The Four Steps to the Epiphany [Review]

Feb 27, 2012

Table of contents:

1. The Product Development Model
2. The Customer Development Model
3. Customer Discovery
4. Customer Validation
5. Customer Creation
6. Company Building

Steve Blank is a retired serial Entrepreneur who has been there and done it. Unlike many of the self styled business experts who write a book of wisdom, Steve has actually experienced the incredible journey of founding successful startups. It was through this experience that Steve noticed a pattern emerging. During the creation of his eighth startup E.piphany, Steve realised that there was a pattern emerging for success.

The Four Steps to the Epiphany is Steve’s guide to founding a successful startup. In it he introduces the steps you must take as a founder in order to create a product that solves a real customer problem. Steve also highlights where many promosing companies went wrong, and how you can take steps to avoid their mistakes.

The Four Steps to the Epiphany is broken down into the following sections…

The Product Development Model

The traditional methodology for creating a product and getting it to market is known as “The Product Development Model”. This is where a team of people create a product within the closed doors of the Organisation. Whilst the Engineers create the product from the initial vision from the Founders, the Marketing department begin creating marketing materials and refining the projected size of the market and future sales targets. The first product is designed and built without much input from the potential clients the Organisation is targeting.

The problem with this approach is it expects the Sales function of the Organisation to begin hitting the projected targets on the first day the product is released. However if the Organisation is a startup or the product is creating a new market, much of the information the company believes will be based upon assumptions.

“Startups don’t fail because they lack a product; they fail because they lack customers and a proven financial model”.

The Customer Development Model

The Customer Development Model takes a different approach by formulating a product from the direct feedback from the Customer. In the Customer Development Model, the Startup first formulates hypothesis on a chosen problem, then uses experiments and learning with direct communication with the intended customer in order to define and create a product.

This has a number of benefits:

• You know explicitly who your customers are going to be
• You know that your product will directly solve a critical need
• You already have relationships with your market
• You don’t waste time and money developing a product that no body wants
• You know how to create demand for your product and you know the best way to distribute it

Customer Discovery

The Customer Discovery stage of the process takes your hypothesis of the problem you are aiming to solve and the product you are proposing and tests them in front of potential customers. By testing your hypothesis at this stage, and not proceeding until you have verified your vision, the startup is able to keep expenditure low before it actually needs to ramp up the sales and marketing divisions.

Customer Validation

The Customer Validation step is where the startup begins to get ready to sell. A lot of thought needs to go into the sale process and the team who are going to be selling the product. It’s also important to look at who your potential customer will be, your distribution channel and how you can target the critical people within an Organisation to close a sale. An important realisation at this stage is that you must first sell to visionary customers, and not chase after the mass market. You can only start to think about the mass market once you have successfully attacked and dominated your niche.

Customer Creation

Much of the Customer Creation stage is determining your market type and your launch strategy. Unlike common myth, not all startup companies should launch the same way. In fact, launching a product into a new market, the same way a startup would launch a product into an existing market could be potentially disastrous. It is also important at this stage to find the right audiences, reafirm your relationships key market influencers and agree upon the metrics for measuring success of your demand creation strategy.

Company Building

The final part of The Four Steps to the Epiphany is the act of building a company. This focuses on creating the correct departments and processes for the specific market that the startup is falls into. Intrinsic in this idea is that for each different market type (new, existing, resegmented) there should be a different approach to building the company.

Steve also goes on to highlight how important it is to create the right company culture and how fostering a “mission critical” rather than a “process orientated” company is important for future growth and success as well as holding on to key talent that will take the company forward.

Whilst every startup should be lucky to reach the stage of building a company, I think it is one that is often neglected in a product oriented technology start up. It’s really good to see The Four Steps to the Epiphany covering this aspect as one of the key parts of the early stages of a company.

The Four Steps to the Epiphany is a education textbook for creating early stage companies that highlights the key steps for success. The book is a little dense for the casual reader, but really is a must read for anyone who is looking to found a company. Steve’s advice is timeless and his step by step guide for the first critical months of your company could be the difference between success and failure.

If you are serious about your company’s future, you owe it to yourself to read this book.

Buy The Four Steps to the Epiphany on Amazon.com (Affiliate link).