RAISING THE ODDS ON NEW-PRODUCT WINNERS

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At a New Products conference earlier this year several speakers presented statistics showing that approximately 78% of new-to-market products failed to deliver meaningful financial contributions. This statistic hasn't changed much in the 25 years I've been attending such conferences.

A believer in the "glass is half full" outlook, I asked myself why 22% of "new" products succeed. An examination of over 500 financially successful new products reveals that they share two characteristics:

The product delivered a meaningful and perceivable benefit to a sizeable number of people.

The product was perceivably different in some meaningful way from its intended substitutes.

Further study reveals that these traits are sine qua nons for success.

This is not to say that every product possessing these qualities will be successful. For without the resources and resolve to provide certain other components, the likelihood of success is slim. But the evidence is clear that without them the odds of failure are overwhelming.

So why are so many products introduced that do not have these two qualities?

The reason, I have come to believe after observing many companies and hundreds of new product development efforts, is startlingly simple: Management did not demand that this hurdle be cleared before a product moved through the development process.

And once a new product gets past a certain point in development, many people involved in the process have a stake in seeing it move forward. These "stakeholders" have a disincentive to kill it.

What is missing in these cases is a system of checks and balances that insures the right questions will be asked (and answered) early in the game. Such a system is not complex, esoteric or even costly. But it does require discipline and consistency. "Black box" techniques that purport to predict trial, repeat and market share have demonstrated little validity. We have employed a rather simple matrix of criteria that is used to evaluate new product ideas from their inception to the point of introduction. Data are not required to use the matrix, but the informed judgment of key members of the development team is necessary.

If strategic criteria are applied at the start of concept development the chances of weak ideas getting further in the process are reduced. Like poker, new product development has few winning hands. One can always play for an inside straight but few players have the resources to do that often. The most successful players drop weak hands early and bet heavily only when they know the odds are in their favor. And according to history, a product must offer a meaningful benefit to a sizeable number of people and have point of difference from its competition to increase the odds of success.

Mr. Baumwoll is a managing partner at Baumwoll Consulting Services, New York.

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