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Customer Development, GeekStack Style
Posted on | November 25, 2009 | 1 Comment
I’m a member of the Chicago Lean Startups group. Lean Startups and Customer Development is a new approach to reducing market risk for startups. Steve Blank, a many-times entrepreneur and current Stanford/Berkeley professor is the author and main proponent of this method. There was a recent discussion on the Chicago Lean Startups group where the gist was that Customer Development makes sense, but has anyone besides Steve Blank used it and succeeded? I ended up writing a longish email to the group where the main point wasn’t to follow a specific method but to reduce risk and lower the cost of faulty assumptions. I ended up talking about the specifics of how this applies to GeekStack so I thought I’d post it here for anyone interested in the business side of GeekStack:
Dear Chicago Lean Startups Group,
I think any time you capitalize the letters to make a Methodology, you’ve got problems. So agile development is good, but Agile Development can lead to a bad fit for some projects. Same thing with customer development vs Customer Development. Steve needs to be an unflagging advocate of CD because people pay more attention to someone who sounds certain, but like any other evangelized method, there’s the usual “it depends”.
The primary goal of customer development is to reduce the cost of mistakes. Just like catching a bug in development is cheaper than fixing it once it has been released, confirming lack of customer demand prior to ramping up a sales engine is cheaper than finding out once you have a paid sales team. This is basic enough that I don’t think anyone can argue with it – reduce the cost of mistakes. Actually, the essence of everything in CD is the same as Marc Andreesen’s Product-Market Fit. First, build something you think people want. Second, find out if people want it and at a price you can sell it at. Third, if they don’t, return to step 1. Fourth, when you have a repeatable scale model, you have very little risk and can either scale profitably or take investment on good terms to scale quickly.
Let me give an example of CD/cd in my own project. I’m making an online trading card game with a science and technology theme. It’s not a technology risk, it’s fairly straightforward web development, so there’s just a market risk.
Here’s the market:
- Trading card games – large but sort of stagnant. Casual online games have taken some of the steam out of it, plus there was over a decade of insane growth from Magic: The Gathering, Pokemon, and YuGiOh respectively.
- Online games – obviously booming, with Zynga, Playfish, social games, Facebook, ridiculous viral growth, etc
- Competitors – there are online trading card games, though most haven’t taken off. MtG has an online game but you need a downloadable client so it’s got more friction than other online games. It also has an XBox Live version. Challenge Games has some trading card games but they’re focused on collecting, trading, and deckbuilding with no interactive gameplay, so they’re a hybrid between casual games and typical trading card games. The closest competitor to what I’m actually doing is Chaotic, which has real cards and virtual cards and you can play online. However, Chaotic is 3rd or 4th banana in the trading card game biz and such a tiny part of the gaming market as a whole that we’d be competing in parallel than directly.
- Monetization – trading cards have a proven model (sell cards), online games and virtual good have shown that people will spend money online. I don’t need to prove either of those things.
So there’s a known market. I don’t need to go around and ask people if they would play a trading card game, or how much they would pay for a pack, etc. The only things I need to prove are:
- Is my game fun? No matter how good everything else is, if the game isn’t fun, it won’t be successful.
- Do people like, dislike, or not care about the science and tech theme? I’m betting on the theme resonating because kids love science, on the novelty being appealing in a world full of swords, ogres, and dragons, and on higher parental approval because of the educational factor.
So in the context of agile/CD/MVP, I’ve spent a decent amount of time developing a super flexible trading card game engine to make it easy to quickly iterate through game ideas and mechanics until the gameplay is up to snuff. Then, if I find the theme isn’t resonating, I can change it and still have the game engine underneath so that isn’t a time consuming change either. My choices locked me into the trading card game market, but since it’s a proven, existing market that isn’t a concern for me.
Since my primary risk is making the game fun, I’ve spent more time signing up playtesters (shameless plug: sign up to be a playtester) than talking to potential paying customers. When the game is refined and fun, then I’ll focus on how to sell it to new gamers and/or people that play other card games. It may be that current tcg players are the best to target because they’re already familiar with the concepts, or they might not be interested because they’re already invested in their games and mine don’t compare favorably. That requires a whole different strategy, and it’s not until that’s worked out that I can really worry about scaling up demand.
I hope this helps. Steve Blank the evangelist needs to speak boldly and confidently about how awesome CD is, but really it’s about product-market fit and reducing the cost of mistakes. I personally think that for web startups, the Eric Ries/Lean Startups spin is much more applicable. Steve Blank is savvy but he has never worked specifically in this market. Same principles apply, but for specific application, check out Eric Ries.
-Peter
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November 25th, 2009 @ 11:36 am
[...] This post was mentioned on Twitter by jakelumetta and Peter Christensen, Peter Christensen. Peter Christensen said: New blog post: Customer Development, GeekStack Style http://geekstack.com/blog/customer-development-geekstack-style/ [...]