“What assumptions have to be true for this business to work?

–Joe Gerber, IDEO CoLab Managing Director

In our Creative Confidence Podcast chat with IDEO CoLab Co-Managing Director Joe Gerber, we explored the world of business prototyping. In his early days as a Business Designer at IDEO, Joe noticed that experimenting and prototyping were essential parts of IDEO’s process. He became curious about prototyping something as complex and abstract as a new business. Applying design thinking and a human-centered approach to ventures through techniques like prototyping can reveal critical assumptions and pave a clearer path forward.

Here are a few highlights from Joe and Suz’s discussion on prototyping new businesses. To go deeper, learn how to design and prototype every aspect of your business in our online course, Designing a Business.

Why You Should Prototype Your Idea

When prototyping a business, start by asking the right questions. Determine what assumptions have to be true for this business to succeed, then design small experiments to test those assumptions. 

For example, PillPack—a full-service online pharmacy that delivers your daily prescriptions in easy-to-use packages—wanted to test pricing and value propositions. They branded a kiosk in a mall where the CEO talked with potential customers. While online prototypes can be great, this instance of live business prototyping allowed the team to learn directly from prospective customers, have conversations, ask follow-up questions, and get real-time feedback about the business. We call this a “lemonade stand” prototype.

“Lemonade stand” prototypes are a great way to get direct customer feedback about your business and answer questions around your value proposition assumptions.

How to Test Desirability, Viability, and Feasibility 

One exciting challenge of building a business is that all the pieces—value proposition, pricing, and financial model—must work in harmony. Often, you’re testing how these pieces come together. Joe and CoLab use IDEO’s three guiding lenses: desirability, viability, and feasibility, to decide what questions to prototype.

• Desirability

• What’s the unique value proposition? Do people want this product or service? Does it make sense for them?

• Viability

• Can we build a sustainable business? What has to be true for this business to work? What are the costs? How will you pay for it?

• Feasibility

• Does this work? Is it functionally possible in the foreseeable future?

Prioritize Your Assumptions

Create a long list of questions related to desirability, feasibility, and viability. Then prioritize. Which assumptions are foundational? Which are dependent on others? Which can you test immediately?

Talk to potential customers and collaborators to determine what needs to be true for your business to be desirable, viable, and feasible.

Benefits of Prototyping in Business Design

• Test and validate assumptions before investing heavily

• Learn directly from your target users

• Reduce financial and operational risk

• Refine your value proposition in real time

Business Prototyping Resources

Here are some tools that Joe, CoLab, and other IDEOers use for prototyping in business:

• The business model canvas
• Tom Hulme's (Google Ventures) business model canvas
• Discovery-driven planning (Refresher)
• Prototyping Tools

An Example of Prototyping a Business

CoLab prototyped an internet-connected solar panel that generates renewable energy credits that can be sold on carbon markets. They’re now working with CoLab member Nasdaq to move forward a pilot with a major solar field.

Learn how to prototype and design every aspect of your business in our online course, Designing a Business.