If you’re in the tech startup industry today, you get the sense that every one of your peers wants to take on the entire world. Founders laud their own “end-to-end” thinking. Engineers and even marketers proudly claim to be “full stack.” Startups launched around seemingly mundane, insular problems glow about their abilities to change the world. Yes, everyone is pushing to make a dent in the universe.
Alberto Savoia just wants them to find the right place to push in the first place.
Starting in 2009, Savoia began using an approach as an engineering director at Google that helped the tech giant know whether it was about to build the right product for the market … or a product that would flop. In the years since, he’s authored a book, lectured at Stanford, and helped a number of Fortune 500 not just build new products but build the right new products.
He’s dubbed the approach “pretotyping,” and it shares many of the same principles as both its similar-sounding (if later-stage) cousin, prototyping, as well as the more well-known lean startup movement.
I recently caught up with Savoia, who shared how this process works and how seed-stage startups might adopt it to find product-market fit more quickly and more cheaply.
NextView Ventures: For those who might be unfamiliar, what is this concept of pretotyping?
Alberto Savoia: Pretotyping consists of a set of techniques and metrics to help you make sure that you are building “The Right It” before you build “It” right — where “It” represents your new product, service, company, etc.
Having The Right It is essential for the following reason: Most new products and innovations fail in the market.
What’s worse, most of them fail not because they were poorly executed but because they were not The Right It to start with. In other words, they were a product that the market did not want — regardless of how well it was implemented.
These two related facts are so important that I felt that they deserved to be immortalized in a Law:
The Law of Market Failure: Most new products fail in the market — even if they are competently executed.
A pretotype is an artifact to help you determine if an idea is The Right It, quickly and inexpensively, before you invest big dollars to build It right.
NVV: How is that different from a prototype?
AS: I get that question a lot. Why did I feel the need to coin a new word for the concept? The best way to answer the questions is to share with you the two examples that led me to realize that between ideas and what most people think of as prototypes, there is a wonderfully efficient and effective intermediate step that is often overlooked.
Example 1: The IBM Speech-to-Text Pretotype
Some three decades ago, IBM was years away from being able to prototype speech-to-text technology because the hardware available those days was significantly underpowered for the task. To cope with the lagging technology, the company utilized a very clever solution to test and validate some of its ideas and hypotheses related to speech-to-text.
They set up a room with a microphone, a computer monitor, and no keyboard. They told potential users that they had a speech-to-text machine for them to try; all they had to do was speak into the microphone and their words would “magically” appear on the monitor.
And that’s exactly what happened. But how was that possible? IBM didn’t actually have that technology.
In reality, they pulled it off by hiding a fast typist with a keyboard in another room. The microphone output was fed to a speaker, and the hidden typist translated the speech into keystrokes which appeared as text on the monitor with amazing speed and accuracy.
Brilliant, isn’t it?
With this clever solution, IBM learned that even with fast and highly accurate speech-to-text translation, there were some fundamental user interaction issues that would have seriously affected its chances for market success. To name a few: Users’ throats got sore after a while, loud working environments made speech-to-text unappealing, and lack of privacy would be an issue for many would-be users. Surprisingly as it may have seemed then, 30+ years later, we are still relying on keyboards as our primary mode of interacting with computers.
The first time I heard this story I was left — ahem — speechless. IBM’s solution was completely different from what most people would consider a speech-to-text prototype. They could not build a proper prototype, so they pretended to have one. I thought that something this clever and unique deserved its own name so that it would not be conflated with traditional prototypes. And the word pretotype was born.
Example 2: The Palm Pilot Pretotype
In the mid-90s, brilliant innovator and entrepreneur Jeff Hawkins had an idea for the personal digital assistant (PDA) that would eventually become the Palm Pilot. But before committing to it and investing in building an expensive prototype (which would have required a full team of engineers and a lot of time and money), he wanted to validate some of his assumptions about the device size, shape, and functionality. He knew he could build it, but would he use it? What would he use it for? And how would he use it?
His solution was to cut a block of wood to match the intended size of the device and use paper sleeves to simulate various user screens and functionality. He carried the block of wood with him for a few weeks and pretended that it was a functional device in order to get insights into how he would use it. If someone asked for a meeting, for example, he’d pull out the block and tap on it to simulate checking his calendar and to schedule a meeting reminder.
With the help of his pretotype, Hawkins learned that he would actually carry such a device with him and that he would be using it mostly for four functions: address book, calendar, memo, and to-do lists.
His simple experiment convinced him that it would be great to have a working version of the device. After he validated some of his key assumptions about its size and functionality, investing in building a proper prototype was well justified.
Eventually, the Palm Pilot not only became incredibly successful in its own right but established the form factor and paved the ground for smart phones.
NVV: When did you first realize that these examples could be replicated with a more practical process? How did this idea of pretotyping help your work directly?
AS: After a co-founding a successful startup (Velogic, which raised $3 million in VC funding and received an acquisition offer for $100 million 18 months later), I thought, “Hey, startups are easy. Why doesn’t everyone do this?” After spending some time at the acquiring company, I was hired by Google and eventually was put in charge of the development team that launched AdWords. Another success. So I thought, “I am good!” So I left Google to do another startup, Agitar Software. This time we raised a total of $25 million from top-tier VCs like Sequoia and NEA. Our product, a software development and testing tool, was amazingly innovative, worked great, and won a bunch of prestigious awards. I was starting to think that I was invincible, infallible, that I had the magic touch … but, as it turns out, amazingly innovative products don’t necessarily produce amazing revenue. After five years, the company was sold for a fraction of the money we had raised — and spent. This time, my reaction was a bit different: “WTF,” or, “Why the failure?”
