In my classes I like to ask students to name all the Google and Microsoft products they use or know about. Then I show them a list of Google and Microsoft products that failed. My list is always at least five times longer than theirs. If you search online for “Google failures” or “Microsoft failures,” you will find several compilations of the companies’ many unsuccessful products—including a Pinterest page called the Google Graveyard and one called the Microsoft Morgue.
Of course, most companies don’t advertise their failures—they bury their dead quietly and move on. But if you dig a little, you will find that you can pick any successful company and create the equivalent of the Google Graveyard or Microsoft Morgue for it. For example, the McDonald’s Mortuary might include the ill-fated McLobster, the Hula Burger (with a slice of pineapple instead of meat), and McSpaghetti—which, as an Italian, I find particularly disturbing.
Competent companies that are more aggressive and more innovative will easily have a ratio of failed to successful products of 5 to 1, if not more. But even more conservative and competent companies will fail far more often than not. The most striking thing about these failed products is that the people, resources, and companies behind them are not only competent, but often the best in their field—with decades of experience. The Law of Market Failure is blind.
The hard fact to take away is that, although experience and competence are necessary to achieve lasting success with a product that the market wants, they are powerless when applied to a product that the market is not interested in. In fact, experience and competence often result in an even bigger and more public failure, because we tend to make a bigger investment and set unrealistically high expectations.
Failophobia
To summarize, most new products will fail, failure can happen in many ways, and competent execution is not enough to defeat the Law of Market Failure. But what is the primary reason for all these failures? Can we identify a major culprit—enemy number one—so that we can maneuver to avoid it?
I had such a culprit in mind, but I did not want to draw general conclusions based only on my experience. So after my first major experience with failure I decided to return to Google, get my old job back, and, while working on new projects, learn more about failure. Fortunately, Google not only took me back, but welcomed me with open arms and gave me a great opportunity to study failure. The company had become very interested in how failure affected its ability to innovate and launch new products and asked me and a few others to investigate the problem and propose some solutions. I could not have asked for a better setup.
As a company, Google has a relatively high tolerance for failure. But although the Beast of Failure did not intimidate the company as a whole, it scared the heck out of most individual employees. Google, the company, understood and accepted that failure is an inevitable by-product of innovation. But most Google employees preferred to work on already successful and well-known products; they did not want to risk failure by joining a group working on a new and unproven idea. They wanted to tell their friends and family, “You know Gmail? I work on that!” as opposed to, “I am an engineer on project SnarfBlatt.”
This deeply human desire for being associated with success and avoiding failure—failophobia—is why many already successful companies have trouble staying innovative even when they, as organizations, are prepared to accept some failures. At the company level, one really successful new product, like Gmail, can easily erase dozens of failures, like Google Wave, but any individual employee will have two or three years of work on a failed product on his or her own résumé. While working at Google as engineering director, I witnessed this behavior every time I tried to recruit engineers or product managers for key roles in new and exciting but risky projects. Because of failophobia, most candidates chose to accept lesser roles working on already established successes.
But although many Google employees wanted to avoid new failures, they had no problem talking about their past failures. In fact, they loved to talk about them. Many of these discussions reminded me of the scene from the movie Jaws where the characters played by Robert Shaw and Richard Dreyfuss share their shark-attack stories, taking pride in their battle scars and trying to one-up each other: “If you think your failure was bad, wait until you hear my story!”
It was fascinating to hear these smart and competent people recount their failures. But I cared mostly about the answer to one question: Why do you think your product failed?
FLOP
After interviewing scores of people about their experiences with failure, a clear pattern emerged. Most projects failed for three reasons:
Failure due to Launch, Operations, or Premise
Which gives us the appropriate (and easy to remember) acronym FLOP.
Failure due to Launch happens when the sales, marketing, or distribution efforts accompanying your new product fail to reach the intended market with the necessary visibility or availability. In other words, too many of the people who are supposed to need or want your product or service (i.e., your intended target market) don’t know it exists, don’t know enough about it, or can’t get their hands on it. It may be the greatest idea ever, beautifully executed, and a perfect solution to a major problem, but if you can’t get the word or your product out to your target market, it will fail.
Failure due to Operations occurs when your new product’s design, functionality, or reliability fails to meet a minimum threshold of user expectations. For example, a beautiful-looking but uncomfortable chair, a restaurant with great food but lousy service, or a mobile app that constantly crashes. You may be able to get a few early adopters to buy or use your product or service, but inevitably, if your implementation of the idea is not good enough, word will get out and it will fail.
