Validate your hypothesis

VALIDATE YOUR HYPOTHESES

RESUMEN:

Validar hipótesis es crucial en el proceso de creación de empresas para asegurar que sus suposiciones sobre el mercado, productos, o servicios son correctas. Este proceso implica contrastar ideas con la realidad del mercado para evitar el común error de basar un negocio en hipótesis erróneas que pueden llevar al fracaso. Validar implica desde encuestas y entrevistas hasta pruebas de concepto, buscando confirmar la viabilidad y ajustar estrategias según sea necesario. Este enfoque minimiza riesgos y maximiza las posibilidades de éxito al adaptar el negocio a las necesidades reales del mercado. Los emprendedores deben identificar y validar todas las hipótesis claves mediante un plan detallado que incluya investigación de mercado, pruebas de producto y feedback del público objetivo. La validación no siempre es necesaria en casos de baja incertidumbre o experiencia previa, pero en general, es una etapa recomendada para cualquier nueva empresa.

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What is a hypothesis?

The ideas we have in our heads must be checked against reality!!! Everything we have imagined in the creation of our company are only hypotheses that are worthless if we do not validate them with the market. Hypotheses are those facts that we believe to be true in our heads but that we are not really 100% sure about because we have not tested them. It is a very serious and very frequent failure to create a company on the basis of an erroneous hypothesis, for example, imagining customers that do not exist, or trying to cover needs that are not true, or creating a solution that does not provide a sufficient solution. The greatest number of failures occur in entrepreneurs who create a company that does not get customers: because there are no customers, or they don't have the imagined need, or they don't like the solution provided... or all at the same time. The first step to start validating is to know how to identify the assumptions you have made in your new company (+).

What is validating your hypotheses?

Validating hypotheses is a process of testing whether the assumptions or theories you have about a product, service or market are true. In the context of a new venture, validating hypotheses is essential to minimise risk and ensure that you are working on something that can really succeed in the market. The methods to validate hypotheses can be very varied, from surveys and interviews with potential customers to proofs of concept with prototypes or minimum viable versions of the product or service. The aim is to obtain concrete information and data to test whether the assumptions are correct and, if not, to adjust the company's strategy and approach.

Why does an entrepreneur need to validate his hypotheses before setting up his company?

Validating assumptions before setting up a company is essential to minimise risks and maximise the chances of success. If an entrepreneur does not validate his or her hypotheses, he or she could waste valuable resources on an idea that is not viable, which could lead to the bankruptcy of the company. Validating assumptions It also helps the entrepreneur to better understand his market, to adjust his business model and to develop a solution that really solves the needs of the customers. In short, the validation of hypotheses is a a critical part of the business creation process and can help entrepreneurs minimise risks and maximise the chances of success.

Steps to VALIDATE your business model:

Develop the validation plan

Develop the validation plan of your company is the first thing you have to do during the creation of the CANVAS of your business model during sprint 1 of the acceleration programme. 

Validar tu CANVAS

Validating your CANVAS is much easier if you answer in writing to the questions included in the deliverable "validation plan". Follow the order we propose! 

      • Use your deliverable to answer the key questions of your validation plan.
Present and receive feedback from your peers: 
      • Share the drive file of your VALIDATION plan with your programme partners, allowing them to comment and offer suggestions for improvement. (see+).

DEFEND YOUR VALIDATION PLAN IN THIS WEBINAR (watch+).

  • Participate in the planned webinar where each entrepreneur can present his or her financial plan and receive feedback from others and the expert speaker (see+). This webinar will allow you to receive additional feedback and gain a broader perspective to validate and learn by collaborating on the other projects.
  • Improve your Validation plan by taking advantage of all the feedback received (see+).
  • With the feedback obtained, adjust your validation plan as necessary, focusing on validating all the hypotheses you have identified. 
  • Consult your doubts at wikiTIPS (see+) If a query of yours does not get a good answer, don't worry, because an expert will take care of it. 

INDIVIDUAL SESSIONS WITH YOUR MENTOR OR ADVISOR

  • Present your updated validation plan to your mentor or advisor and ask them to insert written comments in the file you will share with them as a commentator. 

