Innovative ideas need to be validated before the organization spends time and money on building products, delivering new services or changing processes. The objective of validation is to overthink all aspects of the idea: how the technology or process will work, the value it will deliver, the people that will benefit from it, the skills required to build and operate it, the costs, the revenue-models etc.
This validation will make transparent which assumptions we make about the idea: ‘we can build it’, ‘people will use it’, ‘the intended benefits are real’, ‘we can build and operate at the expected costs’, ‘we can sell it at the intended price-point’, etc. Each of these assumptions, if false, can kill the innovative idea. By identifying them and by ranking them by their impact we create a list of what are called the ‘Biggest Fail Factors’. In most innovations around the globe though, the Biggest Fail Factors are not in the creation of the product or service, but in the adoption of it by users and the integration of the innovation in the existing organization. So rather than to go out and spend a lot of time and effort on building a product, service or process, you should test these Biggest Fail Factors first. Find out if your assumptions are true. Because if they are not, you may have wasted all of this time and money on building stuff while you could have known that that was pointless.
Three steps to Validation
1. Prepare a validation canvas
During the last decade, many effective methods for validating ideas have emerged, especially from the start-up scene. Either of these tools may be useful in validating the idea at hand in your organization. Which one is best depends on the combination of what type of idea needs to validated, the experience obtained by the Innovation Coaches and the time and means the Innovator has available.
There are dozens of canvas templates available online, each with the aim to describe the idea, its value and its costs in a simple overview. The majority of these canvasses are based on the original Business Model Canvas that was first introduced by Alexander Osterwalder and his team. Osterwalder extended the original idea of the Business Model Canvas with a second canvas, which offers a more detailed description of the idea itself and the way in which it offers a solution to customer needs. This canvas is called the Value Proposition Design canvas.
- Lean Canvas – Ash Maurya
- Business Model Canvas – Alexander Osterwalder
- Value Proposition Design – Alexander Osterwalder
Osterwalder’s canvasses are regarded to be the leading canvasses in the field, but that does not mean that other canvasses are not useful. Each canvas serves its purpose when it helps an Innovator to reflect on his/her idea and validate its potential feasibility and value. In addition, the lessons learned from earlier validation sessions are applied to continuously learn from previous experience.
2. Identify assumptions
Identifying assumptions is straightforward, but not always easy. It is an exercise in finding weak spots in your own ideas, and most innovators are biased. The Innovation Coach serves as the ‘devil’s advocate’ in a discussion with the innovator about the canvas: the coach asks questions like ‘are you sure this is technically feasible?’, ‘are we certain that this user-group will like the idea?”. The answers to these questions lead to identified assumptions, which are always formulated as a sentence starting with ‘We believe that….’
- ‘We believe that this product will save workers 10% of their time.’
- ‘We believe that we can administer this service in our ERP-system.’
- ‘We believe that we can purchase the material at a price below US$ 10,-/kg.’
- ‘We believe that 1-in-10 trial users will convert to paying members.’
- ‘We believe that our resellers will sell this product at a 7% margin.’
- ‘We believe that customers will want to pay €24,99 for this product.’
- etc.
Some assumptions may seem foolish, or have obvious answers: for instance, if, in the example above, you have always purchased the raw material at a prince below US$ 10/kg, and there is no expected price-raise, this is not an assumption but a (near) certainty, and it may be taken as a fact. The objective is to find those assumptions that are either known uncertainties (such as the 1-10 conversion rate of trial users) or that have a big impact on the success of the idea if they do not materialize (for instance if the product does not save as much time as expected).
3. Identify Biggest Fail Factors
When the assumptions have been identified, they need to be ranked. After all, if we want to get the idea to deliver value, we need to first prove that these assumptions are valid, because if they are not, the idea is worthless. The best approach then, is to validate those assumptions that either have the highest likelihood to fail or that have the highest impact if they do.
We identify the Biggest Fail Factors by ranking the assumptions in a simple quadrant comparing the likelihood of the assumption to be false against the impact that the false assumption will have. Each of the assumptions are ranked relative to other assumptions. There is no absolute measurement for the impact or likelihood, so it is best to start with an assumption of which most people in the room understand how likely it is to happen and what the impact will be. By all means, discuss. Once the first assumption is placed on the matrix, then others are compared to this and the next assumptions: is it more likely to happen than X? Is the impact greater or smaller than Y?, etc. This way of identifying Biggest Fail Factors is similar to the relative estimation used in Weighted Fastest Innovation First (WFIF).
After ranking the assumptions, the list of Biggest Fail Factors can be prioritized for validation in practice through SWICH’s. This is done by selecting the assumptions in the top-right quadrant first. Rank them individually from the highest to the lowest impact/likelihood. Then add below this list the assumptions from the bottom-right quadrant, then from the top-left and finally from the bottom-left.
The resulting list of Biggest Fail Factors will serve as your backlog for the SWICH’s to follow.