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The following guest post is the third in a series of four articles by innovation agitator Alberto Savoia (find the first here). Throughout his career as a serial entrepreneur and Google employee, Alberto has experienced great market successes–along with a few inevitable failures. In this series he’ll share his knowledge about why products fail and provide recommendations for beating the odds.

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In my previous two articles (found here and here) I introduced The Law of Market Failure which states: “Most new products will fail in the market, even if they are competently executed,” and identified failure in premise (i.e. building the wrong product to start with) as the most common, and hardest to recover from, reason for failure. In this article, we begin to look at how we can test a new product’s premise before we invest too much in it.

All new products begin with an idea. If all you have is the idea, however, the most you can do with it is to solicit opinions based on it; and if you do that, you are likely to run into a couple of problems that may seriously derail your decision-making process:

The Lost in Translation Problem: An idea is an abstraction–and a subjective one at that; it’s something that you imagine or picture in your head. The moment you try to communicate what you see in your mind’s eye to someone else you run into a challenging translation problem–especially if your idea is new and different from anything else they’ve seen. The way you imagine the new product and its uses may be completely different from the way they imagine it.

The Prediction Problem: Even if your audience’s abstract understanding of your idea is a close match to your original intention, people are notoriously bad at predicting whether they would actually want or like something they have not yet experienced, or if and how they would actually use it.

In my book, Pretotype It, I introduced the concept of Thoughtland, a fictional place where unrealized and untested new product ideas live. In Thoughtland, every idea can be a winner or a loser–depending on whom you ask … and how you ask it. This can lead to two dangerous outcomes:

False Positive: People like your idea, they think they understand it and can see themselves using it. They give you thumbs-up and tell you to go ahead: “Go for it! If you build it, we’ll definitely buy it and use it.” Fueled by such positive feedback you proceed to implement the idea. But after you launch it, all that enthusiasm and all those plans to buy and use your product are nowhere to be seen.

False Negative: People just don’t get your idea, or it makes no sense to them. They don’t see what you see. When you talk about your vision, they think you are hallucinating: “Have random people follow you as you write 140 character blurbs? You’ve got to be kidding!” As a result, you drop any plans of implementing your idea and move on. And a few months later another company launches a very similar product to great success.

False positives can lead you to believe that your idea is immune to The Law of Market Failure, so you invest too much too soon in a new product that will eventually flop. False negatives, on the other hand, can scare you away from giving your idea a chance, and you end up prematurely scrapping the next Twitter, or Google, or Tesla.

To minimize your chances of getting false positives or negatives you need to collect something more substantial and objective than opinions–especially when the people who give you those opinions have no skin in the game. And the only way to do that is to transport your idea from Thoughtland to a more concrete environment–let’s call it Actionland.

In Thoughtland you use abstract ideas to ask hypothetical questions and collect opinions.

Thoughtland: Ideas -> Questions -> Opinions

In Actionland you use artifacts to prompt actions and collect data.

Actionland: Artifacts -> Actions -> Data

Let’s say, for example, that you have an idea for a computer monitor stand with sensors and motors that automatically moves and adjusts for optimum ergonomics. Let’s call it The Last Stand–as in: “You can now last longer working at your computer.”

If all you have is the idea and, perhaps, a drawing, you are stuck in Thoughtland. You can go around your office, explain the idea to your colleagues and ask them questions such as: “What do you think of this?”, “How much would you pay for it?” You can reach out to other companies and talk to HR departments: “Would you consider buying this for your staff?” “How many would you order?” That’s a lot of hypothetical questions and subjective answers (with no skin in the game)–not a lot to go on.

Of course, you might learn a few useful things in the process. For example, that most people would not use their own money on The Last Stand, but would be happy to try it–if the company pays for it. Before you make an expensive new product decision based on a flimsy combination of ideas, questions and opinions, however, remember The Law of Market Failure.

