“Customers”

Much of this book lays out the customer development process that is core to the lean startup, adapting it from private sector startups for nonprofits and government agencies. In business, “customer” is well defined—it’s the person who pays you. In the social sector, people served more often than not are not those who pay you, complicating the use of the term considerably.

For almost any nonprofit or government agency, the question “who’s our customer?” is multidimensional. Take the case of Watsi. To make Watsi work, Thomas needed to test basic hypotheses about multiple constituencies. Because Watsi would often deal with life-and-death medical decisions, he had to test whether the basic innovation—providing funds for critical medical care—could deliver to specific individuals who were ill.

In his trip to Nepal, he learned how people came into the clinics Watsi was partnering with, how their treatments would be determined, and how he could gather stories to bring back to his second important constituency: donors who would fund the treatments. A third constituency, philanthropists supporting Watsi’s operating expenses, needed to know about operations and management to feel comfortable investing.

Watsi’s story illustrates the complexity of the word “customer” for nonprofits. One dimension shared with the for-profit world is that customers are people you serve, even if, in the nonprofit context, they don’t actually pay you. For Watsi, these are the patients who receive critical healthcare. To some extent, it’s also Watsi’s partners, the medical clinics and providers who convert the money Watsi gives them into treatment for their patients.

There are at least two different types of people who do “pay” Watsi. The core operating model is to connect individual donors to patients in need, so those contributors are a critical “customer,” as are the philanthropic donors who support the infrastructure that makes it all possible. Watsi directs 100 percent of individual donations toward medical care, so this other category of donors is actually the source of support for Watsi’s operations.

The lean startup practice in our sector is relatively new, while customer development is an increasingly mature framework that is central to any modern lean approach, private, public, or charitable. Changing the terminology for the social sector at this point would cut the sector off from the rich toolkit and wisdom that have emerged over the last dozen years of private sector practice. So, in this book, we will continue to use the word “customer,” particularly when discussing the details of the customer development process. We’ll also use “target,” “client,” and “people served,” depending on the context. The constituencies being served in the social sector break down into three general groups:

• Direct targets: people and organizations who are the primary recipients of the program or innovation. For Watsi, these are the critically ill patients who receive treatment.

• Indirect targets: people and organizations who are influenced via direct targets or other mechanisms, but who are not the primary recipients. In Watsi’s case, there are a wide number of indirect targets ranging from, most immediately, the clinics Watsi supports by paying for medical treatment for individuals to, eventually, insurance and other health systems that can be transformed by increased revenue.

• Funders: the people and organizations that support the innovation or program.

For Watsi, there are in turn multiple types of funders:

• Individual donors who use Watsi to directly contribute to healthcare for the critically ill.

• Watsi financial supporters (individuals and philanthropic organizations) who enable Watsi to operate and to send 100 percent of individual donors’ contributions to provide services in the field.

• In-kind contributors who donate services (legal, technical, software) and time. These include board members, law firms, and software companies.

Who you define as a customer and how will depend on your operating model. Table 3.1 provides more general examples of customer types in the social sector.

Table 3.1 Defining “Customer” for the Social Sector