How to validate a new business idea with the least possible investment?

The most exciting part of having understood customers frustrations and pains through interviews is to be able to come up with a value proposition ready to be tested and validated. This is important because without a valuable value proposition in place, no new product or business idea is ever going to work.

The thing that makes bringing to life a value proposition a critical stage is that at this point entrepreneurs and companies start spending money.
The size of the investment really depends from the type of business, but the key thing is: whatever the business is, the level of uncertainty at this stage is still so high that it’s imperative to minimize the expenditure, as it all might turn out in a massive loss.

The best way to approach this is to fake the proposition in the most credible way and test it on the field, with the objective of minimising potential losses in case something was fundamentally wrong or needs to be drastically changed.
This is a practice that Alberto Savoia called “pre-totyping“. He defined pre-totyping as “fake it and test it before you make it“. It’s quite clear what “make it” means in this case: do not necessarily start coding for months, or do not secure a premium commercial location on a busy road to open that organic restaurant. Instead, there are at least seven techniques to be explored to gather customer commitment, and possibly start collecting revenue, before putting big money on the table.
The seven techniques are roughly ordered below so that the ones requiring the least amount of financial resources are at the top:

  1. PINOCCHIO — It’s a non-functional version of the value proposition, and works particularly well where size, shape, weight, portability are the key elements to be tested. An example is how Jeff Hawkins tested the Personal Digital Assistant Palm Pilot after the market failure of the first handheld computer, the GRiDPad. In order to test the key value proposition of portability and size, he cut a block of wood to fit his shirt pocket, and he carried it around for months, pretending it was a PDA. Through that, he realised that he would have personally used it, and that he was ready to undertake the technical challenge to build it. These days 3D printers can be a lot of help for these kind of tests, and they work best if followed by a few rounds of interviews or trials with prospect customers willing to help.

The ordering of the seven techniques is really indicative, as many variables in place might make a Provincial less expensive than a Pretend-to-Own, for example. But again the key message is: before quitting a day-job, jumping with both feet on a business idea re-mortgaging the house, or committing with the execs a budget for those deliverables, it’s worth de-risking the launch of a new business or a new product by being Lean: fake the proposition making it as much credible as possible, and see if it gets any traction.

In case not, go back to the whiteboard, and re-work some elements of the value proposition or the target segments. But here comes the good part: you haven’t committed that much till now.
In case yes, well, that’s where the real fun starts.

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Innovation Programmes Director | Venture Builder | Exited Serial Entrepreneur

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Davide Turi

Innovation Programmes Director | Venture Builder | Exited Serial Entrepreneur