Customer development is a formal methodology for building startups and new corporate ventures. It is one of the three parts that make up a lean startup (business model design, customer development, agile engineering).
The process assumes that early ventures have untested hypotheses about their business model (who are the customers, what features they want, what channel to use, revenue strategy/pricing tactics, how to get/keep/grow customers, strategic activities needed to deliver the product, internal resources needed, partners needed and costs). Customer development starts with the key idea that there are no facts inside your building so get outside to test them. The hypotheses testing emulates the scientific method – pose a business model hypothesis, design an experiment, get out of the building and test it. Take the data and derive some insight to either (1) Validate the hypothesis, (2) Invalidate the Hypothesis, or (3) Modify the hypothesis.
Many burgeoning startup companies devote all of their efforts to designing and refining their product and very little time “getting out of the building.” The customer development model encourages that more time be spent in the field identifying potential consumers and learning how to better meet their needs. The Customer Development concept emphasizes empirical research.
The customer development method was created by Steve Blank. According to Blank, startups are not simply smaller versions of larger, more developed companies. A startup operates in a fashion vastly different from that of a large company and employs different methods. While larger companies execute known and proven business strategies, startups must search for new business models. Customer Development guides the search for a repeatable and scalable business model.