Here’s a startling fact: between 80% and 90% of new product launches fail, according to multiple studies including Harvard Business Review. Each year, more than 30,000 new products hit the market, from companies large and small, and year after year, history is littered with dead carcasses. How can this astonishingly high failure rate be an accepted norm? If you failed to start your car nine times out of 10, you’d be shopping for a new vehicle. So why hasn’t the new product development process adapted and learned from its mistakes?
After more than 30 years of working across multiple industries and sectors, our consulting firm is on a mission to reduce the failure rates of new products and companies. In fact, we’re working to turn that 90% failure rate into a 90% success rate for our clients. To do that, we’ve taken a hard look at why innovations fail and how we can innovate the innovation process to minimize the risks.
In our experience, there are six primary reasons for failure that must be avoided to reduce risk and increase the chances of success.
- You’re not solving a meaningful need. Often, mature companies will get lazy with their new product development process and focus on what they can make instead of what their consumer wants and needs. Or a company will get excited about an idea without doing any due diligence, without sizing the opportunity and building a business case. We talk with our clients about how to turn ideas into opportunities and help them uncover the assets they have that can support a new product rollout and the gaps that must be filled to bring it to market.
- A disconnect between price and value. Not all innovation has to be expensive, but often it is without delivering additional value. We take our clients through 16 different types of innovation to explore where we can find opportunities to add value without significantly increasing costs. Lots of things are possible, but the cost of goods may preclude you from being competitive. This is where rapid iteration can help you find that right balance between price and value.
- Your new product doesn’t fit with your core competencies. Let’s face it, it’s a crowded marketplace and the competition is stiff. If you can’t match or out deliver the competition, don’t even bother. If you have to invest significant resources into filling gaps such as buying expensive equipment, hiring key leaders and experts and plowing money into building a new brand, you’re endangering your profit margin before you even start taking on the competition. In our work, we include an assessment of assets and gaps in our work to provide clarity and capture the full costs of product development.
- It lacks competitive sustainability. This is a common issue with line extensions. A new flavor that’s super trendy, a color palette that’s subject to the changing whims of fashion, a recipe that’s designed to meet the latest diet craze. We’ve all seen these products and how quickly they can come and go. If you’re set up for rapid innovation, like Lay’s potato chips with their consumer-sourced flavors, great – but most companies are not equipped for speed. Others don’t have a diverse product portfolio and when that diet craze passes, they find themselves in trouble.
- You’ve under resourced commercialization efforts. Not enough time, not enough money, not enough insight, not enough expertise, which ultimately leads to not a good enough product. We know the legacy process is expensive and slow. That's why we’ve borrowed agile methodology practices from the tech industry to work on multiple workstreams simultaneously, reducing costs, shortening timelines and staffing projects with on-demand experts.
- Your launch execution is flawed. Did you utilize the right media and market channels? Allocate a realistic budget and set a realistic timeline? How quickly did you get to market? Did you craft a compelling message? There are a lot of ways to botch a launch. That’s why we recommend a test market strategy. For example, instead of a retail launch at 100 doors that will stretch your ability to deliver, consider a direct-to-consumer strategy that will gauge interest and generate revenue without placing a burden on your manufacturing capacity. Take a page from the startup playbook and launch a minimum viable product in a small market to capture feedback and inform iteration.
There’s too much riding on your new product development strategy to put up with a 90% failure rate. If you’re willing to work differently, there are proven pathways that can decrease your risk and increase your chances of success. Even innovation processes need to be disrupted from time to time. Now’s the time to adopt practices that work.
Karen Barnes is the CEO of Agile City, a nonprofit innovation consultancy based in Winston-Salem, North Carolina. Their mission is to reduce the failure rates of new products and new companies. She can be reached at karen@agilecity.ws.