International Seminar on 13th & 14th November 2016

Review of the book "Testing business ideas"

Testing Business Ideas is part of the Strategyzer business strategy book series, which includes the popular Business Model Building and Value Propositioning by Alexander Osterwalder and his colleagues.

At the time of writing this review, "Testing Business Ideas" has not yet been published in Russian, and it cannot be bought in Russia at all, so I think it will be interesting to see what is inside. I have no task to retell the book. It is more of a general overview that will give you an idea of ​​the content and help you decide if you should buy it.
By the way, a review of the Lost Ways Book can be read here.

As the name suggests, the book talks about testing business ideas, namely, about how to test their relevance, feasibility and viability. The authors point to corporate innovators, start-ups, and solopreneurs (solo entrepreneurs) as the audience for which it will be useful.

The book is divided into 4 parts: 

1. Preparation and development (Design).
2. Testing.
3. Experiments.
4. Mindset.

Parts 1, 2 and 4 seem to me to be more theoretical and may be more useful in a corporate environment. It talks about the importance of testing business hypotheses, why do it at all, how to assemble a team, and provides various cards for formalizing hypotheses that can be used for agreement within the company.

Part 3 (Experiments) is more hands-on and describes the different types of experiments that can be used to test business hypotheses. This part of the book is the longest and contains a description of ways to test ideas. Who needs the most applicable and practical - you are here.

More details about each section of the book:

Development

This part explains how to assemble and prepare a team, how to identify ideas for testing.

The authors suggest using the following algorithm:

• Generation of ideas (Ideate) - the formation of the largest possible list of hypotheses for testing.
• Business prototyping (Business Prototype) - reduction of the list of hypotheses and their detailed elaboration. The authors suggest using business model and value proposition templates for such elaboration.
• Assess - analysis of the resulting prototypes by answering questions like "Is this the best way to satisfy the needs of the consumer?" or "Is this the best way to monetize our idea?"

Testing

This section is about how to develop hypotheses for testing and to prioritize them, to organize the testing process itself.

The authors say that when testing business hypotheses, we can test 3 aspects of our business ideas:

• Demand (“Do they want it?”) Is a test of whether consumers want your product.
• Feasibility ("Can we do it?") - can we make such a product.
• Viability ("Should I do it?") - Is the product capable of making us money.

All this can be superimposed on the business model template of the same Strategyzer company:

What is a good experiment?

An experiment is a way to reduce the risk and uncertainty of a business idea. A good experiment should be repeatable and yield practical and comparable data.

A well-designed experiment consists of 4 components (hypothesis, test method, metrics, success criteria), which can be formalized in the form of such maps:

Experiments

This section is the largest and is a catalog of hypothesis testing methods. There are several dozen of them here, and they are all divided into two types based on goals:

• Discovery - to quickly find general direction and test basic hypotheses.
• Validation - checking the chosen direction and looking for strong confirmation of hypotheses.

Each experiment is described in detail. Described how to prepare for it, conduct and evaluate the results. Criteria for evaluation:

• cost of the event;
• evidentiary force;
• preparation time;
• time to spend.

Examples from real practice of companies are given.

There is no point in listing these experiments. I will give one example that I remember, and which I did not know about before. The experiment is called the Pinocchio pretotype. Pretotype is a preliminary prototype.

The founder of Palm - a company that was one of the first to start producing pocket personal computers - Jeff Hawkins, before launching the Palm Pilot, decided to check whether he would use such a device himself. To do this, he carved a model out of wood, pasted interface printouts on it, and instead of a stylus used a chopstick. Hawkins carried this wooden model with him everywhere, and whenever he needed to make an appointment, make a note, or find the right contact, he took the wooden "computer" out of his pocket and pretended to use it. Thus, the developer checked how many times a day he uses the device, for what tasks, etc.

As a result, the device was released with a focus on the features that were most in demand based on the results of the experiment.

Mindset

This is the final part, which describes some of the organizational aspects of testing, as well as common mistakes and how to avoid them.

Outcome

The practical applicability of the book directly depends on the type and scale of your business. If you work for a large company, you will find formalization tools here that you can use to work out hypotheses and how to test them, agree within the team, and justify before management.

If you're a startup, organizational descriptions can help you avoid the typical startup chaos of everyone doing everything, and experiment descriptions can help you find new ways to test hypotheses.

If you have a small business or you work alone, then the description of experiments will be most useful. In practice, most of them will be inapplicable or you will not have the time and resources for them, but this is not such a big problem, since in most cases you will still only check the demand for the product by the target audience.

In any case, the list of experiments will be useful for everyone - in its original form or as a basis for generating new ideas and ways to test them.

If, like me, you are interested in Strategyzer business tools or are simply looking for new effective business modeling techniques, Testing Business Ideas is great food for your mind. The techniques described in the book are worthy, if not application, then familiarization. Therefore, as they say, it is recommended for reading and will certainly be worth your money.