Failure due to Premise happens when people are simply not interested in your idea. They know about it, they understand it, and they believe that it does what it promises reliably and efficiently. They can also easily find it, try it, or buy it, but they just don’t care.
Through my interviews, I identified these as the three main reasons most products fail in the market, but something about these answers bugged me. People’s accounts of the failures involved an initial pattern of blaming, which muddied the results. When a project fails, people point fingers. In a high-tech project, for example, engineering blames marketing, marketing blames engineering, everyone blames sales, and sales blames everyone. Similarly, if a restaurant fails, people point the finger at the chef, or the service staff, or the marketing team, or even the decorator. But when I pressed my interviewees to get past the blame game, when I asked them to seek a more fundamental root cause for the failure of their project, they realized that most of the people involved were competent—often even exceptional—in their respective designing, building, marketing, and selling responsibilities. There may have been some launch and operation issues, but those were not the root cause for the failure.
Once they got past the finger-pointing, most people had a similar epiphany: “I guess that, after all is said and done, we did a pretty darn good job building and marketing our product, but it was a product that not enough people really wanted or needed. I’ll be damned!” After the fog of blame lifted, one root cause emerged above all others: Premise. A small percentage of products fail in the market because they are poorly launched or built; the majority fail because they are the wrong product idea to start with. I had found my enemy number one, the most common reason behind the market failure of new products.
This result came as a surprise to most people—including me. I had always spent most of my time and energy on a new product making sure that we were building it right (robust, high-quality, scalable, with lots of features) and then on marketing and selling it right. But because we had assumed from the start that we were building the right product, more often than not all that time and effort and competence went into a product that in fact turned out to be wrong for the market.
Most new products fail not
because of incompetence in designing, building, or marketing, but simply because they are not what the market wants. We build It right but we don’t build The Right It—a product that enough people want or need to justify developing it.
I summarized that realization in the following sentence, which has become my mantra and the reason and motivation for this book:
Make sure you are building The Right It before you build It right.
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The Right It
The Right It is not just the title of this book. It’s the star of this book. It’s what it takes to beat the Law of Market Failure—in fact, it’s the only thing that can beat it. So let me take some time to clarify and expand on what I mean by The Right It. I begin by defining it. The Right It is an idea for a new product that, if competently executed, will succeed in the market.
In business, there are no good ideas or bad ideas; there are only ideas that succeed in the market and ideas that fail in the market. As we have seen, most ideas will fail—even if competently executed. The minority of ideas that become a market success have one thing in common: they are The Right It. In other words, take an idea that is The Right It, add competent execution, and the idea will succeed in the market.
Does that mean that if you combine an idea that is The Right It with your competent execution, you are guaranteed success? Sorry, it doesn’t work that way. First of all, there are no guarantees in business. Second, the definition says that the idea will succeed, not you. It’s always possible that someone else will execute the same idea better or faster than you. This happens all the time. In fact, once the market for an idea is proven, other people will realize that the idea is The Right It and jump in and try to do it better—or just differently. Pizza is a great example of an idea that is The Right It (possibly my favorite example); all it takes is a ten-minute drive around town to see how many companies, both large and small, have jumped in to grab a slice—ahem—of the pizza market.
Even though success in business cannot be guaranteed, if you are working with an idea that is The Right It, your odds for success will increase dramatically. And if you apply the tools and tactics you will learn in this book, you will be able to determine if an idea is likely to be The Right It quickly and reliably. You might still fail in the end if you don’t execute well or competitors execute better, but when compared with the odds you have when dealing with The Wrong It, this is a huge advantage. Speaking of The Wrong It . . .
The Wrong It
The Wrong It is the evil twin of The Right It. I define it as follows: The Wrong It is an idea for a new product that, even if competently executed, will fail in the market.
Every time a team of experienced and competent people work hard to develop and launch a high-quality new product and that new product fails in the market, they’ve fallen victim to The Wrong It. The basic Premise for their idea (remember the P from FLOP) is out of sync with the reality (the actual needs and wants) of the market. No amount of competent execution (brilliant design, clever engineering, impeccable quality, masterful marketing, or superior salesmanship) can save a product that is based on the wrong Premise. In fact, the more time and effort you invest in The Wrong It, the longer, bigger, and more painful your failure will be. Going to market with an idea that is The Wrong It is a hopeless task. Even if you manage to create some initial buzz and interest for the product (perhaps with some marketing fireworks), your odds of long-term success are still 0.0%.
