Hypothesis Method: 5 Actionable Steps of Top Entrepreneurs
How do you decide if a new opportunity, new idea, or customer segment is worth pursuing?
This comes up in every stage of every company!
New ideas trigger a decision point: should we spend time on this?
I like using a bullseye framework to quickly triage the value of a project, idea, or strategy.
Another tactic used by successful entrepreneurs is to make a hypothesis.
Here’s how it works…
Hypothesis Method: 5 Actionable Steps
1. Identify the hypothesis.
Write it down. What is the high level concept you’re testing?
Examples:
I hypothesize that this channel could help us reach more customers.
I hypothesize that our product could also help this customer segment.
I hypothesize this type of internal stakeholder is a more likely buyer.
Writing it down helps you get crystal clear on the next step…
2. Name a successful outcome.
If the hypothesis is correct, how will you know? What do you expect to happen if you’re right?
Identify a benchmark and make it SMART.
Examples:
We will close 2 deals within 2 months through this channel.
We will create $100,000 of pipeline within this customer segment.
We will get over 1000 likes on this social post if the messaging resonates.
The odds of this exact benchmark happening are zero 😁
Results are usually a shade of gray and a judgement call.
BUT — having an idea in your head of what “success” looks like is important. It provides an anchor and accountability.
3. Plan your test.
How will you test the hypothesis?
Examples:
We will do 5 blog posts and 5 social posts targeted to this new market.
We will dedicate 10 hrs/wk of a current SDR to call on this customer segment.
We will send an email campaign to this stakeholder.
We will do 20 customer discovery calls with this new persona.
Here are real life, lightweight examples of authentic demand and product concept tests.
Get specific. Use a priority spreadsheet if needed.
Beware of “doing good stuff” that feels productive but doesn’t quite align to your hypothesis. Time will pass but you won’t be closer to a clear result.
4. Set a deadline.
How long are you willing to test?
Before you start, decide when you will evaluate the test results. This is key for accountability and to avoid “just-one-more-week” syndrome.
Examples:
I will schedule a calendar reminder for 6 weeks out.
I will schedule a meeting with an advisor for the deadline to be a sounding board.
I will align this with quarterly goals and tracking.
I will evaluate after talking to 25 customers.
5. Analyze the data.
Arguably the hardest step — was the hypothesis right or wrong? What did you learn?
One challenge is that “data” or “results” are rarely clear cut:
Some customers said x, some said y, some said z.
More deals closed but not as many as we thought.
We got 800 social shares but did not hit our 1000 goal.
Understand and watch out for confirmation bias. Being honest with yourself, even when it’s hard, gets you closer to the right path faster!
Having trouble getting clarity on your hypothesis?
Talk it over with a trusted resource, trust your gut, or come up with a new hypothesis to test!
Top Entrepreneurs Do This
Show me a great entrepreneur and I’ll show you someone who is testing ideas.
Whether intentional or subconscious, top entrepreneurs use the hypothesis method constantly.
They look at data, listen to customers, see what the market tells them, and adjust rapidly.
Identify your hypothesis to quickly and consistently find the signal through the noise!
Do you use the hypothesis method, either intentionally or subconsciously? How do you know if an idea is worth pursuing?
Excellent! Super helpful. Of special interest your comment about the confirmation bias. If we start to pay attention we see it everywhere. When we have the strength to be honest to ourselves, quite literally magic starts to happen. We just need to watch openly and without judgement. Thank you!