The Guide for Perfect Customer Development - Creating knowledge through hypothesis testing

2 November 2021

Alexey Borisov

Co-Founder of Rocketech

How is knowledge created in our world?

We all studied at school and there, at the level of any natural science lesson, it is created through one process:

  1. A hypothesis is put forward
  2. Experiment in progress
  3. Feedback is collected and the result of the experiment is analyzed
  4. The hypothesis is either killed, or requires correction and repeated cycle, or is confirmed.

When we make a product, we create knowledge about:

  1. What should be the product about?
  2. What segment of the audience should our product be aimed at?
  3. How to distribute it?
  4. So that the client buys, and the company makes a profit

We're constantly losing focus on hypothesis testing and knowledge creation.

One of the most important product skills is being able to focus yourself and your team on what needs to be done.

It is very easy to dig into analytics, design, interviews with clients, designing a huge feature, running from meeting to meeting, and juggling with demanding stakeholders. But when you look back at a quarter/year ago, you see that one and a half features have been released, none of them brings money, and even worse, burns them by complicating the code base and supporting endless minors and normals.

To sum up: if you do not focus on consistency and the amount of knowledge generated per unit of time [quarter, month, week], routine and millions of distractions will consume attention. We set one of the Key Results for the maximum Objectives — N tested hypotheses per quarter.

Customer expectations are growing very quickly:

  1. The overall level of products with which customers interact is growing
  • 10 years ago [in Russia] everyone carried wallets and paid with cash, 5 years ago, wallets became thinner and everyone paid with cards, now many people stop wearing wallets, since in most places you can pay with Apple Pay / Google Pay
  • when Apple and Google release new versions of operating systems and when phone manufacturers update their product lines, huge numbers of people get access to slightly better apps, more natural interfaces
  • a huge number of services are cut for giving the client a slightly more enjoyable experience — for fewer actions, a little cheaper, a little more fun, a little more status. As a result, in the states of Amazon I taught myself to the pattern “clicked — tomorrow at the doorstep, and sometimes even tonight”, while in Russia grocery stores see a threat in delivery services, since the acceleration of delivery, dark kitchens [Kitchen in the District, Varlamov Is] allow you to get tasty and hot food in 15 minutes at an adequate price. 
  • A rapidly growing 15 min delivery from the app of grocery is taking over now around the world for just the last few years and we have talked about it here
  1. While you sleep, the competitor sways
  • Moreover, competition often comes from where you do not expect, since complex systems often lead to unexpected (at least, observing from the side) consequences of the second and third orders [1]:
    • media publishers who owned TV stations, radio stations and franchises are losing margins as advertisers now buy ads from Facebook and Google [YouTube] and media publishers are just one of the providers of content on Facebook and Google platforms.
    • In the next 10-20 years, automakers may lose the status of “we manufacture cars and sell them to end customers” and turn into much less marginal OEM suppliers of hardware for Waymo, Tesla, Uber, as the scenario “open an application and call a car for $ 7” to smithereens smashes expensive, hemorrhoid and nervous car ownership

To sum up: this leads to the fact that one of the focuses of the product and the entire team should be the amount of knowledge created per unit of time => the number of hypotheses to be tested. Relaxing and testing one hypothesis per quarter will not work — companies in which teams test 20 hypotheses per quarter will inevitably bypass you.

From the knowledge that each member of the company creates, aggregate knowledge is created about what the company, processes, product should be

You can work with this knowledge in two ways:

  1. Implement in the form of a new feature, marketing campaign, layout, letter, operational process.
  2. To broadcast knowledge within the company so that more people in the company receive this knowledge, if it is relevant to them, and managers see cross-cutting large patterns and, based on this, adjust the vision and goals of the company.

Conclusions

  1. In order not to lose focus, we set one of the main Key Results for the maximum Objectives for each product — N hypotheses tested per quarter. // later, for different stages of the product and competencies of product / managers, I will write on the verification of which hypotheses it makes sense to focus on
  2. We embed the process of transferring created knowledge up to CPO / CEO into the processes of synchronization with leaders / stakeholders. This is how we set all process in ROCKETECH 

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