Now that we’ve defined and explained both The Right It and The Wrong It, we should answer two key questions:
Why do so many presumably experienced people fall in the trap and waste their experience and competence executing The Wrong It?
How can we know if an idea is The Right It before we invest too much in developing it?
I will answer the first question in the next few pages; the second question is the focus of Parts II and III of this book.
Thoughtland
How is it possible that so many competent and successful people and organizations invest so much time and energy in developing products that, more often than not, fail in the market? Shouldn’t these experts know better? Don’t they know that they need to do some market research before pulling the trigger on a new product? Why do they keep falling into The Wrong It trap?
Once again, I set out to answer these questions by interviewing dozens of people from different industries and asking them a series of pesky questions:
How do you know if the product you are currently building is something that the market wants? . . . I see, you do market research. And what market research techniques do you use? . . . Interesting. And how well have those market research techniques worked for you in the past? . . . Ouch, that doesn’t sound like a winning record—more misses than hits. By the way, how much did you spend on that research? . . . Wow, that’s a bunch of time and money to get such unreliable results. . . . You agree? Then why do you keep using those techniques?
What I learned from these interviews is that most successful people and organizations are fully aware that having the right product premise is critical for market success (duh!). To make sure that they have the right product, they invest significant time and money on market research. And yet most of those products still fail. What’s going on?
After digging up for autopsy a lot of product corpses that failed despite extensive market research, I identified a recurring—and problematic—pattern: most of the so-called market research for those products was not done in the actual market, but in a fictional environment I call Thoughtland. Thoughtland is an imaginary place where every potential new product begins life as a simple, pure, abstract idea. Think of it as an idea hatchery. So far, so good.
The problem arises when an idea spends too much time in Thoughtland after it’s hatched. When that happens, the idea starts to attract opinions the way a ship’s hull attracts barnacles. Some people think the idea is great. Others think the idea is lame. Even so-called experts disagree. Opinions about an idea are not data—not even close. Opinions are subjective, biased judgments. They are guesses thrown out without much thought, evidence, and—critically—with no skin in the game (if you are not sure about what I mean by “skin in the game,” stay tuned, as I will discuss this important concept in detail later). If an idea spends too much time in Thoughtland, it gets wrapped in a fuzzy ball of unsubstantiated off-the-cuff judgments, beliefs, preferences, and predictions.
You cannot determine if an idea is The Right It just through thinking. Not through your thoughts. Not through the thoughts and opinions of others. Not through the thoughts of “experts.”
You are no Nostradamus. Nor am I. Nor is anyone else. At best, our predictions turn out to be right some of the time—but that’s mostly luck.
The Right It cannot be deduced or induced while you stay in Thoughtland. It has to be discovered through experimentation in the real world. And yet most market research is Thoughtland-based—and that’s bad news. To better explain what I am talking about, let me illustrate why Thoughtland-based market research is dangerous using one of the most common market research tools: the focus group.
Hocus-Pocus Focus Groups
In case you are not familiar with marketing focus groups, let me give you an example that illustrates why and how they are used. I like beer, and it goes well with another one of my favorite examples, pizza, so I will use it for this example, but the process is the same for all products and services.
Let’s pretend that Alberto’s Beer Company (ABC)—a successful brewing company run by highly experienced beverage executives—wants to capture a greater share of the female drinkers market. To better understand this gender-specific market, ABC decides to use focus groups. It begins by bringing groups of women drinkers into a room (often equipped with a one-way mirror) and asking them a series of questions, such as:
When you choose a drink, how often do you choose beer?
When you choose a drink other than beer, what are the reasons for it?
&
nbsp; What would it take for you to choose beer more often?
Then it compiles the results and comes up with a list of “insights” that looks something like this:
55% of focus-group participants said they prefer white wine to beer, because they think it’s a more appropriate drink for a lady. Sample quote: “Telling the bartender ‘Bring me a Bud’ does not sound very ladylike.”
31% agreed with the comment that light beer tastes “too light” and “flavorless” and nonlight beers are usually “too heavy” or “too bitter.”
38% said that they would be more likely to order beer if there was a brand that looked and tasted more “feminine.”
Armed with this “data,” ABC comes up with a new product idea, LadyLike, a light yet flavorful beer packaged in a slim bottle. The executives love the idea and give the go-ahead to brew a few batches of the beer (perhaps with a few flavor variations), design a fancy new bottle and logo, and run a second focus group to see if ABC is on the right track.
In this second focus group, the participants are introduced to the potential new brand, they get a chance to taste it, and then they are asked another series of questions:
The Right It Page 3