Testing the market
The Market Testing Phase’s objectives are first to understand if the solution is a Market Fit, what needs to be amended, and how to kick off customers’ creation. The insights from three different integral processes (Customer Development Process, Lean Startup and Agile Development) feed into this phase. It goes beyond the activities undertaken in the business model design phase.
The Customer Development Process (developed by Steve Blank) initiated learning intensively about the user, customer, or stakeholder and learning who they are through customer discovery during the concept validation phase. Market testing takes this process two steps further.
Introducing MVPs
Customer Validation aims to prove that there is a real market or use case for the solution. The innovator needs to find ways to reach customers or users and successfully place the solution. Their feedback provides the required information to validate the Value Proposition and improve it. This step is an essential part of the “Build-Measure-Learn-Cycle”, introduced by Eric Ries in his Lean Startup Model. He focuses on testing two hypotheses to understand if the solutions bring value to the user (Value Hypothesis) and to determine how new users will discover the solution (Growth Hypothesis). Ries introduced developing MVPs (Minimum Viable Products) to probe the markets quickly and quantitatively. He defines the MVP as “that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort. ” If the hypotheses are falsified, the feedback is helpful to either amend the business model, the assumptions about the customer or user, or the solution itself. Either way, iterations that involve previous phases of the Innovation Process are required until the solution and the business model meet the needs of the users or customers.
For the development of the MVP or the solution, agile development fits the dynamic of Lean Startup and Customer Development with changing requirements best. Agile development enables to deploy updates frequently to generate a steady income of feedback that helps to improve.
Approaching Early Adopters
The following Customer Creation objective is to reach out and attract a broader range of customers, users, and other stakeholders. Marketing activities are extended. They need to regard that the markets and customers or users they address can be fundamentally different. How to create customers most effectively depends on the type of the market (existing market, new market, or re-segmented market) and the characteristics of the users or customers that should be attracted. The Innovation Adoption Model, developed by Everett Rogers (also known as Technology Adoption Life Cycle), provides further insight. The different groups all represent a unique psychographic. Understanding these is fundamental. Innovators (Technology Enthusiasts) are incredibly interested in trying or testing new solutions. Early Adopters (Visionaries) are open to adopt new solutions, usually following the Technology Enthusiasts. During the Customer Creation Phase, the focus should lie on these two groups only. Statistically, they combine to only about 16% of the potential market share. They first need to be identified and then convinced of the value of the solution. To reach a tipping point to address the remaining 84% later in the process successfully, they need to act as evangelists or at least references and promote the solution.
Good to know!
According to Blank, customer creation is vital
- to set clear and specific objectives
- to have a clear understanding of how to position the solution
- to plan and prepare the launch of the solution orderly
- to create demand
The market testing phase proves the market fit of the solution (or idea) and establishes the solution with the market’s early adopters. In the subsequent phase of the innovation process, commercialisation and scaling, the focus shifts to addressing the mainstream market or users.