Steve Blank: Customer Development and How to Fail Less

Notes from a talk by Steve Blank, father of Customer Development methodology that inspired the Lean Startup movement.


Steve shared how, through his experience founding and working with countless numbers of startups, he had the realization that big companies and startups are very different. Big companies are all about execution: the reason that they’re big is that they’ve identified a business model that works and they continue to execute on that model, increasing revenue each year. In contrast, startups are all about searching for the next big opportunity and proving that it’s valid.


In the “old days”, startups pitched to VCs by making business plans and forecasts for all the money they were going to bring in if their idea worked. The problem with that is when you’re working in a completely new space, on a completely new opportunity, there isn’t really anything to benchmark yourself against. This means that all those “forecasts” are really just blind guesses. Founders try to make better guesses by paying for expensive market research, but market research can only tell you about today, not inform you about tomorrow.


Tech has traditionally followed a waterfall software development approach - specifying everything up front and then building it out from start to finish before showing it to a customer. This was based on the assumption that we already know our customer’s problems and what sorts of product features are needed. This doesn’t work well for startups, though, where the customer has yet to be defined and the features are still TBD.


Steve observed that:


In thinking about how to increase the rate of success and minimize wasted resources and failure, he came up with Customer Development Process.


In considering the definition of a startup:


Startups are constantly searching for a way to create value for itself while delivering products or services for customers in a repeatable and scalable way.

The process Blank proposes is to start by filling out the Business Model Canvas with a series of hypotheses about what will work.

Next, the customer development team (founders from any discipline, without titles) work together to validate each hypothesis. The goal is to test each of these as quickly and scrappily as possible - for example using prototypes or wireframes - to maximize feedback with minimal cost. When hypotheses fail, this is an opportunity to reevaluate your guesses and tweak the business model.

More about customer development can be found in Blank’s books:


I was intrigued by how Blank defines the goals of big companies (“execute”) versus those of startups (“search”). There are many examples of big companies that excel at executing, but fade into irrelevance as times change. As time passes and the market shifts, how can large companies stay relevant? How best to balance the need to execute with the (arguably just as important) need to search?

During the Q&A I asked Blank whether he saw any ways to apply the Customer Development Methodology to large companies. He replied by telling a story about a GE executive who was given a new department and a large amount of funding to run with. The executive decided to reject the funding in the short-term, and instead ask for more time to identify and test the business model. It ended up being the right call– when they were ready to scale, the division was very successful. This showed how focusing on testing out a business model using a Customer Development approach can help large companies to make smart investments in future products and opportunities. 

Blank cautioned that for large companies to take a Customer Development approach, it really needs to “come from the tops down” because it’s a real mindset shift. This made me thankful to work at a company like Intuit which is actively adopting a “lean startup” philosophy across the organization. By shifting our mindset across the organization, we too can reduce “waste” and more quickly get to solving the right problems for our customers with the right products and services.

Eric Ries: Lean Startup + Big Biz

Notes from Eric Ries’ talk about applying Lean Startup to a large software company at the Intuit Delight Forum.

“There are 3 acts to every story, and entrepreneurship is mostly in phase 2, the boring part” – Eric Ries

Entrepreneurs are everywhere

  • They aren’t just “the guy eating ramen in the garage”
  • Definition of a startup: “A human institution designed to create something new under conditions of extreme uncertainty”
  • Nothing to do with size of company, sector of economy, or industry; it’s about running experiments


  • If you’re building something new you are naturally in extreme uncertainty because you don’t know the users or behavior
  • Since nowadays we can build everything, the question isn’t “can it be built” but “should it be built”
  • Today lots of companies waste people’s time– no one takes ownership for it
  • Who’s to blame? Fred Taylor, the father of “Scientific management” - study work, find the best way, manage by exception, standardize work into tasks, compensate based on performance, “the system will be first”
  • What we need is “Entrepreneurial management”, where we can pivot (change direction but stay grounded in what we’ve learned)

