Many companies try to “bottle lightning” when launching new products or services. Either they base their decisions on their own executives’ hunches or they create a disciplined process that siphons the creativity and speed out of the organization. But neither approach leads to sustainable success. Those companies that beat the odds and succeed with multiple new-product launches, time after time, tend to apply a certain type of discipline. This discipline involves three separate practices, combining creative inspiration and analysis. Each of these three practices is both a “thought starter,” raising new concepts about directions for growth, and an “idea filter,” helping a team decide which products and services to launch and how to position them. The three practices are:
1. Market-back analysis: an approach to gathering consumer insights that pinpoints the value consumers assign to different parts of a product or service, and produces actionable intelligence as a result. Wendy’s, for example, would have to look at its potential customers, the attributes they value in quick-service restaurants, and the needs that are still unmet.
2. Darwinian competitive review: a close observation of the customer value propositions that have been shown to work across multiple markets, and the competitors who have already established themselves in those spaces. Within the fast-food restaurant landscape, Wendy’s would consider the track record of mainstream and niche contenders around the globe. It would also look for non-QSR models and innovations that might be adjusted for its business.
3. Capabilities-forward assessment: a dispassionate look at what the company already does well, and which new value propositions its capabilities system could support. If your company has a notable form of prowess, it behooves you to understand what other products or services that capability might help deliver. For instance, if your kitchen setup excels at producing made-to-order hamburgers, might that flexibility also be extended to new entrees, side dishes, beverages, and desserts?
When Launches Fall Short
Managers are not accustomed to this level of rigor in decision making about organic growth, and that helps explain why innovation initiatives produce disappointment more often than success. Many times, when a product or service is introduced, customers fail to see a reason to switch or upgrade. The obstacles to successful innovation aren’t new, but they have become more challenging in an era of global economic strain, low job and wage growth, and cautious consumer spending. In this difficult environment, bad or poorly executed ideas have nowhere to hide.
In retrospect, innovators can usually explain why a given product succeeds or fails. For instance, when McDonald’s introduced the Arch Deluxe in 1996, the company invested US$300 million in marketing, research, and production. This limited-edition hamburger was specifically marketed to adults (the ad campaign showed kids rejecting it), with the slogan “the burger with the grown-up taste” and a recipe, created by a well-known chef, that included specialty condiments, Spanish onions, and hickory-smoked bacon. The hamburger failed to become popular and was soon discontinued. With the benefit of hindsight, McDonald’s executives recognized that their plans had not accounted for the factors driving customer decisions. Some customers would not pay the relatively high price (especially because McDonald’s is regarded as a price leader), and others were apparently holding out for a healthier alternative.
Similar prominent stories of product launch disappointments include New Coke, the Apple Newton, the BlackBerry tablet, the Tata Nano, and many more. In the packaged-goods industry, for example, a record number of products were introduced in 2005. As tracked by the research group Information Resources, less than 1 percent exceeded $100 million in Year One sales, only 10 percent earned sales above $20 million, and less than 25 percent reached sales of $7.5 million.