Zappos' successful experimental approach to Innovation 

Startup founders feel the pressure to reach critical mass as quickly as possible. Big firms face similar challenges, as funding comes and goes with annual budgets.  Reid Hoffman once stated that to innovate and scale a business quickly, is akin to throwing yourself off a cliff and assembling the plane on the way down. This is where rapid experimentation can reduce risk, whilst increasing the probability of success. 

An “Experiment Canvas”, can come in very handy to get the experimentation off the ground. The canvas is essentially a one-page document listing the riskiest assumptions, hypothesis, experiments to conduct to test the hypothesis, results and next steps.

When Zappos set out to sell shoes online, it needed to test the one single assumption: will people will buy shoes online?. The hypothesis was that the consumers would click and purchase. Its experiment involved creating an online store, using photos from a local shoe retailer and when the company sold a pair, it would buy the shoes at retail and mail them - Simple. The approach validated their model. They grew the company and in 2019 was acquired by Amazon for $1.2B.

Here's an approach to start experimenting:

  1. List your riskiest assumption: Zappos needed to test whether or not people would actually buy shoes on the internet.
  2. Define hypothesis: Zappos tested whether people would click and buy shoes without trying them on.
  3. Conduct experiments: Zappos built an e-commerce website with photos of shoes it didn't own.
  4. Review data: Zappos had enough people buy shoes that it was confident it had validated its hypothesis.
  5. Make conclusions: Zappos went for it and scaled the business.

Between steps 3 & 4, Validation Canvas, can be used to keep track of progress overtime. The goal of the validation process is to learn as much as possible, as fast as possible. Running one experiment is never enough and startups may make many pivots before they find the right product-market fit. The conclusions should focus on whether or not a change in direction is needed. 

The entire process should be iterated over and over, until all the risky assumptions are addressed. For founders and innovators, experimentation is an on-going process.