplace. This process is iterative during the early stages of product development and achieving product-market fit. At this stage, learning about market realities is more crucial than focusing on batch size or production scale.

Founders often isolate themselves and then suddenly introduce a product to the market, only to realize that it differs greatly from market expectations or that the market is saturated with superior variations of similar products. The key to success lies in differentiation and positioning.

Furthermore, all products must meet validation criteria in three domains: Technical Feasibility, Economic Viability, and Market Viability.

Technical Feasibility refers to the ability to manufacture a product within the founder's accessible means and resources. Some products may be technologically advanced, requiring extensive knowledge and resources, leading to potential failure. While founders can attempt to learn and master the necessary skills, overcoming this challenge is crucial. Some founders are overly optimistic without understanding the technical efforts required for success.

Economic Feasibility involves selling a product or service at a justifiable price point for the buyer. This price point must also be economically viable for the founder to produce, deliver the service, and generate sufficient profit per unit. This aspect is often referred to as unit economics. In other words, the business should be financially profitable. Without profitability, even if some sales occur, the venture may bleed and incur losses.

Market Feasibility is another critical truth to uncover. The assumption that 1000 units or even a million units can be sold relies on the presence of enough

?potential customers for the product or service. Only at a certain volume does a product become economically viable. Understanding these numbers is vital.

Of course, these three feasibility are interconnected. Technical advantages may lead to cost reductions, improved quality, or enhanced features, making the product economically viable. Pricing may also increase market access, contributing to overall business viability.

Discovering all these factors is possible by engaging with customers, closely collaborating with them during the early stages of product development, customer development, and business development.