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Copyright (c) 2013 Alberto Savoia - [email protected]
NOTE:
These slides are intended exclusively as reference for the attendees of the October 14, 2013 pretotyping workshop
at the Mountain View Hacker Dojo.
Please do not post, republish or distribute.
Instead, please refer potentially interested entrepreneursdirectly to me ([email protected]).
Thank you ... and may you always find The Right It in life and work!
Alberto Savoia
www.AlbertoSavoia.com
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Copyright (c) 2013 Alberto Savoia - [email protected]
Pretotyping WorkshopMake sure you are building The Right It before you build It right.
Mountain View Hacker DojoOctober 14, 2013
Alberto [email protected]
PretotypeLabs
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Copyright (c) 2013 Alberto Savoia - [email protected]
Agenda
FAILURE!
The pretotyping solution
! Your turn: Pretotyping exercise
Success Metrics
Complete example
Discussion and Q&A
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Copyright (c) 2013 Alberto Savoia - [email protected]
My Recent Experiencesand the birth of
Pretotyping
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Copyright (c) 2013 Alberto Savoia - [email protected]
• 1999-2001
Founded Startup 1
• $3M Series A
• +18mos: $100M acquisition
Hey, this is easy!
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Copyright (c) 2013 Alberto Savoia - [email protected]
• 2001-2002
Joined Google as Eng Director
• ..., launched AdWords, ...
Hey, I’m good!
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Copyright (c) 2013 Alberto Savoia - [email protected]
• 2002-2008
Founded Startup 2
• $25M Series A, B, C
• +5 years: ~$0
WTF?Wh
y The
Failure?
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Copyright (c) 2013 Alberto Savoia - [email protected]
2008-2012Back to
Innovation AgitatorEngineering Director
Student of New Product Failure
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The Law of Failure
Most new ideas fails...
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>95% of all mobile apps don’t make money
4 out of 5 startups lose investor money
Most innovative technologies fail in the market
...
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One year: 24,543 new products*
Failed 27%
Disappointed 16%
Cancelled 37%
Success 14%
Star 6%
Total 100%
* Nielsen
80%
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New Product Breakdown
Category # of products % of products
Breakthrough 334 1.4%
Line or categoryextension
1,705 6.9%
“Me too” 18,814 76.7%
Others(seasonal, etc.)
3,690 15.0%
Total 24,543 100%
* Nielsen
Brutal odds,but BIG payoff
WHY?
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The Law of Failure
Most new ideas failseven if they are very well executed
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Copyright (c) 2013 Alberto Savoia - [email protected]
Some Notable Failures• New Coke or Crystal Pepsi (est. $50M) -------------->
• The movie “John Carter” ($275M + $100M in marketing)
• Iridium satellite phone system (66 satellites, $6B)
• Google Wave (~$20-30M)
• Segway transporter (~$180M in funding)
• Pontiac Aztek ($200M+) ------------------->
• Apple Newton (est. $50M)
• Microsoft Bob or “Clippy” (est. $50M)
• CueCat USB barcode scanner ($180M) ------>
• ...
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Copyright (c) 2013 Alberto Savoia - [email protected]
About 75% of startup fail ... and “[venture capitalists] bury their dead very quietly.”
Shikhar Ghosh, Harvard Business Schoolbased on study of 2,000 funded startups
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Copyright (c) 2013 Alberto Savoia - [email protected]
HITorFLOP
F.L.O.P.Failure inLaunchOperations orPremise
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Make sure youare building The Right Itbefore you build Itright.
Pretotyping
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it
innovative technologystartup idea to try
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Youcan’tescape
The Law of Failure...
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...but you
can use itto your
advantage.
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The Pretotyping Effect
Without Pretotyping
IdeasTried
SlowFailures
FastFailures
Successes
WithPretotyping
IdeasTried
SlowFailures
FastFailures
Successes
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Copyright (c) 2013 Alberto Savoia - [email protected]
the pretotyping manifesto
innovators beat ideaspretotypes beat productypes
data beats opinionsdoing beats talkingsimple beats complex
now beats latercommitment beats committees
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Copyright (c) 2013 Alberto Savoia - [email protected]
the pretotyping manifesto
innovators beat ideaspretotypes beat productypes
doing beats talkingsimple beats complex
now beats latercommitment beats committees
data beats opinions
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Ideas, ideas, ideas ..
“We need some innovative ideas!”
“Where’s the next billion dollar idea?”
“I have an idea that will change the world!”
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$ value of ideas?
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Alberto Savoia
I am no Steve Jobsbut ...