As I’ve mentioned in my first article: “In criminal law, a person is presumed innocent until proven guilty. When it comes to market law, we should presume a potential new product to be a failure–at least until we’ve collected enough objective evidence to make us believe otherwise.”

And to collect that objective evidence, you need to move from Thoughtland to Actionland.

You can do that by building a proper prototype of The Last Stand (i.e., an actual stand with sensors and motors–and all the software to run it.) But such a prototype will be costly and will take weeks/months to create.

On top of that, working prototypes are great for determining the feasibility of a new product (Can we build it? Will it work?) but are not sufficient for determining if there is a viable market for it.

Wouldn’t it be wise to objectively test and gauge the potential market for The Last Stand–at least a bit–before making a major investment in prototyping it? Are there other artifacts we use can to collect market data that are simpler, cheaper and quicker to build than a prototype? Yes, between abstract ideas and proper prototypes there are pretotypes:

Pretotype, noun: An artifact used to test hypotheses and collect data about the market appeal and actual usage of a potential new product objectively and with a minimal investment of time and money.

Pretotypes help you to “make sure that you are building The Right It before you build It right.”

In the next and final article in this series, Pretotype It, I continue my discussion of pretotypes and show you how simple pretotypes can quickly take you from Thoughtland to Actionland and be used to collect valuable market data. Please share your thoughts about decision-making in building products in the comments below.

Read the fourth and final article in the series: Pretotype It.

About Alberto Savoia

As a serial entrepreneur and an early Google employee (where he led the development and launch of Google’s AdWords), Alberto Savoia has experienced great market successes–along with a few inevitable failures. Most entrepreneurs and innovators respond to failure by licking their wounds and moving on to their next idea. But Alberto decided to first deal with the sting of failure by stinging back. Between 2008 and 2011, while still at Google, Alberto became a serious student of failure in new and innovative products. After reading dozens of studies and analyzing hundreds of new products, he was able to identify the main cause for why most new products fail in the market, and developed a set of techniques, which he called Pretotyping, to minimize such failures.

The concept, techniques, tools and metrics of pretotyping were an instant hit within Google; and soon Alberto found himself teaching pretotyping at Stanford University and at many companies, from startups to Fortune 500. His handbook “Pretotype It–Make sure you are building The Right It before you build It right” has been translated in many languages and has become an invaluable guide for thousands of innovators and entrepreneurs world-wide. Alberto’s work on innovation has been recognized with numerous awards, including The Wall Street Journal Innovator Award. Learn more about Alberto on his website and follow him on Twitter @Pretotyping.

The following guest post is the second in a series of four articles by innovation agitator Alberto Savoia (find the first here). Throughout his career as a serial entrepreneur and Google employee, Alberto has experienced great market successes–along with a few inevitable failures. In this series he’ll share his knowledge about why products fail and provide recommendations for beating the odds. Download Alberto’s ebook about overcoming market failure.

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In my previous article I introduced The Law of Market Failure which states: “Most new products will fail in the market, even if they are competently executed.”

A tough way to start. But now that we know the odds, we can develop a plan to beat them. After all, implicit in The Law of Market Failure is The Law of Market Success: “Some new products will succeed in the market.” Let’s see how we can maximize our chances to develop one of those successful products.

The Law of Market Failure gives us the rough odds (rough in more ways than one) for market failure and success. But what are the causes that account for so many failures and so few successes? What do new products that fail in the market have in common?

Between 2009 and 2011, while at Google, I became a student of market failure. It was a great environment for doing that. I had access to hundreds of colleagues who, prior to Google, had worked in various capacities (product management, R&D, marketing, etc.) for hundreds of companies and in dozens of markets: from startups to Fortune 500s; from disposable consumer goods to multi-million dollar B2B hardware and software. My colleagues were not only willing, but often eager, to share their war stories. In fact, many of these discussions reminded me of the scene from the movie Jaws where the characters played by Robert Shaw and Richard Dreyfuss brag about their shark attack stories–and take pride in showing off their battle scars.