ACTION PLAN

  • Write down all the activities you have to carry out to complete the validation of your business model, and for each activity estimate the start date, duration, who is going to carry it out and its budget (if there is a cost).

FINAL REVIEW OF YOUR VALIDATION PLAN AND DELIVERY OF THE DOCUMENT

  • Make a final review of your validation plan, making sure that it is realistic and complete, and that it is clear what is already validated and what is not - and what is not - how and when you will validate it.

When is it necessary to validate and when is it not necessary to validate hypotheses in a new venture?

In general, it is advisable to validate all key assumptions in a new venture before making major decisions and investments.

HOWEVER, THERE MAY BE CASES WHERE VALIDATION IS NOT NECESSARY OR NOT POSSIBLE, FOR EXAMPLE:

  • In cases where the risk of failure is not high and the cost of validation is high, some hypotheses can be left unvalidated.
  • If the company already has experience in a certain sector or activity, it may not be necessary to validate some assumptions that have already been proven in the past.
  • In some cases, it may be impossible or impractical to validate certain assumptions before launching the business. In these cases, the option may be to carry out continuous validation and adapt the strategy according to the results.

In any case, it is important for the entrepreneur to be aware of the risks of not validating key assumptions and to make informed decisions with as much knowledge as possible.

THERE ARE SITUATIONS WHERE IT IS NOT NECESSARY TO VALIDATE THE ASSUMPTIONS IN A NEW COMPANY, FOR EXAMPLE:

  1. When you have previous experience in the market: If the entrepreneur has worked in the same market or in a related industry, he/she may already have an in-depth knowledge of the customers, the competition and the business model. In this case, the hypotheses may be more precise and will not require as much validation.
  2. When it is a line or brand extension: If the new venture is an extension of an existing product line or brand, it is likely that many of the assumptions have already been validated in the past.
  3. When a solid data base is in place: If the company has access to a solid and reliable database that provides detailed market and customer information, assumptions can be more accurate and will not require as much validation.

In general, it is important to remember that it is always advisable to validate assumptions before launching a new venture, as this helps to reduce risks and increase the chances of success.

Steps to validate your company (see+ deliverable)

These are the steps you must take to validate your hypotheses, during the acceleration programme you will have to complete the deliverable we give you with these questions.

EXAMPLE OF VALIDATION OF A NEW COMPANY

Suppose an entrepreneur wants to create a mobile application to help people learn languages in an easier and more fun way.

BEFORE STARTING TO BUILD THE APPLICATION, THE ENTREPRENEUR HAS SOME HYPOTHESES THAT NEED TO BE VALIDATED:
  • Client hypothesis: The app's target audience is university students and young adults looking to learn a new language in a fun way.
  • Problem hypothesis: Students find it boring and difficult to learn languages using traditional methods such as textbooks and online lessons.
  • Solution hypotheses: The application will provide interactive games and challenges to help students learn languages in an easier and more fun way.
TO VALIDATE THESE HYPOTHESES, THE ENTREPRENEUR CAN CARRY OUT SOME ACTIVITIES, SUCH AS:
  • Conduct surveys of university students and young adults to confirm that they are looking for a more fun way to learn languages.
  • Conduct in-depth interviews with some of these learners to better understand their needs and wishes in relation to language learning.
  • Conduct market research to analyse the demand for language learning applications and the competition in the market.
  • Create a minimum viable version (MVP) of the application with some basic functions and ask learners to test it and provide feedback on its usability and effectiveness in helping them learn languages.

Based on the results of these activities, the entrepreneur can validate his hypotheses and decide whether to continue with the development of the application or to pivot his idea based on the feedback and results obtained.

ANOTHER EXAMPLE OF VALIDATION OF AN ENTREPRENEUR'S HYPOTHESIS

For example, imagine an entrepreneur hypothesises that there is a market for his new mobile application that helps people maintain a healthy and balanced diet.

