How to test business ideas

Steve Forbes

While every business is always looking for great ideas and new products, it’s rarely a matter of ‘build it and they will come’.

Product Managers know how important it is to test business ideas and new products before proceeding with a full scale launch. However, what is more difficult is knowing how to test, how long to test for and what to look out for when you test your business ideas.

Product expert David Bland addressed exactly this issue at a recent Product Talks meetup. He  discussed how to test business ideas and save your business from the disaster of building a product nobody wants.

With an extensive background in scaling technology startups, David has helped validate new products and businesses at companies such as GE, Toyota, Adobe, HP, Behr and more.

During his talk, one of the first things David shared was how common it was for teams to go to one of two extremes. Either they do a lot of work from within the conference room, then generate a giant project plan and build a product without testing it. Or, they go “testing crazy” on their Product without putting a business model in place.

David wrote his book Testing Business Ideas to help people find the balance between the two examples above.

What makes a successful Product?

David says that successful Products need to be: desirable (do customers want it?), viable (sanity check) and feasible (can we make it?).

This is set out very neatly in Strategyzer’s Business Model Canvas:

Strategyzer business model canvas

For example — one risk of developing a new product may be around acquiring the people or parts you need to build it, not so much about customer demand. You may also need a strong partnership to make a new product happen. These needs will emerge in early discussions if you keep desirability, feasibility and viability in mind.

Where to start

David recommends a brainstorming session before you test a new product, where people can raise their questions about desirability, feasibility and viability as a form of ‘assumption mapping’.

During these discussions, David always has people keep track of whether they have evidence beyond a gut feeling of something being a problem for the new product. “This has the power to change the conversation,” David explains.

“If you have the right folk in the room, you’ll get a well-balanced view of risk,” David adds. Include representatives from across the business when discussing the risk of a new idea. Pull them into a meeting and get other important stakeholders to jump in where necessary.

Testing 101

 There are a range of ways to test ideas. David reminds Product Managers that it is important to focus on feasibility and viability as well as desirability.

One way to test new ideas is through online ads. This is cost-effective and doesn’t take long to set up. However, be aware that you can get very different results between testing Facebook ads, for example, or Google ads. This is because there is a big difference between customer intent with these two platforms. With Google Ads you’re targeting people who are much closer to a purchasing decision because they’re actively searching for something.

Another approach to test a new product is to invite your customers to test your competitor’s product, as a way of gathering data on your value proposition. This is a low-cost approach but the evidence strength when it comes to your own business idea can vary. David advises against unethical practices like sticking your logo on top of a competitor’s product.

While both the above tests are focused on desirability, they don’t focus as much on viability and feasibility.

‘Concierge’, where you mimic the technology behind a product by manually doing things behind the scenes and then sharing the concept/prototype with customers can solve this by providing more in-depth insights. David mentions that people in the business may not wish to commit to the time needed for this approach. However, doing it this way and then sharing what you have created with a test audience definitely saves time when compared to the risk of launching a product which isn’t feasible, desirable or viable.

Finally, a pop up store can be another way to test a business idea. One case study which David took part in was an idea for new software to help people choose the right reading glasses to suit their face. A pop-up store proved to be a hit with people wanting to buy glasses even though the store was only there for experimental purposes.  “The company was able to use quotes from those early customers in their advertising copy,” shares David.

David’s recommendation is to not simply take a single approach. “Pair experiments with one another to generate stronger evidence over time.”

Testing his own ideas

Before publishing his book, David tested the content with the three target markets he thought were most likely to buy it: solopreneurs, corporate innovators and startup entrepreneurs. Each target market has different problems which the book could help to solve. For example, solopreneurs often don’t know if their idea is worth leaving their day job for.

“We didn’t just start writing,” says David, who instead took a sticky note approach with his co-author, sketching out the spreads of the book before adding the text. “We drew it out and created a ‘book map’, to visualise how it would flow from top to bottom.”

David also tested the content with people early in the process, asking questions and getting feedback and then fixing major issues..

David even tested the cover design before he published the book. “I uploaded book covers and recruited the different target audience personas to imagine they were in a bookstore, then [asked them to] explain what they thought the book was about.” Ironically, the cover David liked the least was the clear winner!

Last words

“Think of running experiments not just for products but also for businesses. If you have an amazing product and the wrong business model, you’re going to fail. But if you have an amazing business model and your product is terrible you’ll fail as well. So you need both.”

The idea of experimentation isn’t just a one-off user research thing.

“Basically, try to make everything very actionable and visual. Sketch out your risk, theme it, write your assumptions down, go map them, find experiments that fit, and rinse and repeat until you find your way,” David says.

PS

How long do you test for? David’s rule is about 12 weeks. “Run one experiment a week for twelve weeks, then you’ll know if you’re onto something,” he suggests. This isn’t the case for everything but don’t give up after the first experiment!

PPS

Want to avoid brand damage? Try creating a sub-brand for testing. Big brands like GE do this, posting ideas and prototypes on platforms like Indiegogo to gauge user reactions under the name of a lab brand.

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Steve Forbes

Steve Forbes | Author

Steve leads our Product Talks Melbourne Meetup. He's passionate about Product management and all things digital. He helps organisations navigate through times of change like: adopting new technology, changing customer needs and disruptive business models. He loves working on challenging projects and building products that customers love.

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