It did not take long before a pattern emerged from these stories: Most new product failures could be attributed to one or more of three main causes: Failure in Launch, Operations or Premise. Which, incidentally, makes for a convenient and appropriate mnemonic: F.L.O.P.

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Let’s look at a typical scenario for each of these causes in isolation. In other words, for illustrative purposes, let’s assume that the team got two out of three things right in the Launch, Operations or Premise trio. If you’ve been around long enough some, or all, of these scenarios may sound very familiar.

Failure In Launch

In this scenario we have new products that were well thought-out, clearly met a market need, had the right set of features and were properly designed, engineered and manufactured. However, during the “launch” (i.e. the concerted marketing, PR and social-media efforts) something went wrong. People either didn’t take notice, or the timing, pricing or positioning was such that there was no product traction and no buzz. The new products either failed to achieve the necessary market awareness, or disappeared from it as quickly as they came into it.

Failure in Operations

In this case, we have new products that, as before, were well thought-out, clearly met a market need and had the right set of features. On top of that, the launch was also successful and generated a lot of interest. As a result, there was strong initial traction for these new products and all signs pointed to success. However, after a short time, various operational problems (reliability, usability, performance, etc.) began to manifest themselves. Early adopters brought the quality of these products into question, a few bad reviews appeared online and in the press and, before you knew it, failure was cruelly snatched from the jaws of victory.

Failure in Premise

In this final scenario, the products were well built (solid, reliable, stable) and the teams responsible for the launch did a great job; there was a lot of buzz and, sometimes, even strong initial sales and adoption. But after a short while, even though the product did exactly what it was designed to do–and did it well–people realized that they didn’t really need it or want it after all. The people who had already bought it stopped using it, and those who were thinking of buying it changed their mind and went after the next new shiny thing.

These three scenarios can be further summarized as follows:

Failure in Launch: We built the right product. We built it right. But we launched it wrong.
Failure in Operations: We built the right product. We launched it right. But we built it wrong.
Failure in Premise: We built the wrong product to start with.

When we look at it this way, one thing should become clear: Scenarios 1 and 2 can be remedied–and they probably should. It may not be easy, quick or cheap, but the very same product can be relaunched or re-engineered.

Scenario 3, on the other hand, is pretty much a dead-end. If the launch was successful (i.e., enough people heard about the product, bought it/tried and used it) and the product worked well (i.e., people did not stop using it due to quality or performance issues) the most likely conclusion is that we built the wrong product.

When I reviewed my collection of failure stories in the context of these three categories, another thing became clear: Scenario 3 was not only the hardest one from which to recover and regroup; it was also most the common–by far! The message for new products was loud and clear:

“Make sure you are building The Right It before you build It right.”

Those words have become my mantra whenever I contemplate some new product or venture; and they should become yours as well.

The next question is: How do we know if we have “The Right It” before we build It right?

Read the next article in this series, Don’t Tell. Don’t Ask. Data Beats Opinions and download my ebook, Failure: Analyze it, Don’t Humanize it.

About Alberto Savoia

The following guest post is the first in a series of four articles by innovation agitator Alberto Savoia. Throughout his career as a serial entrepreneur and Google employee, Alberto has experienced great market successes–along with a few inevitable failures. In this series he’ll share his knowledge about why products fail and provide recommendations for beating the odds.

I am going to begin this series of articles on new product delivery by tackling the rather difficult and unpleasant subject of market failure. It may not be the gentlest way to start, but the odds for market success are heavily stacked against any new product. The best way to beat the odds is to be aware of them and to understand the causes behind them — know thy enemy.

If you’ve been involved in developing and launching new products for a while, you have probably experienced a few flops along the way. Welcome to the club! But how common is failure for new products? There is a lot of anecdotal evidence, but what about actual numbers to backup and quantify our experiences? During my tenure at Google I’ve participated in many product discussions and I now have two of the company’s guiding principles embossed in my brain: 1) Data beats opinions, and 2) Say it with numbers. Fortunately, when it comes to new product failure there is plenty of data available.

