After, the definition of the idea, the thorough market research and the formation of the team, businesses proceed to the next stage “Screen / Learn / Adjust” where they need to answer crucial issues for their development. The elaboration of the famous “business model canvas” follows an interesting tool in order to confine the disturbances inside the entrepreneurial environment. This tool is non other than the procedure of the “Assumption Validation”.
What is this procedure?
Initiating the planning of the entrepreneurial model, the enterprises form some hypotheses in which base their concept and their strategy. If these assumptions are not created under strong foundations and the occasion of non realization is not evaluated the consequences might end up especially damaging for the enterprise. The “Assumption Validation” is a methodology that limits those consequences by not wasting time and economic resources in non-efficient activities.
How does this procedure start?
An essential step is mapping all these hypotheses in which the entrepreneurial idea is based but also evaluate them afterwards. The evaluation is usually executed with a diagrammatic illustration of the hypotheses in a cartesian system, counting on the horizontal axis the “uncertainty / certainty” and the “impact” on the vertical one. This visualisation of the assumptions allows us to obtain a better comprehension of their characteristics.
The next step, is the classification of the assumptions based on the risk they entail for the firm and then follows the conception of various tests to measure their validity. At this point, a lot of attention is required on what the firm wishes to count but also on the criteria that are set to test the validity of the suppositions. It is worth mentioning that the methodology is interrelated with the creation of an MVP and the trial of the production process.
To understand better the theoretical context is essential the presentation of a paradigm.
We assume that there is an inventor who discovered a new way to elaborate more durable bicycles, proper for the mountain bike sport and decides to launch them on the market. The contemplation of the enterprise is captured as follows: I will produce a more resilient product which will be invoiced more expensively because of its quality. I will also receive my orders from an online platform and distribute them in co-operation with a delivery company.
Average Cost Of Production=300€
Expenditure for the site=10000€
By the moment that the concept is described with conditionals clauses the entrepreneurial model relies on invalid hypotheses.
The mapping of the assumptions is pictured below:
What kind of experiments can be conducted for the hypotheses testing?
Creation of the MVP=150€
Site’s creation with a free platform=0€
Advertisement Expenses=400€
Without the required control the entrepreneur would have spent 10300€ in his attempt to sell a bike, while with the “Assumption Validation” process in case of non-verification he would have spent 550€ (so resources are saved) and he would have learnt that he needs to pivot.
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