How To Systematically Reduce The Risk & Uncertainty Of New Ideas

Added on by Alexander Osterwalder.

As an innovator & entrepreneur your #1 task is to reduce the risk and uncertainty of new business ideas before you invest big and scale. In this post we outline one of the several big ideas we’ve developed in a project on innovation metrics with three large multinational companies and an SME.

Reduce_Risk_Uncertainty_Strategyzer

We’ve borrowed a concept that IDEO uses to test industrial design, and overlay it on the Business Model Canvas to test desirability, viability, and feasibility. That gives us three major areas of uncertainty: Do customers want it (desirability), can we build & implement it (feasibility), and can we earn more money with it than we spend (viability). Yet, those three areas are still pretty broad, so we further break it down into smaller chunks of uncertainty that are testable.

DOJjL18WsAA1O8v.jpg

Here’s the breakdown:

  • Desirability. You reduce customer-related uncertainty by testing assumptions around the “problem” (jobs, pains, gains), solution (value creation), acquisition, and retention strategy.

  • Viability. You uncover the financial opportunity and reduce the financial risk by testing assumptions around the financial aspects of your idea (revenue, pricing, and cost).  

  • Feasibility. You reduce the implementation risk by testing available or potential technology and resources, activities, and partners.

Every area requires different types of experiments to reduce the uncertainty of your idea. In fact, we’re developing a testing library to address this challenge as part of the metrics project we are running with three large multinational companies. It’s important that companies have the tools and metrics to manage and facilitate testing in all three of these crucial areas if they’re serious about reducing the risk of innovation.