STEP 3: Experimenting to Learn
Risk is the probability of losing times the amount of money placed on the bet. Give away assets intelligently in order to learn how to create value in new ways. The goal is to learn in an open, low-cost, and iterative way that allows for time to discover which questions to ask. How can you and your partners learn how to make money in new ways within your right-of-way?
Learn to make money in new ways
Most prototypes are made to prove you are right, to sell the project. This is logical for an existing business. We have lots of knowledge about what it takes to succeed and few assumptions. So, these refined "high resolution" prototypes are required to see the nuances of the design.
We need to prototype to learn. The market for your reciprocity advantage business probably doesn’t exist yet. Therefore, to learn about the future, you will need to be able to produce 1000's of prototypes rapidly and at low cost. This skills to create the "low resolution" prototypes is called design thinking and is practiced by companies such as IDEO, the Silicon Valley innovation firm that created the Apple mouse and many other everyday objects we all take for granted.
These low resolution prototypes are often hand made props presented as a story. The crude nature of the executions and the vulnerability of the story teller encourages target users as well as management to engage and craft the solution together. The next round of prototypes incorporate thse changes and the learning continues. When prototypes are fast and cheap the rapid learning allows assumitions to quickly be replaced by knowledge.
Gameful engagement will disrupt experimenting
Games are first-person stories that can allow traditionally impersonalized situations to be less alienating. The new economy of engagement is an economy in which positive feelings—pride, curiosity, love, and feeling smart—are the ultimate reward for participation.
In the next ten years, gameful engagement will provide much better ways to get people engaged—on a global scale. Socially constructive games such as the University of Washington’s FoldIt will blossom into much more sophisticated forms of gameful engagement. New product or service ideas could be prototyped gamefully, with input from players around the world. Potential customers could get involved in the design of the basic concepts, rather than just buying the finished product. This vision of gameful engagement— engagement with the brand—will take companies into the space that was formerly occupied by marketing organizations.
How to learn by experimenting
Routine new businesses discussions imagine success as achieving a 20 percent premium over current offerings. Elevate the conversation by imagining what it would take to create a billion-dollar business. Your new business model is simple:
Price × Quantity = $1 Billion
Look at a wide range of scenarios before stepping back to ask the important question: what would have to be true? Explore spaces that are radically different from your current business model by asking questions in which the variables are changed by orders of magnitude:
What are you going to charge for the product or service?
How often will it be used?
Who is going to buy it?
What are the answers to all these questions about your new business, and to hundreds more like them? Nobody knows. The more important insight is that you don’t need to know. At this stage, just make it up! Then start running cheap experiments to learn how bad your assumptions really are.