De-risking and Demand Testing

How we can reduce the risk of new ideas

Innovation can be a dark room. You want to go in, but what lies ahead is unknown. The reckless ones close their eyes, plunge in, and hope not to stub their toe while the not-so-risky ones stand outside listening for someone else to trip over the cat.

The tension between opportunity and risk can stifle even the best of intentions and greatest of ideas. In fact, 80% of CEOs said they would decline to make an investment to fuel innovation if it meant missing one quarter of earnings results.*

Yes, we know. It’s scary…and there’s a lot on the line.

Let’s be honest about innovation and risk. It’s easy to write articles and pitch work about taking big plunges and bold risks when it’s someone else’s department–or even career–on the line. As an outside partner, if we make the wrong bet for a client we can move to another one with a new lesson learned…on the other hand, our clients may lose their job.

This isn’t how partnership works. We believe our client’s future is our future. In fact, it’s the reason for our strongest core value: we’re in this together. I know this may sound immaterial to some, but it is how we run Carter Edwards & Co. To this end, we’ve created an approach and a culture that looks to limit risk for our clients and move faster (yes, it’s possible to do both).

Through some collective intelligence, client partnership, and a lot of hard work we’ve gathered some of our favorite risk-reducing activities that can help light the path in front of you.

Warm up With First-Week Prototypes

Yes, it is possible to get to a working prototype that’s been validated by users in the first week. In fact Google Ventures codified a highly-facilitated five-day process called Design Sprints that does just this. It brings in subject matter experts, explores solutions, develops prototypes and puts tangible products in front of the people using them.

Don’t let the name fool you. The “Design” in Design Sprints refers to its roots in the human-centered design practice and putting the needs of people first.

At Carter Edwards & Company we’ve co-opted the Design Sprint recipe to do much more than solve design problems. We’ve been using Google’s Design Sprint framework to create technology proof-of-concepts for viability, service blueprints to validate operational requirements, and even brand sprints to test value propositions.

The outcome of Design Sprints won’t be your final product. Rather the outcome is an idea that 1) has a tangible form making for more productive conversations, and 2) includes a process that helps you test some initial assumptions quickly. The net value is that you’ve taken months of risk-taking and condensed it into five action-packed days.

Define your assumptions and run experiments

Once you have something (it could be a prototype, a customer journey, a brand promise, etc) ask yourself what about [this] needs to be true for [this] to be successful? The output of that question should be a list of assumptions.

With your list of new assumptions, create “experiments” that help reduce the risk of each. Typically you won’t be able to eliminate all of the risk associated with any given assumption, but you will be more certain. The room will be a bit brighter. If you do this right you’ll have a list of assumptions that have either been proven true (keep going), proven false (maybe you should pivot), or are questionable (accept the risk).

Here are some possible assumptions and experiments:

Assumption: Our customers are willing to pay $20/month. Experiment: Put a paper prototype or value prop in front of customers and ask if this is something they would value enough to pay for. Tip: Asking this question is wrought with bias, but you will receive some helpful indicators either way.

Assumption: We understand the regulations correctly. Experiment: Reach out to legal and policy experts for their guidance…or do your own secondary research. Tip: You’re dealing in speculative insights, but at the very least it will give you more detailed information to help mitigate risk or shape policy.

Assumption: You can borrow core capabilities from within your business. Experiment: Create a service prototype or integration test inside of your organization. Tip: The more inter-dependencies you have in an organization, the more that politics and operational friction can slow you down.

Testing Demand In-Market

Have you ever heard of the “Yellow Walkman” story? It’s a story of focus groups, demand testing, and what people say. In the late 90s Sony was testing their sporty yellow Walkman by asking customers if they liked it. The responses? “I love that yellow Walkman- it’s so sporty!” “Man, would I rather I have a sweet yellow Walkman instead of a boring old black one.”

On the way out they offered each focus group participant a free Walkman for their time. They could either take the black one or the new sporty one…they all chose the black one. The takeaway?

