This is the 4th post in our blog series, “Innovating Like a Startup (When You’re Not In a Startup.)” Previous Post: Get Rid of Your Innovation Goals. Solve Problems Instead.
At each development stage, there are likely one or two assumptions that can make or break your project, depending on whether those assumptions were right. Identifying and testing your assumptions early on can dramatically reduce the risk and cost of the project - including the opportunity cost of time lost if you wait too long to learn that your assumptions were wrong.
However, before you can test your assumptions, you need to be able to identify them.
One of the tools our company uses for that is called a Clarity Canvas, a business model canvas that’s been slightly adapted to ensure it works especially well for digital products. Below is a list of questions taken from the Canvas, designed to help you identify and articulate the biggest assumptions of your project.
1. What’s your problem?
Every good product or service is solving a problem. First, you need to get clear about the problem you’re attempting to solve. Make sure there’s enough “pain” created by the problem that your target user would be willing to stop what they’re currently doing to solve that problem (if anything) and try out your solution instead.
2. Who is your customer?
Get specific about whose problem(s) you are trying to solve, so that when you go to test your other assumptions you’re getting feedback from the right audience. If you miss on this, all of your other testing could be for not.
3. What’s in it for them?
You could build an amazing product, but if your customer doesn’t clearly understand how it will benefit them, it may never see the light of day. If you don’t consider yourself a “marketing person” and feel like you could use some help articulating the benefits of your product, then ask around for a little help. Odds are any skilled marketing person you know would enjoy this kind of challenge and be willing to help out if simply asked. A word to the wise, try to be as overt as possible about the benefit(s) you’re offering. Try to really boil it down so your benefit statements have “can’t miss it” impact.
4. How will your product solve the problem(s) you have identified?
Make sure you get clear about exactly how your product or service will solve each of the problems you identified earlier. What key activities, experiences or backend systems provided will solve the problem? How will they solve them? Write these down clearly and concisely. Doing so will help you cast vision for how your product will work, and may serve as important reasons to believe.
5. What are your top marketing channels?
How will you find your customers, or how will they find you? You could create an incredibly valuable product or service, but if your customers don’t know it exists then it is essentially worthless. Because of this, you need to be thinking about marketing channels right from the beginning. Sometimes a strong marketing or distribution channel can be even more valuable than the product itself. Make sure you test your assumptions about how customers will find you early on.
6. What are all of your possible revenue streams?
How will your product or service make money? Don’t forget to factor in recurring revenue if relevant, and start by being conservative with your assumptions about retention and re-engagement. Most products are not as “sticky” as you’d like them to be at first, but gradually improve over time through customer feedback and optimization. Related to the last point, you’ll eventually need to make sure the revenue you drive from your product or service will exceed the marketing costs required to get people using it. This is particularly true among B2C products.
7. What are your costs?
Make a list of all of your costs, both fixed and variable. From development costs, to marketing costs, third party services, hosting, maintenance, and support - the costs of making a great product can really add up. From the outset, try to be realistic about these expenses; from our experience, most companies (especially those new to building digital products) underestimate what it takes to build, iterate, support, and market their products.
8. What are the metrics that matter?
Better yet, what is the one metric that matters most? In the world of startups, much has been written about the importance of identifying the “one metric that matters” (OMTM). Identifying this OMTM is equally important for corporate innovators. Since there are so many variables in play when you’re building a new product or starting a new initiative, it can be incredibly easy to lose focus. Instead, identify the one metric that matters more than all. Doing this will not only keep you and your team members focused, but also help you know how well your effort is translating into results, allowing you to better communicate your progress to your team, stakeholders, and the media.
9. How is your product different?
What is your unfair advantage? How is your product unique? Early in my career, I worked for an innovation consulting company that helped companies like Ford, Nike, Disney, American Express and other blue chips look into the future and define the new product or service offerings that could fill their innovation pipeline. As part of this work, we commissioned a massive research project that analyzed over 5,000 new product and service concepts that were quantitatively tested with consumers to determine purchase probability, the strength of benefits, perceived uniqueness and more. One of the clearest insights from the research was that products which were highly unique and had a clear point of difference were much more likely to score very high on purchase probability. But to be fair, they were also much more likely to score very low on this same metric. What highly differentiated products were not likely to do was show up in the middle, or what we deemed “the commodity zone”.
The takeaway here is that if you want to hit a homerun, your product needs to have a meaningful point of difference or some sort of unfair advantage that no other competitors have. What you don’t want to do is build another “me too” product, because doing will likely limit your ability to have a major success, right from the outset.
10. What are the death threats?
Now that you have amassed a healthy list of assumptions, think about which ones are the riskiest? Which ones are most likely to kill your project if you don’t get them right? In which do you have the lowest confidence that your assumptions are right? These are your death threats. Stack them from most risky to least, and identify ways to start testing them - starting by testing the riskiest ones first.
Taking the time to give thoughtful, realistic answers to these questions can save you a significant amount of time and resources down the road.
Think big, but start small.
As we’ve discussed, groundbreaking projects and products have a minefield of risks to avert on the path to success. Testing your assumptions can take many forms. Sometimes the first version of a product can be built very simply in something like Google Sheets or Excel. Or perhaps you could start by building a basic landing page with a clear call to action, and then find a way to get that in front of your target customer to see if they’ll engage.
At Differential, our process typically starts with Discovery Sprint where we drive clarity around the key activities and experiences that the product should offer, and then follow up with a Design Sprint, where we create a high-fidelity, clickable prototype of the digital product we have in mind. This process allows us to get a “looks like, feels like” product in front of targeted customers quickly and cheaply, and helps us answer “business questions” like, “Is this a product customers want, understand and would be willing to use and pay for?” It also helps us see if the assumptions we’ve made around user the experience and user interface hold up when a user is actually trying to navigate the (prototype) application. All of this work takes place before we ever write a single line of code.
If you’re a corporate Intrapreneur and are struggling to figure out how to start small and learn fast with your digital innovation project, feel free to give us a call. We’d be happy to carve out a few minutes to help you work through these questions and perhaps identify a few creative ways to test your assumptions.
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