Elaine Chen

MIT Global

Entrepreneurship

Bootcamp

MVP/Hypothesis Testing

March 2016

You are about to get an authentic MIT experience:

“Drinking from the firehose”

On hypotheses

• “A good hypothesis needs to be

written down.” – Ben Yoskovitz

• Basic structure:

– I believe [target market] will [do this action /

use this solution] for [this reason].

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Hypothesis testing using MVPs / MVBPs

• Hypothesis testing using MVP tests the product

• Hypothesis testing using MVBP tests market viability

• A proper experiment looks like this:

1. Write down your hypotheses and define your MVP

2. Design and run the experiment

3. (Optional) Set a measurable threshold for the action, and

use the results to decide whether you keep going, tweak

the approach, or pivot. (This is very good practice!)

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Example hypotheses

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I believe the Frustrated Sleeper will wear a

headband every night to get more accurate sleep

data than a wristband to understand how their

night went.

I believe users of this iOS app will quickly

figure out the intuitive UI to see the layers

of data they can unlock with gestures.

I believe plant managers will make a purchase decision

without an on-site proof-of-concept trial because the price

is so low it’s not worth the time.

Which hypothesis should you test

first?

• Riskiest

• Longest lead time

• Costliest if invalidated

… etc

Pick the first hypothesis you want to test – and

define a corresponding MVP to test it with

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Case study: Lending product assumptions

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• There is demand for consumer loans between USD$100 - $500 in Mexico

• Customers most likely to use this product are:

• Age: 35-45

• Locality: Urban/semi urban

• Education: High school

• Income: USD $7,200 – $9,600

• Job: formal salaried/informal entrepreneur

• Most customers need the funds for:

School fees

Home improvement

Debt consolidation/refinancing

Auto loan

• Customers care about interest rates

• Customers will be willing to download our app in order to obtain a loan

• Customers would trust an unknown company to provide them with financial services

• Customers do not have other attractive options for obtaining these funds

• Customers need a convenient method for cash in/out

Case study: Lending product assumptions

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• There is demand for consumer loans between USD$100 - $500 in Mexico

• Customers most likely to use this product are:

• Age: 35-45

• Locality: Urban/semi urban

• Education: High school

• Income: USD $7,200 – $9,600

• Job: formal salaried/informal entrepreneur

• Most customers need the funds for:

School fees

Home improvement

Debt consolidation/refinancing

Auto loan

• Customers care about interest rates

• Customers will be willing to download our app in order to obtain a loan

• Customers would trust an unknown company to provide them with financial services

• Customers do not have other attractive options for obtaining these funds

• Customers need a convenient method for cash in/out

Workshop activity: Hypotheses

Define the top 3-5 riskiest hypotheses that, if invalidated, could cause a pivot for your venture.

For each hypothesis, use this structure (or at least start with “I believe”):

I believe [target market] will [do this action / use this solution] for [this reason].

Pick 1 hypothesis to be tested first

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Sharing!

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Example MVPs

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Fake, non-functional headband

Ugly interactive prototype

Product brochure plus a video clip

Case study: iOS App MVP Test

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Hypothesis: “I believe users will find the gesture

UX delightful.”

MVP: Functional interactive prototype

Experiment: Usability benchmark. Users were

given tasks to complete that required them

figuring out the gesture UX on their own.

Duration: 30 min UX test + 15 min debrief

Threshold: 50% of users will complete the task.

Result: 0% figured it out.

We killed the feature.

Now for the “B” in “MVBP”

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You can run surveys until the cows come home, but

you won’t know for sure until $ changes hands.

Testing willingness to pay before there’s

anything to sell: The concept of “currency”

Short of taking $$$ from your potential customers for your nonexistent vaporware, what are some asks you can pose to collect surrogate currency that is a predictor of future willingness to pay?

• Yes to scheduling a meeting to discuss

• Actually getting a scheduled meeting on the calendar

• Actually meeting you

• Giving you the email of someone else you should meet

• E-introducing you to someone else you should meet

• Providing an email

• Providing Credit Card for a pre-order (no charge)

• Providing Credit Card for a pre-order (charged, rain check provided)

• … etc

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Example 1: Landing Page Test

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Hypothesis: “Existing customers won’t be scared off by this new

feature.”

MVP: Landing page with product concept and webinar offer

Experiment: Send to 200 existing customers, tally signups

Duration: 1 week

Currency: Email address

Threshold: 20% of customers who visit the landing page will

provide an email (40 ppl)

Opens Email

Clicks thru to page

Clicks “Sign up”

Provides email

30%

It’s a GO!

Example 2: Kickstarter

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Example 3: Preorder on own site

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Example 4: Paid concierge beta

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Hypothesis: “User will pay for this SaaS visualization service”.

MVP: Fully faked via emails and Photoshop

Experiment: 10 customer, paid beta

Duration: 3 months

Currency: $199/month, prepaid

Threshold: Able to close more than 5 for beta

They closed 10. It’s a GO!

Extreme example of “get paid

from day 1” without a line of code

That was a lot of stuff!

You don’t have to remember it all. Save

this deck and read it as a reference after

this week.

For right now: Focus on

1. Define your #1 Use case

2. Identify & define your #1 Hypothesis

3. Define your first MV(B)P

4. Extra Credit: First MVP test

Supplemental Readings

• “Our dangerous obsession with the MVP” –

Bill Aulet, Techcrunch

• “Defining and Building the MVP” – Elaine

Chen (Slideshare)

• “Product definition templates” – Elaine

Chen (Slideshare)

• “Validating Hypotheses with Landing Page

Tests” - Elaine Chen (PDF)

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End

Questions?

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