It’s all hypothesis until it’s live in the market

Here are some ideas that you can run quickly that feel real and get you closer to a real world test of whether people would actually choose your product instead of say so:

• Run Facebook and LinkedIn ads
  In a matter of a couple days, you can create a simple ad that puts the product/service in front of customers in a natural setting. The amount of traffic you see will help you measure how successful it is (use a 2%-3% conversion as a benchmark). Combine that with costs of the ads and you’ll be able to start understanding acquisition costs.
• Smoke Testing
  Smoke Testing refers to creating in-market prototypes that feel right, but are used to measure interest quickly. For example: when an online printing services website wanted to test new ideas around promotional material, they would create real product pages that were “out of stock”. That way they could measure traffic and “let me know when they’re available” interest to see if there’s demand. You can set up a landing page experience with this same objective in a matter of days with companies like Squarespace, Unbounce, and Google Analytics.
• Put content out into the world and measure traction
  Creating content can be daunting for some companies, but the value from seeing which content resonates, generating leads, and starting your inbound marketing strategy can give you a running start with your go-to-market strategy.

If you borrow from some of these activities, then another magical thing happens. By the time you’re ready to go to market with pilot or beta, then you’ll find yourself with a prospect-list of potential customers (through testing & landing page registrants), an inbound marketing strategy (content generated to see what resonates), and benchmark analytics (through ad placement and landing page traffic). Don’t underestimate how valuable these additional benefits can be for a pilot experience.

Don’t let pivots put you at risk

If you’re following some of the steps above then chances are you may have to pivot a few times during the course of your testing. Pivoting means that you’re making adjustments in your approach and a few of them is a good thing; it means you’re reacting quickly to what you learn.

We see a lot of clients equate pivoting with team failure. This attitude actually adds in more risk than it reduces.

While a few pivots are healthy, too many can introduce a myriad of risks; from stalled teams to a fragmented solution to pulled funding. If pivots are all too common, you may want to find the cause before blaming the symptom–or worse–the team! Here are three underlying issues that would lead to over-pivoting and the risks that come with it:

Stakeholder Mis-alignment

As a Creative Director I’ve always said creating great work is the easy part; getting everyone aligned into a single direction is the hard part.

Mis-alignment doesn’t just rear its head in reviews; it comes in the form of hallway conversations and back-office compromises. This constant tension makes any small amount of doubt a opportunity to “reset”. Here are some ways you can solve for the risks associated with alignment:

• Test demand with stakeholders through prototypes. You already have the prototypes–just spend some time with stakeholders individually and that can help iron out some issues without waiting weeks for the big reveal.
• Bring stakeholders into the process with co-creation workshops. Your project stakeholders have something to contribute, so let them. Structuring workshops around co-creating the solution is a great way to let every stakeholder feel ownership in the direction.
• Understand that we’re all trying to get to the same place. In my experience, almost every stakeholder is trying to act in the best interest of the organization. If you start to understand this–really understand it–then you’ll be able to create a stronger foundation of mutual trust.

Lack of Vision

Imagine you’re cruising down the highway, but instead of looking a few hundred feet down the road, you’re looking down your hood at the pavement lines in front of you. A single pothole may require an immediate adjustment. Another one right after might cause you to spiral out of control.

This is why we look down the road in front of us. Any minor obstacle and we can shift and recover quickly. That’s why vision is so important. It will help us navigate the obstacles right in front of us knowing that we’re still on our way to the Blue Ocean.

If you’re like me then you may have seen a lot of vision exercises that take too much time and add too little value. It doesn’t need to be that way though. You can spend anywhere between a couple days and a few weeks giving it a tangible form. It can be a prototype, a roadmap, a customer journey, or even just a simple manifesto.

Creating a vision–even if it’s just over a couple days–will go a long way to helping your team overcome short-term obstacles, reduce the risk of doubt , and manage stakeholder interference.

Putting it all together with a good plan

We do this a lot and have created a practice around innovative work and empathy with our clients. We may not be able to eliminate all risks, but through an approach based on speed, rigor, and a common understanding we can give our great ideas the certainty they deserve.

We wish we had the perfect plan for every challenge but each client and each project is uniquely different. In lieu of a perfect plan we can share our planning principles that help us deliver more certain success:

• Equal representation from creative, technology, and business: Remember that we’re de-risking for the market, customers, and your organization so make sure to have the right people that know how to dig deep on each.
• Bias towards action: Reduce planning and thinking phases in favor of prototyping and testing. You’ll learn faster by putting things in the hands of people rather than over-pontificating as a team.
• Co-create where possible: Account for workshops that bring in a broader stakeholder and customer group. Not only does it help create more effective solutions, it can create organizational contribution and alignment.

About Carter Edwards & Company

We combine Design Thinking and Lean principles to help companies move faster with customer engagement, product management, and organizational change. Learn more about us here.

* Rana Faroohar, Makers and Takers, pp.98