Tuesday, August 22, 2006

The Critical Importance of Customer Validation

Every CEO knows he has to execute – what startups sometimes fail to remember is the importance of customer validation. Techies can and usually will build anything. It’s what they do, however what makes it valuable is what the customer says about what you’ve built.

I’m on my 4th startup… we have this wonderful 32 page business plan and a set of financial's – we call them “mum-bers” as it’s impossible to forecast anything with any real accuracy (however it helps people understand “how” we think).

As usual we’re doing the VC talk show, our PowerPoint is short and to the point (10/20/30) and by slide 3 you know what the problem is, by slide 6 you know what our technology magic is and then on slide 7 you get to see everything run live in real time.

So far – so good. Everybody is nodding their head, things are looking good. Slides 8 – 9 talk about the “product” which makes us money and how we intend to go to market. It’s all very simple.

Next comes the slide that wakes everyone up… it’s the customer validation slide. On that slide are some “multi-billion” dollar companies who are testing our software. One of those companies is actually evangelizing our solution to other companies and also to other divisions within his own company.

Business plans and PowerPoint’s are all talk – what matters is the customer and what they say. It’s the last three pages of our business plan that counts – it’s the current customer evaluation list. You can’t cheat here – people get to say what they think and what they feel.

So far they think it’s worthwhile and solves a meaningful problem. Those customer testimonials started just over 30 days ago.

Today we are shipping the latest rev of the demo to a very large company. I can’t wait for the feedback – why? Because good or bad we’re able to refine our product and go to market strategy in real time and so far the cost has been zero dollars to the company.

Every CEO needs to be talking to customers every single day. It will turn your product into something meaningful and that will generate revenue. Which in turns creates value. You know the rest.


A Legal Journal said...

What is customer validation exactly?

Peter J. Cranstone said...

Customer validation indicates that you indeed have solved a real problem. It's vital to figure out the exact feature list that multiple customers find compelling and do so by purchasing your solution