Did you know that most business ideas fail within the first year?
Although the absence of money and inability to execute the idea are often mentioned as reasons for failure, the root cause is usually lack of proper market research.
What makes studying the potential of new ideas difficult is that it can sometimes be almost impossible to tell a difference between a good and a bad idea.
Sometimes even the most bizarre ideas can turn out great. Think of AirBnb and Uber, classic examples of successful business ideas that people were skeptic about at first. There are also ideas that make perfect sense but still manage to fail.
Although everyone wants their ideas to be loved, only a fraction of those ideas are worth executing by your team. To learn if an idea has a chance to succeed, it needs to be validated.
In this post, we’ll take a look at idea validation from the perspective of validating a new business idea, concept or a product. Here we'll refer to all of these as ideas. We’ll also introduce some tools that you can use to discover whether or not your idea has real potential.
Table of Contents
- What is idea validation?
- How to validate an idea
- Tools for idea validation
- Idea validation success factors
- Get the idea validation toolkit
Idea validation is the process of gathering evidence around ideas through experimentation to make fast, informed and de-risked decisions.
It's a process that starts from an idea and typically ends with a paying customer. The purpose of idea validation is to expose the idea to the practicality of the real world before you build and release the final product or offering.
New ideas have unpredictable elements and if some of them go wrong, it can destroy your plans at once. Validation reduces the risk, speeds up the delivery of a value-creating service in the market, and minimizes the costs.
An idea should be validated before investing a significant amount of time and resources in developing it to avoid building and launching a product or concept no one wants or isn’t willing to pay for.
The purpose of idea validation is to make sure your idea has real demand, otherwise there’s a real risk of it becoming “just another cool idea”.
The idea must either be able to solve a real problem, fulfill its intended purpose or appeal to other incentives.
Validating the problem first and seeing if your solution can solve that problem is typically the smartest approach. Creating a solution first and only then looking for a problem it could solve, is a bad idea if you want to minimize the risks.
Google Glass is just one example of a seemingly good idea that was executed but no one really wanted or needed. Not only was it marketed badly, it also looked unattractive, and had some safety and health concerns. It’s ridiculously high price tag ($1500) didn’t make the situation any better especially when it failed to offer a clear benefit for the user. It was unclear why people might need it in the first place except for violating other people’s privacy more easily.
In some cases, an idea can be validated to:
- See if the timing is right
- Confirm that you can sell and deliver the solution efficiently enough
If no one is willing to pay for your offering, the timing might be wrong, or, it could be that it’s just not a very good idea to begin with.
Validation is a continuous process for improving your idea and doesn’t stop with the first assumption. Even if you had a real problem and a validated solution for it, there are other aspects that might need to be validated as you develop your idea:
- Adopter categories and social systems – How appealing is your idea to the relevant adopter categories?
- Compatibility – Is your idea perceived to be consistent with the needs of potential adopters?
- Relative advantage – Is the idea perceived to outperform competition? How is it perceived to be better? Is it actually better?
- Complexity – Is the idea easy to understand or does it require new knowledge and skills?
- Trialability – Can your offering be experimented before making a purchase?
- Observability – Are the benefits of your offering visible for others?
As already mentioned, there are obviously different ways to validate an idea. The best way to do so depends on the nature of that particular idea. If there isn't much uncertainty, validation might not be necessary.
However, when it comes to new business ideas, products and concepts with more risk, idea validation is highly recommended.
Validation is ultimately about testing assumptions. It’s important to test the riskiest assumption first and not to waste your time on something that doesn’t have potential. You can use the Play-to-Win strategy framework as a reference when conducting tests and making choices.
Although there are multiple different ways to validate and idea, the overall validation process is quite simple and straightforward:
In an early stage you want to focus on validating your assumptions to make sure the most critical ones for your business are true. For example, you might want to validate your target market and its potential to see if your idea is valuable and appeals to the market you’ve defined.
If, however, your assumptions regarding your market and idea are valid, you can start testing your product to learn how all of the elements work in reality.
