Wednesday, April 26, 2017

The Scientific Method applied to Customer Discovery.

According to the Business Model Canvas template, one of the key building blocks to creating a viable new business model is to conduct comprehensive customer discovery. Without understanding the exact needs and types of customers the company plans on taking on, it is impossible to gauge the requirements and specifications the business will need to have. In "Bringing Science to The Art of Strategy", Lafley et al describe how conventional strategic planning is in fact not scientific; they argue that strategy-making needs to follow certain guidelines in order to be scientific instead of simply rigorous [1]. In this post, I will describe how the seven steps for scientific strategy development outlined by Lafley et al can also be applied to one of the first steps of designing a new venture - customer discovery.

The first step to scientific customer discovery would therefore be framing a choice - in this case choosing what segment of customers you would target, and consequently which segments of customers you will not cater to. The second step involves considering additional customer niches or segments that all the decision makers could potentially agree that the company could cater to, given some conditions. This leads to the third step, which is identifying the sets of conditions that must be met for the company to cater to each of the customer options described previously. These could include conditions such the company requiring additional capital, equipment, manpower, specialists etc. or they could be specific circumstances, such as the product selling well among a specific demographic. If any of the decision makers feels that the company can not foreseeably cater to a particular type of customer under any realistic circumstances, then these barriers should be identified and discussed. In this step, the barriers should be realistic and chosen while keeping in mind the goals and attributes of your company.

Once various potential customer segments have been identified, the fifth step is to create potential tests to determine the validity of the selected customer segments analyzed thus far. This will allow us discover the customer segment that best fits the company in terms desired market size, cost-to-entry, locality, technical difficulty etc. The sixth step for customer discovery would then be to execute these tests in the real world to determine whether your desired targeted customers are a good match for you. This can be done by contacting potential customers finding out if and how much they are willing to pay for what your company has to offer them. Additionally, customer preferences can be recorded so as to better determine the type of product or service your company will provide to those future customers. The seventh and final step in this case would then be making an educated choice as to your targeted customer segment, based on the results of the tests. By comparing different choices and then testing out hypotheses regarding customer attributes, it is therefore possible to use the Scientific Method in Customer Discovery.

References:

[1] Lafley, A., Martin, R., Rivkin, J., Siggelkow, N., Bringing Science to The Art of Strategy, Harvard Business Review, Sept. 2012

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