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$B idea from Alberto
Bidding starts at $1,000
Price is for idea only. There is no explicit or implicit offer of help to implement the idea. The idea may not be implemented in a cost-effective way – possibly not at all. The seller of the idea believes that the idea is a good one, but cannot guarantee its success. Since we don’t know all the ideas that have been thought, the originality of this idea cannot be guaranteed; it’s very possible that other people have had this idea. This idea is non-returnable and the sale is final. No credit or refunds will be issued.
Alberto’s$B idea
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But there’s a bigproblem with ideas ...
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Idea
Opinion
Opinion
Opinion
Welcome to
ThoughtlandPop.
8
Copyright (c) 2013 Alberto Savoia, [email protected] Alberto Savoia
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ThoughtlandWhere every idea can be a winner!
False Po
sitive
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ThoughtlandWhere every idea can be a loser!
False Ne
gative
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??????
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If you want innovation,don’t look for ideaslook for innovators
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Copyright (c) 2013 Alberto Savoia - [email protected]
the pretotyping manifesto
innovators beat ideaspretotypes beat productypes
doing beats talkingsimple beats complex
now beats latercommitment beats committees
data beats opinions
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Productypes?
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The Entrepreneur’s Nightmare
Spending years and millions, to build and perfect a product or service
that people don’t need or want.
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$41M
$340M
$43M
$33M
$135M
$48M
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Can youavoid the
entrepreneur’snightmare?
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Yes!
With Pretotyping
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Pretotyping [pree-tuh-tahy-ping], verb: Validating the market appeal and actual usage of a potential new product by simulating its core experience with the smallest possible investment of time and money.
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IBM & Speech-to-Text Technology
Dear Mr. Jones,
In reply to your letter dated ...
$$$$$$$
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Dear Mr. Jones,
In reply to your letter dated ...
Pretendotype
Pretotype
X
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Copyright (c) 2013 Alberto Savoia - [email protected]
“We love the idea of speech-to-textand we’ll pay big $ for itif you can built it right.”
Beforepretotype
tests
Afterpretotype
tests
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Copyright (c) 2013 Alberto Savoia - [email protected]
Fail Fast
Compulsion tokeep going
at all costs
minutes hours days weeks
Time Invested
months years
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Copyright (c) 2013 Alberto Savoia - [email protected]
PretotypingFake it before you make it
Prototyping• Investment: days, weeks
• Main Q: Can we build it?
• Deliverable: Working prototype
Pretotyping• Investment: hours, days
• Main Q: Would we use it?
• Deliverable: [Working] pretotype
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Copyright (c) 2013 Alberto Savoia - [email protected]
Google GlassFrom Pretotype to Productype
Pretotype Prototype Productype
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The Birth of Android Pretotyping
Next Thursday:
Android Pretotyping Workshopat Google
All participants will receivea free Android pretotyping kit!!
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Send
ParkJerk
AndrogenPretotyping Tool for Android
+ + =A
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AndrogenPretotype working Android
apps in minutes
A
179.2
Send
Enter your weight:
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Copyright (c) 2013 Alberto Savoia - [email protected]
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PretoStorming
Brainstorming : Ideas -> Opinions
Pretostorming : Pretotypes -> Data
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A Sampling ofPretotypingTechniques
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Mechanical TurkPretotypes
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PinocchioPretotypes
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The Fake DoorPretotypes
Pretotype Itwww.pretotypeitbook.comThe official book on pretotypingby Alberto Savoia. Only $20.00
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MVPPretotypes
MinimumViableProduct
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One-Night StandPretotypes
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ImpersonatorPretotypes
ExistingProduct orPackaging
New “skin”
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PretoStormingPractice
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Exercise 1
Your turn topretotype
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Pretotype It!
• Pawsbook: Social network for pets (B2C)
• GhostBus: Self-driving city buses (B2B, B2Gov)
• UNuke: Small nuclear power stations for rural communities (B2Gov)
• Vanity Fare: Food/drinks enriched with ingredients for great skin and hair (B2B)
• HappyGlass: Windows that convert/create light spectrum to fight SAD (Seasonal Affective Disorders) (B2B or B2C)
• GoldHound: A luxury version of GreyHound with first-class seating and treatment (B2B)
• InstaNap: The opposite of energy drinks like RedBull or 5hr Energy (B2B)
• 2nd-day Sushi: Less-fresh but lower-cost sushi (B2C)
• Rent-a-mechanic: Rent an expert for used car shopping and negotiating (B2C)
• EatSlow plates: Food plates that open and close to slow down your eating (B2C)
• Fake-a-Mate: Rent a pretend great boy/girlfriend for social events (B2C)
• ReviewsNow: a mobile app for on-the-spot/real-time employee micro-reviews and feedback (Internal)
• ... or offer up your idea!
