The Right It Read online

  This book is a good example of my practicing what I teach. Let me explain. Writing a book is a major undertaking, and I was well aware that most authors never find a publisher or a significant audience for their work. In other words, most books fail in the market.

  So, before deciding to invest a year or more in writing a proper book and taking the risk that nobody would read it or find it useful, I did an experiment. I gave myself five days to write a short booklet, which I titled: Pretotype It: Make Sure You Are Building The Right It Before You Build It Right.* The booklet introduced the concept of The Right It along with a rough version of some of the tools and techniques you will read about in this book. I printed and manually stapled a few dozen copies of the booklet and handed them out to colleagues and friends.

  A couple of days later, I began to receive requests for more copies. “Hey, Alberto, loved the book. Can you get me ten more copies? I’d like to share this with my team. I am happy to pay you for them.”

  Soon the requests for additional copies outpaced my ability to produce them by hand. So I ordered a big batch from a printing shop, and then another batch, and another. Eventually, tired of trips to the printer and schlepping heavy boxes around, I decided to put a PDF of the booklet online and to make it available for free, so people could print it themselves if they wanted. By request, I also created a Kindle version and put it on sale on Amazon for 99¢ (the lowest price allowed).

  A few days later, I began to receive emails from people I did not know telling me how much they liked the booklet and thanking me for writing it. A lot of them encouraged me to write a proper book with more techniques and examples. I also started to receive invitations to give talks and workshops on The Right It and pretotyping at major companies and universities. Several people from different parts of the world volunteered to translate the booklet into their language; and I gave them all my permission with the condition that a PDF of their translation must also be available for free. Thanks to their efforts, today there are about a dozen translations of Pretotype It available.

  The first version of that booklet came out in 2011. Since then, the original PDF and eBook versions (and their translations) have been copied and posted on countless websites, so I have no way of knowing how many people have actually downloaded and read it, but I believe it’s in the tens of thousands. And all of this with practically no marketing or advertising, simply by word of mouth.

  In life and business, including the book business, there are no guarantees. But the strong initial and ongoing interest in my experimental booklet and the many success stories from the people who applied the lessons and techniques in it were enough to convince me to invest the time and effort required to write a proper book—the book you are currently reading.

  Be Daring, but Be Careful

  Please make sure to use your best judgment and respect all applicable laws and industry standards in following the examples or applying the tools that I describe in this book. Every organization is different, and the advice and tactics contained herein may not be suitable for your situation or product idea. In fact, some of the techniques may be illegal or unethical for certain types of products (e.g., in medicine) or in certain highly regulated industries (e.g., aviation). If you wish to apply ideas contained in this book, you are taking full responsibility for your actions. Neither the author nor the publisher shall be held liable or responsible to any person or entity with respect to any loss or incidental or consequential damages caused, or alleged to have been caused, directly or indirectly by the information contained herein.

  Part I

  Hard Facts

  1

  The Law of Market Failure

  I like hard facts. The harder, the better. I like them even when they go against my desires and preferences. I like them because they are grounded in reality, and that grounding gives me a solid foundation—a bedrock I can build upon. Facing and accepting hard facts may feel uncomfortable at first, but that initial distress is nothing compared to the problems and pain that await those who choose to ignore them.

  The hard facts we will explore share three dimensions of hardness:

  They are hard to take. They may be difficult to accept, at least at first.

  They are based on hard, objective data, not on tenuous hopes, wobbly beliefs, or volatile opinions.

  They are hard in the sense of being solid, unyielding, and permanent. They are unlikely to change—at least in your lifetime.

  The last two characteristics of hard facts, objectivity and permanence, make them universal and timeless, so you better get used to them.

  My goal for the first part of the book is to expose you to key hard facts about failure and success. If I do my job well, and if you keep an open mind and a courageous attitude, you will find yourself not only accepting and respecting hard facts, as I do, but also depending on them, valuing them, and seeking them out, as I do. A hard fact is good to find.

  Failure Is Not an Option—Not!

  “Failure is not an option!” I am sure you’ve heard that phrase before in action movies, motivational speeches, and desperate staff meetings. It’s a great quote. So optimistic. So inspiring. So confident. And yet so wrong.

  When it comes to bringing new product ideas to market, failure is always an option. In fact, it is—by far—the most likely outcome anytime anyone tries to do something new or different. This is true in art, in science, in relationships—everywhere. And it’s most definitely true in the world of business. Most new businesses fail, and most new products launched by existing businesses fail.

  Telling yourself that failure is not an option may work if you are a hero in a Hollywood action movie or if you are stuck in a jam with only one way out. But if you are planning to launch a new product into the market, to say, believe, or act according to “failure is not an option” is to go against reality—always a bad idea. Those five words may give you an initial boost of confidence or motivation, but that boost will be short-lived and, more often than not, you will be boosted in the wrong direction—straight into the jaws of the Beast of Failure.

