In the first days of InsightSquared, the three co-founders hadn’t yet raised funding and only had the idea for building a business analytics product. To raise funding, they needed to prove to investors that there was demand in the market for this type of software.
Rather than trying to build their complex software right away, they started with just a spreadsheet in Excel, according to Co-Founder and Chief Product Officer Samuel Clemens.
“There was no software,” Clemens explained. “Our customers would email us a CSV file every week. [CEO Fred Shilmover] would input it into the spreadsheet and manually compile the dashboard. He sold just a spreadsheet for $1,000 a month to two customers.”
This is the spreadsheet that the founders were able to sell and raise money with:
And here is that dashboard as a SaaS product today:
The changes between the very first version of InsightSquared and today’s product are obvious, but the first spreadsheet was an incredibly important step for the business. That spreadsheet was a prime example of pretotyping — a method of testing a new product before fully building it.
This method of product testing is so effective that every SaaS business should use it for every new product launch. Pretotyping can save your company time, money and could even be the difference between your business going under, or becoming a huge success.
The Pretotyping Movement
So what exactly is pretotyping?
The concept was originally developed by Google Engineering Director Alberto Savoia in 2009 as a way to test new products before they launch. Similar to prototyping, pretotyping is when you build a scaled down version of a product before you build a fully functional product. The point is to simulate the experience of having and using a new product with the smallest possible investment of time and money.
One famous example of pretotyping goes back to the 90’s when entrepreneur Jeff Hawkins had the idea of a personal digital assistant (PDA). Before building an expensive and highly-technical prototype, he wanted to understand the size, shape and functionality that would work best.
Though he didn’t call it a pretotype at the time (the term had yet to be invented), Hawkins built a wooden pretotype of what would later become the Palm Pilot. He carried the wooden rectangle with him for weeks, noting how the size and shape fit in his hand, how easy it was to reach the buttons, and much more. Hawkins was able to make some major changes to the product to improve functionality before it launched to the public.
The value of pretotyping for your business is obvious — rather than investing huge amounts of time, money and effort into building a product that the market may not want, you can instead build a pretotype of that product, also known as a Minimum Viable Product (MVP). This product should have the same look and feel of the full product, but without the full functionality. You can then test your MVP extensively and see how well it appeals to the market before you invest too much in actually building it.
Pretotyping has really taken off as a part of the Lean Startup movement, where companies implement an agile development cycle of building, testing, and changing products quickly. The concept behind agile development is that your new product is probably going to fail in some fundamental way — whether it’s a key feature you didn’t build or an error in pricing. This failure is unavoidable, and should be embraced instead of feared. Rather than trying so hard to avoid failure, you should fail often and fail quickly, which means less risk to the overall business. With each failure, you will learn something new and improve your product incrementally, according to the data you collect.
Since you already know your product is going to fail in multiple ways, why would you invest in building a full product? Instead of building software then testing it, measuring it, and making changes, you can go through the entire cycle more quickly and with less expense. Pretotyping helps you be more truly agile and test new features of your product more effectively. Instead of guessing at whether your new product will succeed, you can instead measure customer responses to the pretotype and build something even better for launch.
The SaaS Advantage
The concept of pretotyping is incredibly useful for all types of businesses, but is especially relevant in SaaS. Though SaaS products can iterate more quickly and with less expense than a physical product, a developer’s time and effort is still an expense to your growing business. SaaS products are also subject to higher churn rates than traditional businesses, which means you want customers to be happy with your product from the start. Pretotyping can help your business quickly finesse the biggest challenge for SaaS companies — the product-market fit.
Even if your product is fantastic, you really don’t know how to market or sell it correctly without understanding your ideal customer profile. A pretotype can help you not just improve your product functionality, but also prove that there is a market for it with less investment up front. If people are excited to use the pretotype and are willing to pay X amount for it, you have an MVP on your hands.
“In B2B, it’s not an MVP until you sell it,” Clemens said. “Viable means you can sell it.”
With an MVP, now you have a jumping off place for your sales and marketing efforts and the assurance that someone is willing to buy your product. Rather than going through the difficult growing pains that kill so many SaaS businesses, you will have an advantage from the start.
If your business hasn’t tried pretotyping yet, it’s time to try something new. Pretotyping isn’t just a fad in the business world — it’s a proven strategy for improving new product launches vetted by Google and thousands of other startups. Get on the pretotyping bandwagon and start improving your SaaS business.