Here’s how to get started with the idea validation process:
Just like any idea management-related activity, validation starts with defining your goals. In this stage, you’ll decide what you want to learn and what aspects to validate.
You goal can be one of the following, for example:
- Problem – Is your problem true/worth solving?
- Solution – Is your product/offer going to solve the problem?
- Features – How do the core features of your product work?
- Business model – Is your business model viable and scalable?
- Price – Is there enough demand to make your business model work with the price you’ve set? How does your pricing model work in practice?
Although these themes are common and important, they’re just examples. The purpose of your goal is to identify the most critical assumption related to your specific idea, so make sure you start with the most significant one.
For you it can be an assumption that is most likely to happen, but you can also start with an assumption that has the biggest downside or the worst expected value. Map out all your assumptions regarding your idea and prioritize the one that’s the most critical for your idea to succeed.
Let’s say your idea is to sell contact lenses online with a monthly subscription. You know that the market is growing and will be $9,2 billion in 2023, so there’s no need to do separate market validation. In this case, your most critical assumption is most likely related to the price and your goal is to learn what is the right price point for your monthly contact lens plan.
After you’ve defined your goal for idea validation, it’s time to develop a hypothesis based on that goal. A useful hypothesis is a testable statement, which often includes a prediction.
In AirBnb’s case, for example, its main critical assumption was that people are willing to stay at a stranger’s house and that home owners are willing to rent out their homes for strangers. For AirBnb, this was their most critical assumption because the entire idea depends on other people willing to share their homes.
Although house-swapping was already a pre-validated concept and an efficient way to travel with little money, AirBnb’s concept was different. AirBnb's idea was validated before they even had one.
They were looking for ways to pay their rent when they realized that a huge conference was coming to town and all the hotels were booked up. The founders bought three airbeds to the apartment, offered their guests a bed-and-breakfast service and showed their guests around the city, which allowed them to pay their rent and validate their business idea at the same time.
Usually coming up with the hypothesis isn't difficult. What's more important is to define the minimum success criteria for the test, which isn't always easy. For example, if 8 people out of 10 would say they'd rather sleep in a hotel than on someone's couch, does that mean AirBnb's idea is invalid?
What comes to your contact lens business, your most critical assumption is whether people are willing to make a purchase online as well as the price they're willing to pay for it.
Once you have developed a hypothesis, you can actually start validating that assumption by running experiments.
The point of experimentation is to find the fastest and cheapest way to test your assumption in practice. An experiment is a test or a set of tests that measure the effects of a hypothesis and reveal whether or not you should proceed with your idea.
In other words, an experiment is conducted to learn if your assumption is or isn’t true. Often, the initial idea is just a starting point for a better and more refined idea because you almost always need to improve it.
When you’re going through the validation process, you have a chance to learn how to make your idea or product even better.
There are tons of different ways to conduct an experiment:
- Build an MVP (Minimum Viable Product)
- Landing page
- Physical prototype
- Fake it 'til you make it/ Wizard of Oz
- Crowdfunding platform (such as Kickstarter)
- A/B test (make different versions of your advertising campaigns to see which one performs better)
If you want to validate a problem, conducting interviews and surveys are often enough. If, however, you're looking to validate a product or a service, you might want to use Wizard of Oz prototyping or similar.
When validating a price, you might want to create a landing page and conduct A/B tests. You might also want to try selling a fictitious product and use accepted offers as a measure.
When you're doing research, ask for feedback; ideas, responses, comments and look for common answers to the following themes:
- People who say they’ll buy your product = Target market
- What people are actually paying for it = Price
- People who will buy/keep buying it = Demand
In this stage, you should confirm your assumption to be either valid or invalid. If your idea has potential, and the most critical assumption is correct, you can start refining your idea.
Although validation isn’t always a guarantee of success, as it’s the execution that matters, having validated the most critical assumptions and using the data you’ve gathered in the validation process will definitely help when you start developing and implementing your idea.
Validating an idea can easily become a chaos without the right tools and systematic methods for mapping and testing your assumptions.
