One of the key insights from the Learn Startup methodology is ‘A startup is a faith-based enterprise on day one. To turn faith into facts, a startup must test hypotheses to find out which are correct’. This insight applies to innovation efforts within established organisations, too.
People often have brilliant ideas; they write them down, design the perfect products, and start thinking about how to produce them. What’s next? A well-structured business plan? Mastering the capital needed?
The problem here is that everything is based on assumptions. Do your potential customers have a real problem, pain point or need? Would they want to buy your product or service? Do they have alternatives that you are not aware of? Instead of rolling our sleeves and getting our hands dirty, we must test all the assumptions.
In other words, the next step is to work through your assumptions. Here is a framework we can follow to identify the most critical assumptions to move forward.
1. Identify Critical Assumptions
There are many popular frameworks for business idea mapping, such as the Business Model Canvas and Learn Canvas, but none focus on assumptions. Imperial Enterprise Lab has an Idea Canvas that puts assumptions at the centre of business model design. It asks innovators to identify three key assumptions for each area of the business idea: the problem, the solution, the customers, and the revenue model. Most assumptions fall into three categories: desirability, feasibility, and viability.
Templates
2. Determine The Riskiest Assumptions
Once we have identified the 12 assumptions, we can run them through the Riskiest Assumptions Matrix to identify the top risks that fall into the most uncertain and highest-impact quadrant. These assumptions, sometimes called leap-of-faith assumptions, are often the determining factors for the idea’s success.
3. Design Experiments for The Riskiest Assumptions
After identifying the leap-of-faith assumptions, we can design the appropriate experiments to validate them. One way to do this is to use a Test Card. Your business idea should not move forward unless these assumptions are verified. Often, teams put a lot of effort into developing the MVP long before verifying the idea with real customers, wasting time and money on a solution to a problem based on fallacies.
In the book Talking to Humans, Giff Constable introduced a tool called the Truth Curve, which can give entrepreneurs an idea of how much effort is required for each type of experiment.
The entire process iterates until all the critical assumptions are verified. Only then can you move on to creating the actual product. As you go through the iterations, more assumptions may come to light, and you will likely have to adjust the idea, the product design, and the revenue model. This is the core idea of Learn Startup.