TO VALIDATE THIS HYPOTHESIS, THE ENTREPRENEUR COULD CARRY OUT THE FOLLOWING STEPS:
  1. Market research: the entrepreneur can conduct market research to determine if there is a real demand for their application. This may include online surveys, focus groups or individual interviews with people who fit the profile of your target audience.
  2. Proofs of concept: Once research data has been collected, the entrepreneur can create an early version of the application for proof of concept testing. This will allow users to experiment with the application and provide feedback on its functionality, ease of use and perceived value.
  3. A/B testing: the entrepreneur can also carry out A/B testing on their website and/or mobile application to test different variants and see which one attracts more users and generates more interaction.
  4. Data analysis: As tests are carried out and data is collected, the entrepreneur can conduct a thorough analysis to determine whether the results support his original hypothesis.
  5. Iteration: If the data does not support the original hypothesis, the entrepreneur can make adjustments and pivot the idea. If the results are positive, the entrepreneur can move forward with the development and launch of the application.

The process of hypothesis validation for an entrepreneur may involve a series of steps that may include market research, concept testing, A/B testing and data analysis. It is important to carry out a rigorous process to validate hypotheses before making important decisions about the development and launch of a new company or product.

APPLY THIS TIP TO YOUR PROJECT

NOW THAT YOU HAVE LEARNED HOW TO VALIDATE HYPOTHESES, APPLY IT TO YOUR PROJECT BY REFLECTING ON THIS QUESTION:

  1. With how many real customers have you tested your product/service?
  2. Which parts of your model are untested ideas or hypotheses?
  3. What hypotheses do you not have validated?
  4. What have you already validated?
  5. Indicate how you will validate each of these most frequent hypotheses: 
    1. Who really is the customer?
    2. What problems does the client really have?
    3. How many potential customers are there?
    4. What is the conversion rate (how many prospects become customers)?
    5. Is the customer willing to pay for the service/product?
    6. Where are the customers?
    7. How do we access customers?
    8. How much is the customer willing to pay for the product/service?
    9. How do you attract customers?
    10. How do we make our product/service known?
    11. What product features do they really value/use?
    12. Are the necessary resources (staff, funding, etc.) available to the prospects in a timely manner?

QUIZ

THINK ABOUT YOU

THINK ABOUT HELPING OTHERS

COMPARTE

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Picture of Jose Navarro

Jose Navarro

Activating creativity and innovation through gamification.
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COMENTARIOS

  1. José Luis Prieto Calviño

    Key point: Build the business model on solid and strong foundations.

  2. Pablo Olivera Faix

    Interesting post, especially when they give us options to another study.

  3. Humberto Morales Rocha

    If you do not do a complete and correct hypothesis validation, the probability of success in your project is reduced to below 50%. To mitigate this risk, you need to be clear about how you validate. That is, to perform simple exercises to test the reality, to see if we have got it right, and if we need to pivot and change the hypothesis. If we create a company from a wrong hypothesis; this fact leads to lose a lot of money and fail as an entrepreneur.

  4. Luis-Fernando Robledano-Esteban

    I realise that this is the process which is wound in a trial and error way. With EUROPEA.RED we help to get funding and in particular with ER-Rocket one can receive opportunities that fit one's profile, but are we willing to invest time in this search, are we willing to pay? If the answer is no to both questions, it probably means that you are not really convinced about entrepreneurship or your project (but you want others to be, by investing time or money).

  5. Lorena (CEO & Co-Founder)

    Always very important: build an MVP on already validated hypotheses and not on assumptions (the sooner we abandon our attachment and infatuation with our project, the more objectivity we will gain!)

  6. Miguel Mateos

    Very interesting post

  7. naara

    creativity and innovation is good rewarding building a strong and competitive model. complete correction and validation of hypotheses, the probability of success of the project reduces under 50% and not of its position requires to be clear. How do we validate ? If we create a company out of mistakes and failures we will lose a lot of money. Being more objective will give us more opportunities.

  8. Elvis Salavarria

    The validation of hypotheses and ideas is a fundamental step that every startup must take before investing in a product or service in order to minimise costs and avoid losses.

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