8
Drop It if It Doesn’t Work

Have you ever seen a kid spend hours or days trying to make a toy, scenario, or activity that is clearly unprofitable and not fun, work? I didn’t think so.

Kids simply don’t spend time with things that they don’t enjoy and that aren’t workable. (We’re going to make a natural exception for anything that takes time to master like a musical instrument or a sport, but that practice is built in to the activity from the outset.) There are many reasons why a toy doesn’t work for a kid: lack of interest, too complicated, not a good fit with their play style, not as fun as they anticipated. When there isn’t a compelling reason or tangible incentive to stick with something, kids drop it and move on to the next thing. Moreover, they spend very little time analyzing why something isn’t working. They move on to the next thing. There is no ego involved. No recrimination. Nothing. It’s done.

So, why do adults do it? There are a bunch of reasons, but before we get into those, ask yourself how often you’ve considered something a “fool’s errand.” “Beating a dead horse”? Or, in Hamlet’s somewhat more poetic phrasing, “weary, stale, flat and unprofitable”?

The amount of time and money lost from forcing products into the market, investing in projects long past their viability, or engaging in activities that won’t fulfill objectives has never been measured. It’s doubtful whether or not it can be, but we certainly know anecdotally from interviews with executives at a variety of companies that waste and investment long after a project should be dropped are common occurrences. Nor is this phenomenon limited to private companies, driven by perhaps an idiosyncratic owner with a vision.

As a start, consider these three scenarios:

•    An outdoor products company decides that it wants to expand into lifestyle products. They hire staff, design products, produce prototypes, and even when they get a lackluster response go into production. A year later, the new division is shuttered, the investment is lost, and all the new hires are back on the street.

•    The owner of a mid-sized children’s products company has a dream in which he sees a fashion doll line with a story about girls that transform into cats. Though the company has never made dolls before, they push them into production. At the same time, they introduce a technology that allows the dolls to interact with on-screen games. They get initial placement at toy retailers, but in the highly competitive fashion doll market, they are quickly overwhelmed and don’t even last one season.

•    A publicly traded company spends more than $7 million on a one-time, one-day promotion for a successful product that has a 79-cent-per-unit wholesale cost for the major products in its line. The promotion is, as you might expect, very dramatic and even gets some national TV coverage. Apparently, though, no one points out that the company would have to sell an incremental 9.1 million units in order to make the promotion pay for itself.

In each of these scenarios, there were surely moments at which red flags should have been waving wildly where someone should have put on the brakes. But they did not. As my father used to say of our rector’s sermons, “He reached three perfectly good stopping points, and went right on through them.”

Of course, hindsight may be clear, but it’s not particularly useful unless it can inform other efforts moving forward. What is it that kids know that adults have forgotten—or choose to ignore—that might help make better choices?

For one, when something isn’t working for a kid, as noted at the beginning of the chapter, they have no ego engaged in dropping it. Certainly that’s not true in many business situations. We hear time and time again from frustrated executives about pet projects that come around not through analysis but because the “big boss” wants to do it. They’re afraid to challenge something, even when their promotions or bonuses may depend on the success or failure of a project.

The problem is that no one wants to call an ego-driven project what it is. No one wants to tell the emperor that he’s naked. Instead, people jump through hoops to try to rationalize something, call in research, and generate mounds of data that support the project. At a certain point, since it appears something is going to be done anyway, people throw in the towel and try to make the best of it. In such situations, the goal often becomes to mitigate damage, spin the results, and try not to be blamed for any disaster. This creates a fear-driven and defensive environment where the objective becomes to save one’s skin rather than move it forward.

Just before the Internet crash in 2000, we were consulting to a company that had raised a boatload of money on the speculation that their business proposition would revolutionize online job-hunting. Our research pointed out the flaws in the process from a human standpoint, but the CEO, who was besotted with technology, asserted that it would be so exciting that people would adapt to using the technology. He rejected the research, referred to our team as “analog,” a seemingly scathing criticism at the time, and pushed ahead with the project. Further testing of the system validated our questions, and the whole project crashed and burned spectacularly, one of the casualties of that particular time. The cost of the loss was far greater than the cost of pulling back and retooling based on the information we had about how people wanted to do research on jobs and job functions.

(People will adapt to new ways of doing things. Just look at the rise of online shopping, but that happened over time. It is very rare that one product will change consumer behavior, the obvious exceptions being the iPod, iPhone, and iPad. But the rarity of their success and the industries they spawned prove the point that the truly revolutionary is not an everyday experience.)

