The Right It

1. Market Failure is the Norm, Not the Exception

Most new products will fail in the market, even if competently executed.

The Law of Market Failure. This hard truth underscores the high risk associated with launching new products. It's not a matter of if failure is an option, but acknowledging that it's the most likely outcome. This perspective shifts the focus from blindly pursuing ideas to rigorously validating them.

Defining Market Failure. Market failure occurs when the actual results of a new product launch fall short of or are the opposite of the expected results. This can manifest as lower-than-projected revenue, minimal market share, or outright cancellation of the product. Examples include:

• A restaurant opening a second location that fails to attract customers
• A company launching a new product that doesn't sell well despite positive reviews

Embrace the Reality. Accepting the Law of Market Failure is the first step toward mitigating its impact. By acknowledging the high probability of failure, businesses can adopt a more cautious and data-driven approach to product development.

2. Competent Execution Cannot Guarantee Success

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.

Beyond Skill and Effort. While a skilled team and diligent effort are essential, they are insufficient to overcome a flawed product premise. Many products fail not because of poor execution, but because they are simply not what the market desires. Examples include:

• Coca-Cola's New Coke, despite the company's marketing expertise
• Google Wave, despite Google's technological prowess

The Success Equation. Success depends on multiple key factors, all of which must be "right" for a product to succeed. A single "wrong" factor can lead to failure, regardless of how well other factors are executed. This highlights the importance of validating the core premise before investing heavily in development.

Blindness of the Law. The Law of Market Failure is impartial, affecting both experienced and inexperienced teams. Competence can even amplify the impact of failure by leading to larger investments and higher expectations.

3. Thoughtland is the Enemy of Market Validation

You cannot determine if an idea is The Right It just through thinking.

The Illusion of Understanding. Thoughtland is the realm of abstract ideas and opinions, where market research often relies on focus groups and surveys. These methods can be misleading because they fail to capture real-world behavior.

The Four Trolls of Thoughtland:

• Lost-in-Translation Problem: The way you imagine the product may differ from how others interpret it.
• Prediction Problem: People are notoriously bad at predicting their future behavior.
• Skin-in-the-Game Problem: Opinions are cheap when there's nothing at stake.
• Confirmation Bias Problem: We tend to seek evidence that confirms our existing beliefs.

False Positives and Negatives. Thoughtland can produce both false positives (convincing you to pursue a doomed idea) and false negatives (discouraging you from a potentially successful one). Webvan, the online grocery delivery service, is a classic example of a false positive, while the initial skepticism surrounding Airbnb exemplifies a false negative.

4. Data Trumps Opinions in Product Development

Make sure you are building The Right It before you build It right.

Google's Operational Principle. The mantra "Data beats opinions" emphasizes the importance of objective evidence in decision-making. This requires fresh, relevant, trustworthy, and statistically significant data.

The Pitfalls of OPD. Other People's Data (OPD) is market data collected by others for different purposes. It's often tempting to rely on OPD, but it can be unreliable due to issues of freshness, relevance, and provenance.

The Power of YODA. Your Own DAta (YODA) is market data collected firsthand by your team to validate your specific idea. YODA is far more valuable than OPD because it's tailored to your unique context and provides direct insights into your target market.

5. Pretotyping Validates Ideas Before Building

Make sure you are building The Right It before you build It right.

Testing Before Investing. Pretotyping is a method of quickly and cheaply testing the market demand for a new product idea before investing significant resources in development. It's about validating the "It" before building "It right."

The IBM Speech-to-Text Example. IBM used a "Mechanical Turk" pretotype to simulate a speech-to-text computer, using a hidden typist to transcribe users' speech. This allowed them to gather valuable data on user behavior without building a complex prototype.

Key Pretotyping Techniques:

• Mechanical Turk: Simulating functionality with human labor.
• Pinocchio: Creating a non-functional model to test user interaction.
• Fake Door: Measuring interest by offering a product that doesn't yet exist.
• Facade: Delivering the product manually behind a seemingly automated front.
• YouTube: Using videos to gauge interest and gather feedback.
• One-Night Stand: Offering a limited-time service to test demand.
• Infiltrator: Introducing your product into an existing sales environment.
• Relabel: Repackaging an existing product to test interest in a new concept.

6. The Skin-in-the-Game Caliper Measures Commitment

If there’s no market, there’s no way.

Beyond Opinions. The Skin-in-the-Game Caliper is a tool for evaluating the level of commitment demonstrated by potential customers. It assigns points based on the type of action taken, with higher points indicating greater commitment.

Levels of Commitment:

• Opinions and encouragement: 0 points
• Validated email address: 1 point
• Validated phone number: 10 points
• Time commitment (e.g., attending a presentation): 1 point per minute
• Cash deposit: 1 point per dollar
• Placing an order: 1 point per dollar

Prioritizing High-Value Data. By focusing on data with significant skin in the game, businesses can gain a more accurate understanding of market demand and avoid being misled by cheap talk.

7. The TRI Meter Guides Objective Decision-Making

Make sure you are building The Right It before you build It right.

Visualizing Likelihood of Success. The TRI (The Right It) Meter is a visual tool for assessing the likelihood of success based on pretotyping results. It uses a five-step scale ranging from "Very Unlikely" to "Very Likely."

Mapping Experimental Results. Each pretotyping experiment is represented by an arrow on the TRI Meter, indicating the degree to which the data supports the hypothesis. The Law of Market Failure is represented by a black arrow pointing to "Very Unlikely," serving as a constant reminder of the high risk of failure.

Interpreting the Results. The TRI Meter provides a framework for making objective decisions based on data. Multiple experiments are needed to counteract the Law of Market Failure and provide a reliable assessment of the idea's potential.

8. Plastic Tactics Enable Adaptability and Success

Make sure you are building The Right It before you build It right.

Adaptability is Key. Plastic Tactics emphasize the importance of being flexible and adaptable in the face of new information. Plans rarely go smoothly, so it's crucial to be prepared to adjust your approach based on market feedback.

Key Tactics:

• Think Globally, Test Locally: Validate your idea in a small, easily accessible market before expanding.
• Testing Now Beats Testing Later: Get your idea out of Thoughtland and into the market as soon as possible.
• Think Cheap, Cheaper, Cheapest: Minimize the cost of your experiments without sacrificing data quality.
• Tweak It and Flip It Before You Quit It: Explore variations on your original idea before abandoning it altogether.

The Power of Tweaks. Small adjustments to your product or business model can make a big difference in market acceptance. Don't be afraid to experiment and iterate based on the data you collect.

Last updated: February 21, 2025