Mitigating risk in innovation
When you think about risk in innovation, what comes to mind? For some, it might be that a competitor finds out about your great idea before you can get it off the ground. For others, running out of money after launching a new startup might be keeping you up at night.
For Alex Osterwalder, who created the Business Model Canvas and the Strategyzer company, the greatest risk in innovation is “building something nobody wants.” From pet projects that are “doomed to succeed” as he puts it (due to internal politics), to projects that face incredible pressure to build expensive minimum viable products (MVPs) early because they are overfunded, too many innovation projects fail due to lack of adequate testing early in the process.
Thankfully, it doesn’t have to be this way, by learning established practices and processes for lowering business risk early in the process. We want to share three key resources to help you do just that.
Testing Business Ideas
In a recent Strategyzer Virtual Masterclass, David Bland guided a global cohort of learners through the robust and extensively tested methodology described in the bestselling Testing Business Ideas, which Bland co-authored with Osterwalder, published in 2019. It’s one of three books that helps innovators grow their skill set for identifying assumptions, testing hypotheses and lowering innovation risk through gathering the right kinds of evidence at the earliest stages of a new venture.
The book’s core message is simple yet profound: “Don’t gamble with your business; test it.” Bland advises innovators to adopt a sequence of tests that incrementally increase the evidence for a product’s desirability, viability, and feasibility. This approach allows entrepreneurs to make “small bets,” investing minimal time and money initially, thereby reducing the risk of significant losses.
Bland’s methodology encourages innovators to be flexible and adaptable. If a project shows little to no evidence of market desirability, it’s not a failure; it’s an opportunity to pivot or “successfully retire” the idea. This perspective shifts the narrative from fearing failure to embracing learning, fostering a culture of innovation that values evidence over ego.
One of the most compelling aspects of Bland’s approach is his focus on the ‘Say-Do’ Gap. This gap represents the discrepancy between what people claim they will do and what they actually do when given the opportunity. Bland posits that one of the key roles of business testing is to close this gap. By doing so, businesses can better align their products with genuine consumer behavior, leading to more successful and market-responsive innovations.
The Mom Test
During the Testing Business Ideas Masterclass, Bland also recommended innovators read The Mom Test, by Rob Fitzpatrick.
The Mom Test challenges the conventional wisdom of customer interviews. Fitzpatrick argues that asking customers whether they like your idea or would buy your product often leads to misleading feedback. Instead, he proposes a set of rules for crafting questions that yield honest and useful insights, even from conversations with your mom, who might otherwise offer biased encouragement.
The book’s central tenet is that good questions focus on the customer’s life and their problems, not on your idea. By asking about their experiences and challenges, you can identify whether your solution fits into their world. This approach allows entrepreneurs and innovators to validate their ideas based on real-life evidence, reducing the risk of building something nobody really wants.
Fitzpatrick’s methodology encourages entrepreneurs and innovators to be inquisitive and empathetic. If a conversation reveals that your idea doesn’t solve a real problem, it’s an opportunity to pivot or refine your solution. This mindset transforms potential failures into learning opportunities, fostering a culture of innovation that values understanding over assumption.
One of the most impactful aspects of “The Mom Test” is its emphasis on the importance of unbiased feedback. Fitzpatrick asserts that by asking the right questions, entrepreneurs can uncover the truth about their customers’ needs and behaviors. This approach helps businesses align their products with actual market demand, leading to more successful and customer-centric innovations.
Testing With Humans
Another slim book that packs a punch is Testing With Humans, by Giff Constable. This addition to the Innovator’s Bookshelf came from Healthcare innovator Todd Dunn, Vice President of Innovation at Advocate Health. It’s a follow-up to Constable’s earlier book, Talking to Humans.
In Testing With Humans, Constable argues that the traditional approach of building a product based on assumptions often leads to wasted resources and missed opportunities. Instead, he proposes a method of continuous testing and learning from customers, ensuring that the product being developed is something they truly want and need.
In keeping with the theme of this article, the book’s central principle is that customer feedback should guide every stage of product development. By engaging with customers early and often, entrepreneurs and innovators can validate their ideas based on real-world evidence, reducing the risk of building something that doesn’t resonate with the market.
Testing with Humans emphasizes the importance of human-centered design. Constable asserts that by involving customers in the testing process, entrepreneurs can uncover invaluable insights about their needs and behaviors. This approach helps businesses align their products with actual market demand, leading to more successful and customer-centric innovations.
The book addresses dealing with internal blockers in organizations where innovation isn’t being successfully driven from the top down. Constable recommends, with step-by-step instructions, how to run a “science fair” to showcase your business experiments and build excitement for the potential of business testing.
With these three books handy and guiding your innovation efforts, it’s far less likely that your teams will “build something nobody wants.” Watch this space for more book reviews and recommendations from innovators in the healthcare and other industries who are using them to get measurable, real-world results using repeatable, scalable processes.
Building on extensive experience in the fields of journalism, media production, and learning design and development, John Marc Green’s newest adventure is serving as Director of CHIME Innovation. In this role, his ongoing conversations with CHIME Members and Partners provide insights and direction to serve their interests in a variety of ways, including digital healthcare innovation journalism, professional development events and program facilitation, and on-demand educational development through CHIME Innovation.