Several years later, we tested a product concept for a major luxury goods company wanting to get into the broader collectibles market with a comparatively low-end offering at about $50. Though the concept tested well with many populations and in different regions where the parent company was established, it quickly became clear that it could not be produced at a cost that would work within its target market segment, and that the overall market based on the price was substantially smaller than projections and what was needed to make a viable product. There were many other reasons to suggest going back to the drawing board or even tabling the project, but that was at odds with what the people driving the product within the company wanted. A crisis of sorts occurred, but if you’ve been following along so far, you can probably guess that, against all the information and against the odds, they pushed ahead with the product. Once produced, it got some placement and actually sold a few pieces. On the whole, though, the product was a failure, and it was only the size of the parent company that allowed it to absorb the loss relatively easily. (Being a private company doesn’t hurt, either.)

This is where ego comes into play: More is at stake than whether something works or doesn’t work, and that’s the problem. The person who is supposed to be a visionary has an investment in making something work against all odds, and that opens the door to bad decision-making. The volatile, inter-personal dynamics at the luxury goods company created a political situation that ultimately wasn’t about making or not making a product. It was about proving a point. This type of political situation can be all too common, and what should be rational, dispassionate decisions about the viability of an initiative become clouded by personal investment. We’re all people, and on some level we’re all passionate about certain things, but keeping an eye on the larger objectives, or having someone who can rein in the egos, is essential to creating a success. This type of behavior is more pronounced in private and very often family-run businesses, although it still happens in large companies as well.

Companies are often also hesitant to drop something that isn’t working because the project has passed a supposed “point of no return.” This is the point at which so much has been invested in time, money, materials, and so forth, that it’s impossible to pull the plug.

The argument we hear about this point is that, sure, kids can drop something if it doesn’t work because they have no investment in it. Mom or Dad, or someone, bought the toy, so there’s no financial risk, and it’s easy to find something else. That’s not exactly true, and once again it’s the application of an adult’s understanding and interpretation of experience to a child’s reality. All you have to do is talk to a kid who has been disappointed by something he or she hoped to get for a birthday or holiday and you’ll see this is, from a child’s perspective, quite serious. They might wish they had asked for something quite different.

The real issue for adults is that the prevailing belief that dropping something is failure. Discovering something you believed in doesn’t work the way you hoped is failure. The situations in which a company has held back something or delayed a launch are often considered failures. And failure is to be avoided at all costs because it reflects negatively on the individual or the company and invalidates them on a very elemental level. So we hear the argument “Well, we’ve invested X dollars in it, so we need to see it through.”

“They’ll think there’s something wrong with the product” is something we also hear a lot when there are indications that a launch should be delayed. Well, of course there’s something wrong with the product. If there weren’t, why on earth would you hold it back? Even a publicly held company might do better taking a hit on its stock for delaying a product than on lost revenue from rushing something into the market. (And they might not even suffer that, if they frame the story correctly.)

But how do you know if something isn’t going to work? Or isn’t working? That’s really one of the questions. Sure, you say, a kid knows because all he or she has to deal with is his or her feeling at the moment. Well, sure, we’re taking a little poetic license, but there are ways to know—and indications along the way.

Recently, a small, privately held toy company held back a major new launch for a full year because they thought the product needed more development. It’s not that there weren’t orders or interest from retailers, but the product wasn’t working the way they wanted it to, and they knew a little more time in development could solve that problem. They were willing to take the short-term financial hit in order to take the chance on being more successful and profitable when the product finally came out. The product actually did very well when it was introduced and exceeded projections. Would it have been as profitable if it had been introduced on its original timetable? Impossible to tell. Nonetheless, the product’s ultimate success was what mattered, and the risk paid off.

What these situations really require are structures that allow for fluidity and response to new information and changing conditions. As we’ve said—but it bears repeating here—kids trying to master a skateboard trick fail much more than they succeed. The same is true in business. For every hit product or every successful initiative, there are many that don’t make it. Like the kid on a skateboard, you have to be comfortable with risk and think of the process as one that’s going to have bumps and setbacks. As the oft-quoted, and perhaps apocryphal, saying from Thomas Edison goes, “I haven’t failed to make a light bulb. I’ve successfully found 1,000 ways that didn’t work.”

Kids can also drop something if it doesn’t work for them because they have all the information they need based on their personal tastes, play styles, and experience to determine if they want to continue with something or not.

Obviously, this is not as simple with business ventures or adults, but the principle still merits consideration. Whereas kids have merely their own pleasure to consider, businesses must consider the market, investment to date, projected return, their audience, competition, and so forth.

So, we have market research. This is, for the most part, how you’re going to “know” whether or not something is working. In an ideal world, research helps you determine if something is working, or what it needs to work, or whether, in fact, you should drop it. It can be invaluable—if it’s used correctly.

