By Edwin E. Bobrow, CMC, CPMC
EdBobrow@compuserve.com

According to Dr. Robert G. Cooper in his book, Winning at New Products, published by Addison-Wesley Publishing Company, there is a failure rate of 25 to 45 percent for new products that are launched. The percentage will vary by industry. (Cooper's book is a must read.) In the grocery industry, for example, David A. Light, writing for Harvard Business Review, November-December 1996, Briefings from the Editor, found in a study done that in 1995 over 19,000 new products were introduced to supermarkets and that half disappeared from the shelves within two years.

In Benchmarking over a dozen leading and successful companies who create, introduce, and sell new products and services we were able to identify the key causes of this high percentage of failure. This Benchmarking, which was done for one of our Fortune 100 clients, served to confirm what our experience had taught us and what the literature bears out, and that is:

1. The most successful companies are new product machines. Rubber Maid, 3-M , HP, and others are perceived, both internally and externally, as being new product machines. Their culture is attuned to new products and all their people think new products. Their customers expect and receive many new products from them each year. This strategy comes from the leaders of the organization who say that this is the way it will be, but, more important, they make it that way throughout their organizations by their actions.

2. They have clear strategic direction. They don't just leave it to the R & D department or the New Products Group to develop products. They make sure everyone in the company knows the strategic direction and that all functions within the company are working toward that same strategic direction.

3. The corporate culture has been aligned behind new products. Communication, both internal and external, delivered in person by all executives and through various media keep sending the message that the organization is new products and services oriented. It is through action even more than statements that the culture is built.

4. Resources of people and money have been allocated. The message that your organization is new product driven will not ring true without backing up the in-tent with adequate people and dollar resources.

5. The new product effort is cross-functional. Every function must be brought into the new products and services effort. People must be kept informed of the activities and play an active role in meeting the goals that are set for new products.

6. There is a central place where the process resides. Without a New Products Group to lead, facilitate, orchestrate, update the process, and coordinate the effort it soon peters out.

7. Each has developed the process best suited for them. It is most important not to take a process off the shelf or have a consultant come in and hand you one. The process should be developed in house to serve your organization's needs. It is always best developed by you with the guiding hand of experts in the field.

8. Clear measures of success or failure are established. If you don't know what success will be, how can you measure results? The metrics must be spelled out be-forehand and tied to the resources. People must know what is expected of them and the rewards they will receive if successful.

In conferring with leaders in the field, we found that our conclusions and their experience were in agreement. From this study we were able to determine the five major causes of failure for companies trying to develop new products and services. Listed in rank order they are:

1. Lack Of Strategic Direction:

The best-in-class companies and all experts in the field of new product development say that strategic direction is the first essential starting point for success. It must also be integrated across functional areas of the company and meet the goals and strategies at the corporate level. The strategic direction dictates portfolio direction; risk profiles; defined marketing arenas; measurable metric targets; the form of competitive strategy; etc.

Unfortunately, in too many instances it is difficult, if not impossible, to obtain strategic direction from senior management. New product development groups are told, "just give us some winners and do it now". The implication being: you decide on the strategic direction, develop the products, and we will tell you when you are headed in the wrong direction. How wasteful and costly these trips to nowhere-in-particular are.

It does take time and effort for management to determine strategic direction. Once it is established, however, you will find it will produce the best possible opportunities for products or services that your organization can successfully market.

2. Lack Of A Process:

All experts say a process is necessary for success. It is necessary to build a state of the art "Stage Gate Model" or "Phase Model" within the process. It is also necessary to train a core group of people to educate and communicate with the entire company in order to facilitate their involvement and adoption of the process.

The "eureka" product or service seldom happens. You could get lucky; it might happen to you. However, if you develop a process you can turn your company into a new product-producing machine with a steady stream of strategically directed products to bring to market.

3. Lack Of Resources:

Resources should be established according to goals. Usually expected returns are part of the goals and strategies. A level of resources needs to be assigned in order to achieve the expected output or return.

Your resources, money, and people are like the five fingers of your hand. If you use each finger separately to strike at your target (goal) it will not be as powerful or effective as when you pull them all together into a fist and direct that fist toward what you want to achieve - your goals or aims.

4. Lack of Core Competencies:

World-class companies have a thorough understanding of their core competencies and have aligned them with their strategies to leverage these competencies. To understand the required core competencies you need to know the market arenas in which you intend to compete.

Too few companies study their changing core competencies. More important, they do not figure out what competencies they will need to achieve their strategic direction. Most operate like children: they just want it when they want. It just doesn't work that way. You need strategic direction; you need a process. But all that won't help if you don't know what you're great at doing, and what you can become great at doing, in order to make new products and services a success.

5. Lack Of Knowledge Of Customer Needs:

As a foundation to begin new products and services offerings in a competitive environment it is imperative to have a de-tailed understanding of customers' wants and needs. To get at the visceral needs of the end-user many companies are using leading techniques such as: lead-user analysis; deliberative polling; bio-feedback; advanced computer tools monitoring for measuring customer input; quality function deployment; and advanced data base modeling techniques that allow one-to-one modeling.

There has been a lot of input from many sources that have gone into the conclusions set forth in this article. A special note of thanks, however, must be given to John Fritz of the Entergy Corporation for his input into the "Five Keys".