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The dance of hypotheses: How innovations begin with smart assumptions

Wichtigkeit des Innovationsmanagement

In Innovation, everything starts as an assumption.

In the world of innovation, everything is based on hypotheses (hereinafter referred to as assumptions) – from the individual needs of users to the potential success of the business model. But why are these assumptions so fundamental (and often wrong)? Let's take a deep look into the fascinating process where we continuously form hypotheses, not only consciously but also deep within the unconscious. Let's dive in and explore how this hidden instinct for innovation lays the foundation for groundbreaking changes.

We are drowning in information but starved for knowledge.

John Naisbitt

The instinct for assumptions is within us all

At the deepest layers of our existence lies an innate urge to predict the unknown future. This drives us to incessantly form assumptions – not only in conscious deliberations but also in the hidden corners of our subconscious. While this isn't inherently wrong in terms of bias, blindly following assumptions is a costly bet on the future.

A concrete example from personal experience was the assumption that electric mobility would experience significant growth from 2015 onward (supported by numerous international studies). Meanwhile, the automotive industry continued to peacefully produce internal combustion engine vehicles, the energy sector was preoccupied with its perceived outdated business models, lobbyists were doing their job, and customers were buying what the industry produced. Consequently, the envisioned solution for managing the many charging stations for electric cars, charging simultaneously, would become a relevant issue much later. Insisting on these assumptions based on classical quantitative market research (assumption about correlation instead of causality) either leads to a very long dry spell (years of additional financing in the Valley of Death), a pivot in the business model, or the termination of the innovation project.

Assumptions about users: "Walking in someone else's shoes"

To create a real solution to a problem, it requires the ability to see the world through the eyes of our users. The initial assumptions about their needs and behaviors act as the fundamental building block and therefore the hypothesis of the problem that needs validation. However, these are only assumptions, and observing users in the real world and asking questions is the only correct way to do so. This involves not only demographic data or their correlations in the traditional sense of market research but also understanding the causations by capturing emotions, behaviors, the goals they want to achieve, why these are relevant, what alternatives they have, what a shift from the status quo would mean positively and negatively, etc. An example could be mistakenly assuming that users primarily want to save time and money with a solution, while, in reality, spending less time solving a problem, the user-friendliness, and the solution taking over the task are of higher importance. They would even be willing to pay more than current solutions (value-based pricing).

The cause of most problems is not what people don't know, but what they know that ain't so.

Mark Twain

Assumptions about problems: "The art of recognition"

The path to innovative solutions begins with the precise identification of problems. The hypothesis here is that we not only see the problems of our target audience from our perspective but understand them from their point of view and can actively address them. This requires deep immersion, for example, through intensive interviews and targeted observations. A wrong diagnosis can have similarly catastrophic effects on the entire innovation process as in medicine. An illustrative example could be the assumption among intended users that time constraints in preparing a meal are the main problem, while in reality, a lack of knowledge about the cooking process (skills/guided learning/training) is the primary concern.

Assumptions about solutions: "The game of ideas"

In the next step, we enter the field of ideas, where assumptions about possible solutions are made and daringly tested. The use of prototypes and experiments becomes an indispensable tool. It is crucial to emphasize that the focus is on the continuous learning process, and solutions are just tools to solve problems. An example could be hastily assuming that a mobile app is the optimal solution, while tests show that a web-based tool works more effectively and can be more versatile among users with media breaks on various devices.

Assumptions about the business model: "The house of cards"

Finally, we come to the crux, the business model. Its assumptions essentially form the house of cards on which the assumptions of the entire company or project rest. Those who do not validate in time risk that the entire house of cards collapses with the slightest changes to individual elements. An example could be assuming that a freemium model works best, while tests show that a pay-per-use model is better tailored to customer needs. Do we now need to find new users who fit the pricing model? Can we afford these distribution channels and marketing with the existing cost model? Or should we approach the originally assumed users with a different pricing and cost model?

"I'm annoyed by the constant and increasingly long ads when using the service, and I find the monthly subscription fee too high for my added value. For example, I would be willing to pay a small amount for a party where no ads are played."

User of an audio streaming service

Conclusion - Hypotheses

The process of assumption formation is challenging but simultaneously exciting and opens a vast field of innovative possibilities. Quick and cost-effective validation proves to be the key to success. Because saving time and money allows for faster iteration and improvement. So, let's boldly explore the world of assumptions and see where it might lead us as a collective – perhaps to innovations that not only change our thinking but also our world.

Yetvart Artinyan

P.S: Do you want to know more about how to make your innovation project successful and avoiding typical pitfalls?

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