3 lenses of innovation: assessing the viability of a new venture • Slash

When we incubate a new tech-enabled venture at Slash, we evaluate upfront the viability and investability of the venture by leveraging IDEO’s 3 lenses of innovation methodology.

The 3 lenses are:

Desirability – Is the product desired by users? Will it delight and solve a real pain point (i.e a need or a want)?
Feasibility – Can the product technically be built, and in a cost-effective way?
Viability – Is it a viable or sustainable business? What are the risks associated with the business and financing roadmap, can these be solved within a reasonable timeframe?

For each of those categories, we ask ourselves what are all the underlying assumptions that need to be true for the venture to be successful, and test them. While we do this from the point of view of an investor, the exercise is essentially the same if we do it from the point of view of an operator and entrepreneur.

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How does the process work in practice?

In 5 easy steps:

For each of the 3 categories, identify key assumptions that would drive success.
For each assumption, assign a level of confidence (low/medium/high) we have that this assumption can be delivered and a level of impact on the venture if it is not (low/medium/high).
This gives you a 3×3 matrix of assumptions plotted against their confidence level vs venture impact. Priority should be given to assumptions with low levels of confidence and high impact.
We can then design experiments to test priority assumptions and determine if we can increase our levels of confidence. This step can be repeated as needed, for as many assumptions and experiments as is required. The lower the confidence level and the higher the impact, the more you would want to find supporting evidence to give you peace of mind that your assumption might work.
Finally, if we do proceed to invest or to incubate the venture further, we should have a relatively well-informed business plan with clear risks and a backlog of more complex validation sprints we may need to undertake in the future to shore up our confidence levels around key assumptions.

For example:

Desirability: let’s say we are working with a cybersecurity insurance startup targeting small business owners. In the first category – desirability – we have assumptions such as “SMEs are potential clients” and “Insurance companies are very likely to cooperate”. We then create an experiment to validate or disprove this. For example: we could create a mockup of the solution with the price and SME benefits, schedule 5 test calls or meetings with SMEs that fit our profile, and collect their feedback. The exact number of test users depends on the solution and the scope of your test: in general the more the merrier, but you need to balance it with your available resources.
Viability: let’s say a startup generates digitally personal loans within 5 minutes based on a simple user application process. Some of the key assumptions could be “the business can be compliant with regulations from Day1” or “we can handle non-performing loans”. You could research regulation, make a regulatory checklist and talk to 3 lawyers for advice (the first meeting is usually free!); and model how many of your loans would become non-performing and at what threshold your business model wouldn’t be viable anymore – and then test this with market data!
Feasibility: imagine you’re building an electronic Know Your Customer (KYC) solution for Cambodia. Your solution needs to support Khmer script. To validate or disprove this assumption you may need to research how accurate OCR is for Khmer script, find available open-source or commercial libraries, integrate and test, etc.

Passion and Validation

Finally, a note to the passionate entrepreneur. Most founders fall in love with their solution and some may have been obsessed with their venture for years prior to starting it. That is only humane and it can make an objective exercise in desirability, viability and feasibility sometimes seem … inconvenient!

The challenge for the smart entrepreneur is to take a step back, remain cool-headed and disciplined about engaging with customers; and when to preserve and double-down on their vision, accepting the risks for what they are (just odds that you can play!) and prove the world wrong.