Many new entrepreneurs think lack of capital, inability to implement ideas, lack of sources are the reasons behind the failure of a business venture. No doubt the aforesaid factors contribute to the failure but the root cause is inappropriate to market research. Every good and bad idea has the potential to succeed and become the best but the problem lies in knowing the probability of an idea of succeeding and carving a niche in the market.
Sometimes even a strange idea can turn the tables and simple, coherent one can fail miserably. To know if your idea has a chance to succeed or no, validate it. To be more appropriate, it is not only the idea that should be validated, time, concept and a product that can also require validation.
Many new entrepreneurs start worrying about their 1000th customer when they haven’t even attracted their first one. In such a competitive market space, the entrepreneurs need to take baby steps than directly aiming for the stars. So, it is mandatory for you as an amateur entrepreneur to go through the process of business idea validation and have a business plan beforehand.
LinkedIn’s co-founder has once said, “The only way to scale is to do things that don’t scale”. Doing things that don’t scale is an approach to minimize cost, risk while maximizing success rates. Creative business idea validation requires a similar approach.
All the successful businesses were just the ideas once. For example Uber, Airbnb, Facebook, etc so as a budding entrepreneur, you also need to validate the business idea for lesser risks, more clarity about the market demand.
About idea validation
The process of idea validation includes gathering information through experimentation for well informed, fast and de-risked decisions. The goal of idea validation is just to reveal the practicality of an idea to the market before actually releasing the final product or service in the market.
The purpose: The aim is to make sure the idea has real, genuine demand else it has potential risk to become just another ‘cool idea’. I am sure you would never want this. If not, just work on my brainstorming over a business idea.
The approach: Validating the problem initially and then seeing if the solution can solve the problem is ideally the intelligent approach. If you will look for a solution first and then reach out to solve the problem, it will only waste your time, money and energy. It would be a bad idea if you aim to minimize risks.
Why it is important to validate an idea?
It is vital to validate an idea because validation helps in
- Reducing risk
- Boost up delivery of service in the market
- Reduction in cost and time
In some cases validation is also done to know if the time is right for the product to be sold, provide desired results.
Steps to validate a business idea
Here are some of the steps that you can follow to validate your business idea:
- What do you want to validate?
The idea is supported by many other factors like its features, model, price, problem, and solution. It is your call to decide what to validate first. Ideally, you should validate the problem big enough to solve. Validating a problem will initiate a solution and solve the problem.
For example, Mark Zuckerberg wanted university students to connect digitally. The problem of not being able to connect was converted into a perfect business opportunity that eventually became Facebook. The point is to identify critical assumptions and then start with the most significant problem. It is important to map out all the assumptions, then prioritize one of the most crucial ones and then work on it to find a viable solution.
- Define wise hypothesis
The hypothesis is a statement that includes a prediction. It is usually not difficult to come up with a hypothesis. But what is more important is to define the minimum success criterion for the test or the survey.
For example, Airbnb had a critical assumption that people were willing to stay at a stranger’s house and even the owners are willing to rent their homes. This was one of the most critical assumptions by Airbnb because their entire ideation relied on other people’s willingness to share their home space. The idea of Airbnb was different and validated.
- Experiment to test your assumptions
The next step is followed by experimentation. Experiments are conducted to find the fastest and the cheapest way to test the assumptions made in the second step. Experiments will help in measuring the effects of the hypothesis and reveal if you should proceed further or no with your business idea. Here are some of the ways by which you can conduct experiments:
- Conducting surveys/interviews
- A/B test – Making more than one version of a test just to see which one performs better and gives the desired results.
- Build a Minimum Viable Product (MVP) – It is a process in which a new product is developed with important and useful functionalities just to test the feedback and response of the audience. After the feedback, the actual product is designed. MVP assists in testing, designing the final product.
- Wizard of Oz method also referred to as Fake it ‘til you make it is the process in which a person conducts either a part of a service or the entire service to know if people are willing to pay for the service. This process helps in minimizing losses and prepares you well ahead of any danger in the near future.
Develop and validate
This is the final stage and involves confirmation of your assumption that whether it is valid or no. If your assumption turns out to be correct, you can step ahead by refining your ideas. Validating an idea does not guarantee success but it certainly eliminates doubts, thereby creating a smooth ride for aspiring entrepreneurs in implementing the whole process.
Every business idea is not alike and cannot be validated at the same time. So, you need to follow some general tips like being critical towards you own idea, keep the whole validation process simple, clear, focus on targeting the right audience, read and learn from others’ mistake.