Most Product Development Efforts Fail Commercially

Furthermore, most product development efforts fail commercially, ie

"...Over 60 percent of all new product development efforts are scuttled before they ever reach the market. Of the 40 percent that do see the light of day, 40 percent fail to become profitable and are withdrawn from the market......three-quarters of the money spent in product development investment results in products that do not succeed commercially..."

Clayton Christensen et al, 2003

Part of the reason for this is inadequate market segmentation or categorization, ie poor process of identifying groups of customers that are similar enough that the same product or service will appeal to them all. Unfortunately most segmentation is done incorrectly, ie it is defined by the attributes of the products/services, such as what product type, or by price point, etc and customers, such as on demographic, or psychographic lines, etc. This can lead to the concept of a "one-size-fits-all" product/service which usually ends up being "one-size-fits-none". This attribute-based categorization can successfully identify correlations between attributes and outcomes, but it lacks a plausible statement of causality.

Categorization should be based on the notion that customers 'hire' products/services to do specific 'jobs' or outcomes, and only after that "job" is identified should other marketing-related challenges, such as brand marketing and product/service positioning, be addressed. This circumstance-based categorization brings into focus what features, functions and positioning will cause customers to buy a product/service. It requires an understanding of the thought process (including functional, promotional and social dimensions) and circumstances in which customers will buy or use products/services to do the "job-to-be-done", or produce an outcome that customers are seeking, effectively, immediately, reliably, conveniently and as inexpensively as possible. This means

"...Companies their products at the circumstances in which customers find themselves, rather than at customers themselves......Put another way, the critical unit of analysis is the circumstance and not the customer..."

Clayton Christensen et al, 2003

The first-time developers of a new growth business need to assess what their target customers really are trying to do. The developers are searching for the disruptive foothold - the initial product or service that is the basis for the point of entry for new market disruption. For example, if there is a popular job-to-be-done, or outcomes that customers are seeking, which has not been correctly addressed, this can create a launching pad or platform for future growth. The challenge is how to identify these opportunitiesUnderstanding the jobs-to-be-done is fundamental and can be done by carefully observing what people are trying to achieve for themselves and what they are saying about it. For example, Sonny's founder, Akio Morita, was very successful at studying (by observing, questioning and obtaining feedback) customers, and then developing the solution or outcome they were seeking to help do the job-to-be-done, or achieve the desired outcome. As a result of this approach

"...Between 1950 and 1982, Sony successfully built 12 different new product disruptive growth businesses. This included the original battery-powered pocket transistor radio, launched in 1955, and the first portable solid-state black-and-white television, in 1959. They also included videocassette players; portable video recorders;......Walkman, introduced in 1979; and 3.5-inch floppy disk drives, launched in 1981..."

Clayton Christensen et al, 2003

Sony, under Morita's leadership, used a group of around 5 people who continually searched for disruptive footholds by studying what people were trying to get done, ie

"...they were looking for ways that miniaturized, solid-state electronic technology might help a larger population of less-skilled and less-affluent people to accomplish, more conveniently and at less expense, the jobs they were trying to get done through awkward, unsatisfactory means..."

Clayton Christensen et al, 2003

In the early 1980's Morita started to withdraw from active management; at the same time Sony's disruptive odyssey came to an end. It is now focusing on sustaining technology, rather than disruptive innovations.

We need to understand the forces that shape innovation and thus growth, ie

"...what can make the process of innovation more predictable? It does not entail learning to predict what individuals might do. Rather, it comes from understanding that forces act upon the individuals involved in building businesses - forces that happily influence what managers choose and cannot choose to do..."

Clayton Christensen et al, 2003

Understanding how the managerial processes about ideas get shaped is criticalMiddle level managers play a crucial role as they shepherd acceptable ideas into business plans, etc that are submitted to senior management for decision-making, funding, etc. The system mandates that middle managers support proposals with credible data on the potential of the markets that each idea targets. Suggestions from existing customers and the performance of similar products/services add credibility to any potential idea. Furthermore, other factors may be relevant:

personal factors are involved, ie middle-level managers prefer to propose ideas that senior managers are likely to approve.

turn-over rate of management positions, especially for talent - as most management development programs rarely leave talented middle managers in one position for longer than a few years, these managers want a reputation of delivering results and will be inclined to provide ideas that will pay off in the short-term. Also, to speed up the decision-making process, they propose ideas which resemble ideas that were approved and became successful in the past. These factors mitigate against innovation.


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