Whether it’s confidence, or an indicator of arrogance, we’ve all been in scenarios when we’ve put our eggs in one basket, took a risk, and been led by our gut instinct.
There are times when it’s acceptable to take a calculated gamble, but there are others when we need to have absolute confidence in the outcome of a decision.
While a culinary experiment may burn your mouth, or taking an uncertain shortcut could add even more time to your journey, these merely minor inconveniences don’t equate to the possible financial implications if you don’t test a business hypothesis, with such shortcomings damaging to your pocket, as well as your reputation.
72% of all new products end up failing, while 42% of failed startups were unsuccessful because their product or service didn’t address a real market need. So, whether you’re a new kid on the block launching a new product for the first time, or a market heavyweight developing an existing offering, be sure to put contingencies in place to keep your business, and pride, intact.
In this article, we'll focus on:
- Top tips for testing assumptions
- Testing assumptions case studies
- How to test assumptions as a new business
Top tips for testing assumptions
We’re not fans of massaging our ego… (yep there’s a but coming), BUT we’re well versed in the product marketing field and we like to think we know what we’re talking about. So, believe us when we say we’ve seen plenty of people walk off with their tails in between their legs having ignored our advice to ignore a hunch.
We’d hate for you to experience similar shortcomings, so we’ve popped together what we’d consider useful advice - and we strongly recommend you follow it.
There’s a fine line between being sensible and being paranoid. After all, if you spent time testing every assumption you and your team made, you’d get nothing done - right? Before you make the decision how thoroughly you’re going to test, identify the risks involved, and if it transpires the potential damage is minimal, or even non-existent, consider testing on a smaller scale. There may even be instances whereby testing may not be warranted whatsoever, but only if the circumstances are right.
Always address the following question when testing your idea: Is there a chance that getting it wrong could cost me money, customers, and reputation? Suffice to say, if the answer’s yes, you’ll want to run rigorous testing to mitigate risks.
Don’t assume, hypothesize
While we’re not scientists, as such, treat your testing the same way a scientist approaches an experiment; outline a hypothesis, carry out the method, and evaluate your findings.
Reframe your assumptions, and instead, form hypotheses that you’ll be able to assess at the end of the research.
For example, if companies such as Harrys.com send men shaving products and grooming kits in the post.
Let’s use this example to illustrate how an assumption can be reshaped as a hypothesis.
Your Assumption: Customers will be happy with the shaving kits they receive via our website.
Reframed as a Hypothesis: We believe that customers will be happy with shaving kits they receive via our website.
When testing multiple hypotheses as part of your research, it’s important to decipher which are most important, as these will warrant greater attention and more rigorous testing.
If there isn’t sufficient importance attributed to a particular hypothesis, and it transpires to be overruled by the results, this could potentially throw a spanner in the production.
This cannot be left to chance. Call a meeting with your team, and vote on which would be most threatening to the product’s success if the assumption turned out to be false.
Take off the rose-tinted specs
We can’t stress the importance of establishing impartiality and distancing yourself from when testing assumptions.
An inability to judge in a logical, non-partisan manner will not only cloud your overall judgment but can potentially lead to catastrophic results, not only for the product in question but for your company as a whole.
Sure, we understand there are times when you may have embarked on a passion project and may be reluctant to acknowledge that some elements of the product or service don’t work. To combat this potential issue, seek the opinion of people who can maintain a degree of impartiality, to gain a true sense of whether or not you’re onto a winner or a potential flop.
There’s a fragility between pivoting and persevering. If you pivot prematurely, there’s a fair chance you could miss out on a truly exciting opportunity. On the other hand, if you pivot too late, you could be licking your wounds, having lost out financially, reputationally, and competitively. To make sure you’re basing your decisions on reliable information:
- Avoid vanity metrics - for example, just looking at the number of customers or clients who’ve taken out service X could feed you with misleading information if revenue isn’t taken into account too.
- Always review your progress and amend your targets accordingly.
- Combine qualitative and quantitative data.
Human feedback is the best feedback
You can crunch numbers until the cows come home, but ultimately, a number won’t pull out a wallet and buy your product.
