I read a guest post by Andrew Elliott of Lottay on Steve Blank’s blog with the title How Customer Development Failed Us. A really good post, by the way, because it talks to the realistic assessment of failure: a thing that is very hard to do.

Here is what Andrew has to say on that subject:

Being honest with yourself is perhaps the hardest part of being an entrepreneur. You’ve sold your friends, your investors, and yourself on your vision. You wouldn’t be putting yourself and your family through this if you didn’t believe in your idea. So who keeps you honest and tells you when you don’t have a business? Your customers and your hypotheses.

There may come a time you need to face the fact that the earlyvangelists you thought you had are actually just very polite users. Face the fact that your product won’t be able to make money or scale. Face the fact that your hypotheses are all wrong. And ultimately, face that fact that it’s time to majorly rewrite your vision. The sooner you face these facts the more chances you’ll have to course-correct and win.

This led me to consider buying Steve Blanks’ book, The Four Steps to the Epiphany, so I went to Amazon and found a review (really an old blog post from 2006 (is that possible?) that I am sure I read before, but can’t exactly place) with these two paragraphs which I thought worth repeating:

Get out of the building. Very few startups fail for lack of technology. They almost always fail for lack of customers. Yet surprisingly few companies take the basic step of attempting to learn about their customers (or potential customers) until it is too late. I've been guilty of this many times in my career - it's just so easy to focus on product and technology instead. True, there are the rare products that have literally no market risk; they are all about technology risk ("cure for cancer"). For the rest of us, we need to get some facts to inform and qualify our hypotheses ("fancy word for guesses") about what kind of product customers will ultimately buy.

And this is where we find Steve's maxim that "In a startup no facts exist inside the building, only opinions." Most likely, your business plan is loaded with opinions and guesses, sprinkled with a dash of vision and hope. Customer development is a parallel process to product development, which means that you don't have to give up on your dream. We just want you to get out of the building, and start finding out whether your dream is a vision or a delusion. Surprisingly early, you can start to get a sense for who the customer of your product might be, how you'll reach them, and what they will ultimately need. Customer development is emphatically not an excuse to slow down or change the plan every day. It's an attempt to minimize the risk of total failure by checking your theories against reality.

Distinguishing between vision and delusion can be a real challenge. The difficulty in determining if you are on track or off track can be greatly exacerbated when there is a huge externality (like the great recession) that seems to touch every aspect of business. One tactic that can be very helpful is to write down your hypothesis and measure against it from time to time and then revise and remeasure. Here is what Andrew Elliott has to say about this idea:

This seems so obvious, yet it must be said: write down and track the evolution of your hypotheses. It’s something that’s almost too easy to gloss over — keeping track of your hypotheses and the results of your customer development work are vital. Failure to keep track of our hypotheses meant we were never quite clear on what was working and what was not. This meant we had a hard time focusing our development.

You don’t need to worry about wandering around in the desert for 40 years if you don’t do this because you won’t be around for 40 years.

One further thought, consider and try to account for confirmation bias when evaluating your hypotheses.