New Products Should Swing For the Fences (Jim Karrh Commentary)

Even with all the necessary hatch-battening of late in the business world, most companies still need a regular stream of successful new product or service offerings to prosper over the long haul. Perhaps your company is one that needs to get some new stuff on the market, successfully, and soon.

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Yet most companies’ product introductions aren’t survivors. In mature product categories such as automotive supply, new-product success rates (defined as marketplace survival for five years or more) run between 30 percent and 50 percent. In consumer products more generally, the survival rate is typically estimated at 15 percent to 20 percent. For technology products, success might come to fewer than one in 10 new entrants.

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That isn’t a batting average that will keep you in the big leagues very long. But a few companies tend to consistently produce winners. What can you learn from them?

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Procter & Gamble is one of those consistent winners. The company’s former CEO, A.G. Lafley, said in an April interview with BusinessWeek that his company built a 50 percent success rate with new products, which makes P&G roughly three times as successful with new products as the average consumer goods producer. Lafley, who stepped down recently, moved P&G from a product-oriented model of innovation to one where the consumer exists at the center of the process.

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A similar culture exists at S.C. Johnson & Son, makers of brands such as Ziploc and Drano. The company has a big hit this summer with its Off clip-on fan, designed mostly for women who would rather not apply chemicals, especially stinky ones, to their skin. Johnson has revitalized its product-development efforts in part by involving marketing managers earlier in the process.

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“But Jim,” you might say, “my business isn’t a consumer-products behemoth. How does this help me?” Fair enough. Here are some market-tested ways to raise your batting average with new products and services, regardless of company size or industry category.

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Seek home runs in the form of clear product advantages. The Off fan is a different type of product for S.C. Johnson. I can imagine how, in other companies, that particular product idea would have been shot down by those who were invested in the notion that repellents simply must be applied to skin. Think differently about consumer needs and don’t be afraid to buck the system — or even your company’s history.

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Do the homework first. In a report for the Product Development Institute, Robert Cooper found that U.S. companies were on average devoting only 7 percent of a project’s funding to critical up-front activities such as market and competitive analyses, consumer research, concept testing and technical/feasibility assessments. That can’t be sufficient for establishing a real business case. On the other hand, those companies that do a better job of pre-development work have higher success rates and much stronger financial returns.

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Integrate the consumer, and your marketing team, into every major point of the process. Consider using workshops, interviews or focus groups at early, hypothesis-generating stages — then larger-scale, more scientific techniques to validate the most promising ideas.

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Build cross-functional teams, guided by objective financial criteria and a strong project leader accountable for the process from beginning to end. As Lafley said, “Fail early, fail cheaply and don’t make the same mistake twice.”

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Define the product with discipline. Development teams should be able to write in 10 or fewer pages a coherent case that includes the consumer’s value from this new product, its fit with larger strategic objectives, the new product’s fit into the portfolio, the pricing, distribution and communication plans, and a justification for financial investment.

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Plan for the launch well in advance. Some teams treat the launch as something to worry about later (in the unlikely event of project approval).

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A reminder to the CEO: Your role is to ensure the discipline and vitality of the entire product-development process — and not to be involved in individual projects. By encouraging both innovation and accountability, you will help develop a solid batting average for all.

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