Testing hypotheses is essential to product development, as it helps identify potentially successful products and saves time and resources. However, most product hypotheses do not pan out, and it takes a lot of work and a large budget to develop a product fully.
To increase the chances of success and attract investors, experienced product managers can use methods like the Riskiest Assumption Test (RAT) and Minimum Viable Product (MVP) to test hypotheses quickly and extensively. RAT involves identifying and addressing uncertainties during the development process, while MVP is a fully functioning product that delivers maximum value to customers with minimal effort.
Both of these approaches can help ensure a product's viability before significant time and resources are invested in its development.
Why is it essential to be able to test hypotheses and correctly create prototypes and MVP?
Testing various product hypotheses is vital to create a product that meets users' needs. A good product manager should be able to efficiently test these hypotheses without requiring extensive time or resources and without relying on developers or other specialists.
What is the purpose of testing hypotheses?
Testing hypotheses is essential because it helps us identify potentially successful products. Product development can sometimes cost hundreds of thousands of dollars. Testing saves us time and resources. It's also important to keep in mind that most product hypotheses don't pan out. It always takes a lot of work to fully develop a product, which usually requires a big budget.
One way to get funding is through investors, but they also look at the chances of a product's success before investing. The ideal situation for an investor is a product that already has paying customers and is growing. Testing hypotheses on a large scale can help ensure a product will be successful and attract investors willing to provide funding for its development. But how can we ensure that our product hypothesis is immediately successful and attracts paying customers who will continue to use and support the product? Experienced product managers should be able to test hypotheses quickly and extensively using methods like RAT (Riskiest Assumption Test) and MVP (Minimum Viable Product). These are the basic approaches for testing hypotheses.
RAT – Riskiest Assumption Test
Before the product is fully formed, it's crucial to determine value hypotheses, target customer segments, research the market, and identify customer acquisition metrics and channels. One of the best methods for testing product hypotheses is RAT (Riskiest Assumption Test). RAT involves identifying and addressing uncertainty during the development process. By testing these hypotheses early on, we can ensure the product's success before investing too much time and resources into its development.
When testing product hypotheses, it is vital to consider the risk of not confirming the hypothesis.
There are three categories of risks to consider:
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Product risks indicate that the consumer does not need the product because it does not solve their problems;
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Client risks prevent us from finding and acquiring customers through various channels;
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Market risks prevent us from turning the product into a profitable and successful business.
By considering these risks, we can make informed decisions about the potential success of our product before investing significant time and resources into its development.
Next, we should prioritize testing those hypotheses with the highest risk of failure, as these can impact the product's success. Specifically, this includes product risks and assumptions, of which we have the slightest knowledge. By addressing these risks first, we can effectively ensure the product's viability before investing significant time and resources into its development.
MVP – Minimum Viable Product
Before creating MVP (Minimum Viable Product), it is important to ensure that we can not test all hypotheses and risks without developing a full version of the product. We can do it through market research, surveys, interviews, or "dummy products". Once all of these steps have been completed, moving on to creating MVP may be appropriate.
MVP is a full-fledged version of a product that allows you to collect a maximum amount of data with minimal effort. It is important to remember that MVP is not a prototype but a fully functioning product that brings value to users. Value is the solution to a user's problems or the satisfaction of their needs. When creating MVP, it is crucial to focus on delivering maximum value to customers with minimal effort. It means maximizing profits and minimizing resource costs in terms of money, time, and effort. The higher the ROI of MVP, the more influential the result will be.
There are a few instances where it may be appropriate to skip the RAT (Riskiest Assumption Test) and move directly to creating an MVP (Minimum Viable Product). These include:
- When it is impossible to test the product value hypothesis without launching the product;
- When we are launching a well-known business model with proven value in a similar market or environment;
- When all first-order hypotheses have already been tested.
In these cases, we may move directly to creating an MVP.
MAP – Minimum Awesome Product
MAP (Minimum Awesome Product) is a concept that emphasizes the importance of creating high-quality and sophisticated first versions of products. In today's market, where technology is constantly improving, and there is an abundance of products available, users have come to expect a high level of design and usability from companies. Therefore, it is essential to consider MAP when developing a product, especially in competitive or complex markets. The more competition there is, the more necessary it is to create a well-developed and impressive product first. Additionally, the more complex the market, the more complex the MVP (or MAP) should be to meet the expectations and needs of users.
Final thoughts
Product development can be a risky and costly endeavor, but using methods like RAT and MVP can help to mitigate these risks and increase the chances of success. By testing hypotheses and creating prototypes and MVPs, product managers can make informed decisions about the potential success of their product and attract investors willing to provide funding for its development. By focusing on delivering value to customers and maximizing profits and resource efficiency, product managers can maximize the potential of their product and ensure its long-term success.