Here’s a short story about the possibilities of success or failure, as well as the factors and randomness that go into deciding the outcome.

Joanne is a young single mom who writes her first book, and then finds an agent who agrees to try and help find a publisher. The book is sent to a publisher for review, and shortly thereafter rejected. This is repeated again and again by Joanne and her publisher, each time the submission is met with a rejection.

In fact, it’s repeated twelve times, before a publisher was found who agreed to publish the book – and only because the daughter of the company’s chairman liked the book.

Since the publication of her first book “Harry Potter and the Philosopher’s Stone,” the author Joanne Rowling, or J.K. Rowling as she is better known, and her books have gained immense popularity and become a cultural worldwide phenomenon selling approximately 450 million copies and being translated into 73 languages. J.K. Rowling has subsequently become one of the richest women in the world. Yet the publication of her first book might very well never have happened.

The road to creating a hit, whether a book, movie, product or company – requires a significant amount of work and passion. History and recent research also shows that creating a hit can be very unpredictable and involve a good amount of luck. Yet there are a couple simple proven strategies that individuals and companies can use which have been shown to have a profound effect on making a hit. In fact, one of the companies successfully using these strategies has created hit after hit after hit. They’ve released 14 major products over the past 20 years, and every one of the 14 have been blockbusters, each generating well over $100 million dollars. But more about that later.

Follow Kartik Hosanagar on Twitter @enabletech

To learn more about how to create a hit product, I met with Kartik Hosanagar, a tenured Associate Professor at Wharton who has been recognized as one of the top 40 business professors under 40. Hosanagar has his PhD in Management Science and Information Systems from Carnegie Mellon University, has received several teaching awards, has done work for Google, Nokia, American Express, Citi, and been involved with a number of tech startups. He’s a thoughtful and experienced teacher and entrepreneur himself. Here is what I learned from Kartik Hosanagar.

WE ARE IN THE ERA OF THE HIT

You’re likely familiar with the Pareto principle, or the 80-20 rule. As a quick reminder, it describes that approximately 80% of the results come from 20% of the causes. A couple examples being: approximately 80% of the mobile phones are produced by roughly 20% of the manufacturers; or that roughly 80% of a grocery stores’ sales come from 20% of their customers. While there have always been companies, products and people that received a disproportionate amount of success, we are now in an era where the disproportion is even greater – where having a successful hit brings more return than ever.

Graph from Prof. Kartik Hosanagar

Hosanagar explained that the primary reason this is occurring is because of “scalability.” He explained that scalability is the reason a movie star makes more money than a teacher – because the product of an actors work can be readily reproduced, delivered and enjoyed to millions of people. And just as that winner-takes-all dynamic drives individual compensation scenarios, it also drives revenue concentration in various industries.

Subsequent to hearing Hosanagar’s research on the topic, and reading some of his work, the thought occurred to me that another key reason driving the “winner-take-all” era of the hit is “availability.” An offering needs to be both readily scalable (such as mass producing widgets) and readily available to tip the scales towards a hit-centric market.

Having people, products or industries that are scalable and available not only drives a winner-takes-all market dynamic (or at least a winner-takes-a-greatly-disproportionate-amount), but it also means that small differences in quality translate into big differences in market share. As an example, twenty years ago you may have had the choice of driving to a bookstore in your town or to a slightly higher quality bookstore (whatever that means to you) 15 minutes further away. In that scenario, you likely would just stop locally and save the time, but forgo the slightly better quality atmosphere of the distant store. However, if both bookstores were now online, you’ll use the online store that provides even a slightly higher quality level since there is no longer any advantage to use the lower quality option.

This phenomenon can be seen in the graph below. Although any of the search engines would work, there’s no disadvantage in using the one with the highest quality, even if that is barely discernible.

TWO BIG PROBLEMS IN DETERMINING HITS

There is however a significant problem with scalability and availability translating into big differences in market share – that being market predictability becomes very difficult. Unpredictability arises because small differences in quality can be difficult to discern and hence their impact on the market can be highly unpredictable.

Another factor driving unpredictability in markets that are scalable and available, is that social media and other social influences will dramatically affect market receptivity and share.

WHAT ARE THE INHERENT QUALITIES OF A SUCCESSFUL PRODUCT

This was cleverly studied by Matthew Salganik a professor at Princeton who wanted to better understand how much of success could be attributed to the inherent qualities of the successful thing itself, and how much was just chance.

An example being the Mona Lisa. The painting is seen by throngs of people daily and kept behind a bullet proof glass and guarded by a railing. The question Salganik and others asked, is the popularity of the painting due to its exquisite quality, or some other factors.

Salganik constructed a clever experiment wherein he created a website that contained 48 new songs by unheard of musical artists, and funneled 30,000 teenagers into the website to listen to the songs, and then after listening, download the songs they liked for free. Salganik created nine separate worlds each containing the 48 songs. In eight of the worlds, the teens could see which songs had been downloaded by their peers and how many times, so they knew which songs their peers thought were good. In one of the worlds, Salganik hid what songs had been downloaded, thereby removing any social influences. The 30,000 teenagers were then randomly assigned into each of the nine worlds, so they could listen and then download the songs they liked.

