What is the Riskiest Assumption Test

May 18, 2021 Business, Startups

MVP, or minimal viable product, was used for a long time in order to assess and develop digital product concepts. However, in order to stay afloat, a business needs to constantly improve, move forward, and look for new directions. Now it is not enough. It is necessary to determine whether the product will be popular or sink into oblivion. To do this, professional UX/UI designers use RAT (Riskiest Assumption Test). Let’s figure out what it is and how it works.

History of origin

To assess the idea’s relevance, the MVP, or minimum viable product, was previously used. A professional UX design company creates a sample with very limited functionality. Then it is offered to the public. Based on its popularity, conclusions were drawn about whether the product is needed by consumers or not. It was believed that this is the cheapest way to test.

However, many investors and entrepreneurs were unhappy with him. Minimum viable product was poorly suited for testing startups since it often required significant cash injections. For example, Uber spent up to $1.5 million on MVPs. This is an example of a successful project, but how many startups fell short of this investment? Given that, a different approach was required, and Rick Hyam, manager of Skyscammer, came up with RAT.

RAT (riskiest assumption test) makes it possible to determine whether the product will be in demand among customers or not at the initial stages of the project. The MVP loop looks like this: generating an idea => creating an MVP => receiving feedback from consumers. RAT has a different cycle: getting an idea => creating a RAT => receiving customer feedback. Testing risky hypotheses ensure against cash injections into a non-viable proposal and helps to determine, in several iterations, how promising a product is.

How to work with RAT

Testing the riskiest hypotheses involves a clear sequence of actions. First, a business model is created, and the following insights are collected:

  1. Client categories – Not only are the people who buy the product taken into account, but also those who will use it (for example, parents buy a toy, but a child uses it).
  2. Problems – What user problem will the proposal help solve? Are there other similar products on the market right now? All competitors, direct and indirect, are taken into account.
  3. Value – What makes the offer unique? Why would customers want to buy it immediately?
  4. Channels of communication with users – How will the product be distributed?
  5. Profit – From what sources will the profits come to creators and investors?
  6. Costs – It takes into account all the costs of creating a product, from the acquisition of the materials to the cost of renting and employee salaries.
  7. Advantage – What are the hidden advantages of the offer that make it unique in the market?

After the analytics have been collected, you can proceed to test risky hypotheses. It is proposed to answer the following questions:

  • Is the problem that the product will solve a serious problem?
  • How many customers will it take for the offer to start making a return?
  • How long will it take until it appears?
  • Are consumers willing to pay for the product? (interviews with representatives of the target audience may be required).

Experts believe that the best hypothesis is the one that will affect the maximum number of users, and its verification will take a minimum of time and effort. Once found, an experiment is conducted (often involving potential consumers). If the hypothesis turned out to be viable, proceed to the next one. Sometimes one test is enough to understand that the idea will not take off.

Criteria for testing risky hypotheses

When working with the RAT, the following test criteria should be followed:

  • Ability to execute – Is it realistic to create a working sample at minimal cost to test a hypothesis? Will it work as the creators expect it to? Can it be a landing page instead of a full-fledged website?
  • Viability of the idea – Will it work in real conditions as the creators expect? It is necessary to discuss the details with all project participants, find out what expectations they put into the product, and determine their criteria for success.
  • Demand – This is the most vulnerable spot of all startups. Often the creators think their idea will appeal to most users, but the harsh reality dampens this enthusiastic approach. It is necessary to soberly determine how important and in-demand the product is among the target audience, whether it is so large to recoup the costs.

Summing up

RAT isn’t just for startups. Large companies can also use this approach if they want to master new markets and move to another level of interaction with customers. UX/UI design agencies can apply this to save their clients money and time. The RAT theory helps so that you only invest in promising ideas.