About 10 years ago, I read in the Wall Street Journal about a new online business that I just knew had great potential. In fact, it was one of the few new business ideas that caught my attention that year.
And venture capitalists were pouring eight figures into the startup.
A Tale Of Three Startups
After a little research, I realized there were only two companies racing to do this novel concept online. The second venture was backed by an angel investor with a successful track record.
Yet I was convinced I could beat them to the market for a fraction of the cost because of some preexisting competitive advantages.
So, what happened?
- We launched first.
- The other two ventures launched.
- And all three flopped.
Where did we go wrong?
There was no market.
Although there was a multi-billion-dollar service industry to be tapped, consumers didn’t want what was offered no matter how it was pitched or refined to appeal to them.
So, what should we have done instead?
Discovered if there was a market before investing significant time or money.
Pretotype New Business Ideas
To borrow a term coined by Google’s former innovation guru, Alberto Savoia, use “pretotyping.”
When you pretotype new business ideas, you test to see if there’s a market ready, willing, and able to buy your potential new product or service before you even invest the time and money to create a prototype.
For example, you could drive traffic to an online sales page for your nonexistent product or service. When a prospect clicks the order button, you can measure that metric. And the button can take that person to a page that lets them opt in to be on a waiting list to receive email notification when/if the product or service becomes available instead of making an actual purchase.
And there are ways to measure if there’s a willingness to pay by having the person start filling out the order form but not complete a purchase.
Of course, there are other ways to pretotype to discover if you’ve got a market that justifies pursuing a new product or service.
Let’s say you do determine there’s a market that justifies moving forward.
Does that mean a full launch with all of the bells and whistles? Nope.
Prototype After Pretotype
Instead, create a bare-bones version of the product or service. Some would call this Version 1.0 a minimum viable product (MVP) or minimum viable service (MVS) instead.
For example, before investing in a software-as-a-service (SaaS) model, we successfully prototyped Website Legal Forms Generator Software as a simple downloadable Windows-compatible desktop application without any bells or whistles.
Because prototyping minimizes your investment of resources in a prospective venture as you further test the market.
And, you’ll discover that customer feedback on your MVP/MVS will provide you with guidance on developing later versions.
By following this methodology, you’re taking smarter calculated risks because you’re testing both the existence of a market for what you’re proposing to sell and getting feedback for what to offer that market over time in later versions, spin-off products or services, etc.
Will pretotyping and prototyping guarantee you success? Of course not.
However, they will enable you to take calculated risks, cut your losses if there’s no potential, and speed up the pace at which you’re able to test new business ideas.