What was fascinating about the experiment is that different songs became significantly more popular in different worlds. As an example, in one world a song came in first, and in another world it came in 40th out of the 48 total songs. What the experiment showed, is that history evolved differently in the different worlds and was influenced by initial social cues, which over time became magnified. Salganik went on to do other similar studies, and found that quality does have a limited role, but after meeting a certain level of quality, whether or not it becomes a huge success is basically a matter of chance. A matter of who liked what and how those influences grew. You can listen to an 8 minute NPR story on the study here.

This randomness certainly seems to have been reflected in the thinking of William Goldman, the American novelist and screenwriter, when he said “Nobody knows anything… Not one person in the entire motion picture field knows for certainty what’s going to work. Every time out it’s a guess.”

DEFYING THE RANDOMNESS

So, if producing a hit is mostly a matter of scalability and availability, and if those two factors inherently make predicting a hit unpredictable, how can you improve your hit prediction? The answer lies in a couple simple techniques.

But first, let me tell you about a company that has consistently generated hits. The company that was alluded to at the beginning of the article is Pixar. They have had 14 out of 14 hits for Buena Vista Movies.

A typical year for Buena Vista Movies (or any large movie studio) looks something like the graph below. There are a few movies that do well, and the vast majority underperform and generate no profit for the studio.

Pixar however defies the odds. To date, they have made 14 major films and each one of the 14 has been a blockbuster. Kartik Hosanagar calculated that based on the odds of a 1 in 10 blockbuster success rate, having 14 our of 14 hits is actually 1 in a 100 trillion probability!

From boxofficemojo.com

So, how does Pixar do it? And how can you employ their practices in your organization.

RULE NUMBER 1: ITERATIVE TESTING: FAIL EARLY AND OFTEN

Typically, idea generation whether for new products or services is done by a small group of people within an organization – oftentimes this is marketing or product development. Pixar generates their ideas very broadly, and involves up to 500 different ideas, all boiled down into one sentence pitches. The example Kosanagar used was “A hot-shot race car named Lightning McQueen gets waylaid in Radiator Springs, where he finds the meaning of friendship and family.” These ideas are then mixed and matched, and put through several iterations until they winnow down the storylines to the best concepts. As stated by John Lasseter (who lost his job at Disney in 1983), “When you think about science it’s about experimentation, and 99% of the experiments fail, but you learn from the failures and you move on.” And as Lee Unkrich, the director of Toy Story 3 explains, “We fail a lot. We just don’t fail by the time the movie comes out.”

RULE NUMBER 2: GENERATE & LEVERAGE EARLY MOMENTUM

As Matt Salganik showed, social influence is critical in creating a hit product. Therefore, it’s critical for organizations to do whatever they can to lead and impact the social factors influencing their brand and/or product adoption through authentic engagement with their audience and influencers.

Social engagement is best done when the spread of the offering is actually a viral part of the user experience, such as:

• When you receive a digital holiday card via email wherein your friend’s face is superimposed on the dancing elf, and you’re provided with a link that allows you to do the same thing to someone else (and spread the word).
• Online eyeglass frame store Warby Parker (former Hosanagar students) that lets customers send photos of themselves trying on different eyeglass frames to their friends to solicit their opinions on what looks best (and spread the word).
• Conference promotion where attendees receive a free book thereby driving ranking up the New York Times best seller list (and spread the word).
• Creating valuable and low cost (or free) educational content to drive views and membership (Coursera, Udacity, etc).

INFLUENCING THE OUTCOME

Experience and observation have shown me that oftentimes there seems to be no reasonable or logical explanation for something that has become a hit. In fact, sometimes it seems that popularity is in inverse proportion to its inherent value or quality. There are countless examples, and I’ll resist the temptation to start listing examples of things I think inane. But it does seem that oftentimes for every product or artistic endeavor that was created as a direct result of commitment and obsession with quality – and that deserves to be a hit, there is likely an inferior offering that is similarly or even more popular.

Kartik Hosanagar and Matt Salganik have explained some of the reasoning as to why this occurs. More importantly, they’ve pointed out a couple ways in which the randomness of creating a hit can be influenced.

So whether you’re working on the next big mobile app, a Marty McFly hoverboard, the next great rock album release (yes, they’re still called albums), or developing a new medical device – remember you can significantly improve your odds of success by using the same strategies which helped Pixar deliver 14 hits in a row. Fail early and often; and, generate and leverage early momentum. As Buzz would say – “To infinity and beyond.”

What are your thoughts on strategies to create a hit? What else do you think is necessary for success? I’d welcome hearing your thoughts!

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Tom loves building meaningful businesses and technology (with people who care). Reach him on Twitter @thomastriumph or tomtriumph.com.