A $250 million reason to prototype your IoT idea

IoT startup finds a bigger opportunity for its service by observing consumer behavior—and avoids the costly mistake Ford made with its Edsel

A $250 million reason to prototype your IoT idea

How to ensure your Internet of Things solution doesn't fail like the Ford Edsel

Credit: Pixabay

The Ford Edsel was rolled out in 1958 with a lot of fanfair and a massive year-long advertising campaign. A year later, the Edsel was dead and Ford had lost $250 million. The Edsel has come to symbolize how not to design a product.  

How do you ensure that your next Internet of Things (IoT) solution isn't an Edsel?

“Prototype first,” recommends Justin Lokitz, an expert in product strategy and author of Design A Better Business. He shared three key lessons from a recent IoT product launch. 


The founders noticed that paying for drinks in bars was difficult. Bartending for large, noisy crowds in dark rooms is not for the faint of heart. Their idea: OneBarTab (name fictionalized) would let drinkers pay automatically using a mobile app and sensors installed at bars.

A huge market. No competition. What could go wrong?

Getting out of the building

A compelling investor pitch deck helped the company get into a startup accelerator. The team was soon indoctrinated into the world of innovation. “Get out of the building,” advised a design strategy practitioner at the accelerator.

This lesson has been popularized by Steve Blank, a Silicon Valley serial entrepreneur and academician. Blank stresses that founders shouldn’t rely only on their current point of view and assumptions to build their companies. They should go where their customers are to watch them, ask questions and test early prototypes. Products and services that truly resonate with their customers result. Founders make their ideas stronger and perhaps even find new, unmet customer needs by “getting out of the building.”

The OneBarTab team gladly started visiting bars. However, rather than simply sidling up to the bar and ordering drinks, they watched and listened to people ordering drinks from the bartenders. They noticed that bartenders repeatedly walk back and forth between the register and bar often clutching five or more different check holders stuffed with credit cards and cash. The bar staff explained that it was hard for them to remember who ordered what drink and how their tabs were to be split. 

These bar visits helped the company's founders realize that OneBarTab’s real value was in solving bartenders’ billing problems—it wasn't just a cool new app for bar goers.

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A revised design was sketched with the Business Model Canvas. Their new business model was more closely aligned with the bar payment ecosystem. Bar patrons could load their payment details into the OneBarTab app and order drinks via their smart phone. Bar staff would be directed to patrons via a "live map" using beacons and the patron’s phone to locate where they are seated or standing in the bar. Patrons could close their bar tab and leave with just a single click.

A prototype of OneBarTab was developed with templates from Keynotopia. The team went back to the bars to share their prototype with patrons and bar staff to get their feedback. Six iterations were needed before the prototype was acceptable. The app was further tested in a few bars with different mobile devices and beacons before the service was finally launched. As a result, OneBarTab was a success when it hit the market.

Where in the bar are you?

Beacons are like lighthouses that continuously transmit signals and are often Bluetooth-based. They transmit signals about 100 feet indoors and can run for months on a single coin-sized battery via Bluetooth Smart, which is very power-efficient. Many smartphones and wearable devices support Bluetooth Smart, including the Apple iPhone, Samsung Galaxy S, Fitbit fitness trackers and the Apple Watch.

A mobile app calculates how close a person is to a beacon based on the strength of the received signal. The person's location is determined by comparing the relative signal strengths from multiple beacons placed in the bar. This triangulation-based approach is available in an elegant form from Estimote.

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Designing for success: 3 steps

Lokitz says designing a sustainable IoT business involves three essential steps:

1. Lead with a strong point of view
Use your intuition and strong point of view as your guide. Never forget what brought you to this point in time and essentially sparked your initial idea. Having a strong point of view will provide you with the energy, guts and gusto to persevere even in the face of conflict. Believing in yourself and your point of view will enable you to overcome challenges and remove hurdles from your path. But, like a muscle, you’ll always want to build and inform your point of view by continually understanding and testing it.

2. Get out of the building
Continually seek to understand your customers and the context surrounding your idea. Get out of the building! Left to your own devices (and your untested point of view), you’ll likely take one of two paths: either you’ll never release anything due to analysis paralysis or you’ll bring to market something no one wants or needs. When you get out and seek to understand what customers need and want, watching first and asking questions second, you’ll refine your point of view—giving you new insights and ammunition to design something better (or save time and money designing something different). And, of course, you’ll also want to expand your understanding beyond just your customers. Taking a step back, seeking to understand the context surrounding your idea, will enable you to find new approaches you hadn’t considered before.

3. Prototype and validate
Validate your assumptions and bring your idea to life with prototypes first. Just as not understanding what your customers need will lead to certain failure, not validating and prototyping your idea is a missed opportunity to dial in your product, service and business model. Sure, you may bring to market something untested yet still interesting, but more than likely you’ll find you would have built something better, worth more (to customers), using fewer resources had you validated and prototyped your idea, further informing your point of view. 

“Always test your concept with a prototype first,” Lokitz advises. "It makes sure that what you’re building matches what’s customers really want.”

Lokitz's new book, Design a Better Business: New Tools, Skills, and Mindset for Strategy and Innovation, shares a range of helpful tools and interesting case studies.

A little market testing goes a long way to make sure your project doesn’t share the Edsel’s fate.

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