Organizations continue to push for business growth by launching wave upon wave of new products, yet many end up as just hardly ripples. We seem to have this NPD ‘bug’ of wanting to constantly innovate, it is required, expected and keeps our organization’s teams of developers and marketing groups gainfully employed. Yet we continue to have poor product rates of return. Why?

Researching new product failure is fairly hard to cut through fact and fiction

Recently I was asked to research into these failure rates, the part of the broader question was interesting, in trying to understand this continually high failure rate, as it is claimed we have advanced significantly with our innovation understanding, structures and research techniques to understand market and customer needs, yet we still have, it seems, the same ongoing failure rates. Why?

Firstly getting at definitive failure rates really can be one of those “it depends” replies. Not just which industry you are in but which market, which segment within the market, what are you trying to do, what are you trying to build, defend or advance etc., etc. It gets incredibly complex to give a baseline to failure; apart from it does seem unacceptably high.

Four strands of insight seem to reflect some measurement ‘sense’ of failure

Firstly, I liked one view here provided through the PDMA: “often new product ideas are not developed and the majority of new products never make it to market. Consider these two interesting statistics: 1) New products have a failure rate of 25 per cent to 45 per cent; and 2) For every seven new product ideas, about four enter development, one and a half are launched, and only one succeeds”.

Secondly, according to Booz & Company, they report that 66 per cent of new products fail within two years.

Thirdly, the Doblin Group reckons a startling 96 per cent of all innovations fail to return their cost of capital.

Fourthly, this makes product development very sobering. Few product introductions, for instance, within the food and beverage categories, are blockbusters. Companies in mature industries often must find another way to make a splash. Only 1% of new product launches reached $100 million or more in sales revenues in their first year (Bain & Co in a report back in 2008). I doubt it has got any easier, most probably a lot harder since then!

Each of these failure rates speaks to me

Each of these four metrics has given a clear qualification to failure rates. Failure is qualified and framed.

Yet it grows in my mind so often that our failure rates are not to do with the market or customer acceptance but the very poor ways we conduct new product development within many of our organizations. How we manage innovation internally can contribute to market success or failure.

Much of our failure might lie with us, not the market
We seem to have five really big internal failure points, let me call this the internal “magic five” that have hidden within them the common problems that might be stopping organizations from improving their internal npd rates.

1. Innovation Execution

The high level of products that miss launch dates is often due to a lack of dedicated time and resources assigned to execution. It simply leaves the product at the factory gate, not having the dedicated focus and gaining the attention it needs in the marketplace. You hit the rocky road of execution as Innovation execution is not a smooth process, it is full of surprises, Innovation is serendipitous, full of fortunate discoveries, and often you stumble across something that takes it further forward and these need dedicated attention.

How often does your innovation execution lacks momentum, as suddenly all that necessary energy dissipates and falls away, what started as a bang ended with a whimper as resources get pulled due to the mistake that “job done” was when the product rolled off the production line. You really need to have as much leadership and attention immersed in the deployment zone of execution but we often fail to recognize this.

2. Too Few Good Impactful Ideas

How many times have you got caught up in that ongoing debate on ideas, the quest for many required by a (stupid) metric, clashing with top managers who need to find and fund those higher-value projects that have real value impact? The hyping up in tensions this can have internally, staking the future on some personal bets, padding out others to meet yet another metric, of products launched in the year.

Also, some organizations get caught up in that underlying ‘push’ to introduce increasingly more incremental products to offset underperformance. The lack of clear criteria on what will be supported and why, or those that work the idea so as to ‘massage’ the numbers up to get it into the next stage of the pipeline. Idea Management needs clear, concise governance and well-thought-through metrics to deliver against and that is NOT ideas, for idea’s sake!

3. Lack of Alignment
The alignment of product innovations to areas of strategic focus is one issue but then even if they are aligned, the organization fails to allocate and connect the need to make the appropriate resource allocation to deliver. This gap of alignment between strategy and product development activity is one of the real gaps as they are internally driven and not customer alignment driven.

To get closer to achieving alignment of strategic needs and our innovation outcomes, we need an overarching strategic design, to reduce the ‘disconnects’. Innovation needs constant alignment. One essential need is to provide a well-designed strategic plan that will allow the connections needed. We need to seek out alignment through clarification, through talking to each other, by working explicitly from the ‘same page.’ Putting together alignment and objectives need a specific design.

4. Portfolio “Placing Bad Bets”
The feelings, instincts, and personal favourites often get the favoured resources but are they ‘grounded’ on exact customer needs? No, more personal beliefs, and in the end, precious resources are wasted on unsuccessful products.

Do we actually do product profitability evaluations one or two years later to encourage the culling and learning from our product launches? How can you promote a more careful evaluation of innovation practices, striving to eliminate variances yet guard against that relentless pursuit to reduce the failures?

We need to guard against acquiring that prevailing risk mitigation mindset with the idea of standardising and simplifying, validating through increased data verification and mining, striving for benchmarking and searching for best practices.

These ‘good practice intentions’ seem to go nicely with placing the innovation bets on increasing the incremental activities, all to the detriment of seeking out more radical innovation. If one type of innovation prevails and begins to dominate, the risks of not providing for a healthy future increase. We begin to lose our abilities to be responsive and flexible.

We lose our agility to respond to changes in our markets, we are beginning to ossify our innovation, and ending up with ‘no good bets’ means you are placing no decent bets for your future health. Managing the innovation portfolio well can be the difference between success and failure.

5. Product development remains often ego-driven

Many responsible for new product development seem to suffer a selective perception, full of wishful thinking and optimism which can lead to biases in the direction of their wants. There is this growing internal trait to become predisposed and think of ‘our’ ideas in terms of product success, not a product failure.

