Build the Right It [Entire Talk]

TL;DR

Test market demand by using pretotyping to collect evidence of actual behavior before investing heavily in product development. Alberto Savoia argues that premise failure, customers simply not caring about an idea, is the most common of three failure categories, alongside launch and operation failure. His own startup spent two years building an award-winning tool that prospective customers had promised to buy, yet ended in a fire sale; read on to see why behavior matters more than opinions.

Transcript

who you are defines how you built this is my battle cry these days fail your bites bite back I'm a serial entrepreneur and I kind of got my butt kicked a few times and the last time I decided I don't want this to ever happen again to me or anyone else so my mission is to help entrepreneurs most of you here to teach you how to fight failure and win ... Read More

Key Insights

• Most new ideas fail in the market even when they are competently executed. The law of market failure applies to startups and established companies alike, including organizations with strong engineers, successful products, substantial resources, and extensive experience launching technology.
• Market failure has three major sources: launch, operation, and premise. Launch problems prevent customers from learning about or reaching a product, operation problems make it function poorly, and premise problems arise when people simply do not care about the proposed offering.
• Premise failure is the most common source of failure among new ideas. Effective marketing and reliable operation cannot create lasting demand when the product itself does not address something customers genuinely value enough to adopt or purchase.
• The right product is an idea that will succeed in the market if it is competently executed. Its opposite is an idea that will fail despite competent execution, because engineering brilliance and marketing activity cannot overcome a fundamentally unwanted premise.
• Competent companies can repeatedly produce unsuccessful products within fields they understand. Examples in the talk include New Coke, Google Wave, the Ford Edsel, the McDonald's pineapple burger, and Howard the Duck, contrasted with successful offerings from the same organizations or creators.
• Ideas discussed only in thought land produce opinions rather than dependable market evidence. Those opinions are subjective and filtered through personal preferences, beliefs, and biases, so enthusiastic reactions cannot establish that people will actually use or buy the proposed product.
• Positive customer statements are not reliable commitments to future behavior. Savoia's startup built the sophisticated software tool that prospective customers requested, won technology awards, and still ended in a fire sale after the people who had promised to buy it disappeared.
• Pretotyping is a rapid-prototyping technique for testing whether people actually care about an idea. It supports the broader principle of making sure a team is building the right product before committing the time and resources required to build that product well.

Questions & Answers

Q: How can you test market demand before building a product?

Use pretotyping to test whether people genuinely care about the product idea before committing substantial time and resources to development. The goal is to replace opinions from “thought land” with evidence based on actual market behavior.

Q: Why do most new product ideas fail in the market?

Most new ideas fail because intended customers do not care enough about the underlying premise, even when the product is competently built and promoted. Savoia identifies premise failure as the most common of the three major failure categories.

Q: What is the law of market failure?

The law of market failure says that most new ideas will fail in the market, even if they are competently executed. It applies to startups and established companies alike, including organizations with strong engineers, substantial resources, and experience launching technology.

Q: What is the difference between the right product and the wrong product?

The right product is an idea that will succeed in the market when competently executed. The wrong product will fail despite competent execution because engineering quality and marketing cannot overcome a premise that customers do not value.

Q: What are launch, operation, and premise failures?

Launch failure means customers do not discover or cannot reach the product, while operation failure means the product does not work adequately. Premise failure occurs when the product is competently launched and operated but customers simply do not care about it.

Q: Why are customer opinions unreliable evidence of demand?

Opinions about an unbuilt idea come from what Savoia calls “thought land,” where reactions are subjective and shaped by personal beliefs and biases. Enthusiastic statements do not prove that someone will actually use or purchase the finished product.

Q: What did Alberto Savoia learn from his failed software startup?

His startup raised $25 million, spent two years building the sophisticated software-development tool prospective customers said they would buy, and won technology awards. Five years later, the company ended in a fire sale because those prospective buyers disappeared, showing that promises are not reliable proof of demand.

Q: What is pretotyping, and why is it useful?

Pretotyping is a rapid-prototyping technique for testing whether people actually care about a proposed product. It helps teams gather practical market evidence early and judge whether they are building the right product before investing in building it well.