Luckily, there are some good idea validation tools that can be used for keeping track of your validation process:
The Validation Board is a tool that can be used to validate and pivot your assumptions and to track those pivots. With the help of the Validation Board, you can define customer, problem and solution hypotheses, and identify the core assumptions related to these aspects.
The Validation Board can be a useful tool for those who are looking for a systematic and active way to set goals and make decisions about whether you should proceed with the idea or pivot.
The tool is very actionable and can be used to track multiple hypotheses at once.
Another tool that can be used for validating an idea is Validation Canvas by Lean Service Creation.
This tool can also be used to test assumptions, but it's different form the Validation Board in a sense that instead of looking for supportive arguments to prove that you idea is good, the point of Validation Canvas is to prove that it’s not.
Validation Canvas helps you find answers to the following questions:
- How to validate your value proposition?
- How to validate your customer grouping?
- How to validate your customers’ willingness to pay?
- What are the results?
- What can you conclude?
- Should you proceed with the idea?
In case you also need other tools for validating your idea, the Validation Canvas works well with those. Both the Validation Board and the Validation Canvas are good and simple options for validating and keeping track of your assumptions.
Although each idea is different and most of them often cannot be validated by using the same methods, there are some general tips that can help succeed with the process.
People who build businesses are almost always optimists, and while you definitely need a certain amount of optimism, having too much of it won’t get you very far.
There are far more bad ideas than there are good ones and even for the good ideas, there are far more bad solutions than there are good ones. The only way to get past this issue and to make better decisions is to be highly critical of your own work.
Keeping the process simple and effective is the key to fast learning. Often your assumptions are different from your actual challenges. So, instead of listing every single assumption and spending tons of time making sense of them, treat your process as a simple, general framework.
Pay attention to picking the right selection criteria and metrics and focus on the most essential aspects of your business first. You have plenty of time to focus refining the details once you know your business idea is solid and the big picture works. The point of validation isn't to come up with a perfect solution but to make sure your idea has potential.
The point of validation isn't to come up with a perfect solution but to make sure your idea has potential.
When validating a new idea and gathering feedback, involving the right audience is the key.
Although your nearest and dearest are the first ones to support your idea, friends and family aren’t usually the most reliable source of feedback.
Your idea validation process depends on the ability to gather accurate information regarding your idea. Therefore, finding the right people who know enough about the business or the topic of your idea is necessary.
For example, if your offering is a B2B product for the Fortune 500, you probably want to reach out to them.
Idea validation should be done in a systematic manner to keep track of the assumptions you have regarding your idea, as well as the measurable results you’ve received from testing it. One way to increase your systematism is to use a dedicated innovation management software for gathering, developing, evaluating and validating new ideas.
Viima, for example is a cool tool that helps manage ideas throughout the entire validation process. You can gather all validation data in one place, including feedback, validation boards, evaluation criteria, etc.
It’s very unlikely you’re the first and only one coming up with a new idea and there’s a chance that there are several people who have had the exact same idea before you.
Being aware of what happened to already existing ideas is smart as it can help avoid some of the critical mistakes already made. In most cases, having no competition isn’t a sign of originality and innovativeness.
Often, either the timing or execution of the previous ideas were poor, or the ideas were bad to begin with. It doesn’t matter how well your product is executed if no one finds it useful.
So, look at the players in the market and how they do things. Is there something you can learn from previous mistakes or your current competition to avoid making the same mistakes people have made before you?
Idea validation is done to minimize the risk of implementing ideas no one wants or isn't willing to pay for.
The purpose of idea validation is to make sure your product or business idea has potential and the most critical assumptions regarding your idea are valid. The point is to find the fastest and cheapest way to test your assumptions so that you can decide whether you're going to proceed with the idea or pivot.
What makes validation difficult is that often your assumptions are different from the real challenges. Because there are tons of different aspects you can validate, the ability to identify the most significant ones requires a systematic approach.
This post is a part of our Idea Management blog-series. In this series, we dive deep into the different areas of idea management and cover the aspects we think are the most important to understand about managing ideas.
You can read the rest of the articles in our series covering idea management by clicking on the button below. Don’t forget to subscribe to our blog to receive updates of our upcoming content!