We overestimate, interpret evidence to meet our wants and forget to keep going back to focus on the needs of our customers. A much harder place to focus upon and stay determined to deliver to. I repeat “are we internally driven and not customer alignment driven and do our egos get in the way?”

Product failure might lie far more internally than we are prepared to admit
Uncomfortable as it is there is a time to call into question the lack of a decent set of values that our innovation governance should be tackling.

I’d argue we are failing ourselves as much as we are failing our customers, when products don’t live up to the promise that was originally intended, as identified and needed, they just seems to somehow get lost in internal compromise and product development failure.

It does seem how we are managing innovation internally has a large part to play in the present contributing to market success or failure and that needs addressing.

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Publishing note:  This blog post was originally written on behalf of Hype and with their permission I have republished it on my own site. I recommend you should visit the Hype blog site where they have a range of contributors writing about a wide-ranging mix of ideas and thoughts around innovation, its well worth the visit.

The post Questioning internally those many product failures first appeared on Building Your Innovation & Ecosystem Intelligence.

I don’t think this is sour grapes of the people working away on innovation daily, that the ‘finger of failure’ is well and truly pointing upwards. There is more of an innovation knowledge gap at board room level or even just below this, than many can imagine, that is the plain reality.

They often simply have no real clue on how innovation really works and what their essential role is in connecting all the different parts necessary to align this into the organizations overarching goals, objectives and strategies.

Let’s simply select the top common causes of innovation failure.

In a recent survey I was reading*, it provided a set of results about the common cause of innovation failure. The survey was asking participants to check all that applied and although there were 30-odd possible reasons the top ten that stand out as head and shoulders above all the others are nearly all down to the simple failure of innovation engagement in its leadership.

Failure lies at the very top on why innovation fails.

I know I keep ‘going on’ about the Executive Innovation Work Mat and its value but let’s look at these top ten contributors for failure that is occurring in organizations just like yours. The Work Mat approach tackles these and lots more but those that are the cause of failure, the leaders in organizations, do need to understand it is them that are the reason for this.

So the top ten causes of innovation failure then tell me the root cause, a lack if innovation leadership.

The top three failures

The three main reasons for failure have been given as 1) unrealistic expectations from top management regarding resources and the time really required in achieving innovation, then 2) the lack of resources allocated in budget, people, infrastructure and 3) far too much focus on products and technology and ignoring the other options within innovation, such as service, business model, platform collaborations etc.

Each of these is without doubt for me a top management failure.

They either don’t have a real clue of the complexity of innovation, starve it of its essential resources or just want to stay well within their comfort zone of existing product and technology understanding.

This reluctance to push innovation, to extend capabilities and provide it with the right capabilities ends up in these continuing failures.

Equally not to explore all the types of innovation available does not make sound business sense. This shows a lack of real involvement, comprehension, understanding and engagement.

The next three failures
In our next three the one that is so constantly described as limiting innovation is 4) that people or teams operate in silo’s instead of broader collaborative approaches, 5) the wrong personnel are in place to make innovation happen and 6) that classic of classics, a poorly defined innovation strategy and the goals to achieve this.

Each of these again is a top management failure. They fail to understand the value of building up the capabilities for broader collaborations; they constrain the very essence that gives their organization its growth by holding back or not pushing for the best people to be engaged within the projects, or just fail to connect their (often) lofty strategic goals with the innovation activity that can deliver on this.

Again, simply failures of top management to address and resolve these issues are the root cause.

Then the last four within the top ten

The last four within the top ten again start with 7) a lack of innovation strategy, and then 8) where the emphasis is placed in far too much on idea generation and not on execution, followed by 9) a lack of involving external partners and lastly 10) poor management of the innovation process.

So again a clear set of management failures. By not having a clear overarching innovation framework in place that links innovation to strategic alignment, which communicates innovations value and its value position and then the failure to put in place all the critical factors of an innovation process to make sure that innovation, has the chance to work.

Surely this top ten list of causes for innovation failure does become fairly worrying to anyone involved in growth, wealth creation and building and wanting to belong to a healthy sustaining business?

Depressing outcomes and on-going failure

For me, I simply can’t understand why our leaders are simply not listening to the constant stream of innovation failure messages that get written daily. Of course, I hear you say “it is simply because they are too busy”. Oh come on, lets stop protecting them.

My argument straight back to this is “if a leader or his team does not focus on the clear ways to grow a business and make this happen and this must come primarily through innovation, then they should not be leading”. They should not be focusing on just making organizations efficient but on being increasingly effective through innovation.

How can they be leaders of organizations, claiming they are keen to grow and expand, if they do not get fully involved in providing the appropriate framework for innovation to thrive? This is a strategic leadership failure.
I can only assume they are simple not understand that they are the primary cause of innovation’s failure within their organization, they are the main culprits in this.

Will this change overnight, of course not?

Somehow or other, those within the innovation communities, both within and outside organizations have a job to do, a message to deliver to the leaders. They need to get across this failure message lies within the board room, not outside it and its needs addressing.

Deliver just one message today, please.

We need to deliver this simple message – “as long as you as the leader of the organization and those immediately around you fail to understand what ‘makes up innovation’ you deserve to fail, and more than likely, fail you will”.

Why not just give the leaders of most organizations an early Christmas reading present– you can download it here– it explains the connected part of the Executive innovation Work Mat that forms the strategic framework for innovation to connect across organizations.

Then we might begin to reduce this list of common failure points significantly. I do hope so, otherwise what’s the point?

* The survey was conducted by Stefan Lindegaard under his post Organizations and Failure: Why Don’t We Learn More?  I think he is looking within the organization more, whereas I see failure ‘sitting’ far more at the top of the organization.

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