Speed wins

  • If we can reduce the time between pivots, we can increase odds if success before we run out of money
  • Minimize total time through the loop - ideas, build, code, measure, data, learn - by avoiding “achieving failure” (successfully executing on a bad plan)

Innovation Accounting - 3 Learning Milestones

  • Establish the baseline -  build a MVP and measure how customers behave right now
  • Tune the engine - experiment to see if we can improve metrics from the baseline towards the ideal
  • Pivot or persevere - when experiments reach diminishing returns, it’s time to pivot


Eric held a “live coaching” session in which he provided feedback and advice for teams regarding real projects that they were working on. Top takeaways:

  • Don’t worry about the competition and what they know about you. It’s all about you moving faster than the competition.
  • Regarding competitors stealing ideas that you’re just testing: “Try to get someone else at another company to steal one of your ideas and notice that it’s really hard to do that” - observed that many competing companies have similar backlogs of features but it can be equally hard for both to actually get them into a product. In the end, it’s all about how gets there first.
  • Worried about potentially damaging your company’s brand? Try releasing under a different brand name.
  • You can test different types of application positioning by using different words or images on your marketing pages.
  • Regarding sustainable growth: New customers come from the actions of past customers. Engines of growth: Paid, Viral, and Stickiness/Engagement. Growth needs to be engineered, so choose one to focus on and do everything you can to help drive that up. Can use “lifetime value” as a framework for thinking through this
  • Consider the distribution channel you will use to get to your customers
  • Get into a rhythm/cycle where every 6 weeks, you meet to decide whether you’re on track or need to pivot. Have a clear understanding of the evidence you’ll need at that meeting to make that decision.
  • Remember: pivot is changing the strategy without changing the vision

Wrap up

Myth: Lean means “cheap and saving money”
Truth: It’s not about cost, it’s about speed

Myth: Companies are “lean” if they are small bootstrapped startups
Truth: Companies are “lean” if they are ambitious and are able to deploy resources in a good way

Myth: Lean startups replace vision with data or customer feedback
Truth: They are driven by a compelling vision, and are rigorous about testing each element of this vision.“ You don’t turn on your GPS and ask it where you should go. Data helps you get there, it doesn’t tell you where you should go.”


A few final thoughts from Eric that emerged during the Q&A section.

A message to big companies: “There are startups gunning for you right now. It’s not like size is everything.” At big companies, people know what needs to be done but are afraid to do it. Hopefully this is an invitation for people to actually do this.

Regarding whether Lean methods of testing represent loss of integrity: Integrity means being clear and honest with the customer and apologizing when you do something wrong. “We are already doing the wrong thing. Our customers dont know how to use our products, so our customers are constantly experiencing us as a bait and switch.”

Early adopters would rather have things in an unfinished state and being the first to try it. If you are spending too long perfecting it, customers will get mad because they can’t use it yet.

Regarding legacy code: Being first means that people will be gunning at you, but whoever moves faster will win. Legacy code means that everything we’ve learned is embedded in the code. If you have a choice, invest in new features, in cleanup, or in things that help you move faster in general. Refactoring tools can help you to move more quickly so they’re a good investment. But if you pivot because your use cases change, refactoring is better than starting over.

Teams need good measuring tools. "Metrics are people too.“ Best method is usually a homegrown way to see important data for a product, such as 5 key metrics pulled straight from the master database.

"Most visions can’t be recognized. As a startup, think that you’re the exception and systematically try every idea about getting there.”

Regarding selling through channels: Ask “am I creating value for the end user? What is lifetime value of the customer?" It might make sense to use the channel, but for testing you might first want to try selling direct and learn, then start applying that learning when you get building with the channels.

We now favor flexibility over high fidelity (that is, MP3s over CDs), convenience over features, quick and dirty over slow and polished. Having it here and now is more important than having it perfect. These changes run so deep and wide, they’re actually altering what we mean when we describe a product as “high-quality.”
— Luke Williams, “Four Ways To Spot Markets Ripe For Disruption”