In today’s world, many new products and services fail when they follow the traditional method of development and introduction. This involves creating a business plan, pitching the plan to investors, launching the business, and starting to sell. According to Harvard Business School, about 95% of the approximately 30,000 new products launched each year fail following this method. While the failure rate varies from one industry to another, the odds of success are still very low.
Entrepreneurs and inventors must validate their ideas before investing a lot of resources. Validating the idea can help minimize the risk of failure and increase the chances of success. The 3-step vetting process that focuses on doing research identifies a problem that needs to be solved, develops a minimum viable product for potential customer feedback, and iterates the product based on feedback. This method is faster and less expensive than developing the final product for testing, reducing the risk of failure. The vetting process redefines a startup as an organization that is searching for a scalable business model, not one that has an existing business plan that it is determined to execute.
In the past I have written about vetting your business model concept using market size, market positioning; pricing; and industry fit. This blog will focus the vetting process which sometimes is called an agile development process or a lean startup methodology that involves iterative development, continuous testing, and refinement. The build-measure-learn feedback loop is a core component of vetting. The loop includes building a minimum value product (MVP), testing it with potential customers, and using the feedback to refine the MVP until it’s optimized. Remember, success isn’t binary. You either win or learn from failing…it has been said that you can’t fix a broken wagon wheel, but you can use the parts to build a new one. By creating a simple version of the business offering and testing it with customers, entrepreneurs can quickly determine if it’s a good idea. If an idea is likely to fail, the iterative focus of vetting ensures it fails quickly and cheaply instead of slowly and expensively. This vetting method can prevent wasted time and reduce the risks when starting a business.
A core component of vetting using concept testing is the build-measure-learn feedback loop. The three steps of that iterative loop are:
- Build — While creating the MVP, think forward by looking for answers to: Should this product/service offering be built? Can a sustainable business be built around this set of products & services?
- Measure — After creating the MVP, take it to different customer segments, who will test the product/service offering & provide feedback. Use techniques like: Split Tests; Usability Tests; Funnel Analysis; Cohort Analysis; Search Engine Marketing (SEM). Now, use the data from the MVP & compare it to the initial idea. Use the customers’ comments & experiences to make changes to the business concept and MVP.
- Learn — Once the MVP is optimized, customer feedback & data obtained, it’s time to decide how to move forward with the business concept idea…the vetting decision. Is there enough interest in the idea that it makes sense to create a business & go through product development? Or must the idea be changed? Or should you pivot to a new business model concept?
There are several benefits to conducting concept testing. First, it helps companies identify potential issues with the product/service concept before it is launched. This can save the company time and money in the long run by avoiding costly mistakes and ensuring that the product is well-received by customers.
Second, concept testing allows companies to understand customer needs and preferences. By gathering feedback from potential customers, companies can identify which features are most important and what changes should be made to the product to better meet their needs. This can help companies create products that are more tailored to their target audience, leading to increased sales and customer satisfaction.
Third, concept testing provides companies with insights into their competition. By asking potential customers about their current product preferences and what they like and dislike about existing products, companies can gain valuable insights into the strengths and weaknesses of their competitors. This can help companies identify opportunities for differentiation and develop products that stand out in the market.
When vetting a business model using concept testing, it’s important to use the right methodology. This will depend on the type of product being tested and the target audience. Qualitative methods such as focus groups and in-depth interviews can provide rich insights into customer preferences and behavior, while quantitative methods such as surveys can help companies gather more standardized data from a larger sample size.
Overall, concept vetting is an essential part of the product development process that can help companies create products that are more successful in the market. By gathering feedback from potential customers and using this information to refine the product/service, companies can improve their chances of success and ultimately drive growth and profitability.
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