Do we build products, services, or courses, and then find out after launching it that there are not enough paying customers to make it profitable? This is an "Oh sh*t" moment that many go through. Some will grudgingly accept failure and learn from it. Others will continue to plod along, hoping for a success. But the market is brutal. It is telling you that they don't like what you have to offer. By the time you figure it out, it will prove to be a very costly lesson in time, energy, money, and confidence.
Alberto Savoia, author of "Right It," knows this well from his experience. He writes,
"Most new products, services, businesses, and initiatives will fail soon after they are launched—regardless of how promising they sound, how much their developers commit to them, or how well they execute them."
(You will also find my interview with Alberto Savoia in the blog post "Five Questions for Alberto Savoia: A Man on a Mission to Prevent Failures Among Entrepreneurs.")
So how do you eliminate failures right from the get-go? You have to pretotype that Savoia popularized and writes about in his practical book. The idea of pretotyping applies to all of us, not just entrepreneurs. Why fail when you don't have to? All you have to do is pretotype, gather data, make a go-no-go decision. It's not that complicated.
What is Pretotyping?
Pretotyping is pretending you have a prototype of a product, service, or a workshop (in my example below) so you can find out whether customers are willing to pay. If customers are not willing to pay, you will fail. If you still decide to go forward, you will be taking a huge risk. Great customers are those who pay before you even have a product.
You can think of pretotyping as similar to what they use in manufacturing called build to order. In the beginning, you are building a customized product, so you have to build based on customers' willingness to pay. And that is what you have to do when you are trying to get valuable information from customers.
Tesla's Example of Pretotyping
Before Tesla built their Model 3 car, they pretotyped the concept to gauge customers' interest in the car. They wanted customers to make a commitment by preordering it online by putting down $1,000 deposit. Over 115,000 put down $1,000 before even seeing the what the car would look like. That showed Tesla that they can now build the car since there is not just passing interest but people were expressing it with cold hard cash. It was time to build the car and they did. Not only did I not preorder the car, I did not see this as a sign to purchase Tesla stock.
My Simple Example of Pretotyping
Have a one day workshop to teach people how to interview for a job.
I gave a talk and asked people at the end how many would be interested in attending a paid workshop.
Out of fifteen people who attended, I think close to ten raised their hands. So I thought I had customers. But raising a hand at a free talk costs one nothing.
Test the Workshop Idea
I sent an email with one-pager advertising the workshop and the agenda. I priced it at $299, which I thought was very reasonable and would accommodate up to ten people. I knew that I needed at the minimum five paid customers to make it work.
Response from Customers
I got only one response from someone who was ready to attend the workshop and was willing to send me the payment. Well one is better than none, but not sufficient to conduct a workshop, so I had to move to the back up plan if doing the workshop made no business sense.
Back Up Plan
I contacted the client and told him that the workshop idea will not prove very useful to him since clients have different backgrounds. Instead, I have decided to conduct two 75 minutes of one-on-one coaching sessions for the same price.
In fact, this client was getting an excellent deal. He would now get two one-on-one coaching sessions for $299, which would have cost him $499. The client gladly took the two sessions and liked it so much that he has become one of my best clients.
For now, I have dropped the plan to do a workshop for now. I may pretotype it again in the future before committing to it.
You have to pretotype to see if customers are willing to pay for your product, service, course, etc. If you don't get the numbers you need, you have to have a backup plan to take care of those who were ready to pay or already paid for it. You may lose a little, but it is better to lose a little by learning a valuable lesson than to lose a lot by not knowing whether you will get any customers. You have to fail very fast.
So pretotyping is something we should all do before we build anything. It can be as simple as my conducting a workshop or building a product or service. You need some data to justify building a prototype. Without customer data, you will be flying blind and crash. Pretotyping is a simple way to mitigate failures.
Jay Oza is an author, speaker, executive coach. He makes people thrive on high stakes stage whether it's for a job interview, a sales presentation or a high-stakes speech. He is the author of a practical book Winning Speech Moments: How to Achieve Your Objective with Anyone, Anytime, Anywhere. You can get this book on Amazon for $9.99 for a limited time. Please download the free speech checklist that you can use to help you create a winning speech for any situation.
Please contact him if you would like to discuss how you can work with him even if you are budget constrained due to the pandemic. If you are interested in inviting him to give a Zoom talk on job Interviewing or high-stakes speaking, you can reach him at firstname.lastname@example.org.