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[SOUND] Earlier in this course, we took
our initial business idea and

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expanded on it to explore all sections of
a working business model.

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What do you think our next step should be?

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The most common advice and

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what we tend to do naturally, is to start
building our product or service.

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So, that's what I should probably do,
right?

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Immediately start building my project
management software, so that I

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have a fully functional product that I can
show my customers and get excited.

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Now this software should include all the
features I listed down, and

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be all shiny and glossy so my customers
really want to use it.

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Unfortunately no, that's
counter-productive.

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At this point we have absolutely no idea
what our customers want.

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We think we know our customers because we
sat here brainstorming, but remember,

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those were only assumptions.

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You may be thinking, well I am a customer,
I am in need of this product, so

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I am sure there are others out there who
need this product too.

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Now that may be true, but you will find
that there are lots of

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people who say that they would find the
product useful, and they would use it.

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But only a small portion will actually pay
real money for

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the set of features that you offer.

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The best thing that you can do is to build
a product that you

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know with certainty that your customers
want.

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And how do you know exactly what they
want?

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By getting out in the real world and
talking to them.

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After developing our initial business
model,

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the next phase of starting a business can
be broken down into the following steps.

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Conducting an experiment to test each
assumption we built in the business model,

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engaging with customers and

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testing their understanding of the model,
understanding our customers better.

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Implementing the insights gained from
conducting each test.

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Why do we test though?

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All this seems like a waste of time and

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effort when we could be launching our
business to the public.

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Validation is an extremely important
process and

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crucial to succeeding as a business.

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Anytime spent building a product before
validating our assumptions can be

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a waste of time.

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There are many reasons why validating is a
good idea.

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We've made a lot of assumption when
fleshing out our business model.

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We need to get out and test these
assumptions, so

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that we can validate whether our
hypotheses are correct.

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Validating your ideas before you build can
save you a lot of time and

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money, by avoiding a situation where you
build a product that no one wants.

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Validating your assumptions gets you
connected with your customers.

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This is invaluable, and

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the first step towards a methodology
called validated learning.

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Validating will give you a fresh set of
eyes on your product or

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service, and help you refine your ideas.

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And finally, and most importantly, by
validating your idea with customers, you

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figure out real quick if there are people
out there willing to pay you real money.

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When we put together our business model,
we made a lot of assumptions.

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We assumed that there are groups out there
who didn't have a perfect product to

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fit their needs.

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We assumed that existing products didn't
cut it for them.

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And finally, we assumed a lot of things
about our service.

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Value proposition and all down to the
individual features.

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When validating, it's good to break all
this up into different segments so

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that we get meaningful insights.

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Test your riskiest assumptions first,

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since a lot of other things depend on
them.

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In conducting our experiments, first we're
gonna validate our market, and

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then the problem.

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My hypothesis, or assumption, is that
there are lots of small groups out there

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who find current project management
software complicated or too complex for

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their uses.

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Is this true?

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When validating our assumptions, we need
to gauge the size of the market.

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Just because a few people confirm your
assumptions,

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that's not enough to run a business off
of.

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Make sure you have a sizable market, and I
really mean sizable.

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Withe each successive filter, the number
of people that drop off will be

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quite large, so make sure your market
hypothesis stands up to a large number.

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Then we need to validate the problem.

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New customers have the problems you think
they have?

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Do they suffer the same pain points you
do?

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My claim is that existing software is
focused too much on

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either the individual or enterprises.

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There is a gap in between where smaller
organizations need certain tools, but

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they're priced too high.

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We need to get out there and make sure
that this is true.

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When validating our problem, like when we
validated our market,

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it can be tempting to talk to family and
friends, or people that you know for

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certain experience the same problems that
you have.

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Now this will wrongly influence your
learning and

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decisions, take pains to identify the
right groups of people.

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Understand how they currently solve your
perceived problem, and

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how they would like to see it solved.

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Don't force your assumptions on them,
because that pollutes your findings.

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You are not there to convince them that
they need your product,

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you just want to validate the problem and

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figure out how you can craft a solution to
fit your customer's needs.

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The experiments we design to test our
assumptions should not be complicated, and

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they should not take much time.

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They should be simple pass or fail tests
that let us quickly gather data.

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Go out and talk to a bunch of customers.

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Do they experience the same problem we're
trying to solve.

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Yes or no?

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Set a bar that you need to cross.

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For every 50 people you talk to, at least
35 need to say,

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yes, we're experiencing the same problem.

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The larger the test, the greater the pass
rate needs to be.

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If only ten people confirm that they
experienced the problem,

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that means only a smaller subset of this
may validate the product, and

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an even smaller subset will pay for it.

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Once you have validated the market and

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the existence of the problem, then it's
time to validate your product.

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Traditionally, when people think there's a
problem to be solved,

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they spend six months to a year building
something.

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Only to launch and

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find out that the product fails because it
doesn't adequately solve the problem,

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the problem doesn't exist, or the market
isn't even sizable to begin with.

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By validating first, we make sure the
product we build, and the time and

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money we invest, is actually worth it.

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If you think of these different stages of
validation as filters to our assumptions,

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then each stage of validation eliminates a
bunch of assumptions.

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The ideas that we are left with in the end
are what makes for

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a potentially successful product.

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Your thought process should go something
like this.

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[SOUND] Do consumers recognize that they
have the problem you're trying to solve?

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[SOUND] If there was a solution, would
they buy it?

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Would they buy it from us?

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And can we build a solution for that
problem?

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And how do we test these things?

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By talking to customers.

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There's no other way.

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Don't substitute Google keyword research
or

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Facebook data for actual customer
insights.

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Testing the market and your problem, the
first step, will be hard.

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You have to identify potential customers.

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Now this is important, don't just ask your
friends and family.

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Contact them and then convince them to
give you some of their time.

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You should aim to talk to around 30
customers per week during the initial test

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phases, so keep looking for potential
customers you can get in touch with.

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You don't need exactly the right customer,
you just need to find someone who

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loosely fits the hypothetical customer
archetype that you developed.

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Now that we know why we should conduct
experiments,

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let's look at how we can do that.

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But before we move on, let's recap.

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After you develop the first iteration of
your business model,

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you need to test all the assumptions.

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Validating our assumptions is an important
activity,

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because validating your ideas before you
build can save you a lot of time and

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money by avoiding a situation where you
build a product that no one wants.

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Validating your assumptions gets you
connected with your customers.

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You start by validating your market.

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If this test passes, validate the product.

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Your experiments should be simple pass
fail tests that enable you

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to quickly gain feedback and move on to
validated learning.

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Finally, all experiments should happen
through customer interaction.