Building a Business seminar: how start-ups can test their assumptions

During his recent seminar as part of the Building a Business series at the Saïd Business School, our MD, Dave Fletcher, talked to budding entrepreneurs about the first two stages of Steve Blank’s Customer Development Model. Here, in his follow up blog, he provides some nuggets on Customer Discovery. More specifically, recognising and testing assumptions… 

I argued in my previous post that challenging your own convictions is one of the crucial first steps of product development. Question is, how do we actually recognise and challenge our assumptions objectively? Using the example of a recent in-store search app we built for Foyles, that’s exactly what I will focus on here.

How do you recognise your assumptions?

Blank suggests you write a one or two page hypothesis for each part of the Business Model Canvas. Granted, it sounds onerous. In truth, it will save you time and hard-earned cash. Let’s think then, about writing the Value Proposition segment.

Foyles recently asked us to help extend the book shopping experience onto their customers’ smart phone. Their value proposition was straightforward: search this store on your mobile.

The proposition had to be tested by Foyles first though, before we spent money on building an app. That meant they had to work out their riskiest assumptions. To help, their value proposition was put down on paper using a bullet-pointed story approach. The point of these bullets was to explain the need for the product, as well as the solution and the expected results. (It’s worth noting here, if you can’t condense your business into 5-10 concise bullet points then it’s probably too complicated in the first place.)

Approaching the value proposition like this enabled Foyles to spot their riskiest assumptions easily. Let’s look at it in practice:

Screen Shot 2014-12-24 at 10.17.09

So this exercise got Foyles asking one big question. What’s the quickest and cheapest way of validating this massive, risky assumption?

Faking it until you’re (literally) making it 

What Foyles did was this. For one day they posted signs around their West End stores, promoting the in-store search app. And they set up wi-fi to enable customers to try out our great idea on the spot. Except (and here’s the thing) there was no product yet.

This meant that when a customer logged on it was time to come clean. They were told that the app was currently being developed. As a thank you for showing interest though, they were given 10% off a book purchase on the day. 

 

Foyles Book Search, in store poster to test mobile search usage.

Foyles Book Search, in store poster to test mobile search usage.

The search had been faked to validate the assumption that it would appeal to customers. What we explicitly didn’t do, however, was build a product first and then test it. That would have been expensive. And it may well have failed.

The response to the test was strong. Foyles had proved that there was indeed a customer need. And while your own search doesn’t necessarily need to give you clear, quantifiable data – just a strong signal is enough – the key is to make sure the evidence you collect backs up your assumption. 

Of course, you’ll be noting all along what you’ve learnt from the exercise. This after all, is what helps you refine your product. But ultimately your decision to proceed should be based on the evidence you’ve collected. And as we have seen in the Foyles example, to collate the right evidence quickly and cheaply, you will likely have to be creative about how you get it.

In his concluding Said Business School seminar series post, Dave covers the second part of Blank’s Customer Development Model – Customer Validation – recognising whether a customer problem actually exists. 

View Dave’s presentation, How can I know if my idea is good?
More about Building a Business seminar series.
Some recommended further reading:  The Lean Startup – Eric Ries; The Startup Owners’ Manual – Steve Blank.

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