Winner's formula: RAT-directed marchitecture

SkadiRatDirectedMarchitectureIsWinnersChoice

They say that starting a growth business is scary because it involves high capital investment and high risk. No, it isn’t! Here’s how to make it fun, while living a normal life.

Validate business ideas with zero cost

Yes, starting a new growth business involves risk. Nobody guarantees you will make any money with your ideas. Starting a business involves an investment also, but that does not immediately have to involve capital, as in money. The investment can well be just some additional hours now and then, while being paid for a day job.

Most new businesses need not and should not be started as full-time ventures, where the founder(s) spend all their time in figuring out which business idea could fly. Often, it makes sense to validate new ideas on the side, while mainly being paid for something else. That may involve evening and weekend work, but not necessarily extra money.

Done this way, starting a new business is fun. The main risk is that time spent learning and formulating business ideas does not bring in money. In other words, the main risk in starting a growth business is that you don’t get paid for learning. Not a huge risk, as in the 21st century, those who don’t invest time in learning are not likely to be paid for long!

RAT-directed marchitecture in business development

At Skadi, we appreciate the concept of the Minimum Viable Product (MVP). However, we love the concept of the Riskiest Assumption Test (RAT) and apply it to all new business opportunities. That way, we eliminate everything that is not absolutely required to find out if an idea provides a meaningful opportunity.

Skadi was originally founded to test a hypothesis regarding chatbots being able to increase retail and media, especially newspaper, revenue. We built a few chatbot prototypes for media, mobility, and entertainment, and quickly found out that the opportunity for chat bots in retail or media sales was not lucrative in the UK or in Finland. However, our biggest learning was the afterthought that we would have been able to learn the same lesson faster without building anything. Developing a chatbot framework took us time which we could have skipped if following the RAT guidance.

While moving out of chatbot business, Skadi quickly RAT-tested and dropped e.g. machine learning in image categorization. One of the ideas that survived the RAT was automating mortgage and other loan processing. Having learned from the unnecessary chatbot development, we validated the idea with slideware, which contained also technology details about the implementation of the solution. However, we did not build any of the solution before going to meet customers with a product description. Knowing that in finance, lead times may be long, we estimated that our marchitecture description of the solution was sufficient for iterating towards a feasible design.

Don’t build it before they buy it

The RAT-directed marchitecture approach proved valuable. We visited several finance and lender organizations with our story and slideware, improving the story and our customer understanding with each visit. After a few of the first meetings, it became obvious that we were on to something feasible. Even though the concept wasn’t fully shaped yet, we built a demo, which solicited further valuable feedback.

With the marchitecture and demo, we were able to create the concept for Skadi CreditWorthy, while mostly running on the financing we got for testing the opportunity of chatbots in retail and media. We built the solution when the concept was already rich and validated with prospects.

RAT-A-TAT-TAT – it’s fun!

We got traction with CreditWorthy within a short period of time, and developed related leads in e.g. car finance, collateral processing, and automated handling of several types of documents. Most of the business ideas beyond loan automation came from the prospects that we approached with our RAT-based marchitecture for loan automation. Thus, the ecological validity was high, and we successfully RAT-tested many of them.

Using the RAT-directed marchitecture approach, business opportunities can be validated without dropping your current job or assignment before you know it is worth it. Funding, or the courage to spend more time on the ideas, is easier to find with validated opportunities. Risky? No! Fun? Yes!