I had more experience, great investors, an amazing team, and this great technology. What happened?
I was fortunate enough to be hired back by Google, and while there, I was asked to be part of an “innovation task force.” This gave me an opportunity to study innovation failure for which, fortunately, there is no shortage of data. After a few months of reviewing all the data, I came to the conclusion that I mentioned above: Most new products don’t fail due to poor implementation but because they are not products that the market is interested in. That’s when I coined the phrase, “Make sure you are building The Right It before you build It right,” and made it my mantra. Pretotyping evolved as a set of tools, techniques, and metrics to help you make sure that your idea is The (very elusive) Right It.
NVV: Lots of entrepreneurs reading this will think about the lean startup movement when they hear about pretotyping. Is this approach different? Are the two approaches complementary?
AS: Lean Startup and pretotyping are wonderfully complementary, and Eric Ries has done an amazing job at setting entrepreneurs straight – he’s a hero of mine.
While Eric was busy developing and writing about the Lean Startup, I was busy developing and writing about pretotyping at Google. Our very similar experiences with past product/startup successes and failures led, not surprisingly, to the same conclusions and the same solutions.
Even though we use some different terms (e.g. MVP as opposed to pretotype), we are allies: We are fighting the same fight on the same side. I always urge entrepreneurs to read The Lean Startup in addition to my more modest effort — Pretotype It — because the differences in terminology are not important but the similarities in the message are. As a matter of fact, when I started giving pretotyping workshops at Google, I always gave attendees a copy of The Lean Startup along with my book and urged them to study both.
NVV: When an entrepreneur believes they’ve identified a problem, or else they’re passionate about an idea, what should they be measuring to ensure it’s the right thing to actually build?
AS: Good question. The right metrics are key to identifying The Right It. I would usually begin with a metric I call ILI (Initial Level of Interest) because it’s very simple and, if properly measured, hard to ignore.
Let’s assume that you have an idea for, say, a biodegradable fishing line. If the line breaks, it will dissolve in the water in a few weeks and not float around polluting the waters for centuries like regular fishing line. Your hypothesis is that at least 30% of fishermen are environmentally conscious and would want to try it. Before you invest big money on producing 100,000 feet of this line and put it on sale, you should test your assumption. Create a landing page, invest $100 on some online ads that say, “New breakthrough biodegradable fishing line,” and see how many people visit the website, how many sign up to be early adopters, what your CAC (customer acquisition cost) is, etc. (Note: I cover ILI and the just as important OLI — Ongoing Level of Interest — metrics in Pretotype It.)
In addition to that, my colleague Jeremy Clark (now at Xerox PARC) has written another very relevant book (Pretotyping@Work, found on the same page linked above) that covers some of the most effective and objective metrics entrepreneurs entrepreneurs should use to make sure they are not fooling themselves.
NVV: How do you see a pretotype helping (or hurting) a founder’s ability to raise capital and scale successfully?
AS: Pretotypes are designed to help you collect data so you can make your business case with data instead of opinions and beliefs. I had two expressions ingrained in me while working at Google: “Say it with numbers,” and, “Data beats opinions.” To that, I added my own variation: “Don’t believe the hype, believe the numbers.”
Take the example above. I could go to investors and say, “I believe that 30% of fishermen are environmentally conscious and would buy my biodegradable fishing line.” At that point, the investors will have their own subjective and often biased or even plain wrong opinions. Fishermen don’t care about the environment! I fish and I would never risk losing a fish because of a weak line.
But if I go with data, I can say, “I created a landing page and spent $100 in web ads targeted at fishermen to measure initial level of interest and got a click-through rate (CTR) of 4% [this is a very good CTR in case you are wondering], and I have pre-orders for $850.” It’s a very different story. You make your case with objective data: CTR, customer acquisition cost, etc.
The investors may still say no to you because they might not see a big enough market or don’t care about being in the fishing business, but they can’t really say, “Nobody would want this.” It bears repeating: Data beats opinion. Don’t believe the hype, believe the numbers.
NVV: When an entrepreneur is post-launch for their product, at whatever stage of growth as a company, can pretotyping help them at that point? How?
AS: Once you have a proven product (i.e., The Right It) you can’t sit on your laurels. You need to evolve it and keep up with the inevitable competition that comes up whenever you have shown that there is a market for your idea. This evolution typically takes the form of either expanding the product line (e.g., Coke to Diet Coke to Diet Lime Coke) or adding features to the existing product or service. Pretotyping is still very useful in both cases because both line extension and new features are still subject to the Law of Market Failure. You may over-invest in developing a variation of your product that people won’t buy or adding a feature to an existing product that people don’t use.
NVV: What’s next for the concept of pretotyping?
AS: I believe that the material that I and others have generated on pretotyping (books, articles, interviews, videos, presentations, workshops, etc.) provides a very solid foundation. People “get it” and they have little trouble putting it to good use. But we need to spread the message from the US to other countries where these techniques are still not well known and there is still a top-down new product decision process coupled with considerable fear of failure.
One of my main objectives right now is train people in other countries. To that end, for example, I have given anyone who wants to translate my book permission to do so, for free, as long as they make a free PDF version of their translation available. There are already translations Spanish, Italian, French, German, Swedish, Hungarian, Chinese, Hebrew and Danish. (And if you are reading this and would like to volunteer to translate it, drop me a line at email@example.com and we’ll make it happen.)
Thank you for the opportunity to share pretotyping with you. And may you always find The Right It in your personal and work life.
To learn more about pretotyping and Alberto Savoia, visit pretotyping.org.