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Pretotypes are quick, cheap, revealed-preference tests to validate whether a breakthrough innovation is appealing to its market. Pretotype tests occur immediately after a breakthrough idea is born, but well before significant investment is made in development. Pretotyping benefits Inventors* (who get to take action on more of their ideas), Investors (who get rapid, risk-managed plans to build confidence in innovations), and the economy (saving vast resources currently wasted on developing solutions which no-one wants).
*For purposes of this Hack, Inventor = Innovator. Please don’t write with your elaborate theories on why the two roles are different. I like how it plays off the term Investor!
Pretotyping solves a problem of market failure within the breakthrough innovation process. Inventors (those who come up with novel solutions) appeal to Investors (senior executives who control development resources, most critically time and permission) for funding to pursue their ideas. The problem is that, although company leaders often ask Inventors to dream up bold solutions representing attractive new markets, in practice the more radical the idea proposed, the less it resembles the current business the Investor group typically has responsibility for. This agency problem, in which Investors are the sponsors of innovation but are rewarded for optimizing short-term business, causes the reflexive rejection of the best and boldest ideas.
Think of the problem as two subconditions of the Innovator’s Dilemma, to resolve which companies must learn to balance the pursuit of current business with the exploration of new opportunities:
- The Inventor’s Nightmare: spending months or years developing a product or service that no-one wants. Most entrepreneurs and Inventors within companies want to work on successful projects, defined as marketplace success. Yet most innovations don’t fail because of either poor marketing/launch effort, or poor operation of the product or service. In most cases failure happens not because the team built “it” wrong, but because they built the wrong “it”!
- The Investor’s Nightmare: funding spurious-sounding business case proposals while anticipating complete failure. Most Investors are inclined to reject breakthrough innovation proposals because the market projections are works of creative fiction, and thus the development cost “ask” is a likely losing bet. This may well be an artifact of the funding process, that requires Inventors to fabricate numbers that hit an arbitrary hurdle rate, but in any case the idea probably sounds like a loony waste of time and money to the average Investor.
These two subconditions manifest in two wasteful results:
- False Positives: Inventors get so excited by their ideas they risk overinvesting in them before they’ve been proven attractive to their markets. Inventors’ infectious enthusiasm and passion trumps rational analysis, and a large team gets funded to “go build it”.
- False Negatives: Investors become so reflexively skeptical of crazy-sounding ideas that they risk underinvesting in them before they’ve had a chance in the marketplace. They make the easy decision to not swing the company’s bat, and refocus all concerned on the next opportunity.
Pretotyping replaces this emotional, speculative, opinion-based innovation market for early-stage funding with a quest for confidence-building data.
Pretotyping begins with a breakthrough idea - this is the Inventor’s “it” to be tested. Simpler, evolutionary ideas do not require pretotyping as demand has already been validated for the basic offer, and vectors of improvement desired by customers are usually well understood.
The first step is to isolate one or more demand-sensitive (“Do they want it?”) questions that must be answered to understand if this is the right “it”. Think of the most likely target customers, and ask what aspect of the “it” will need to be confirmed. In the case of a new user-interface design, such as the iPhone’s touch screen, the right first question might be “Will people use their fingertips to control the phone (vs a stylus or keypad)?”.
When Jeff Hawkins of Palm Computing was thinking of what became the Palm Pilot PDA, his main concern was whether users would adapt from carrying a paper diary/organizer to a pocket-sized electronic device. Hawkins’ pretotype test was to wrap a block of wood about the size of a deck of cards with a piece of paper printed with his first thoughts on a UI for the device. Hawkins carried this utterly non-functioning (and therefore emphatically not a prototype!) artifact in his shirt pocket for a week or so, miming his interactions with it every time he had a need to check his schedule or make a note. His pretotype test not only validated that he - as a proxy for his customers - would use the device, it also confirmed which functions were most useful, thereby refining down the list of features built into the first working model.
Having defined a clear “Do they want it?” question, the next challenge is to select a pretotype mode that best suits the task of exposing the offer to customers. Remember that the test does not have to feature a working offer, or even a facsimile; it merely needs to establish interest in the “it”. Several pretotype modes are available, in ascending order of complexity and cost:
- “The Fake Door” is good for testing the initial level of interest in as-yet unbuilt products or services. The test captures the % of those exposed to the offer who are interested enough to respond (by e.g., calling or clicking through). Examples: a brochure for an unbuilt product; a search engine keyword campaign, e.g., Google AdWords.
- “The Pinocchio” is good for testing the appeal of the basic form factor and esthetics of a proposed new offer. Example: a wood or composite model, e.g., Hawkins’ Palm Pilot dummy.
- “The Mechanical Turk” is good for testing the initial level of interest in product or service that depends upon as-yet unbuilt complex technology such as software or hardware.Example: human expertise used to simulate artificial intelligence proposed for an app.
- “The Impersonator” is good for testing the initial level of interest in as-yet unbuilt products or services that require full-scale exposure to customers. Especially valuable for food and beverage products. Example: repackaged or re-”skinned” existing product masquerading as a developed product.
- “The One-Night Stand” is good for testing the initial level of interest in a service experience whose customer benefits depend upon the complex interactions between several environmental factors. Example: a pop-up or temporary service environment such as a kiosk.
- “The Minimum Viable Product”* is good for testing the initial level of interest in the core functions of a largely undeveloped product. This is the transition point to more traditional prototyping. Example: a working prototype with bare minimum functionality.
* The term MVP is credited to Eric Ries, author of The Lean Startup.
Pretotypes generate two types of data that can progressively build confidence in a breakthrough innovation:
- Initial Level of Interest (ILI): this is the % of a target group exposed to the pretotype that acted to express an interest. A simple ratio of the number who try your “it” to the number exposed to the pretotype offer.
- Ongoing Level of Interest (OLI): beware, you can sell anything once! OLI tracks the proportion of those initially interested (from the ILI test) who are still interested in later test periods.
These two metrics allow Inventors and Investors to reach easy agreement on the parameters of pretotype tests, by means of a quick discussion about how many of what type of customers should receive a pretotype offer, and what level of interest will be considered a success. If the first round test produces encouraging ILI numbers, then a second round of testing to confirm a robust OLI should be an easy decision. If the trend over several rounds reveals a settled or growing pattern, further development follows; unfortunately, the odds are that OLI reveals a downward pattern in market interest, and development resources should be diverted to other projects. In either case the learning has been extremely efficient.
This makes for a third, and much more powerful, outcome: a new type of dialog between Inventors and Investors, based on a shared quest for real data about the desirability of new “its” rather than a shell-game of artificial hurdles and spurious business cases.
Alberto Savoia, serial entrepreneur and ex-Googler, coined the term Pretotyping in 2010. Jeremy Clark has been collaborating with Alberto to develop pretotyping as a response to both the high rate of failures among breakthrough innovations and the systematic bias against breakthroughs within corporate innovation systems.
Pretotyping has been developed into two mini-books, available at pretotypelabs.com or as e-book downloads from Amazon:
"Pretotype It! Make sure you are building the right it before you build it right" by Alberto Savoia
"Pretotyping@Work: Invent Like a Startup, Invest Like a Grownup" by Jeremy Clark
Pretotyping principles have been taught at Stanford GSB and at a number of corporations in the US and Europe, where breakthrough innovation teams have applied the techniques and metrics with significant success.