Imagine that by now you’ve held your successful ideation session, generated a bucket load of ideas and created a shortlist of the top ideas that are going to solve the innovation woes of your organisation. Well done, you. What’s next? Throw the innovation budget at the ideas and see which one sticks? Start designing the end product? Send sketches of the idea to manufacturing? Launch a marketing campaign for the new services? Before investing heavily into each idea, there is one critical step that must be undertaken to minimise the chance of failure and optimise the potential for success and ongoing buy-in and support for your innovation program: test your assumptions.
Why Test Your Assumptions?
A staggering 96% of start-ups fail in search of product-market fit. With more than 70% of IT projects failing and more than 80% of new ideas at large companies failing, a corporate innovation team or R&D department that considers new concepts to take to market is no different to the startup next door. Whether you’re an entrepreneur or corporate intrapreneur, there are proven methods to avoid such disappointing fates. Author and creator of the Lean Canvas, Ash Maurya, says that “the true product of an entrepreneur is not the solution, but a working business model. The real job of an entrepreneur is to systematically de-risk that business model over time.”
In order to de-risk our ideas, we can look to the Lean Startup movement, which uses the scientific method of testing hypotheses (aka the riskiest assumptions, aka the greatest ‘leaps of faith’) to validate or invalidate those assumptions. Identifying the riskiest assumptions early on and testing whether or not they hold true is critical to understanding whether an idea is worth progressing. There is little point in creating a product or service that customers are not interested in, or unwilling to pay for.
How to Identify the Riskiest Assumptions?
There are a number of tools available to guide identification of the idea’s riskiest assumptions. Free downloadable canvases such as the Business Model Canvas, Lean Canvas, Value Proposition Canvas and Validation Board can be filled in and converted into assumptions to test.
Another quick, intuitive way to identify what your riskiest assumptions are, is to ask “what assumptions, if untrue, would cause the idea to completely fall over?” For example, large online shoe retailer Zappos, was one of the first startups to enter the e-commerce space. Their riskiest assumption was ‘would be people buy shoes online?’ In the case of Uber, their assumptions for the two-sided market place were likely ‘would passengers get into cars with strangers’ and ‘would drivers be willing to drive strangers around?’ Without testing these very basic assumptions first, corporate innovation teams and startups alike leave themselves wide open to the high possibility of failure.
How to Test the Riskiest Assumptions?
The whole point of testing the riskiest assumption is to validate (or invalidate) the original business model, understand if the proposed idea solves a real customer need and learn as much as possible about the idea. Testing these assumption must come before any time or money is invested into the development of the new product or service.
Eric Ries of Lean Startup fame recommends creating Minimum Viable Products to test the hypotheses identified, see Lean Startup process below. The ‘lean’ part of this underpins the principle that testing assumptions should be done as efficiently as possible with minimum time and funds spent.
Today’s environment is more uncertain than ever but one thing is certain, by testing your assumptions, you will be far more likely to succeed and avoid over investing in the wrong ideas. Here are12 ways you can test your assumptions as quickly and cheaply as possible. Now get testing!
Receive thought leadership in the form of blogs, ebooks, innovation resources, videos, invitations to exclusive events as well as the latest episodes of Future², our iTunes chart-topping podcast all about corporate innovation and entrepreneurship.
Access more blogs, podcasts, videos, innovation, tools, ebooks and more just like this one here!