Summary

In this video, Alberto Savoia, a serial entrepreneur, shares seven strategies for fighting failure as an entrepreneur. He emphasizes the importance of building the right idea by understanding the law of market failure and conducting proper market research. He introduces the concept of "pretotyping" as a way to quickly and inexpensively test ideas before fully investing in them. He also highlights the significance of collecting data, using numbers to articulate ideas, testing locally before scaling globally, and failing fast and cheaply. Savoia emphasizes the need for entrepreneurs to be adaptable and open to feedback to increase their chances of success.

Questions & Answers

Q: What is Alberto Savoia's mission as a serial entrepreneur?

Alberto Savoia's mission is to help entrepreneurs fight failure and win consistently.

Q: What is the law of market failure and why is it important to understand?

The law of market failure states that most new ideas will fail in the market. It is crucial to understand this law because even if an idea is competently executed, it can still fail. This applies to startups, established companies, and products from existing companies.

Q: What are the three major reasons why most new ideas fail in the market, according to Alberto Savoia?

Most new ideas fail due to launch, operation, or premise issues. Launch failures occur when the market doesn't know about or cannot reach the idea. Operation failures occur when the product doesn't work correctly. Premise failures occur when people simply do not care about the new product idea.

Q: What is the "right it" and the "wrong it"?

The "right it" is an idea that, if competently executed, will succeed in the market. The "wrong it" is an idea that, even if competently executed, will fail in the market. Many successful companies have launched "wrong it" ideas, assuming that their success in other areas will guarantee success in the new product.

Q: How can entrepreneurs determine if their idea is the "right it"?

Entrepreneurs should collect their own market data, preferably data that involves people's skin in the game (i.e., a commitment of time, money, information, etc.). By collecting their own data, entrepreneurs can gain a better understanding of whether their idea is something the market is interested in.

Q: What is pretotyping and why is it important?

Pretotyping is the creation of the simplest artifact or technique to collect data quickly and inexpensively. It helps entrepreneurs test their ideas in the market before fully investing in them. Pretotyping allows entrepreneurs to fail fast and cheaply, minimizing time, money, and effort spent on ideas that will likely fail.

Q: How is pretotyping applied to apps?

Pretotyping techniques can be used for apps as well. Instead of building a fully functional app, entrepreneurs can create simulations or demos using tools like PowerPoint. These simulations can be used to collect data and determine if people are interested in the app idea.

Q: How can entrepreneurs test B2B (business-to-business) ideas using pretotyping?

B2B ideas can also be tested using pretotyping methods. Entrepreneurs should focus on getting their product in the hands of potential users within the business. By collecting data from these users, entrepreneurs can evaluate if their product is meeting their needs and if there is potential for success.

Q: What is the XYZ hypothesis and how can it be used to articulate ideas in numbers?

The XYZ hypothesis is a method for articulating ideas using numbers. It forces entrepreneurs to define their idea and market potential in quantifiable terms. By using numbers, entrepreneurs can better understand their target market, customer interest, and potential success.

Q: How does pretotyping help entrepreneurs reduce risk and uncertainty?

Pretotyping helps entrepreneurs reduce risk and uncertainty by allowing them to quickly and inexpensively test their ideas in the market. By failing fast and cheaply, entrepreneurs can avoid spending excessive time and resources on ideas that don't resonate with the market.

Takeaways

The key takeaways from Alberto Savoia's talk are:

• Understand the law of market failure and accept that most new ideas will fail.
• Focus on building the right idea that the market cares about, rather than assuming success based on past accomplishments.
• Use pretotyping to quickly and inexpensively test ideas in the market before fully investing in them.
• Collect data from the market and rely on numbers instead of just opinions to evaluate ideas.
• Test locally before scaling globally and be willing to fail fast and cheaply.
• Be adaptable and open to feedback to increase the chances of success as an entrepreneur.

Summary & Key Takeaways

• Alberto Savoia argues that most new products and companies fail in the market, even when competent teams execute them well. His own failed startup taught him that technical excellence, substantial funding, industry awards, and encouraging customer statements cannot rescue a product when the market simply does not care about its fundamental premise.

• Market failures fall into three categories: launch, operation, and premise. Launch failure prevents customers from discovering or reaching a product, while operation failure means the product does not work adequately. Premise failure is the most common category because the intended customers do not actually want the product, regardless of its quality or promotion.

• Entrepreneurs should determine whether an idea is the right product before investing in polished execution. Opinions gathered in thought land are subjective and biased, while market behavior provides stronger evidence. Pretotyping offers a rapid-prototyping approach for testing genuine demand early, helping teams avoid spending years competently building products that customers will not adopt.