Customer Development – The Importance of Validating Your Assumptions

As you all definitely know by now (or those who have been reading my blog) I was part of the Lean Startup Machine competition/event in New York City last week. This really did take-over my life for four days and absolutely changed my way of thinking. When you spend a lot of time surrounded by Entrepreneurs and Venture Capitalists who are mentoring you and sharing advice around the clock it’s hard to not leave a bit of a different person.

My blog has always been and will always be me sharing my experience with you, the reader. Back in 2007 when I started my blog this was my goal and it really has never changed, my business has grown, but it’s still the same vision. You’ve probably noticed a deviation from Domaining and you can expect this deviation to continue. I’m really inspired by the startup world now and building full-scale businesses. I see domains as a critical part of this and see some companies in the Domaining space doing some amazing things to help bridge the gap.

Previously I have said that a good company starts with a good domain name…now I’m more than happy to admit I was wrong. It’s all about creating a business model that has a market and a product/service that customers want. A good domain name can absolutely help but you don’t need one to create a good business.

During my time at Lean Startup Machine I learned a lot about customer development. This is the process of learning who your customer is and what they want. This applies to startup companies and Domainers alike so there’s benefit in here for people on both sides of the fence. This post is meant to be a very brief introduction to customer development with more to come in the future. It was shocking to me how much I learned about customer development and how little customer development many companies do.

So what the heck does this all mean?

Customer development really boils down to validating your assumptions. I hear so many people tell me that people need this, or everyone wants this, or a ton of people are doing this. When you ask how they know, they look at you like you’re crazy. The fact is, you don’t know if your assumptions are true until you validate them by talking to real customers.

To give you an example let’s look at something that I just launched, DomainTheft.org. This is a company I am very passionate about and we’re already making a difference, but we still have a lot of customer development to do. I made some assumptions that probably aren’t true, but I won’t know until I talk to real customers. Here’s the assumptions I made:

  • People will pay to list stolen domains in a centralized database (not yet validated)
  • Companies will want to connect to a verified theft database to validate if a domain is stolen or not (validated, companies are showing incredibly strong interest, yay!)
  • Registrars will work with me to help return stolen domains to their owners (not yet validated)
  • Law enforcement will want to work with DomainTheft.org (partially validated, seeing a great response so far)
  • People will check a centralized database of stolen domains before buying a domain name (not yet validated)

Like most businesses, I made assumptions and went-head and created something based on those assumptions. This is fine, but I learned that you can really save yourself some time by validating your assumptions. This means that I would want to poll actual people who have had domains stolen and ask them a number of questions to validate, or invalidate my assumptions. It is critical that when you are doing customer development you make sure you are talking to your customers, not your competitors or people who would never use your service.

Think about it, if you are trying to see if people like a new soda you made, don’t test it with people that don’t drink soda. At Lean Startup Machine we quickly found-out that our idea that we thought had VC’s as its customer, really had entrepreneurs as it’s customer. We had to iterate and come-up with assumptions we could validate with entrepreneurs.

When you are building a business, startup or not, it is so critical to do real customer development. There are a million ways to do this and like I said, I’ll go deeper-into this in future posts. Just know that until you poll hundreds of potential customers, you don’t really know if your assumptions are true, they are still, really just assumptions! Get out there, talk to your customers, find-out what they are looking for and then build something for them, build what they want, not what you think they want!

{ 4 comments… add one }

  • Pablo August 2, 2011, 10:40 pm

    Well said Morgan!

    Reply
    • Morgan August 3, 2011, 7:53 am

      Thanks @Pablo!

      @Abe – great comment and absolutely true. I’ve talked a lot about the value of a good domain name and think this is definitely a benefit to a business, however getting the model right is the first step.

      Reply
  • Abe August 3, 2011, 7:35 am

    It sounds like you gained a lot and had a great experience!
    Right now you are probably still in a high which you should be in. I’m sure though that you realize that every place has its own philosophy and way of doing things. At the end you obviously do what works for you.

    Regarding domains… Yes, it’s true that a good company does not start with a domain or that a good domain is not needed to create a good business. However, a good or GREAT domain will take you a lot further or save you a lot of money as far as branding etc… Needless to say a business model that works is important to have.

    Reply
  • Abe August 3, 2011, 11:18 am

    Maybe the saying should be corrected from “all you need is a dollar and a dream” to “a dollar,dream .. and a domain..:-) ”

    Dream=idea, which needs to be validated by making sure there is a market for it. One of the important ways as you said is “hitting the streets”(polls etc.). Needles to say that a business model and plan would be needed , but as you know those can change too.
    However one usually needs a team or someone to.. actualize the dream even if there is a market for it.
    So either you partner with those who you can get excited about your idea/vision or you need to have the financial backing for it, which brings in the other part of the equation :”All you need is a… dollar”.

    There are many great ideas out there. The problem in general is raising the capital.
    Of course all this is underlined by..time or lack of it.
    Bottom line its all about DDT – dollar-dream-time(&domain :-))

    Reply

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