  I offer you a more realistic formulation:

  Failure is the most likely outcome.

  Consider this your first hard fact, and remember that hard facts are your friends even if they may not appear so at first glance. As you go through this book, you will see why treating failure as the most likely outcome for any new idea is a much more effective way to think, because it aligns with the reality of the market, and that alignment will ultimately and consistently lead you to more successes in the market.

  This first hard fact about failure is so important and so deserving of respect that I believe it’s wise to treat it as a law.

  The Law of Market Failure

  I’ve already characterized failure as a beast, and I will use the metaphor of the Beast of Failure throughout the book because, psychologically, that image conjures up the kind of fears and emotions most people feel when faced with failure. We must not ignore those psychological effects, because they do impact how we think and act. But I also want to present and deal with failure in a more objective and analytical way. When new products are brought to market, failure is the rule, not the exception. Failure is so consistent, persistent, and ubiquitous that it will serve us well to treat it as a law and give it the respect it deserves.* The Law of Market Failure is this:

  Most new products will fail in the market,

  even if competently executed.

  I wrote the law on two lines because it packs a one-two punch:

  Punch 1: Most new products will fail in the market.

  Ouch!

  Punch 2: They will fail even if competently executed.

  Double ouch!

  I will soon give you hard evidence to back up the hard fact that failure is the most likely outcome for any new product. But before we go there, it’s a good idea to clarify what we mean by market failure—and the more elusive market success.

  Market Failure and Success Define
d

  For our purposes, market failure means any actual market result from an investment in a new product that is less than or the opposite of the expected result.

  Let me explain. When you bring a new product to market, you make an investment—an investment of money, time, resources, and reputation. You make that investment with the expectation that you’ll achieve specific desirable results: more revenue, bigger profits, a larger market share, new customers, more publicity, and so on. For example:

  Two employees quit their secure jobs and invest their savings to start their own company, expecting that they will be happier and/or make more money being their own bosses.

  A company invests in developing a new and improved version of an existing product, expecting that it will sell more and be more profitable than the previous one.

  An expert in a field takes an unpaid sabbatical to write a book in which he shares his expertise, expecting that the book will be published and that it will add to his reputation. A publisher decides to publish that same book expecting that it will sell well.

  A restaurateur operating a popular and profitable restaurant opens a second location, expecting that it will also be popular and profitable.

  A highway department invests in adding new toll-road lanes to a busy freeway, expecting that this will ease traffic congestion and generate enough revenue to pay for itself.

  If you launch your product into the market and the actual results are less than or the opposite of what you expected, that’s what we call a market failure.

  Our definition of market success is the flip side of the one for market failure. Market success means any actual market result from an investment in a new product that matches or surpasses the expected result.

  It’s important to note that some products can be a market failure but still be considered successful based on other criteria. A movie that garners critical praise but flops at the box office is still a market failure—at least for those who invested in it hoping to make a profit. A new product that does exactly what it’s supposed to do, does it better than anything else, but does not sell enough to enable a profitable business may be a marvel of engineering, but it’s still a market failure. A new toll road that eases traffic congestion but does not generate enough revenue might be considered a success by commuters, but it’s a market failure as far as the taxpayers are concerned. It’s important to be explicit about your success criteria before you get started.

  Now that we have clear and specific definitions of what we mean by market failure and market success, let’s explore in more detail how often, how, and why most new products do fail.

  Market Failure Statistics

  The first line in the Law of Market Failure states: “Most new products will fail in the market.” By using the word most, I am implying that more than 50% of all new products fail. That’s a safe position to take. I have yet to find an industry in which the majority of new products consistently succeed. This makes perfect sense, because that would indicate an industry or market with infinite demand and resources to absorb a huge number of new products—and there’s no such thing.

  But what is the actual rate of failure? Is it 51%, 70%, 95%, 99%? The answer depends on a number of factors, among them the type of business or industry, how many companies and products are included in the study, and the definition of failure.

  In the broader consumer-products market, some of the best data on new-product failure comes from the venerable firm Nielsen Research. For decades, Nielsen has been tracking tens of thousands of new product launches. Every year it produces a report on how those products have fared in the market. The results are remarkably consistent: approximately 80% of new products fall short of their original expectations and are categorized as “failed,” “disappointing,” or “canceled”—year after year, with no exceptions.

  If you research or talk to people like authors or publishers, mobile app developers, venture capitalists, and restaurateurs, you will hear the same story and get roughly the same 80% number over and over. So if you are looking for a number to replace “most” in the Law of Market Failure, anything in the range of 70% to 90% will do. I suggest you err on the side of caution and begin by assuming a 90% chance of failure for any new product idea.

