Factor L

Another re-run, this one from 2004:

Why do some products and services succeed while others fail? Why do
some ideas go viral, rocketing across the marketplace, while others
wither and die in obscurity?

It’s not the quality of the ideas. Go take a look at X1 (www.x1.com).
Here’s a really cool utility that can instantly search all your email
(I have more than 150,000 on file from the past six years) to find any
word. This Google for your hard drive works pretty well, and it’s
cheap. The Web site is really well done, too. The reviews are good. The
trial is free. But do you have it installed? Probably not. Most of the
162 million Internet users in this country don’t. I wonder why.

On the other hand, consider "Baby Boy," the top-10 hit by Beyonce.
She certainly has talent, but is this the very best song from the very
best album by the very best singer in the world? It’s been a hit for
weeks. I wonder why.

What, precisely, is going on here? I have no idea. You don’t, either.

We’d all love to know the series of steps to follow, the calculus we
need to run, the hoops we need to go through in order to launch a
product or service that is guaranteed to succeed. It would save us a
lot of angst and disappointment if we could put our hearts and souls
into something with a reasonable expectation of success.

It used to be that way, of course. If you had a very good product
and a fairly sophisticated ad campaign (and enough money to keep both
of them going), you could buy attention and turn it into market share.
Creating new products was largely about having the will (and the means)
to get your market to sit up and notice.

Today, it feels like more of a crapshoot.

What is it about Krispy Kreme Doughnuts, for example, that suddenly
turned them into a profitable fad–and then a phenomenon? Sure, they’re
good, but are they that much better than Dunkin’ Donuts? Friendster,
the online social networking service, is the latest viral rage. It
recently turned down a chance to be acquired by Google for $30 million.
Just a few years ago, though, SixDegrees.com was offering almost
precisely the same service, and it’s no longer on the radar.

MoveOn.org has more than 1 million subscribers, while other
political sites struggle. Some politicians catch fire; others (with
arguably better records) never gain traction.

It’s easy to call the game after it’s over. It’s easy to explain
what the market liked about product X. The hard part, of course, is
doing it in advance. I don’t think we can. I don’t think you should
even try.

Sure, you should work hard to maximize your chances of capturing the
imagination of your market. But all you can do is all you can do. After
you’ve done that, you should stop tweaking.

The L factor is about luck. And as any gambler will tell you, you
get to keep playing until your money runs out. After that, you don’t
get any more chances to win.

As our marketplaces have changed, our approaches haven’t. We still
overinvest to ensure success. We still make sure we have just a few
eggs, in just one basket, and then we watch that basket really closely.
Big mistake.

We live in a world of fashion, not rational computation. A world
where everything from brake linings and ball bearings to clothes and
airlines is chosen for unpredictable reasons.

The way to grow in the future is to acknowledge how important luck
is and to diversify your risk. Do that with lots of products, not just
one or two. Cut your overhead so you have plenty of chips, ready for
another spin of the roulette wheel.

Take the case of Levi Strauss & Co. This company was lucky,
plain and simple. It makes a garment that was the clothing of choice
for a generation of free-spending consumers. But instead of recognizing
the luck, Levi imagined it was smart branding, or its employment
policies or even its ad agency that had somehow enabled it to grow.
Once the luck ran out (and it always does) Levi shrank fast. In just
six years, sales dropped more than 30%, and every U.S. factory was

Every time you launch a product or service, every time you apply for
a job or start a nonprofit, you’re either going to hit or not. If you
get lucky, you’re entitled to deny that luck had anything to do with
it. But if you fail–and you probably will–understanding the role of
the L factor will keep you sane. And if you’ve planned for it, it will
keep you solvent as well. Solvent enough to try again and again, until
you make it (and take all the credit).