We’ve all heard the lament: “we are not innovative enough!” We’ve heard the exhortation: “to survive against brutal competition we need to innovate.” We know all too well the warning “to avoid commoditization, we need to launch new products.”
Every year businesses throw billions of dollars at innovation – and generally interpret innovation to mean the development of new products or features.
Where does this money go?
We’ve all heard the dismal statistics about new products: 95% of new products fail. Year after year, several thousand new products are launched on the super market shelf, a couple of hundred may survive until the one year anniversary of their launch. Most are withdrawn and sink into oblivion. And that is just the super market channel – several thousand products are launched through other channels, and face similar mortality rates in infancy.
So what does this high failure rate tell us? What should we conclude from the dismal data?
The broad conclusion managers draw is that we need to improve new product development and marketing processes to improve the chances of success.
Specific recommendations include stage gate models of innovation where concepts and prototypes are market checked; and well developed marketing programs that take in to account customer feedback obtained through market research; positioning that differentiates the new product from competitors while demonstrating the added value to the customer.
Those are valid conclusions if you are in the trenches battling to make your product succeed in hand-to-hand combat with other new products competing for the same shelf space and the same consumer dollar.
But what if you are a General surveying the battlefield and witnessing the slaughter? What conclusions do you come to?
How would you alter your strategy?
If you’re on that perch overseeing the pitched battles, the data should be a clear indicator that there is too much money chasing too little innovation. At a 95% failure rate, clearly most innovation is little more than a shot in the dark. You’ve handed your managers expensive weapons, but they’re shooting blindly.
As a General, even before you decide to introduce better controls for managing the innovation process, perhaps the first thing you should do is to cut your innovation budget. Don’t get me wrong – you don’t need to stifle experimentation and the innovative spirit – but let your troops experiment on the shooting range before they go to battle. Let them innovate without actually launching new products – prevent them from going to market with products that will end up in the trash. Filter better, and save yourself expensive launches.
You wouldn't play a Las Vegas table that had 95% odds of losing, so why do you throw money at innovation?
The most important lesson we should draw from the high failure rate of new products is: innovate less, not more. Innovation budgets should be spent better, they should not be bigger. What innovation needs is quality, not quantity.