The first step in creating your business should be the Value Proposition. This is a very effective means of exploring and defining the problem to be solved and establishing whether your proposed solution is sufficiently effective at mitigating that problem for users to want to pay for it. Once you’ve created your Value Proposition Canvas your next task is to verify it by formulating hypotheses.
One of the defining characteristics of a startup is extreme uncertainty. This uncertainty makes it difficult to produce accurate forecasts. The best that a startup can do in these circumstances is to form a set of hypotheses (in the scientific sense - i.e. a proposed explanation for a set of circumstances that can be tested) about what we’d like to see happen. In his book The Startup Way, Eric Ries refers to these as leap-of-faith assumptions or LOFA.
The theory is that the sooner you can make your LOFA explicit the sooner you can test them and start to remove some of the uncertainty which makes life so difficult for a startup. As with many things, however, the theory can be much easier than the practice. In my experience working with startups many of the most important hypotheses that founders identify are described in such abstract terms that they are untestable. For a startup, an untestable hypothesis is no hypothesis at all.
The post suggests using the Toyota 5-whys technique to dig into your LOFA and turn them into something useful and testable.
Why, oh why, oh why, oh why, oh WHY?
Much of what we now call Lean business has come from the Toyota Production System, or TPS. The TPS came about due to the extreme constraints that Japan was under following the end of the Second World War. At this time, the Japanese economy was in a very bad way, with money for investment being almost non-existant. In addition to this, Japan is a relatively small country in terms of land mass, with little land available for large factories.
It is around this time that Toyota decided to start making cars. Lack of money and land put them in diametric opposition to the Americans who had a great deal of both. Despite this, Toyota not only managed to find a foothold in the American market but have since become one of the world’s premier automotive brands.
“How did they do this?”, I hear you ask. The answer is the Toyota Production System. The TPS is far too big a topic to cover in a simple blog post (it literally takes decades for employees to become qualified in the TPS). What is of consequence here is one of the techniques used by Toyota to turn constraints into advantage - The 5-Whys.
Lack of money and space led Toyota to perfect Just-in-time manufacturing (JITM). If you can’t afford to buy materials in bulk ahead of time and have nowhere to put them anyway while you wait to use them then it makes sense to order just enough to make the next batch, which is the essence of JITM.
One of the keys to JITM is constant monitoring of the production system and the ability to stop and fix problems as they occur. To this end, all employees on the shop floor were attached to a ‘kill switch’. If anyone noticed that a process they were monitoring was not working properly they threw the kill switch, which had the effect not only of shutting down their process but also of shutting down everyone else’s. In other words, the whole production line stopped.
Once the whole production line had stopped, the production team would gather around the process that had triggered the halt. This is when they use the ‘5-Whys’ to determine the root cause of what happened and fix that along with the symptom which brought production to a halt. The idea is that by fixing the root cause the problem can be avoided in the future. The root cause is found by asking the question “Why?”. Each answer forms the basis of the next question. It was found that by the time “Why?” had been asked 5 times, the root cause had generally been identified.
The ‘5-Whys’ became a key element of Toyota’s success.
The answer lies in the weeds, not the clouds!
So how can the 5-Whys help turn abstract assumptions into testable hypotheses?
The best way is with a (contrived) example. I often see assumptions like this:
Customers will want to buy our product
Well, this certainly qualifies as a LOFA but it’s pretty much meaningless when it comes to creating testable hypotheses. As The Mom Test explains so well, if you ask customers directly whether they will buy your product they are more likely to lie to you than not, making the answer meaningless and misleading.
So let’s try to break it down into meaningful, testable hypotheses:
- Why will they want to buy our product? - Because it saves them time (First why)
- Why will it save them time? - Because they no longer have to do X for themselves (Second why)
- Why do they no longer have to do X? - Because our patented Widget system will do X for them (Third why)
- Why do they want X done for them? - Because the process of doing X is tedious and error-prone (Fourth why, and root cause)
So, we’ve now reduced an abstract assumption to something we can test: Do customers agree that doing X is tedious and error-prone? But we needn’t stop there. We can ask “Why is doing X tedious and error-prone?. We can also start to put a monetary value on doing X, thereby enhancing our Business Plan.
If you’ve done your Value Proposition correctly you’ll already know the answer to this question, but often the 5-Whys process uncovers jobs/pains or gains that are not included in the original Value Proposition. In addition, this provides the perfect opportunity for asking Why is our patented Widget system not tedious and error-prone? This not only provides secondary validation of the proposed solution but also contributes valuable information for our sales pitch.
This example is necessarily simplistic but is by no means unusual - I come across definitions like this all the time. One of the hardest things I have to do is to force startup team members to focus on concrete detail rather than abstract generalisation. This is primarily because defining all the detail is often hard, boring work. It is also often because the team has jumped straight to a solution before focussing sufficiently on the problem. However it may be, asking Why? is one of the most useful tools we have.
Just as not all problems have a single root cause so not all assumptions have a single testable hypothesis. It is more than likely that there are multiple questions that can be asked at each level, and each of these sub-questions can resolve into a testable hypothesis. The key is to avoid more assumptions and logic traps and trace the chain of causality as far as you can.
The 5-Whys is not a silver bullet. It can take a lot of work and is really just the starting point for discussing LOFA and creating hypotheses. It is, however, a relatively simple way of breaking a deadlock and opening up new opportunities for creativity.