How to Test New Innovation Ideas

In our last episode, you might remember that we looked at how best to identify innovation opportunities – why ideas aren’t always all that great, what makes a good opportunity, and how to plan out the opportunities you want to pursue.

You beautiful people then told us that on our next episode, you wanted us to focus on what happens next! Once you’ve spotted some high-value opportunity areas, how do you test ideas in that space?

As we spend something like 75% of our time here at Future Foundry doing just that, were more than happy to oblige.

So in this post, we’re covering a few key lessons:

1. Why business innovations fail (usually by assuming too much and testing too little).
2. Why blind faith is NOT an innovation strategy (aka why CNN+ failed so spectacularly).
   
3. The three things you must test for before going to market (desirability, viability, feasibility – get these tattooed on your forehead)
   
4. How you actually test innovation ideas and experiment in an effective way.

First Thing's First

To understand how to experiment effectively, we have to understand why things go so wrong – usually, it’s because companies have failed to check (and kill) their assumptions.

It’s a bit of a cute quote, but remember: assuming makes an ‘ass’ out of ‘u’ and ‘me.’ Smell-o-vision, Google Glasses, and Betamax all took products that weren’t feasible, viable, or desirable to market, and they flopped.

These ideas all died tragic deaths because they missed out on one crucial thing. They didn’t tick all the boxes. When it comes to successful innovation, you have to have a product that’s viable, that’s feasible, and that the customer genuinely wants.

Two out of three – well, that’s just plain bad. It might be a feasible, viable idea, but if your customer doesn’t desire it, then it simply won’t sell. Could be that your idea is sought-after by your customer, but your solution is too complex to roll out in a cost-effective way.

Assumptions are what get in the way of innovators being able to tick all these boxes. That’s why testing your assumptions is of paramount importance.

Lessons from CNN+

Let’s take a look at CNN+. We often say here at Future Foundry that ideas without evidence are pointless because they are.

Earlier this year, the world’s most trusted news brand, CNN decided to launch CNN+ - a paid-for streaming news service which would be the network's answer to similar services.

Within three weeks of launch, having spent around $300m with McKinsey - it was thrown out.

McKinsey told CNN that by charging $6 monthly or $60 annually they could expect two million U.S. subscribers in the first year and that the domestic subscriber base could grow to 15-18 million in the first four years.

In reality, less than 10,000 people per day were watching the service. The cost? That’s $30,000 spent per viewer per day. Yikes.

In short, CNN decided to invest in a streaming service that required about 4.5 million subscribers to break even while “free” CNN - which you can access everywhere - captures fewer than one million viewers a day.

What has gone wrong here? Well, they hadn’t tested the assumptions behind these claims and gathered evidence for them.

Sure, CNN could easily spin up a streaming service, but they had no evidence around desirability. Did people really want more round-the-clock news, that they have to pay for, let alone capture 4.5m subscribers, who’d pay $60 annually for the privilege?

Their business case was built on blind faith.

Desirability, Viability, Feasibility

Don’t be like CNN (and definitely not like McKinsey, for that matter.)

Ask yourself the following questions.

1. Is my idea desirable? Do people want it because it solves a real unmet or underserved need? That enables you to create value for a customer.
2. Is my idea feasible? Do I know how, both technically and organisationally, we will deliver and capture that value?
3. Is my idea viable? Am I able to capture that value and deliver a financial return back into your organisation?

Lastly, you have to have evidence for all of these things.

Why? Because…

• Things that people want, that you know will generate a return, but that you don’t know how to build? That’s impossible…
• Things that people want, that you know how to build, but you don’t know whether it'll generate a return? That’s fantasy…
• And finally, things that you know how to build and generate a return, but you don’t know whether anyone wants it? That’s pointless…

Remember – just because you can do something, doesn’t mean you should.

Testing, Testing, 1…2…3…

We’d like you to burn your business plans.

Yes, it sounds wild, but bear with us. Traditional companies and dinosaur consultancies leap to creating a business plan once they have a (usually untested) idea. They set their hopes on a mythical linear path that takes them from idea to revenue.

This is a terrible plan! Going from idea to value is never, ever a straight line – it’s more like a spider’s web at a roller disco: squiggly.

So knowing this – how do you go about testing new ventures, products, or service ideas?

Kill Assumptions

Firstly, let’s recognise that you don’t actually have an idea. Instead, what you have is a set of assumptions. You have assumptions about:

• Who your customers are
• What the customer relationship might look like
• How you might reach those customers
• What your value proposition is
• Which key resources you’ll need to leverage
• What key activities you’ll need to undertake
• Which key partners you might need to work
• How much your idea will cost
• And how many customers there are, and what they might pay

We like to use Strategyzer's Value Proposition Canvas template to help flush out your preconceived notions about the above.

You can see where we’ve mapped out those three key considerations – desirability, feasibility, and viability. Now we map them against four criteria – importance/unimportance, high evidence, and low evidence.

Your next step is to take the notes in the upper right quadrant (high importance, low evidence) and test to see how those ideas relate to desirability, feasibility, and viability because these are your riskiest assumptions.

Choose experiments that will help you either evidence or kill your assumptions. Here are some of our favourites:

For desirability, use tests like…

• Search trend analysis (seeing what problems customers are looking for help with or understanding which areas are growing in popularity and where geographically they’re growing)
• Discussion forums (enabling you to talk through and test potential solutions with customers in a place that they’re engaged with looking for that solution is super helpful)
• Explainer videos (particularly helpful when you’re trying to get customer feedback on a complex journey or service offering)

For feasibility, use tests like…

• Expert interviews (where you run discussions with internal experts or external subject matter experts to understand the ‘how’ of your idea)
• Single feature MVPs (where you’re building out the most valuable feature of your proposed idea so that you can understand how to make it work)
• Mash-ups (where you’re plugging your front-end proposition into existing backend fulfilment services, for now, to understand how it would work.

For viability, use tests like…

• Crowdfunding (where you can find out how much people might be willing to pay for the solution is helpful)
• Split tests (where you can test a variety of not just different prices but also pricing models)
• Pre-sale (where before you offer your solution you see how many people are willing to pay for the solutions)

Pro tip – check out our episode here which contains a bonus, real-life example of what these tests looked like in action for one of our retail clients!

All Together Now

You’ve tested your assumptions. You’ve gathered evidence. You’ve analysed your idea for desirability, feasibility, and viability.

You now need to consider other things, like:

1. Validating your proof of concept by using data, and creating a first version of the idea that you can test with customers.
2. Creating a sensible go-to-market plan and a blueprint for getting the idea to market that’s grounded in reality.
3. A commercial case for the higher-ups, with a compelling argument for investing (or sometimes not investing - which is equally valuable!) in the idea.

Now, that’s easy to distil into bullet points, but the crux here is that without testing your assumptions, measuring for desirability, feasibility and viability, and experimenting cheaply and quickly, you won’t be able to do any of the above.

Got a question about any of the above, or fancy booking a call? You can do that right here.

Oh, and PS - the good news is that you don’t actually have to do any of the above on your own.

At Future Foundry, we do this work with clients, helping them rapidly test ideas to reduce the chances of failure from 90% to 0%. Find out more here.