The secret to breakthrough new products

As humans we are creatures of analogy and association. This matters a lot, when creating a new product. The movie industry is a good place to explain it. The movie business has high risks, high rewards if done right, and lots of data on outcomes.

Photographer: Magic Mary | Source: Unsplash

A handful of researchers lead by Lovallo decided to see if it was possible to tap into analogies people already have in their heads, to help predict future movie success. David Epstein relates:

They started by giving hundreds of movie fans basic film information-lead actor names, the promotional poster, and a synopsis–for an upcoming release. At the time, those included Wedding Crashers, Fantastic Four, Deuce Bigalow: European Gigolo and others. The moviegoers were also given a list of forty older movies, and asked to score how well each probably served as an analogy to each upcoming release. The researchers used those similarity scores (and a little basic film information, like whether it was a sequel) to predict the eventual revenue of upcoming releases.

To cut a long story short, forecasts based on moviegoer analogies were frighteningly accurate compared to another model based on the characteristics of the movies. The analogies based approach was within 2-4% on a number of predictions of 17 movies that were subsequently released.

This is essentially the same approach as with landing page pre-testing. You are confirming if the product idea or product ties into analogies and associations that they already have. To be fair, it’s not exactly the same: It’s more of a branding test, rather than a behavioral one. It also makes a number of assumptions about the audience and doesn’t really focus much on segmentation.

The problem with corporate innovation is analogous to that of big movie studios. They know all of the internals of a movie project from start to finish. And while they may be capable of high efficiency (and not blowing wads of resources just because they have them), they can easily fall into the trap of using internal criteria to commit to new product ideas.

Your riskiest assumptions are probably related to your prospects and customers. Establish empathy quickly with your target prospect, figure out what's valuable, and get your innovation into the market.

In practice, however, the revenue side is driven mostly by customers. More importantly, it’s driven by what’s already in the customers’ heads:

  • expectations
  • analogies
  • associations

You can pre-test an idea to surface these factors, which ultimately help de-risk your product before you even start building it. The most common reason for new product failure is building a product no one wants.

Having an outside-in customer view is how you prevent that from happening. And the fastest way to figure out how is my book Launch Tomorrow.

Goal setting with creative boundaries

Recently I appeared on the marketing mindset internet radio show. It’s hosted by Marie Mason and it airs at 6pm EST. There aren’t many shows that drill down into this really important connection. In fact, like my friend Rob Drummond likes to say with respect to small businesses: almost every business problem is often rooted in a personal one.

Photographer: Héctor J. Rivas | Source: Unsplash

We’ve had two weeks into the new year, so reality is starting to set in. I can’t say I am an expert in this topic, but on the show I do share what works for me. In particular, the focus was on boundary setting last year.

Setting good boundaries and holding yourself to them helps ensure you reach your goals, both personally and as an organization. I also think setting boundaries is intimately tied with a creative process and innovation, which we cover briefly.

chatting about boundaries

Have a listen and let me know what you think.

Also, my friend Rob Drummond (mentioned above) has a free kindle book offer until Sunday (Jan 17) night for his book Simple Story Selling. I love his work, as it results in bite size stories which we often already tell as founders or entrepreneurs. The approach really helps with writing emails. It also ties in really well to early-stage landing pages. In short, story is the best possible way to present new products to unaware audiences. Really, it’s a no brainer. Grab it, and read it when you have some time.

Your new product’s key milestones

time to break out the bubbly

While it would be presumptuous of me to say that all startups have exactly the same milestones, there are certain key moments in the life of every high growth tech startup.

  1. made first sale to someone you didn’t know beforehand
  2. make sales repeatedly
  3. enter high growth phase, where sales grow exponentially

The first sale

The first key moment in the life of a startup is the first sale, because you’ve solved all of the above problems. If you’ve successfully done that, you’ve essentially proven you have an attractive offer. You’ve proven you’re serving a niche willing to pay for your product or service. You’ve proven that your product description and positioning are effective enough to start building a business. For startups focussed on high adoption and user growth initially in order to become more valuable, this means you delay this first sale significantly (for example to advertisers). While it does work, it’s a much riskier strategy because you can’t answer the above questions. You need to think through how you can mitigate that risk initially as much as you can. For example, you can speak with potential advertisers to learn how big of a user base they want before being willing to purchase ads. Alternatively, you can try introducing a different payment scheme, such as a transaction-based cost, where you make a few pennines on each transaction so that users barely notice they’re paying you. These details are very much dependent on the type of business you want to run. If you are starting a multi-sided market, such as an exchange, you need to address the needs and concerns of each group, i.e. both buyers and sellers, which will typically be very different, in order to get that first sale.

Repeated sales

After you celebrate the first sale, your next major milestone would be to make sales repeatedly. At this stage you will need some kind of product or solution which you offer, at least a minimum viable product which focuses on the biggest pain point your users have. While it may be of prototype quality, you have enough to continue talking with customers about their problem in much greater depth, as they gain experience with your product. The time frame depends significantly on the size of transaction. The larger the transaction size, the more objections you need to overcome. So for example, for a low priced product like an iPhone app, a startup should be aiming to sell multiple times per day. This is pretty much an impulse buy. For a much higher priced product, such as a B2B software solution, you’d want to see a few sales per quarter. Convincing a number of people across a business, each with their own agendas and needs, to buy a $70,000 software package requires you to overcome a lot of objections. Total revenue should be financially significant, where you are able to cover your operating costs for example or quit your day job if you’re a solo founder.

Hockey stick

Phase 3 means that you’ve hit message-market fit within a particular niche. At that point you need to scale. Your biggest bottleneck stops being marketing, and starts to be fulfillment. You make promises in your marketing which were easy to fulfill at the first stages, but become difficult to fulfill at this stage. Often this will mean major changes are required. For example, you may need to perform a complete rewrite of your technology to be able handle the growth. While a prototype-quality product was ok to prove the business concept, you need to ensure that you keep a high standard of performance as new customers are pouring in. For example Facebook needed to rewrite a significant part of their original PHP code into highly optimized C++ code for the key components of their architecture, such as the social graph construction so that their newsfeed could keep up.