How to: making evidence-based decisions in the corporate world

In order to be able to innovate and bring valuable ideas forward, make evidence-based decisions, and develop new products, tools and/or services, another step should be completed – experimenting. While executing this first phase you can easily find out what works for you and what your customers want and need. There are many approaches that can be used to gain a competitive advantage by experimenting and learning, including the lean startup and design thinking. What are all these models about and how do you get from ideating to applying one of them?

Keep on reading and you will find out!

It all starts with the problem-solution fit

The problem-solution fit lies at the foundation of innovation. Therefore, in order to understand the methodologies that companies and startups are now using to structure and lower the risk of their innovation activities, you first need to know what problem-solution fit is, how it works and why is it necessary.

If you come up with a product/service that you think is great but your audience doesn’t need, then it will most likely fail. So, how can you make sure that what you are creating is going to be successful? It’s easy – you experiment and test, test, test.

The aim of the problem-solution fit is to test the riskiest hypotheses of the problem taken into consideration by implementing a (first) solution.

So, what steps do you need to follow in order to reach problem-solution fit?

Problem fit

In order to identify THAT problem worth being solved, you need to answer one main question: Does the problem really exist for your customers?

After learning more about your target audience and their needs, you can then identify a real problem they’re facing. After getting into your audience’s brain, you can now come up with a hypothesis that will (eventually) be turned into an experiment.

Solution fit

When trying to create a solution to the problem you discovered during the previous phase, you need to have in mind these 2 questions:

For whom is the solution?

What problem are you solving?

You should know by now that “everyone” is never the right answer. In order to find a viable solution,  you should first choose your specific target. After having a clear audience in mind, you can then focus on finding the best solution to their problem. A solution that you are able to transform into a product or service.

Customer expectations

After you identify the problem and come up with a solution, your customer should assess whether he is interested in your product as described. This can be done by creating an MVP (Minimum Viable Product). It can come in many forms and shapes, depending on the case: from video to a web page to service description to virtual prototype, depending on the case.

By using the MVP you can demonstrate marketability and validate your risky assumptions by finding out if your solution meets your clients’ expectations and if your customers are willing to buy your product.

After completing all these steps, you will ideally find a problem worth solving and discover a viable solution. After the problem-solution fit stage, you know with almost certainty: who your customer is, what problem you’re solving and that your solution is effective and feasible.

To sum it up, the problem-solution fit is when there is an indication that an identified problem can be solved by a particular solution, and that it has a business potential.

As stated before, the problem-solution fit constitutes the base for two of the most important experimentation methodologies: Design Thinking and Lean Startup. These two share many characteristics, but also have a few differences. The main objective of both is to facilitate the development of innovations. They both sustain a strong customer-centric mindset that enables the development of solutions that solve the recipients’ problems. But what are their differences and when should you apply them? Read on and find out!

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Design Thinking

The Design Thinking approach has at its core the problem-solution fit model and the customer. The main benefit of Design Thinking lies in the discovery of user pains, context, problems and a wide variety of solution ideas. Its final result is a product that people love. In order to achieve that perfect answer, you have to follow the next 5 steps:

  • Empathise – try to empathize with the main users and understand their needs
  • Define – define the problem that should be solved and explore the solution space
  • Ideate – come up with ideas and identify new solutions to the problem statement you’ve created and stick with the one that can be turned into a successful product.
  • Prototypeproduce a small number of inexpensive, scaled-down versions of the product you came up with in the previous stages.
  • Test –  various solutions are being developed and tested in order to find the most suitable one for a specific problem.

To have a clear view of how this model uses problem-solution fit, you can see it like this: the Empathize, Define, and Ideate phases can be included in the Exploration of the problem phase, and Prototype and Test in the Exploration of the solution phase.

Design Thinking helps innovators and experimenters by bringing designs to life and reducing the risks involved in bringing a new product/service to the market. All this is achieved by testing people’s interests. Before starting you have to make sure that you have the perfect solution to the problem of all customers. Therefore, design thinking is most valuable when used in the earliest stage of the innovation process.

The Lean Startup

Focused more on the solution phase, the Lean Startup uses tools like the build-measure-learn loop and MVP to reduce the risks associated with new projects and ventures.  Just like Design Thinking, the Lean Startup states that one first needs to find a problem-solution fit and after that the product-market fit.

 

The build-measure-learn loop

This feedback loop is the most crucial part of the principle. Each time something has been confirmed as validated learning the process will repeat, leading to new validated learning. By using the build-measure-learn feedback loop, evidence-based decisions can be made about the direction towards which the product/service should be moving.

evidence-based decisions
Source: simple-pdh.com

The steps:

Build – this part concerns gathering the data that is going to be used as evidence in decision making. n this phase, the main goal is to build or develop the MVP in order to test a certain number of assumptions and hypotheses. For each idea that you have there are some critical assumptions about what success means. To get answers to whether these assumptions are true or false, hypotheses that can be tested through experiments are being formulated.

Measure – a key activity of the Lean Startup is to determine whether the development is progressing or not.  To determine whether real progress is being made or not, the results obtained from the experiment performed during the build phase are being measured

Learn –  Weather the initial hypothesis was validated or rejected, the outcome is always the same – validated learning. Based on the measurements accumulated in the last phase the innovators have to decide if they persevere or pivot. Persevere means that they are going to carry on with the same goals, while pivot means going back to square one and start again.

The process can be repeated in continuous loops until the perfect solution for the audience’s needs is being discovered. The goal is to reach a state where the data proves that the team has built a product/service that accurately addresses the needs/demands of the market.

Application of the Lean Startup for big companies- The example of Pearson

As stated in our last article, the biggest challenge corporates who are ready to innovate have to face is aligning it with their business strategy. Even though it was initially created to help startups succeed, the Lean Startup methodology can be adapted so that all kinds of companies can use it.

The core principles of the Lean Startup method are the minimum viable product (MVP), and the build-measure-learn loop. These two allows innovators to learn the most about their customers with the least amount of effort.

Pearson is a great practical example of how this innovation has affected business strategy and decision-making, enabling the company to be able to have a greater impact on learning with the aim of simultaneously helping the business to grow financially. Pearson struggled to transform itself from a publishing company to an education technology company. In order to achieve this goal, Pearson had to make a lot of changes and apply the Lean Product Lifecycle method. All the frameworks included in this method can be synthesized into the three simple steps for innovation; creating ideas, testing ideas and scaling ideas (build-measure-learn). Every now and again, a company may decide to refresh the business models of its existing products through renewing ideas. Having an innovation framework provides a unifying language for the business. And this is what Pearson did. They adopted innovation and created an innovation framework.

Pearson encourages a culture of customer centricity by changing employee incentives. The Learn – Build- Measure cycle is now Pearson’s innovation best practice. The Lean Product Lifecycle is an award-winning process and it’s inventor, Tendayi Viki is explaining all about how it works and how it helped Pearson change, experiment, and innovate in the video below

To sum it up, the above-mentioned methodologies helps innovators come up with better ideas and turn those ideas into business models that work. Using these methods enables innovators to work smarter rather than harder and make evidence-based decisions.

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