When pivoting or iterating, how can you manage risk effectively?

1 Define your assumptions

Before you decide to pivot or iterate, you need to identify the key assumptions that underlie your current approach and test their validity. For example, you might have assumptions about your target market, customer pain points, product features, revenue streams, or distribution channels. You can use tools like the Lean Canvas or the Business Model Canvas to map out your assumptions and prioritize the ones that are most critical and uncertain. By defining your assumptions, you can avoid making changes based on gut feelings, opinions, or biases, and focus on the ones that are backed by evidence.

2 Validate your hypotheses

Once you have your assumptions, you need to turn them into testable hypotheses and design experiments to validate or invalidate them. For example, you might use surveys, interviews, landing pages, prototypes, or MVPs to collect feedback from your potential or existing customers. You can use tools like the Experiment Canvas or the Validation Board to plan and track your experiments and measure your results. By validating your hypotheses, you can reduce the risk of wasting time, money, or resources on building something that nobody wants or needs, and discover new opportunities or insights.

3 Analyze your data

After you run your experiments, you need to analyze your data and draw conclusions. For example, you might use metrics like customer acquisition cost, customer lifetime value, retention rate, conversion rate, or net promoter score to evaluate your performance and compare it to your benchmarks or goals. You can use tools like Google Analytics, Mixpanel, or Amplitude to collect and visualize your data and identify patterns or trends. By analyzing your data, you can avoid jumping to conclusions based on anecdotes, emotions, or vanity metrics, and make informed decisions based on facts and figures.

4 Learn and iterate

Based on your data analysis, you need to learn from your results and decide whether to pivot, persevere, or iterate. For example, you might pivot if you find out that your product-market fit is weak or nonexistent, persevere if you find out that your product-market fit is strong or promising, or iterate if you find out that your product-market fit is moderate or uncertain. You can use tools like the Pivot Canvas or the Learning Loop to document and communicate your learnings and actions. By learning and iterating, you can avoid sticking to a failing plan or missing out on a better opportunity, and continuously improve your product, business model, or strategy.

6 Balance your risks

Finally, you need to balance your risks and rewards when pivoting or iterating, and avoid taking too much or too little risk. For example, you might face risks like losing your competitive advantage, alienating your customers, diluting your brand, or running out of cash. You can use tools like the Risk Matrix or the Risk Register to assess and mitigate your risks and prepare contingency plans. By balancing your risks, you can avoid being too reckless or too cautious, and optimize your chances of achieving your desired outcomes.