Why new products fail

A.C. Nielson, for who knows what reason, apparently recently completed a “study” of 30 packaged-goods marketers and found a possible correlation between new product success rates and management. In an industry with a documented new-product failure rate of between 60% and 90% this could be useful information.

Based on an article in Ad Age, Nielson found that companies that kept senior management away from their new product development teams got more revenue from new products (as a percentage of total revenue) than did those companies that allowed senior management to be proximate to these new product efforts.

The entire article raises more questions than it answers and without access to the entire Nielson study, drawing conclusions can be risky. However, Nielson apparently decided to issue some “findings” from the study, so I feel compelled to comment.

First, the metric they use: revenue from new products, is not necessarily the best or only metric of interest when measuring new product success. Second, they studied something they called “blue sky” teams, which they define as skunk works. That is clearly not the only, or even the primary, source of new product development in companies. Would I usually keep senior management away from skunk works? You bet. In the late 1970s at Motorola the 68xxx series microprocessor was developed by a blue sky team in Austin, TX that was purposefully kept secret from senior management in Phoenix, AZ based on a belief that the project would have been killed. Fortunately for Motorola (now Freescale) that project was successful.

The study found that companies without blue sky teams got a higher percentage of revenue from new products than did companies with blue-sky teams that were located proximate to management. No real surprise here. If you put a so-called blue sky team near management, it is hard to call them a blue-sky team unless you have a management culture that understands blue-sky efforts. In fact, the article notes that Apple clearly can get blue-sky ideas developed while being close to management. Wait, at Apple it actually is driven by management … that is their culture.

Anyway, be careful about the results of studies that you can’t fully see (business, medical, political or otherwise) and, if new products are a critical part of your business, learn to get good at it. Here is a link to some free resources on the subject.

Mitch

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One Response to Why new products fail

  1. Pingback: What do CEOs want? | Value Acceleration

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