October 09, 2012 // By: Jennifer Lankheim
Interview: Alberto Savoia
Innovation is all the rage these days, with companies and contributors racing to rock the market with the ‘next big thing.’ Unfortunately, most new products and innovations fail – not because they are poorly executed but because the idea wasn’t the right idea.
“The biggest challenge in innovation isn’t coming up with new ideas, it’s identifying which of those ideas will be successful in the market,” says Alberto Savoia, founder of Pretotype Labs and former Google innovation executive. “Pretotyping helps organizations test their innovative ideas to make sure that they have the right ‘it’ before they invest in building ‘it’ right.”
I sat down with Savoia in Silicon Valley earlier this month for a lively Q&A. Savoia explains why a seemingly great idea goes bust while an outright crazy one makes bank, and argues that pretotyping, often seen as a ‘just a start-up thing,’ is relevant to big business.
Alberto Savoia: I’ve had the good fortune of being an early employee of two companies that went on to become industry giants – Google and Sun Microsystems – but in my heart of hearts, I’m an entrepreneur. After my first stint at Google from 2001-2002, I had a successful start-up. Then I had a second start-up. We felt we were doing everything right. We raised a sufficient amount of money, had great people. Everything should have gone perfectly, but when we launched the product, not enough people wanted it; it wasn’t successful. I asked myself, what went wrong here? I went back to Google in 2008 with the intention of studying failure: Why is it that eight out of ten start-ups fail? Why do 80 percent of new product introductions flop?
Make sure you’re building the right ‘it’ before you build ‘it’ right. This doesn’t just apply to technology; ‘it’ could be anything. If you’re an author, before you write a book you want to make sure there’s a market for it.
They think they know the market, but really they’re just guessing. All entrepreneurs fall in love with their great idea, so they invest a lot of money, launch it, and nothing happens. Google Wave, which was supposed to replace email, is a famous example. It was done by two of the smartest people at Google. It had the pedigree; it had the people. Email was ready for an improvement, and yet – after a significant investment – the launch fell flat on its face. Why? Because, instead of actually collecting data on whether or not people would use the product, they asked for opinions about the product and based the development on that.
I’ll give you an example. Remember Webvan? They presented the idea and asked people if they’d like to order groceries online. Everybody said, “Yes! Of Course! The Internet is cool; it’s a convenient service; and I like to shop!” So, on the strength of that positive reaction, they went for it and launched the company, all out. In just a few years, Webvan raised nearly a billion dollars, built huge refrigerated warehouses full of stock, and acquired a fleet of vehicles. Well, it turns out that even though nearly 100 percent of the people surveyed loved the idea of Webvan, only about two percent of them actually used it. And the company went out of business.
Apply pretotyping to the Webvan example and instead of spending over $100 million to launch the company based on surveys, they would have started small and watched what happened. They would set up the website, advertise it one market – say, San Francisco and its suburbs – and see how it goes. They would not buy warehouses and trucks; instead they’d work out some kind of deal with a supermarket (or something) to fulfill the orders.
Had they done this, Webvan would have seen that the number of people who said they would use the service was dramatically different than the number of people who actually did use it. They would have seen that the majority of users were in the City. It would have been apparent that they needed to scale back the concept, tailor it to city-dwellers and forgo the suburbs. And they would know this without having spent enormous amounts of money. The Webvan story might have ended differently.