Viability Testing

Testing Desirability through User Journey

Using an example scenario, we created a user journey of a bride, one of the target audiences in the form of a storyboard. We tested the user journey with women who were recently married and are are soon to be married.

The storyboard illustrating a user journey

The storyboard illustrating a user journey

Key learning:

  • the idea is valuable not only for the current identified users but also for people who came to the wedding, took pictures and are looking to gift the newly married couple something that is personal to them

  • the couple would want to have the idea packaged as an album for sharing with elders/family members who could not make it to their wedding – this could potentially replace a wedding album

  • there should be different package options for the couple to choose from (ranging between $20 to $100). This pricing could also reflect the “giftable” aspect of the offering.

  • there needs to be a visual demarcation between the wedding story and the story of people who are connected to the wedding. It’s the couple’s story and needs to look that way.

Generating the Business Model Canvas

Using the Business Model Canvas template, we laid out the key factors and features of the venture. The exercise was aimed at understanding the key correlations between the different factors and identifying aspects that could be leveraged to generate profit early or build growth strategy.

A first stab at the Business Model Canvas

A first stab at the Business Model Canvas

Key learning:

  • We realised that established social media giants like facebook, Pinterest, etc. would be our primary channel for both pushing content out of the platform to get exposure and pulling more users onto the platform to grow it beyond the current use case

  • But these companies also are in the perfect position to create a competing product. Given their existing user base (that we are trying to leverage) their version may achieve popularity quickly.

  • The Growth Strategy section of the canvas helped us articulate how the current user base will provide a launching pad for the platform and become a prototyping to test functionality

Embedding Profitability through Reverse Income Statements

In order to bake profitability into the business model, we created a reverse income statement for the venture that recognizes the necessary profit and the allowable costs to give us a target revenue to be achieved.

Determining Key Variables

To achieve this target revenue, we modeled the reverse income statement first with a fixed number of users to give us the price, then with a fixed price to calculate the number of users we need.

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Key variables calculated through the Reverse Income Statement

 

The Total Revenue reflects the target revenue to be made in order to make a gross profit of 1 million. The following were the primary outputs of the calculations:

  • The average price per user gives us the average target price assuming that the number of users is fixed (at 10,000 brides and 5,000 photographers) which gives us the minimum price for the two target segments (brides and photographers).

  • The number of users reflects the total user base we need assuming that the price is fixed (at $1/year for brides and $100/year for photographers). The number of photographers and brides.

Listing Assumptions

We have two sets of assumptions in order to calculate both price per user, and number of users. To calculate the price, we have assumed that 1% of brides(10,000) and 5% of wedding photographers(5,000) in the U.S. will use our service.

Screenshot 2014-03-02 16.01.03.png

To calculate the number of users required, we assume that brides will pay $1, and photographers will pay $100.

Unquantified Assumptions:

  • Customers are willing to pay for the service
  • People want to share their wedding stories online
  • We can launch the service before someone else
  • We can pull content from other social media websites
  • Other people are going to add to people's wedding stories
  • The product will sell itself, it will become viral
  • People will continue to use the service for other life events
  • brides make all decisions around recording the wedding

Apart from assumptions made for calculating the overall cost and revenue, we also recognized the underlying assumptions in the development of the idea that cannot immediately be quantified. Moving forward we will develop tests for evaluating our hypotheses.

Calculating Allowable Costs

We made a simple account of fixed and operating costs with high margin for error to calculate a crude total cost.

Screenshot 2014-03-02 16.03.21.png

Finding out the cost of Amazon Web Services was tricky. This question was asked on quora and it was pointed out that quora costs about $50,000 per month. We used this number as our cost estimate.

We need to design and develop the application and used known consultancy prices as a reference. In order to develop the app and maintain it, we plan on hiring a developer.

We used census data to find out the number of people getting married per year, and the number of wedding photographers in the U.S.

Screenshot 2014-03-03 14.01.16.png

Key Learning:

Using the Reverse Income statement was valuable in understanding the limits of the business model and its viability.

  • Through the structure, we were pushed to calculate the market size for each segment that revealed the there are 20 times as many people getting married as there are wedding photographers.

  • Through sensitivity analysis, we discovered that increasing the number of brides had little effect on our revenue. The number of photographers had a much larger effect even though there were fewer of them.

  • We also ran into an issue with calculating the advertising budget. We had planned to base this cost on the revenue (taking 5% of revenue as expense) but the advertising costs are a part of the total costs. To resolve this loop, we calculated the total cost without advertising expense and generated a target revenue using that. The advertising budget was 5% of this revenue (entered as a “hard number” instead of a percentage).

Overall Thoughts

We realise that there are a fixed number of potential users if we limit ourselves to the wedding use case. However, there are many uses for this tool beyond weddings such as documenting kids’ lives, memorials, and other life events. In order to create profit in the long term we will have to build a roadmap that allows transition from one use case to the next without cannibalizing sales or degenerating the product quality.

Next Steps

Next week we will be focusing on creating tests for our hypotheses and live prototyping to execute the testing.

 

Conflicting Values

During the past week we have been focusing on testing our value proposition with stakeholders. We have two main groups of stakeholders; end-users, and brand managers. We talked to both groups to understand what benefit our service provides them. What we realized was that for both companies, and end-users, there is a risk of conflict.

Our service offers consumers a way to build and share stories with each other. They want to share their experiences with friends and family, but question the intentions of companies who use these stories for advertising. We need to find a way to reassure users that they have control of their content. 

Companies have a conflict in creating customer engagement through social media. On the one hand they realize that having customers share their own experiences is very powerful. These customers become brand advocates. On the other hand, these same customers can also share negative experiences, creating problems for the brand. The company wants to control what is being said, but at the same time be authentic.

We need to find a way to reassure users that they have control of their content, and reassure brand managers that they have control of their campaigns.

 

 

Testing and validating startup ideas

In the article "How I Quickly Test and Validate Startup Ideas", David Berube explains how he used Google Keywords and Microsoft adCenter to gauge interest in potential startup ideas. While initially found this idea intriguing, I now question its  effectiveness. 

Last semester in A Service Design workshop with April Stare, my team and I developed a service which I believe solves and important problem, and has the potential to be a viable business. We used David's technique with poor results. In his view, we should have scrapped the idea. I believe the problem wasn't with the idea, but with either the method, or our use of it.

Our service connects research scientists who need access to specialized instruments with laboratories who have them. The acquisition process for these items involves at least 3 stakeholders and can take up to year to complete. It was difficult to figure out what keywords people would use to find our service. We ended up targeting words like lab sharing, lab equipment rental, as well as 10 top machines universities purchase in the top 3 scientific research hubs in the US. The results were awful. Out of 200 placements, only 1 person clicked. If we had phrased it differently would we have gotten better results?

How do you use search to validate an idea for a new type of service and involves multiple decision-makers?