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. 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.
In practice, however, the revenue side is driven mostly by customers. More importantly, it’s driven by what’s already in the customers’ heads:
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.
In his confessional expose, Ramit Sethi (@ramit) publically admitted and explained why he killed a $2mln product. It seemed to be doing well on the surface. There were hundreds of meetups around the world. People were getting value from the product. But the product’s churn hovered around 10%. Which meant that they would lose all…