High failure rates, in our experience, are often correlated with inattention to assumptions, which underlie all innovation initiatives. Companies often confuse assertions with assumptions, stating confidently what “should be true” for an innovation concept (for example, the price premium that customers will pay) instead of acknowledging that it is merely a strong hypothesis that needs to be validated. We therefore encourage management teams to place assumptions at the heart of the initiative review process: identify what must be true for the initiative to succeed, define a learning-driven development plan to test these assumptions, and run sprints to substantiate or invalidate them. When teams are unable to validate early, critical-path milestones, they should stop their projects or pivot them to a path that can be supported. We call this approach “assumption-based development” and have found that it dramatically improves innovation performance. When management teams understand the number and uncertainty level of core assumptions, they are better able to compare the relative risk of different initiatives, make trade-offs across the portfolio, and clarify for innovation teams the rationale behind tough choices.
Authors: Brian Quinn, Daniel Cohen, Erik Roth
Source: McKinsey Quarterly