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Copyright (c) 2013 Alberto Savoia - [email protected]
PretostormingChallenge
1. Groups of 4-6
2. Pick an idea from the bag
3. Pretostorm (design a pretotype)
4. Debrief
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Copyright (c) 2013 Alberto Savoia - [email protected]
the pretotyping manifesto
innovators beat ideaspretotypes beat productypes
data beats opinionsdoing beats talkingsimple beats complex
now beats latercommitment beats committees
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Copyright (c) 2013 Alberto Savoia - [email protected]
An Intro toPretotyping Metrics
RPI: Return on Pretotyping Investment
ILI/OLI: Initial/Ongoing Level of Interest
PretoBayesian Metrics: How to factor in the impact of pretotyping data in decision making
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Copyright (c) 2013 Alberto Savoia - [email protected]
Learning (Pre) Cost (Pro)RPI = ______________ _____________
Learning (Pro) Cost (Pre)X
RPI
How much (%) can you learn from a given pretotype compared to the full product.
How much (%) can you learn from a prototype or final product. Set to 100% for the final product.
How much would it cost (time or $) to develop and test/market a prototype or the final product.
How much would it cost (time or $) to create and test a given pretotype.
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Copyright (c) 2013 Alberto Savoia - [email protected]
What should we learn?(before we blow $100M)
Will people use the web to order groceries?
What % of people would use it?
How often would they use it?
Will people in cities use it more than people in suburbs?
What kind of products will they buy?
What’s the $ value of average transaction?
How many will continue to use it after the novelty has worn off?
...
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Copyright (c) 2013 Alberto Savoia - [email protected]
Pretotype for
Pretotype 1: MVP
Create a high-quality website.
Advertise locally in a major city (e.g., San Francisco) and a suburb (e.g., Palo Alto.)
If/when orders come in, purchase food at existing stores.
Rent delivery trucks and hire temporary personnel to deliver food.
Run experiment for, say, 4 weeks.
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Copyright (c) 2013 Alberto Savoia - [email protected]
Learning (Pre) Cost (Pro)RPI = ______________ _____________
Learning (Pro) Cost (Pre)X
$ RPI for
.75 $100M
1.00 $1M
RPI = .75 x 100 = 75 = 7500% cheaper
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Copyright (c) 2013 Alberto Savoia - [email protected]
Time RPI for
.50 60 mos
.80 1 mos
RPI = .62 x 60 = 37.5x “faster learning”
Learning (Pre) Cost (Pro)RPI = ______________ _____________
Learning (Pro) Cost (Pre)X
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Copyright (c) 2013 Alberto Savoia - [email protected]
~?% $?
~?% $?
(Learning proportion) x (Cost proportion) = RPI%
RPI = ______________ _____________
Learning (Pro) Cost (Pre)X
Learning (Pre) Cost (Pro)
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Copyright (c) 2013 Alberto Savoia - [email protected]
ILI/OLILevel of Interest
(If we build, will they come?)
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Copyright (c) 2013 Alberto Savoia - [email protected]
ILI
Initial Level of Interest:
What % of a target group is interested in ‘it’ to give it a try?
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Copyright (c) 2013 Alberto Savoia - [email protected]
ILI
ILI = ________________________________# invited to try ‘it’
# who’ve actually tried ‘it’
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Copyright (c) 2013 Alberto Savoia - [email protected]
Small representative
sample (~100-1,000)
I (1000)
Time
T (741)
ILI in Action
Target market
ILI = 741/1,000 = .741
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Copyright (c) 2013 Alberto Savoia - [email protected]
OLI
Ongoing Level of Interest:
What % of a target group continues to use/buy ‘it’ after they’ve tried it.
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Copyright (c) 2013 Alberto Savoia - [email protected]
OLI(t)
OLI(t) = __________________________________________
# who tried ‘it’
# still using ‘it’ after time t
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Copyright (c) 2013 Alberto Savoia - [email protected]
Time
I (people invited to try innovation)
T (people who actually try it)
R4 (...4 weeks)R2 (...2 weeks)
R1 (return/retained users after 1 week)
ILI: Initial Level of Interest
OLI: Ongoing Level of Interest
OLI in Action
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McSpaghetti!
This is just a fun example for practice.
