Idea validation pyramid: 5 ways to test your business idea

When thinking about a new business idea, whether that's for a startup or a fortune 500, creating a case to go out and execute that idea is just as important as the idea itself. The problem is that most innovation managers and entrepreneurs create this business case in a silo, using assumptions and formulas put into a template to justify their idea.

There’s a good reason for this, it’s what you see on business blogs and makes the most sense timewise. After all it’s just one person's time doing some research and putting that together.

There are, though, many reasons why doing this is a bad idea. 

1. Results can be biased based on what you want them to be.
2. They aren’t real results, just what is forecast.
3. Your value proposition might not be what the market wants.
   

That’s where the idea validation pyramid comes in. This is the hierarchy of all the ways you can test business ideas and how effective they are. 

Pretotyping

You may have heard about prototyping, or building MVPs, but have you heard about Pretotyping?

This method of market validation was created by Google in 2010 and has been tested, refined and used in many top businesses around the world. And there is a great reason for that.

It saves time and money yet can still accurately predict a successful business idea.

This is because you are using reliable data and making decisions on that, rather than on opinions or forecasts - more on that later.

Pretotyping is all about finding out if people are interested in the product more than if the product can be built like prototyping does. This means you are adding an extra step to your go-live strategy, but in the idea validation process, will have a significant impact on your business.

You can make sure you focus on launching winning products that people actually want rather than just hoping for the best, whilst saving time and money because you don’t have to make anything physical.

One of the best ways to put pretotyping into action is through landing page tests, or more specifically, fake door tests. These help a company test their business ideas and gather accurate data around the market demand for the product tested.

Focus groups

This is the most well known way to test and validate ideas. You get a group of your target audience in a room (or virtually) and ask them questions based on the product you are looking to launch. 

The idea of this is that you get data directly from the audience and so can start to understand how that product might be received by them. After pretotyping, this is one of the best ways to validate ideas, but it has quite a few drawbacks.

It can be resource heavy. After all you have to either hire a company or run these meetings yourselves, which requires a room, technology, people, analysts, surveys… you get the amount of work that goes into this.

Then you also generally need to pay the audience who are answering your questions. You are taking time out of their lives to get data, so you need to compensate them for that.

Finally, the data you get is hard to analyse. Whilst it is interesting data, to hear directly from a consumer what words they use and the intent behind that, it’s not a defined piece of data that can be viewed from a strict analytical view. You have to take into account moods, personalities and your own biases.

It’s still in second place though because having these conversations can still reveal some great data and help you understand the audience better, maybe more so than the actual product.

Surveys

Surveys can be a great way to test an idea with your audience, or get feedback on potential new products and features. Within the world of idea validation, they can be used in a similar but less effective way to focus groups - less effective because there isn’t an option for follow-up questions or conversation, it’s set questions in a survey. 

The great thing with surveys is they are quick to implement. There are a number of tools out there that can be used to quickly get a survey up and running, all you need to do is get people to fill it out.

That’s where surveys can start to fall down. Getting people to fill these out without any incentive is incredibly hard to do. Even if you can, when interpreting the data, you start to have the same issues as focus groups. It can be interpreted differently depending on your biases.

The best way to use surveys is to make them quick to fill in, max at 5 questions and make the questions based on a scale rather than input. This will give you more reliable results and more engagement with it.

It means you may need to run multiple surveys with different questions to gather the entire picture, but can be a good way to understand the want for your product.

Prototype

If you are using a prototype as your idea validation, then you are either confident or don’t know a better way. After all, a prototype is all about the how of the product, more so than the why. 

Some people do this because it makes sense in some ways, you create a basic version of your product, show it to people and basically see where it goes.

The problem with this should be fairly obvious after seeing the other 3 options in this list. 

• The time it takes to build a prototype can be months or even years
• If you can’t do it yourself, you are looking at a decent cost attached to it
• You’re hoping your assumptions in the market are correct
  

Building a prototype should be a result of the market research you do to validate the want for your product. After all, with good market research, the assumptions of features or core propositions you thought the market might want could be the complete opposite.

Cliff jumping

You might be so confident in your idea and have more money than even Elon, so you say screw it to any idea validation and just build whatever you want. Maybe people will like it, maybe they won’t, it doesn’t matter to you.

Don’t get me wrong here, this has a 50% chance of working. After all you might just happen to nail the market demand and value proposition from sheer luck or an incredibly in-depth knowledge of the audience. But we would never advise doing this, at least run a survey to make sure your audience thinks the same as you. Please!

Takeaway

The main takeaway from this is that undertaking proper market research can allow you to quickly and easily test business and product ideas so you can focus on those that have a higher chance of success.