Testing assumptions hinges on the viewpoints of the views of people within your target market; you need to put yourself out there and have a conversation with relevant personas - they’re the ones that matter. Nobody else. Pop over an email, fire out a social media post, pick up the phone; with so many members of communication at your disposal, there’s no excuse for not speaking with people directly to see whether their views provide credence to your initial thinking.
Granted, sometimes people may be reluctant to talk, and this can be frustrating. Thankfully, there’s a simple solution - dangle an incentive and they’ll take the bait.
They always do.
Invest in a prototype
Having completed a few cycles of testing, measuring, and learning, you'll have an idea whether your initial assumption was on the money, or well wide of the mark.
Either way, if you’ve conducted thorough research, you’ll have an in-depth idea of what consumers within your market want, not what you think they need. Which leads us to our next stage of building a prototype and/or Minimum Viable Product, otherwise known as an MVP.
But before you set the ball rolling, let’s decipher the difference between a prototype and MVP:
- These don’t resemble the final product, but allow you to test out their features and functionality;
- Provide qualitative and quantitative findings;
- Help you understand the product’s values and limitations; and
- Highlight useful areas (which could become your USPs) and, most importantly, where improvements could be made.
And remember, to collect robust and accurate feedback a fresh prototype should be rolled out for every new feature or function you add.
- Are a stripped back version of your product that contains all and only its key features;
- Usually, come after several rounds of prototypes;
- Test the fundamental elements of your whole product rather than specific areas;
- Are by no means the perfect end product, but are a truer reflection of it than a prototype; and
- Miss some functionalities, design, and features (you should flag this to any potential testers and investors).
Ok, we get it, prototypes and MVPs aren’t something you can buy off the shelf in the local department store; they can cost a lot of money. However, it’s essential to acknowledge how they can be an integral part of the process. A prototype or MVP can highlight a subtle change that could make the world of difference to the overall quality of your final product.
Remember, there’s a time for speaking and a time for listening, so make sure you put those ears to good use, and take on board any advice coming your way.
Testing assumptions: case studies
There are other ways to analyze your inkling, with the generation of online content a common method utilized by many companies seeking reassurance their ideas hold credence.
Hubspot: Publication of blog content
SaaS heavyweights Hubspot incorporated this approach with aplomb, with founders Dharmesh Shah and Brian Halligan publishing a series of blogs about inbound marketing, and monitoring the subsequent on-site traffic.
Upon assessing the data, the increase in visitors validated their initial hypothesis that the concept had potential, and they decided to press ahead safely in the knowledge their market was receptive to their idea.
Buffer: Data capture
Similarly, Buffer also tested their idea before pressing ahead and launching their service.
Although a minimum viable product, or assets, weren’t in place, CEO Joel Gascoigne validated his idea following the launch of two pages, seeking feedback from the people who submitted their email address, and using their responses to refine his initial concept.
This feedback proved critical and the only thing left to do was make sure people were willing to pay for it, a question answered via the launch of a third landing page.
How to test assumptions as a new business
If you're a brand new business, unlike more established companies, you have less room for maneuver; you’ll still be building your reputation, and finding your feet in your respective industry.
Crowdfunding should be considered as a serious option if you’re in the testing stage as a new company. If your campaign is successful, you'll have a product with paying customers ready and if you fail, you've learned that product may not be the best idea after all. As a bonus, you’ll build a rapport with potential future customers too.
As always, it’s always essential to scope out your current, our soon-to-be competitors, and establish what products they’re offering, as well as price points, etc. This information can be discovered by conducting competitor research. If you’re unfamiliar with how to complete this process, there are a whole host of tools to help.
Revenue is the biggest indicator as to whether a business is successful or not. So, your competitor research has revealed a company is making a fortune from a product you’re looking to produce yourself, logic would suggest there’s demand, and much of the validation has been completed for you.
That said, rather than go head-to-head with an identical product, you’ll need an eye-catching differentiation strategy in place, to convince your target market to select your product ahead of the competition.