I’ve chosen it because, as an Italian, I know something about spaghetti andeveryone is already familiar with and has probably been at a McDonalds.
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What should we learn?
Will people going to McDonald want to order pasta?
What % of people would order McSpaghetti?
Will they order McSpaghetti again?
Will they order it regularly?
In what geographies would people order McSpaghetti?
Will they order fries with?
...
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Copyright (c) 2013 Alberto Savoia - [email protected]
Pretotype 1 for
Pretotype 1: Fake door.
Add McSpaghetti to store menu (above the counter) and display an in-store poster/ad.
Run experiment in 5 stores in different geographies.
Is this pretotype worth doing?
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Learning (Pre) Cost (Pro)RPI = ______________ _____________
Learning (Pro) Cost (Pre)X
Learning(Pre): .25Learning(Pro): 1.00Cost(Pre): $20K (~est)Cost(Pro): $10M (~est)
RPI Worksheet forMcSpaghetti pretotype 1
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Copyright (c) 2013 Alberto Savoia - [email protected]
RPI for Pretotype 1(Fake Door)
Learning (Pre) Cost (Pro)RPI = ______________ _____________
Learning (Pro) Cost (Pre)X
.25 $10M
1.00 $10K
RPI = .25 x 1,000 = 250 = 25,000 %
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Possible Outcomes FromPretotype Experiment
1: Nobody, or too few people order McSpaghetti (<4%): No interest, probably not the right it.
2: Enough people (=>4%) order McSpaghetti so it’s worthwhile to explore this ‘it’ further.
3: McSpaghetti is popular in some geographies and not in others.
Case 1: Probably want to move to another ‘it’.
Case 2 & 3: Need another pretotype.
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I (people visiting restaurant with McSpaghetti during 2 weeks)
T (people who try to order McSpaghetti)
I = 5,500T = 856ILI = 856/5,500 = 15% (!!!)
Pretotype 1 (fake door)
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“McSpaghettiis the right
‘it’!”
Not so fast ...
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Good ILI but what about OLI?
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Copyright (c) 2013 Alberto Savoia - [email protected]
Dead Cat Kick*
* No cats were harmed in the making of this example.
Users
Time
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OLI(t)
OLI(t) = ________________________________# invited to try ‘it’
# still using ‘it’ after time t
E.g. OLI(4wks)= % of people using ‘it’ after 4 weeks.
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What we’ve learnedfrom pretotype 1 (fake door)
Will people going to McDonald want to order pasta?
What % of people would try McSpaghetti?
Will they order McSpaghetti again?
Will they order it regularly?
In what geographies would people order McSpaghetti?
Will they order fries with?
...
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Copyright (c) 2013 Alberto Savoia - [email protected]
Pretotype 2 for
Pretotype 2: MVP + Provincial + One-night Stand
Add McSpaghetti to store menu (above the counter) and display poster.
Cook and serve McSpaghetti when ordered. Hopefully al-dente.
Ask people if it’s the first time they’ve ordered it and keep track of repeat McSpaghetti customers.
Run experiment in 5 stores in different geographies.
Is this pretotype worth doing?
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Learning (Pre) Cost (Pro)RPI = ______________ _____________
Learning (Pro) Cost (Pre)X
Learning(Pre): .50Learning(Pro): 1.00Cost(Pre): $100K (~est)Cost(Pro): $10M (~est)
RPI Worksheet forMcSpaghetti pretotype 2
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Copyright (c) 2013 Alberto Savoia - [email protected]
RPI for Pretotype 2(MVP + Provincial + One-night stand)
Learning (Pre) Cost (Pro)RPI = ______________ _____________
Learning (Pro) Cost (Pre)X
.50 $10M
1.00 $100K
RPI = .50 x 100 = 50 = 5000 %
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Time
I (avg people visiting store with McSpaghetti during 2 months)
R4R2R1
Pretotype 2 (MVP+...)
R6 R8
return purchases after 1, 2, 4, 6 & 8 weeks
I = 5,783R1 = 483 (8.3%)R2 = 398 (6.8%)...R8 = 415 (7.1%)
The right spaghettit!
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Time
I (avg people visiting store with McSpaghetti during 2 months)
R4R2R1
Pretotype 2 (MVP+...)
R6 R8
return purchases after 1, 2, 4, 6 & 8 weeks
I = 5,783R1 = 211 (3.6%)R2 = 188 (3.2%)...R8 = 69 (1.2%)
The wrong spaghettit!
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VisionIdeasOpinionsPassion
RealityPrototypes
DataRationality
The RightIt!
Vision vs. Hallucination
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