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Developing new products is tough. It’s tough not only for startup teams but also for well-established businesses. To address a high rate of failure, founders started adapting frameworks that could increase their chances to build products people need. One of such frameworks is hypothesis-driven development. It’s a process of forming assumptions, making hypotheses, validating them, learning and iterating.
The first step to adapting hypothesis-driven development is to form product and business assumptions. Assumptions are ideas or beliefs that entrepreneurs assume to be true about their future startup. There are several known ways to come up with assumptions, one of which is assumptions mapping. It puts users at the very center and promotes user empathy during the process. Let’s learn more about it.
Related: How to Increase User Empathy and Build Better Products
Assumptions map as your first step in hypothesis-driven development
Assumptions Map is a time-tested framework originally designed by IDEO — the pioneers of the customer-centric approach. Sometimes it’s also called The Three Lenses of Innovation, as it’s used as a business tool to drive innovations in established companies. This framework allows business leaders and entrepreneurs to view any new product creation from these three aspects — desirability, feasibility and viability — and build assumptions around them. Forming assumptions consist of three parts:
- Running assumptions mapping workshop with the executive team. It involves key knowledge holders and decision-makers writing down their ideas on how to make a product desirable, feasible, and viable — ideally all at the same time. It can be done in the form of sticky notes inside online collaboration tools (here is a good template).
- Filling assumptions map with prioritization of which assumptions should be considered first based on importance (important/not important) and available information of how confident we’re about this assumption (known/unknown).
- Translating assumptions into hypotheses that the team will test and validate. An assumption is something the team considers to be true, it’s an opinion. While the hypothesis included an expected measurable outcome that could be easily tested with the possible target audience. A good format for the hypothesis could be “We believe that with [activity] for [these people], [this result/this effect] will happen.”
Now let’s go back to the desirability, feasibility and viability aspects of the assumptions map and discuss in more detail how to form relevant business and product assumptions for a new venture.
Related: These 4 Questions Can Help You Identify Your Ideal Customer
Entrepreneurs should have ideas on how to build user-centered experiences. Experiences that will address the most important needs of the customers, making the solution hard to replace. That’s why it’s so important to form assumptions that address the following desirability questions:
- Is the product addressing a problem that the customer is facing? Always look at how big the problem is in customers’ lives and how much time, money, and headache it saves. What is at stake if the problem goes unsolved?
- How frequent is the problem? Building a product for a one-time problem is risky. It’s much better to evaluate the possible stickiness of the product and retention, listing what can get the product there.
- Do customers actually need this problem to be solved? Will this solution be treated as a “vitamin” or a “painkiller,” a “nice-to-have” or “must-have?” Some products address problems that are more pronounced than others, which naturally increases their desirability.
Building products will always have some constraints, starting from the technology, time and budget to resources and partnerships. Feasibility assumptions unleash possible blockers. Also, they help business leaders understand what needs to be done in order to release the product:
- Technology. What kind of technology and professionals are required? Should the business hire a full-stack engineering team, or is it possible to start with a minimum viable product built with no-code? Physical resources, licenses or cloud services — are those critical for the product’s success?
- Budget and timing. Established companies might have budgets for building new products, while startups might need to look for funding. How much funding and time will it take to bring the product to the market?
- Partnerships and resources. What are the pieces that businesses need to align to make the product a success? Those are partnerships to leverage, GTM resources and support from the compliance or legal sides.
Related: The 5 Critical Components of a Great Customer Journey Map
What would be the core assumptions to have a profitable business model? Unscalable business models with unreasonable monetization will quickly hit a dead-end for the new product. That is why during the assumptions mapping workshop it makes sense to focus on scalability and unit economics.
- Market opportunity. How big is the market for the planned product? What is the value of the problem that the business is planning to solve and how much will potential customers be willing to pay? The answers to the above will give assumptions about the growth potential for the solution.
- Revenue streams and channels. What are all the marketing channels to reach customers and what will be the monetization model? Once initial revenues are made, what is the plan to increase profitability?
- Cost structure and unit economics. Is the pricing attractive compared to direct and indirect competitors? Is the cost vs profit ratio indicating a profitable business? What would be acceptable customer acquisition costs? How are you charging your customers? Will the product have a free trial or freemium?
Assumptions mapping is a simple and easy-to-use framework to set up initial assumptions. It also covers a comprehensive set of questions for questions to address, which on one entrepreneurs hand allows one to have a strategic view of the product development and from another hand, requires a lot of knowledge. So when working on an assumptions map, the executive team should firstly gain a strong understanding of the target audience, their needs and desires, as well as users’ willingness to pay and business readiness to build required features.