The problem that we see with research, however, is that too often it’s not well structured or designed to achieve a specific outcome, or the data is misinterpreted.

Too often we see research used as cover for when things don’t work. “Our research said ‘X,’ so we were surprised when the product failed” is something we often hear in post-mortem sessions. This is like a kid trying to deflect blame by saying another kid told him to do something.

“What went wrong with the research?” is a question that’s seldom asked. Well, generally what went wrong is the research was manipulated to give a desired result. This is called bias confirmation. Or the research wasn’t structured to give a clear answer. The sample might not have been large enough or diverse enough. Or, more often than not, it hasn’t been considered in a broad enough context, so what appears to be definitive information isn’t an accurate picture.

A major bank was trying to figure out how to refine its credit card marketing targeting college students—already a complicated and somewhat controversial issue. Four focus groups in four cities indicated that college freshman really didn’t understand how credit cards worked. The creative team came back with three treatments, and the one that emerged from qualitative testing as being most appealing to students was produced. The campaign featured a puzzle and included copy about finding your way through the confusing world of credit cards.

The campaign failed. Big time. In fact, it was such a disaster, compared to their previous campaigns, that the managers had to put the failed creative back into focus group testing to find out why, especially when compared to campaigns that had worked. The results revealed that students still thought credit was confusing, but they didn’t need to be told that. They needed to be given a simple solution, which, by the way, is what the successful campaign continued to do.

The point of this story is that in trying to save money, the bank missed an opportunity to find out if something was or wasn’t going to work—while there was still time to drop or fix it.

What this points to is that focus groups can be effective, but they are also misleading. Show consumers a new product, and they’ll likely be interested. Adult focus group participants love the attention and generally try to be helpful. Kid focus groups in the toy industry are notoriously inconclusive, because if you put a child in the room with a new toy he or she hasn’t seen, engagement is a given.

There’s also another problem with a lot of research: By the time a company engages in it, development is so far along that it seems impossible to turn back, and whether consciously or unconsciously, the research is structured to provide a predetermined response, so despite the investment of time and expense, no one really wants an answer that’s going to challenge what was going to happen anyway. In the case of the campaign mentioned previously, which was to be delivered via direct mail, of the three treatments tested it emerged as the best, but by that time the bank was committed to doing one of them. What they were testing was the execution of an idea rather than the communication overall. The research was flawed because the outcome—producing one of the three treatments—was a foregone conclusion.

Companies invest a lot in research. Good research is hugely expensive, is time-consuming, and has precise rules for methodology if you want real insights, rather than validation. Moreover, even statistically defensible research can never tell you definitively if something will work. There are way too many variables to ever test all of them reliably, and in a dynamic marketplace, research is a snapshot of one point in time. However, even less than perfectly structured research can tell you that something will not work. And it’s probably good to pay attention when that happens.

Even with the best research, there are no guarantees, and there are going to be times when things don’t work for reasons that are difficult if not impossible to determine. Unlike the child who can simply drop something and move on, most business situations required an exit strategy.

This is something that we’re seeing more and more as a result of a fragmented economy and consumer behavior that is increasingly difficult to predict and/or quantify.

If you’re completely gung-ho about a new product, it can seem like a buzzkill to have to go in with a strategy for what you’ll do if your product doesn’t work, but more and more retailers are making it an essential element of any sale. They want to know what you plan to do if something fails to perform and how to mitigate potential damages to all concerned. And exit strategies force you to ask tough questions, which, when done well, can only help you gather more information.

A good exit strategy considers all the variables and projects actions you can take. Nobody wants to assume something is going to fail, but if you’re considering the exit at the outset, it can help you temper your plans and be able to scale down—or if all goes well, scale up—your plans as you go along. Moreover, it’s not just the final exit strategy that you should be concerned about. As you develop plans, think of your project as a turnpike with exit points along the way. Each of these presents an opportunity to make choices and, most importantly, keep an objective eye on whether or not something is working. You don’t have to take the exit, but you should be cognizant of having a choice, to hyper-extend the metaphor.

This, ultimately, is what happens when individuals or companies push forward with things long after a point of viability. They’ve come to believe that they have no choice in the matter, and they’re stuck with what they’ve got. That’s almost never true, and it’s often beneficial to consider an exit strategy, and when to implement that exit strategy when it’s clear something isn’t working. This can often be challenging and politically difficult, particularly when people have egos invested in a project, but it’s also responsible to admit the possibility that something might not work and create a contingency plan. This is going to be more and more prevalent a practice, as marketing becomes more data-driven and that data is almost instantaneously available. In other words, you’ll know pretty soon if something isn’t working.