Imagine that two competing companies with a similar business problem hold an ideation session with their employees. They both generate a lot of great ideas and create a short list of the top ones they believe will solve the identified problem. What happens next?
Company A decides to pursue its idea by investing several months and hundreds of thousands of dollars to develop and launch the proposed solution, only to find that the solution does not meet clients’ needs, and therefore fails in the market.
Company B decides to test the key assumptions behind the idea proposal, taking 12 weeks and minimal spending. They find that the solution does not meet clients’ needs and are able to stop the project without investing significant resources. They pivot to a new proposed solution, test the assumptions again, and then develop and launch for success.
Which of the two companies is more likely to minimize their resources and expenditures, lower their chance of failure and optimize the potential for success? You got it, it’s company B.
Before investing heavily into any idea, companies need to test their hypotheses and validate that the key assumptions behind the solution are correct.
We asked our innovation coaches who work with teams involved in WTW’s annual Horizons innovation challenge to help guide them through the testing phase of innovation. They work with teams competing for the best idea to assess their concepts’ desirability (do clients need it?), viability (will it succeed in the market?), and feasibility (can we develop and deliver it?). A key part of the process is a build-measure-learn cycle where the team builds a prototype of the concept, obtains client feedback and iterates based on this feedback.
What is the objective of the testing phase?
Ollie Narraway: All ideas are based on some underlying assumptions that need to be true for the solution to be successful. For instance, this could be as simple as assuming that the problem we want to address is truly a problem for the proposed buyer. The purpose of the testing phase is to identify what we take for granted and test it objectively, to determine whether and how our assumptions are flawed.
Identifying and testing assumptions sits at the heart of the lean startup methodology. In effect, it’s a form of risk management; the faster and more objectively we can identify flaws in concepts, the faster we will understand when to stop, or how to pivot. Ultimately, this is about driving an effective portfolio of innovations where we optimize the time we spend on concepts that are needed by customers, feasible to develop/deliver and commercially viable.
How do we identify and test assumptions?
Constanza Lobo-Guerrero: When we think about identifying assumptions, we need to understand what needs to be true for an idea to work. We do this by asking key questions such as: Are we sure we understand our clients’ problem properly? Is there enough market demand for our product or solution? Are we able to successfully deliver the solution or product with our existing capabilities in a profitable way?
For example, Uber’s assumptions likely included: Would passengers get into cars with strangers? And would drivers be willing to drive strangers around in their own cars?
To test assumptions, we can use various tools ranging from desk research and client interviews to developing a simple prototype that would enable us to test our concept and behaviors with its target users. Testing often leads to new insights we hadn’t considered or may even surface new assumptions. Testing assumptions iteratively gives us the best chance to make course corrections early and move in a different direction (pivot) if needed – or stop the project altogether (fail fast).
How do we know when to pivot or change direction in a project?
Katie Plemmons: At times an innovation team may face an overriding challenge – deciding when to pivot or to persevere. During testing, if we determine that the solution isn’t resonating with potential buyers, we may need to make a pivot in the potential solution. We must periodically ask ourselves: Are we making sufficient progress to believe that our original hypotheses and assumptions are correct? Or do we need to stop or make a major change?
There is no bigger destroyer of an idea’s potential than the mistaken decision to persevere. A team that ignores market feedback can get stuck consuming resources and commitment from stakeholders but not moving ahead. In other words, successful pivots put us on a path toward developing a sustainable solution.
This idea is linked to the notion of learning fast. If we shift from failing fast to FAIL, meaning First Attempt In Learning, we can then take our learnings and move on to the next idea.
In today’s uncertain environment, one thing is certain: By testing our assumptions and adopting a philosophy of learning fast, we will be far more likely to succeed in innovation and avoid over-investing in the wrong ideas. If we reshape the culture to replace the notion of failing fast to learn fast, we will create a true culture of growth and innovation.