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Testing New Business Ideas: Learnings from OWLET Part 1

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We often use the OWLET team video from the International Business Model Competition in 2013 to illustrate how to de-risk new ideas, cheaply and quickly. Let's unpack together the most important principles to follow when testing new business ideas.
What can we learn from Owlet on testing new business ideas?

At Strategyzer we often use the Owlet video (a pitch that led the Owlet team to win the International Business Model Competition in 2013) when we train business teams on how to execute innovation sprints.

First, we apologize to team members in advance, telling them that a group of innovation professionals like themselves with access to corporate knowledge and a wealth of resources will probably not learn much from a group of inexperienced students, but we show them the video anyway. Of course, this is a set-up as there is so much to learn in this 10 minute video!

In this post, I want to highlight some key principles related to testing new business ideas that are superbly illustrated by the Owlet video.

The first: Trust the testing process, not your vision!

owlet-4


* Co-founder Jake Colvin explaining how Owlet’s most critical hypothesis proved wrong and why they had to pivot their business model after one week of testing.


Success in innovation and entrepreneurship is based on solid testing. Notice how little time the Owlet team spends on selling their vision and business idea.

Instead, they focus on explaining how they de-risked their most critical hypotheses by running a number of experiments, getting solid evidence and insights and finally acting accordingly - even when it means letting go of core aspects of their initial vision.

So, within the first couple of minutes, the Owlet case study already resonates two convictions of ours:

  1. Don’t fall in love with your initial idea

  2. Innovation is a constant iteration between design and testing, enabled by a solid testing process.

owlet-4

* Colvin explaining why they tested market risk first before testing the technology risk

When you start testing your hypotheses, should you start with desirability hypotheses, feasibility hypotheses or viability hypotheses?

So many teams we work with are drawn to testing feasibility hypotheses first. We always strongly advise them against this.

You want to know why? Because many startups work on products nobody wants.

Innovation teams can avoid all the wasted time, resources and effort by applying one simple principle: start with testing desirability hypotheses!

If the tests show that your business idea has traction then keep going. But if no one wants your product or service then you have learned something valuable without having to spend much time, resources and effort.

By starting with market risk, i.e. desirability hypotheses, the Owlet team was able to learn within a week that their initial business idea – selling a wireless pulse oximetry device to hospitals - would never work and pivot their value proposition accordingly. In the course of 6 weeks they almost entirely de-risked the desirability of their business idea, even before building anything. Pretty impressive!

Here’s another blogpost on how to systematically reduce the risk of new business ideas, if you’d like to dive deeper.

In this first post on key learnings from Owlet we saw how the first few weeks of their entrepreneurial journey illustrate two key principles: i) trusting the testing process, not your initial vision and ii) testing desirability first. Stay tuned as we’ll cover more in the second part of this post .

In the meantime, if you want to go further on our thinking on testing, join the prototype of our new testing course, and if you want to go through the same process with your team please check out our Spark and Innovation Sprint offerings.

We’ll be back next week with part two, along with even more insights from the Owlet case study.

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