The Right It

Why So Many Ideas Fail and How to Make Sure Yours Succeed

Alberto Savoia

• Verlag: HarperOne
• Jahr: 2019
• ISBN:
  9780062884671
• Thema: Business
• Thema: Entrepreneurship

In this accessible, prescriptive, and widely applicable manual, Google's first engineering director and current Innovation Agitator Emeritus provides critical advice for rethinking how we launch a new idea, product, or business, insights to help successfully beat the law of market failure: that most new products will fail, even if competently executed. Millions of people around the world are working to introduce new ideas. Some will turn out to be stunning successes and have a major impact on our world and our culture: The next Google, the next Polio vaccine, the next Harry Potter, the next Red Cross, the next Ford Mustang. Others successes will be smaller and more personal, but no less meaningful: A restaurant that becomes a neighborhood favorite, a biography that tells an important story, a local nonprofit that cares for abandoned pets.

Simultaneously, other groups are working equally hard to develop new ideas that, when launched, will fail. Some will fail spectacularly and publicly: New Coke, the movie John Carter, the Ford Edsel. Others failures will be smaller and more private, but no less failure: A home-based business that never takes off, a children's book that neither publishers nor children have any interest in, a charity for a cause too few people care about.

Most people believe that their venture will be successful. But the law of market failure tells us that up to 90 percent of most new products, services, businesses, and initiatives will fail soon after launch—regardless of how promising they sound, how much we commit to them, or how well we execute them. This is a hard fact to accept.

Combining detailed case studies with personal insight drawn from his time at Google, his experience as an entrepreneur and consultant, and his lectures at Stanford University and Google, Alberto Savoia offers an unparalleled approach to beating the beast that is market failure: "Make sure you are building The Right It before you build It right, " he advises. In The Right It, he provides lessons on creating your own hard data, a strategy for market engagement, and an introduction to the concept of a pretotype (not a prototype).Groundbreaking, entertaining, and highly practical, this essential guide delivers a proven formula for ensuring ideas, products, services, and businesses succeed.

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:

1. They are hard to take. They may be difficult to accept, at least at first.
2. They are based on hard, objective data, not on tenuous hopes, wobbly beliefs, or volatile opinions.
3. 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 Defined

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 classes, 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 bu...