Every year, companies launch thousands of new products of all types and in all markets–with each team believing and hoping that “This is the one.” All of these launches are carefully followed and tracked by various market research companies. One such company, Nielsen, has been analyzing thousands of worldwide product launches for a long time. Here is a summary from one yearly report:

Nielsen Research

The results are remarkably consistent from year to year. There may be minor annual variations, but Nielsen summarized its many years of research and analysis of what it labels “historical new product performance” and assigned it a failure rate of around 80%. Ouch.

Now, it may be true that some research companies define failure/disappointment or success differently, and that some markets may be more or less brutal and competitive than others. Even with the most lenient definition of failure in the most accepting and open-minded markets, the overwhelming majority of new products will fail.

But why is that? Is there a primary cause for all these failures? The most common response is to blame “execution” somewhere along the way. But whose execution? At what stage in the process? Answering these questions is a challenge because after a market failure there is a lot of finger pointing. As the saying goes, success has many fathers while failure is an orphan. What does the research show?

Unfortunately, the causes behind market failures cannot be quantified or categorized as neatly as the number of market failures. There is little doubt that bad design, missing key features, poor reliability or performance, wrong pricing, a bad marketing campaign, a poorly timed launch, etc., …can doom a product. An inexperienced team may make one or more critical mistakes in any of those areas; but many new products fail in the market even when they are competently executed by experienced teams. Double ouch.

There are, in fact, many cases where the same company and people responsible for a hit product fail to achieve even mild success with one or more follow-up new products. Same company, same team, same resources and expertise, same market knowledge, goodwill, etc., and very different results. Past performance may still be the best predictor of future performance; but the odds for failure still trump (and trample) previous success records and competent execution.

The numbers and the data are so compelling and consistent that I decided to summarize and formalize them into a law:

The Law of Market Failure:

Most new products will fail in the market,

even if they are competently executed.

In criminal law, a person is presumed innocent until proven guilty. When it comes to market law, we should presume a potential new product to be a failure–at least until we’ve collected enough objective evidence to make us believe otherwise.

You may be thinking, “Thanks for that morale booster, Alberto. Now what?”

I had warned you that this series of articles would begin on a somber note. My goal is not to discourage, but to provide a realistic assessment of the odds faced by anyone involved in delivering new products to market.

The great news is that we got the tough stuff out of the way early and once we acknowledge and accept The Law of Market Failure we can begin to study it and develop ways to deal with it. And that’s exactly what I will cover in my next article; we are going to look at “F.L.O.P. Analysis” – a way to categorize the most common causes of new product failure, so we’ll know where to strike. It will be the beginning of our journey from likely victims of The Law of Market Failure, to likely victors over it.

Read the next installment in this series, F.L.O.P. Analysis – Why Most New Products Fail In The Market

About Alberto Savoia As a serial entrepreneur and an early Google employee (where he led the development and launch of Google’s AdWords), Alberto Savoia has experienced great market successes–along with a few inevitable failures. Most entrepreneurs and innovators respond to failure by licking their wounds and moving on to their next idea. But Alberto decided to first deal with the sting of failure by stinging back. Between 2008 and 2011, while still at Google, Alberto became a serious student of failure in new and innovative products. After reading dozens of studies and analyzing hundreds of new products, he was able to identify the main cause for why most new products fail in the market, and developed a set of techniques, which he called Pretotyping, to minimize such failures.

The concept, techniques, tools and metrics of pretotyping were an instant hit within Google; and soon Alberto found himself teaching pretotyping at Stanford University and at many companies, from startups to Fortune 500. His handbook “Pretotype It–Make sure you are building The Right It before you build It right” has been translated in many languages and has become an invaluable guide for thousands of innovators and entrepreneurs world-wide. Alberto’s work on innovation has been recognized with numerous awards, including The Wall Street Journal Innovator Award. Learn more about Alberto on his website and follow him on Twitter @Pretotyping.