  The statistics on new-product failure are clear, consistent, and convincing. But what’s behind those numbers? Why do most new products fail? Hard facts are easier to accept and deal with if we understand their causes. So let me begin to answer those questions by exposing the logic that explains why failure is a much more likely outcome than success.

  The Success Equation

  Success depends on a number of key factors. A factor is a circumstance, fact, or event that contributes to a result or outcome. And a key factor is one that must be done right or turn out right for the idea to succeed. Most results and outcomes depend on the interaction of multiple key factors, and to have a successful outcome all key factors must be done right or turn out right.

  To help visualize and analyze this concept we can use a formula that I call the Success Equation:

  Right A × Right B × Right C × Right D × Right E, etc. = Success

  where A, B, C, D, E, etc., are key factors for success.

  A competent and well-trained kitchen staff is a key success factor for a new restaurant; let’s call it key success factor A. But success also requires finding a suitable space in the right neighborhood (B), good suppliers (C), capable servers (D), sound financial management (E), good marketing and a sufficient marketing budget (F), and competent operations (G). In addition, you need the cooperation of factors that are mostly outside your control, like the overall economic climate, competitors, and reviewers. All of these are key factors. All of these must turn out right for the restaurant to succeed—and that’s a lot of rights in a row.

  On the other hand, all it takes for something to fail is for a single key factor to go wrong—just one!

  Right A × Right B × Right C × Wrong D × Right E, etc. = Failure

  * * *

  Right A × Wrong B × Right C × Right D × Right E, etc. = Failure

  Remember when you first learned in math class that any number, no matter how large and impressive, when multiplied by zero results in zero? The same general idea applies to the Success Equation.

  A single bad review from an influential critic in a bad mood can doom a restaurant—whether you’ve spent $1,000 or $1 million in marketing. Any number of success factors done right or gone right can be undone by a single thing done wrong or gone wrong. (For those of you who are mathematically inclined, if a successful outcome depends on n key factors being right, there are 2n–1 ways to fail—and only 1 way to succeed.) With the odds so heavily stacked against them, it’s not surprising that most new products fail. The real mystery—or surprise—is that some products beat those odds and succeed.

  This brutal logic explains the statistics behind the Law of Market Failure—but it’s also the logic we’ll use to beat it.

  Too Smart to Fail?

  Most people don’t argue too much with the first part of the Law of Market Failure. After I provide them with the statistical evidence and the logic behind it, they eventually accept the hard fact that most new products will fail in the market. But I get a lot more resistance to the second part of the law, the part that states that most new products will fail “even if competently executed.”

  Very few people are ready to accept that, and I understand their reluctance. That’s exactly what I used to think, that failure is the result of incompetence or inexperience at one or more points during the execution of a new product. Unfortunately, competence in execution is not an antidote to failure. That’s a hard pill to swallow, but swallow it you must. If you operate under the delusion that experience and competence in a given field or market insulate you from the Law of Market Failure, not only will you still fail, but your hubris will be punished by your failing in an even bigger and more painful way.

  In my workshops and clas
ses, I prove my point by showing case after case of dramatic failures by people and companies widely considered the best in their respective markets. Here are some examples.

  Coca-Cola and PepsiCo are arguably the two most successful companies in the soft-drink industry. Both companies are world-class experts at making, marketing, and distributing anything bottled and bubbly; they have decades of experience and unparalleled know-how and resources. None of that impresses the Law of Market Failure. Coca-Cola’s New Coke—a mid-1980s reformulation of one of the most iconic products in history—involved a massive market-research and publicity effort. But, despite all that work, research, and preparation, New Coke was met with a response that ranged from negative to downright hostile. The company had to rush back to offering the original formulation. PepsiCo experienced a similar failure with Crystal Pepsi, a coloring-free, caffeine-free alternative to regular Pepsi.

  Did you see the movie John Carter? If you answered no, you are in good company. The movie was a flop—even though it was a Disney movie with a $250 million production budget and a $100 million marketing budget. Disney is no Dumbo when it comes to making and marketing movies; on the contrary, it’s one of the most savvy, experienced, and successful movie studios in history. But its competence does not make it immune to the Law of Market Failure. The same applies to filmmaker George Lucas, who followed the hugely successful Star Wars with Howard the Duck—a disastrous flop.

  Google is one of the most experienced and competent companies in the world when it comes to developing and launching internet products. And yet, in 2010, the same company that brought you Google Search, Google Maps, and Gmail, launched Google Wave—a new way for teams to collaborate online. Despite an impressive amount of press, hype, and enthusiasm, Google Wave ran smack into the Law of Market Failure, and the company began to phase it out in a matter of months. The same fate awaited many other high-profile and well-publicized Google products such as Google Buzz and Google Glass. Dozens of lesser known Google products also failed or fizzled out—ever heard of or used Jaiku or Google Answers?