We typically build the assumption matrix at the end of our bootcamps, which allows us to kickstart the inception phase. This matrix is a simple tool that helps you prioritize which business case assumptions you need to test first. You can then validate these assumptions in the inception phase before market experimentation begins. Such validation helps reduce lingering uncertainties and increase the idea’s odds of successfully reaching the market.
As shown in the figure here, the matrix depicts a set of assumptions about the market (labeled with “M”) and about the technology or solution (labeled here with “T”) across two dimensions, namely:
- Blocking (vertical dimension): To what extent would your business case be invalidated (or “blocked”) should the assumption be false?
- Effort (horizontal dimension): How much effort do you need to test that assumption (what is the cost to learn)?
When needed, we broaden the scope to included the full TMRO (Technology, Market, Resources, and Organization) in our assumption matrix.
The assumption matrix is built following three simple steps:
Step 1: List assumptions
In a team, have a group discussion to enumerate the set of assumptions of your business case. One way to do so is to go through your business case slides and categorize everything as either fact or assumption. You can then use post-its to label each market assumption, which includes business model assumptions (M1, M2, …) and each technology assumption (T1, T2, …).
Step 2: Score assumptions
Score each assumption in terms of how much would your business case be “blocked” should the assumption be false and how much effort it takes to test such assumption:
- Start by scoring “blocking” in a 1-5 scale, where 1 is “very low damage to business case (if assumption is false)” and 5 is “very high damage to business case (if assumption is false)”. You can either do the scoring as a group (faster) or first do it individually and then come together to discuss differences and come to a final group-level score (slower but potentially richer).
- Repeat the process for effort. That is, score each assumption in terms of how much effort do you need to test that assumption. Use again a 5-point scoring scale, where 1 is “very low effort (testing the assumption can be done quickly and cheaply) and 5 is “very high effort (testing the assumption will require a lot of time and/or resources)”.
Step 3: Plot assumptions
Plot your assumptions in the 2×2 “assumption matrix” using the scores you obtained. You can easily do the “plotting” on a large piece of paper, flipchart or whiteboard by using one post-it per assumption and placing it in the corresponding location in the assumption matrix.
Step 4: Prioritize
Prioritize which assumptions you will test. This requires you to examine the matrix you just created and decide – based on their potential blocking effect and effort required – which assumptions you would like to test before the next stage-gate, and which you will only test later. Typically, you would start with assumptions that are highly blocking, but require little effort. Think for example of a strategic partner you need that may not be effortful to contact, but that is necessary to your case.
The matrix allows you to pinpoint your key assumptions to test, which has three key benefits:
- You de-risk innovation projects early in their lifecycle. Requiring ideators to verbalize and clarify assumptions to test helps them break the idea into smaller “pieces” or testable “assumptions”. These assumptions are, in a way, tentative hypotheses about the market (e.g., customer desirability, cost- and revenue-model viability) or about the technology (i.e., technological feasibility in a competitive landscape).
- You clarify the direction each project should pursue. For instance, testing market size or willingness to pay hypotheses may lead a team to conclude that a certain target market is too small, or very hard to reach. Such testing may also suggest changes in the value proposition that would make the idea more appealing.
- You save resources and time. Even though you could think that entering “project mode” as quickly as possible is the fastest and cheapest road to market, the opposite may be true. Instead of wasting resources and time “driving in the wrong direction”, a few weeks of lean validation means that your company can delay the more serious investments required in “project mode” until you have more evidence and lower uncertainty about the direction of the idea. Ultimately, this means a faster and cheaper go-to-market.
Download the Assumption Matrix tool