Why do new products fail?
One would think that with an abundance of literature on innovation and new product development, the success rate for new product launches should improve, yet the success rate remains stuck at 1 success for every 7 product development efforts (source: The Attrition Rate of New-Product Projects cited in Robert Cooper, Winning at New Products).
A 1 to 7 internal product development success rate is one thing, but perhaps even more telling is the commercial success rate of new products that reach the market (products that are launched regardless of how many development projects were in the pipeline): the commercial success rate on average is in the order of 60% (Source: Robert Cooper, Winning at New Products). Admittedly the product success rate is a hard number to generalize because the definitions of “new” and “successful” very widely from industry to industry but what we do know is that these generalized numbers have not shown appreciable improvement over the last 20 to 30 years of study!
Introducing innovative new products is inherently a risky business – we simply don’t know what we don’t know, especially for truly new innovations and products. But we can avoid “dumb” mistakes by learning from both our own past mistakes and the mistakes of others. Understanding the common reasons why products fail can help us improve our innovation performance and position ourselves in the top 20 “best innovators” who consistently achieve 80% success rate at launch (Source: Robert Cooper, Winning at New Products).
Over the years I have identified six basic reasons product ideas fail in the market. These failures are avoidable if we can understand the underlying root causes and realize that innovation and new product development is a complex system with many interacting parts.
I use the term “product ideas” verses “products” (services and products are synonymous for our general discussion) to acknowledge that some of the best product ideas never see the light of day to become a winning product. Perhaps this is the biggest failing in launching truly innovative new products and why we see so much incremental improvements which are easier to quantify, represent relatively safe bets, but yield mediocre results and stagnation over the long haul.
We must think differently on how we manage uncertainty and risk to play the innovation game. The goal is not to get better at launching incremental new products – though incremental new products are the bread and butter of any good balanced product development portfolio – but rather get better at creating game changing innovations and products – that disrupt and destroy the current business model (ours included) and replace it with a new business model that provides us with a competitive advantage resulting in breakthrough growth.
With that in mind here are the six basic reasons why new product ideas fail in the market:
1) The product simply was not needed: We either failed to launch a significant new improvement to what customers already buy (undifferentiated me-too products) or we completely missed the boat and had no idea who and why customers would want the product (a solution looking for a problem).
2) The market did not understand the value proposition of the product: We either failed to define a compelling customer value proposition (the solution looking for a problem) or lacked the marketing skills and resources to properly communicate the value proposition. Understanding, communicating and persuading customers to adopt a new value proposition is a huge challenge and requires a different approach to achieve customer adoption (i.e. early market diffusion of innovation challenge).
3) The product did not work and/or failed to deliver the “desired outcomes” that were promised: The product either sort of works or flat out doesn’t work, either way the customers are disappointed with the performance and lack of results promised. Depending on the dynamics and circumstances of your market, you may never get another chance with the customer now that you have disappointed them.
4) Business Model didn’t support/justify the effort: The problem being solved simple wasn’t big enough to justify creating a new product launch and business venture. The opportunity lacked business “viability” using design thinking lingo. And/or perhaps the assumed value proposition didn’t match the customer’s perceived benefit versus cost analysis making the sale difficult. Or the cost structure to manufacture and deliver the product is too high resulting in an unsustainable business.
5) Too many projects, not enough resources: We simply try to do too many things with too few resources. Without a robust project portfolio management system there is no consistent way to select the best ideas from the rest. There are too few of the right kind of projects – the bolder innovations. Scarce and valuable resources are wasted on mediocre or low value projects. The truly deserving projects don’t receive the resources they should. The result is good projects are starved for resources and move at a crawl or simply aren’t done.
6) Idea died on the vine and never saw the light of day: Being innovative and bold is hard; it requires a change in thinking and operating. If our focus is on the “safe bet”s to try and reduce the risk and uncertainty, we dismiss ideas that are perceived too new and innovative, ideas that don’t fit the business model and/or strategy. These ideas are seen as distractions and not taken seriously – “best to kill them off and focus on the knitting” so the conventional management thinking goes.
Unfortunately this is a formula for mediocrity; innovation requires us to navigate in the “whitespace” of uncertainty. A company must step outside its currently business thinking and operational practices to pursue business ideas that don’t fit inside box.
The first four basic failures can be avoided by using good “idea-to-launch” innovation frameworks and design thinking & development tools with special emphasis on incorporating the Voice of Customer through an interactive process of build-test-feedback –revise/rethink to formulate a winning value proposition.
Failures 5 and 6 are fundamental root causes to why companies struggle at launching innovative new products. A combination of not focusing resources on the best opportunities and being too risk adverse to breakout of the current business model that at some point in time, will become obsolete.
Now that we have identified the six basic reasons why products fail, what can we do about it? In future blogs we will discuss solutions and remedies to eliminate the 6 basic reasons why products fail.
At iNPD Center, we are committed to working with companies to develop innovative new products that customers want and love while eliminating the frustration and waste of launching product duds.