It takes humility to realize we don’t know everything, not to rest on our laurels, and to know that we must keep learning and observing, if we don’t, we can be sure some startup will be there to take our place.”
Cher Wang, Cofounder HTC
Experimentation and lean delivery are the hallmark of start-ups and organisations that believe in hypothesis driven decision making. The promise of using this approach is that uncertainty and risk associated with execution are reduced. As much as we hear a lot about this method, I’ve not seen many companies (including start-ups!) using experimentation effectively. Why is this the case?
Quite a few of the start-ups that I’ve been exposed to have either expressed exasperation of not having the time or know-how to apply a structured experimentation approach or the founders believe they know the path to scale and disregard experimentation tools available.
At the other end of the spectrum are large, established organisations where the biggest challenge is overcoming the sensitivity around accidentally damaging the company’s brand in the testing process.
There is also the challenge of attempting to take an experimentation based approach in highly regulated industries where the slightest misstep can result in unwanted attention from the regulator and potential fines and criminal proceedings.
So, despite these challenges, if you’re still convinced an experimentation oriented approach is the best way to find your path to scale, how might you proceed?
The new addition to the Strategyzer series: Testing Business Ideas provides a way!
David Bland and Alex Osterwalder, the authors of Testing Business Ideas, have not disappointed with their simple, practical and actionable field guide for rapid experimentation that includes a robust framework and step-by-step descriptions of 44 experiments to systematically test business ideas.
The book is a treasure trove for those wanting to avoid wasting time, energy and money as part of scaling a product or company.
The information included in the new publication includes:
- Learning how the testing process works
- Design and run your own experiments
- Reduce the risk of your business idea
- Fine-tune your testing process
- Understand the different kinds of evidence that may be obtained through using various testing methods
- Leverage the library of experiments that go beyond interviews, surveys and MVPs
- Learn about experimentation based ways of working
The book takes two of the Strategyzer foundation frameworks: business model canvas and value proposition canvas and applies a hypothesis driven approach to reducing desirability risk (customers aren’t interested) + feasibility risk (we can’t build and deliver) + viability risk (we can’t earn enough money).
“Your #1 job as an innovator, entrepreneur, or corporation is to test your business ideas to reduce risk of failure.”
David Bland and Alex Osterwalder
Bland and Osterwalder encourage a progressive approach to achieving an acceptable level of confidence to scale ideas. In the process, the business model canvas (or lean canvas if you’re a fan of Ash Maurya) is used as the core of decision making around what your assumptions are, the associated hypothesis and the level of confidence you have around these to scale your product or idea.
The iterative experimentation process:
The ability to draft a set of clear assumptions and associated hypothesis to be used as part of testing a business idea is a new skill for many executives. Sure, many of us will have flirted with defining and testing hypothesis as part of our grade school science classes, however, defining and applying these in a structured way in a business context is not as common as you’d think.
David and Osterwalder have worked their magic to provide a simple step-by-step approach around how to define a hypothesis and prioritise these for testing.
The assumptions map provides a straight-forward to approach to identify the hypothesis that are most important with the least amount of evidence.
Once you’ve prioritised a subset of hypothesis to focus on you’re now ready to test!
The icing on the cake is the cookbook of recipes that provide experimentation sequences that show the path to gain momentum and build up stronger evidence over time. These experimentation sequences can be applied to a range of scenarios including:
- Hardware, Software and Services
- B2B and B2C
- Highly regulated environments
A number of free templates are available on the Strategyzer website providing test and learning cards that can be used to set up your experiment and to record the outcome of the experiment. These templates work well to conduct multiple tests and track the outcome of these by using a structured approach to document what you aim to achieve and the results of the test. The evidence and learnings gained through these experiments can then be used to iterate your business model / lean canvas and value proposition canvas.
The test and learning cards provide simple way to apply some rigour to your thinking process and gathering insights based on the outcome of the experiment.
Test card information:
- Hypothesis — Outline what you believe and how critical the hypothesis is
- Test — Define how you will verify your hypothesis and associated test cost and level of data reliability you expect
- Metric — How you will measure the outcome and the time required
- Criteria — In advance of your experiment, define the success criteria for the test to validate the hypothesis
The learning card provides a record of the outcome of the experiment:
- Hypothesis — Restate what you believe based on your initial assumption
- Observation — Outline what you observed and the reliability of the data
- Learnings and insights — This is what it is all about! Was your hypothesis validated?
- Decisions and actions — based on the learnings and insights, outline your follow up actions.
So, if you are looking to build a new business or product within the constraints of a large organisation, or working within a medium size business that lacks the experience and knowledge around experimentation, through to taking the leap as a start-up, I can’t recommend a better book to help you start testing your product and business ideas quickly and effectively — Testing Business Ideas.
Interested for more? A few other topics that I’ve written on within Medium.
Digital Transformation — Are you among the 70% who will fail at digital transformation?
Customer journey / experience mapping — Trust me (no really!)
Digital Strategy — We need you to create a digital strategy