New Product Launches

Volume 2 Letter 2

(Wise men learn by other men’s mistakes; fools by their own – anon)

Someone once described insanity as doing the same thing again and again and expecting a different result. This probably accurately describes most companies when it comes to new product launches.

Last month I was teaching with a colleague from the London Business School and over dinner we were exchanging stories about new product failures. In some cases the products were doomed to fail from the beginning but many were great products introduced into large markets where customers had a real need. Last month’s newsletter had a story about workers who were getting skin rashes from metal working fluid and the business owners were paying huge dollars to remove and replace it. A company had developed a product that would eliminate the skin rashes, eliminate the disposal and replacement costs (not to mention the smell), yet they couldn’t sell it – it was a dismal failure. Customers had a clear need, the company had a proven solution but still the product failed – a marketing disaster! This prompted Bill and I to develop our top 10 + 2 reasons why new products fail:

1. Superficial strategic planning: ‘The product is so good it will sell itself’ – I can’t believe intelligent people still believe this myth.

2. Poor product role out strategy: Lack of product, poor distribution, inadequately trained service staff and ignorant sales people are the result of poor planning and training. Take care of the details.

3. Lack of commitment by top management: If top management isn’t committed to rolling out new technology, success is rare. Develop incentives at all levels of the organization tied to the success of new products.

4. Lack of resources: Lack of money and people to detail the new product have killed many a new product. The resources needed must be in proportion to the potential market opportunity.

5. Failure to negotiate the value up front: One test product completed a project in ½ the normal time (82 days rather than a projected 163 days), saving the customer millions. However on the next job the customer insisted on paying the old day rate for the new technology. The effect was a double saving for the customer – 50% savings on the day rate as the job took half as long plus savings of $12K – $20K per day in other costs as the job was completed faster. Great deal for the client – disaster for the company. Technical success * commercial failure still equals failure.

6. Lack of commitment by product champions: The former CEO of 3M said that when product champions put their careers on the line most of their new products tended to succeed. Sun Zu in the Art of War described a general who burnt his own ships upon reaching the enemy’s shore and exalted that “We either go home in our enemy’s ships or we don’t go home”. To launch products successfully sometimes you need to burn some ships.

7. Maintain central control of new products: Product champion needs guidance and real support from senior management. It took one pharmaceutical company four years to fix a role out strategy high jacked by a regional manager. Six other regions prospered but it took four years of sub par revenues, extra sales people and countless hours of management time to fix something that could have been corrected immediately if senior management had stepped in to support their product champion.

8. Lack of market knowledge: Other than the pharmaceutical market, market data can be tough to get. Many managers don’t know the size of their market or their market share. Develop an accurate method for measuring revenues, sales margins, number of customers and distribution of sales, by region, by business line and by product.

9. Early failures due to adverse test conditions: Choose clients and test conditions where success is likely. Avoid the “EST” sites (deepest, toughest, strongest, coldest, remotest etc.). Don’t sacrifice years of R&D on adverse test conditions. Ensure early success.

10. Poorly communicated strategy: If you can’t sell your product to your own people don’t expect customers to buy!

11. Lack of clear criteria of success: Success criteria need to be agreed upon before the product or service is tested not after.

12. Arrogance: Trying to force an unwanted or overpriced product onto customers who depend on you can be disastrous – remember the old IBM? Focus on the customers’ needs and deliver real value.

The goal of launching any new product is to:
1. Offer real value
2. Get trial and ensure the product delivers the promised value.
3. Ensure you communicate the total value to your customer segment.
4. Price it so both the customer and your company share in the value.
5. Use customers to generate word of mouth so you get both repeat business and trial with new customers.

“Business enterprise has two functions, marketing and innovation. Marketing and innovation produce results; all the rest are costs” said Peter Drucker. Many of us have the innovation part down but I’ve yet to see a product sell itself! Stop launching products and services the same old way expecting different results. Stop the insanity. Learn from the mistakes of others and start succeeding!

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