De-risk Innovation by Testing Business Ideas – Feat. Simon Jalbert

The innovation economy is built, not on the will to power or the hunt for money, but the search for truth. Rare is the organization that consistently produces breakthrough ideas without recourse to the scientific method.

In their influential book and product development framework ‘Testing Business Ideas’, David J. Bland and Alexander Osterwalder stress the importance of bringing science into the boardroom, the innovation lab, and the sales floor. The book’s aim, according to Bland, is clear and simple: to make sure innovators don’t “waste time building products that nobody wants”.

After attending Bland and Osterwalder’s intensive course, U+ Head of Commercialization Simon Jalbert recently shared his experiences at a company-wide learning session entitled ‘How To Test Business Ideas.’

“It’s easy to be led astray by business theorists who know all the buzzwords but don’t know what they’re talking about,” Jalbert observed. “[Bland and Osterwalder] aren’t like that. They definitely know what they’re talking about.”

Based on this endorsement, we sat down with Jalbert to discuss the ins and outs of the ‘Testing Business Ideas’ framework and find out how innovators can apply its insights to their own work.

Advancing beyond assumptions

Every great business begins life as the faintest spark of entrepreneurial energy – and that spark usually takes the form of an assumption about the world.

Business assumptions can be useful, as long as we see them for what they are: early attempts to articulate a product’s identity or value. If an assumption remains unfounded for too long, the result can be disastrous.

Entrepreneur Jeff Dunn learned this the hard way. In 2017, Dunn founded Juicero, a startup that sold Internet-connected juicing machines. He raised millions in VC dollars and became the toast of Silicon Valley before discovering that people saw next-to-no value in his company’s flagship device – except as a source of mild amusement. A brief foray into good faith consumer research would have saved everyone involved a lot of time and money. Instead, some of the smartest people in the tech world sank years of effort into a product that CNET called “the greatest example of Silicon Valley stupidity.”

One of Jalbert’s favorite sayings on this topic comes from the great sci-fi writer Isaac Asimov: “Your assumptions are your windows on the world. Scrub them off every once in a while, or the light won't come in.” Nor, perhaps, will the juice come out.

Extract risk from the business idea

Bland and Osterwalder identify three core innovation tenets: desirability, viability, and feasibility. To successfully advance a new venture, innovators must address all three (see diagram below).

Desirability assumptions ask “do they?” questions. For example: Does the market want what we are building? What evidence of customer interest do we have right now?

Viability assumptions ask “should we?” questions. For example: Is pursuing this market worth the time and investment? Is there a practical path to profitability?

Feasibility assumptions ask “can we?” questions. For example: Can we execute on this business? Are the necessary resources available?

Innovators should approach these three areas in a collaborative, open-minded, and systematic way, aiming to find answers that are revealing enough to make them reconsider prior assumptions, yet solid enough to build a subsequent business case upon.

Map out your assumptions

Once you’ve determined where your risks are with a degree of objectivity, it’s time to visualize your assumptions. Jalbert suggests using a simple 2x2 matrix, with the X axis representing evidence and the Y axis representing importance.

“This simple, straightforward matrix allows us to analyze business ideas based on how much information is available to us and how much that information matters,” Jalbert explains, “Plenty of assumptions are easy to validate but relatively unimportant, like whether your website should have a blue or red CTA button. Other assumptions might be hard to validate but extremely important, like whether your business will survive proper regulatory scrutiny.”

“Ultimately,” Jalbert adds, “the goal at this stage is to figure out what assumptions you should be testing as quickly and cheaply as possible.”

Having completed this exercise, you should be able to modify some of your original assumptions into discrete, testable, precise hypotheses that leave little wiggle room.

Jalbert illustrates the difference between assumptions and hypotheses with reference to Fllite, a private aviation company and U+ client based in Colorado. By mapping out the business’s foundational assumptions, speaking to customers, analyzing the market, and gaining a deeper insight into the founder’s objectives, the U+ Commercialization team was able to form a series of hypotheses it could test.

To clarify, here is an example of an original assumption we made regarding Fllite’s target market. Notice that the statement uses hard-to-define words like “wealthier” and “interested.”

“We believe wealthier people are interested in chartered flights to and from the Colorado region.”

And here is the hypothesis we arrived at after a comprehensive data-driven analysis. Now you’ll notice that it’s grounded in numbers and statistics, with much less room for interpretation.

“We believe that individuals flying to and from the Colorado region who make more than $300k/yr will click on our search ads at a CTR that is 5% higher than those who make less than $300k.”

“We started with vague, untested assumptions,” Jalbert says. “And very soon we had a series of hyper-precise hypotheses that we could actually work with. By bringing this scientific framework to bear on our commercialization work, we made it to launch day without encountering any expensive dead-ends.”

Conduct rapid experimentation

“Now that we have extracted some of the risk from our assumptions, and turned those assumptions into empirical hypotheses, it’s time to run a series of cheap, quickfire experiments to gain even more actionable insight,” Jalbert explains.

According to “Testing Business Ideas”, there are four principles to keep in mind during the experimentation phase:

• Go fast and cheap early on
• Run multiple experiments
• Pick your next best tests
• Delay building for as long as possible

Jalbert recommends using Bland and Osterwalder’s Strategyzer test card (pictured below) to facilitate this process.

“These test cards are valuable for innovators because they allow us to be very clear about what we’re measuring and why it’s important,” says Jalbert, “In addition, they allow everyone on the team to be aligned regarding what failure and success looks like.”.

In conclusion, ‘Testing Business Ideas’ offers a simple, hands-on framework for turning assumptions into truths, and truths into viable business cases. It allows solo innovators, entrepreneurs, and corporate venture builders to bring new products and services into the world while minimizing cost and risk.

“Assumptions are a double-edged sword,” Jalbert says. “They’re necessary in the very early, value-discovery stages of a business venture, but they soon become actively dangerous as the venture takes up more time and resources. Bland and Osterwalder’s achievement was to introduce a healthy dose of science into the art of developing ideas.”

The U+ Method can efficiently and effectively lead the development, implementation, and improvement of innovations in any sector. To date, we have used this method to bring 100+ products to market, creating over $1 billion in value for Fortune 1000 companies. Check out U+ success stories here.