What brings a character to life?
An idea I read in the book Story by Robert McKee (which I super recommend to anyone willing to take the time to read it) that kinda changed the way I looked at things, is when it talked about how some creators will argue over which is more important: Character, or Plot? And the book said that's an impossible question, because Character IS Plot. Think about it this way: if you have a character who is a hero, but nobody in the story is ever in danger, then you'd never get to see how heroic that character is. The plot of the story has to showcase Who your character is and What they value by threatening those things in some way. Yes, characters are more than what they say and do -- but what they say and do are the only way we'll get to see it!!
So, if there's something you want people to see about who your character is and what's important to them, then the plot has to hilight that in some way -- a cowardly character has to be put in danger, a shy character has to be put into conflict, a brave character needs someone to save that would put themselves in danger, a kind character needs to be put in a situation where it will cost them something to help someone.
And when you know what your character is willing to risk or work for, you can also have the story bring different values into conflict -- if you have a character who values both his family and his dreams of hollywoood, and you put him in a situation where he has to pick one -- if this hollywood contract moves you far away, and your family will have a tough time without you, do you follow your dreams, or help your family? -- then that's REALLY INTERESTING because we get to see that conflict, and find out what he values more. If a character is cowardly, but also loves her sister, then when her sister is in danger, which desire wins out?
And that can be a lot of where character development comes from -- something that changes the character's values. A character is afraid of fighting, but when they run away from a fight, a friend gets hurt, and then that changes how they look at things -- that might make it worth it to them to learn to fight. Or a character who's cynical because she thinks anyone who's nice to you has something to sell -- until she meets someone who's genuinely kind, out of love, and her desire to connect to that person starts to win out over her fear of being taken advantage of.
I think an important thing is for the audience to have a hint of where character development came from, emotionally -- that it's not just "he's cowardly, but now he's a little braver, and now he's a little braver" -- it's "he was cowardly, but now he has a reason to try to be brave, and he doesn't quite get it the first time, but the second time he does a little better."