Testing Business Ideas

David Bland’s work includes the product death cycle, a classic anti-pattern innovators and entrepreneurs fall into when trying to create a new product. He highlights that building what customers say they want is not the way to be successful; instead, ideas need to be tested to see what they need to succeed. In this week’s show, Barry O’Reilly and David discuss his new book, Testing Business Ideas: A Field Guide for Rapid Experimentation, including what it takes to do experimentation right.

Stick To Your Vision or Walk Away?

“It doesn’t matter how beautiful something looks, or who you think your customer is, if they don’t want it they don’t want it.” His early experience in a financial services startup taught David this valuable lesson. He says that at some point you have to decide whether to stick to your vision and pivot to another segment, or walk away. Having the market reject your hard work is humbling because you personally attach yourself to what you’re creating. However, David comments that the way to move forward is to listen to the data. [Listen from 4:40]

Being Open To Being Wrong

Your vision may need to be tweaked in some way for you to be successful, David says. As such, leaders should adopt the mindset that they’re testing their vision against reality and that they might be wrong. [Listen from 12:25]

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Unlearning Ideas About Experimentation

Barry asks David to comment on what organizations need to unlearn about experimentation. David responds that much of it boils down to leadership mindset. People usually become leaders because they are experts in some area and have proven that they can produce results. It’s an ego-driven path, David says. If you’re not careful, you can become a CEO who still thinks that it’s all about you. Barry adds that so many leaders are used to managing to output-based measures of success. Asking them to measure outcomes seems an alien concept, so they are resistant to the idea. [Listen from 18:20]

David says funding is another area organizations need to unlearn. He contrasts the traditional method of annual budgeting for projects with the concept of internal VC funding, and explains why the latter is better suited to experimentation. [Listen from 24:45]


Big Leadership Questions

Technology is changing the world so quickly that organizations need to be able to adapt. The static business model that can run for years without change cannot survive in today’s market and economy, David comments. A very important question leaders need to consider is, What would happen if a startup is created today that would make us obsolete?  Barry adds that another question leaders should ask is, What would stop us investing in this idea? It’s not enough to optimize only for the happy path; pairing it with metrics that tell you when to kill an initiative creates a clearer picture of what success would look like. [Listen from 30:50]

Start Manually

David shares the story of an SMS dating app to illustrate that you can use manual processes to test the validity of a business idea without building sophisticated features. You can use what you learn to find a strategy or automate a process to scale. It also de-risks the process, Barry comments, as you find out if anyone cares about your product, if anyone would use it, and if you should build it. Starting manually makes for safe experimentation since you’re only investing your time, but you learn so much. [Listen from 35:20]

Looking Ahead

David hopes to influence change in funding startups, as he believes that it should be based on evidence rather than emotion. [Listen from 43:35]