Many managers want their organizations to develop breakthrough products and ask their R&D departments to come up with the equivalent of the iPod or iPhone. Unfortunately, the reality is very different—most organizations struggle to come up with novel product concepts, and of the thousands of new products introduced worldwide each year, product failure is more common than success. What are the reasons for product failure and what steps can companies take to avoid it?
Avoiding product failure
The first lesson from research is that failure rates are high. For example, a recent survey found that of the hundreds of new food and beverage products introduced in the last few years in the US, 90% had failed (and were withdrawn from supermarkets within 3 months of launch). Food and drinks is a particularly challenging market but research in other sectors—from automobiles, to pharmaceuticals, to chemical products—shows that product failure is a (far too) common phenomenon.
Products sometimes fail because they do not function correctly. For example, although most people think of Apple as the archetypal innovative company, it has had its failures, notably the Apple Newton personal digital assistant that promised but failed to recognize handwriting. Similarly, both Unilever and Proctor & Gamble have introduced ‘power’ washing powders to remove stains but which damaged fabrics. Products must function correctly but research shows that this is a necessary but not sufficient condition for product success. Product differentiation is critical, that is products must stand out from the crowd. Truly differentiated products, which offer unique features that provide real customer benefit, have an 80% chance of success, whereas ‘me-too’ products that replicate competitors’ features have only a 20% chance. Creating breakthrough products requires a deep understanding of customers’ needs.
Link to European Business Review article: http://www.europeanbusinessreview.com/?p=3373
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