New Products: What Distinguishes the Winners?

(This article is a throwback that was originally published in 1990 by Robert G. Cooper in Research-Technology Management (RTM). This article was the winner of the 1991 Maurice Holland Award. For a more recent look at Dr. Cooper’s writings in RTM, check out Vol. 60, No. 1 #Happy60thRTM!)

By Robert G. Cooper

An accurate understanding of why new products succeed or fail is vital to improving new product performance: 

  • If the keys to success are descriptors of the product, market, technology, or their synergies, then this knowledge can be built into the project screening. The end result is sharper evaluation decisions, more focus, and better use of scarce development resources.
  • On the other hand, if what distinguishes winners from losers depends primarily on the actions that take place from idea to launch, then our focus should be on improving the new product process itself.

The keys to new product success have been sought in Project NewProd III, a retrospective analysis of 203 actual new product projects in 125 industrial product firms. This study revealed that there is a pattern to success; indeed, significant differences emerge between successful and unsuccessful projects when we look at the nature of the product and market, the level of synergy and other strategic variables, along with activities undertaken as part of the project. Here new product success was defined in a number of ways including:

  • A simple success/failure measure: whether the product’s profits met or exceeded the company’s financial criterion for success;
  • The product’s profitability level (measured on 0-10 scales, where 10 meant “far exceeded” and 0 meant “fell far short of”);
  • The new product’s market share after Year 3;
  • The degree to which the product met company profit and sales objectives (0-10 scale).

Key Factors Underlying Success

1. A superior product that delivered unique benefits to the user. — Superior products that delivered real and unique benefits to users tended to be far more successful than “me too” products. When we compared the top 20 percent of products in terms of product superiority to the bottom 20 percent (the least differentiated), these superior products:

  • Had an exceptional success rate of 98.0 percent versus only 18.4 percent for undifferentiated ones;
  • Had a market share of 53.5 percent versus only 11.6 percent for “me too” new products;
  • Had a rated profitability of 8.4 out of 10 (versus only 2.6 out of 10 for undifferentiated products); and,
  • Met company sales and profit objectives much more so than did undifferentiated products.

These winning products offered unique features not available on competitive products; they met customer needs better than competitive products; they had higher relative product quality; they solved a problem the customer had with a competitive product; they reduced the customer’s total costs; and, they were innovative.

2. A well-defined product and project prior to the development phase. — Successful products had much sharper definition prior to development. Projects that had these sharp definitions were 3.3 times as likely to be successful; had higher market shares, by 14 share points on average; were rated 7.6 out of 10 in terms of profitability (versus 3.1 out of 10 for poorly defined products); and tended to meet company sales and profit objectives much more so.

Before the project was allowed to proceed to development, winning products had a clear and agreed-to definition of items such as: the target market; customer needs, wants and preferences; the product concept; and, the product’s specifications and requirements.

3. Quality of execution of technological activities. — Projects where the technical activities were executed in a top-quality fashion—preliminary technical assessment, product development, in-house product or prototype testing, trial or pilot production, and production start-up—were considerably more successful. They had 2.5 times the success rate and a higher market share, by 21 share points.

4. Technological synergy. — Successful projects featured a strong fit between the needs of the project and the firms’ R&D, engineering and production resources and skills. Such products had 2.8 times the success rate, and were rated higher in terms of profitability and in meeting company sales and profit objectives.

5. Quality of execution of pre-development activities. — Products distinguished by proficient execution of those activities which precede the development phase were more successful; a success rate of 75.0 percent (versus only 31.3 percent for projects where pre-development activities were lacking); much higher profitability ratings; and a market share of 45.7 percent (versus 20.8 percent). These pivotal pre-development activities include: initial screening; preliminary market and technical assessment; detailed market study; and, business or financial analysis.

6. Marketing synergy. — Successful products featured a strong fit between the needs of the project and the firm’s salesforce/distribution system, its advertising resources and skills, its market research/market intelligence resources, and its customer service capabilities. Where marketing synergy existed, the success rate was 2.3 times as great; the rated profitability was higher; and, market share was 14 share points higher than for products where marketing synergy was lacking.

7. Quality of execution of marketing activities. — Success was more often the result when the following marketing activities were executed proficiently: preliminary market assessment, the detailed market study or marketing research, customer tests of the product prototype or sample, the trial sell or test market, and the market launch itself. The success rate of these projects was 2.2 times as great, and market share rose 18.5 share points.

8. Market attractiveness. — Products targeted at more attractive markets were more successful. They had 1.7 times as high a success rate and also were rated much higher in terms of profitability and their meeting of sales and profit objectives. But market shares were only marginally higher. Attractive markets were large ones with a high growth rate, and where the customer had a high need for the product and considered the purchase to be important.

9. Other factors. — Factors that originally were thought to impact on success but were found to have a low impact included top management support and the competitive situation:

  • Products aimed at highly competitive markets were no less successful than those targeted at less competitive markets. The message is that products succeed in spite of the competitive situation—they succeed because they are superior, well-defined, executed well, and have certain synergies with the firm.
  • Top managers supported failures almost as frequently as successes. Those projects where top management was committed, involved directly in the management of the project, and provided considerable guidance and direction were only marginally more successful.

Quality of Execution

Quality of execution was a prevalent theme in the keys to new product success revealed above. Figure 1 shows the impact of quality of execution, activity by activity, for successes versus failures (6). The conclusions are provocative;

1. The greatest differences between successful and unsuccessful projects lie in the first few steps of the new product process: the up-front or pre-development steps (2). Ask yourself: How much time and energy do we devote to these vital steps?

2. Product development activities are executed more proficiently among successful products. The pattern was consistent regardless of the activity. One key to success, then, is ensuring that every step of the new product process is executed in a quality fashion: consistency is the key!

3. There are serious deficiencies in the typical firm’s new product process. On average, quality of execution was rated about mid-range on a zero-to-ten scale; quality of execution was anything but a 10. Managers confessed to serious errors of omission and commission in most projects, and comments such as “we do a fairly good job on most of the steps, most of the time” were typical.

cooper_fig1

The allocation of resources within projects helps to explain why some steps and activities closely tied to success and failure were so poorly handled. Figure 2 shows the number of person-days spent on a typical project, broken down across the various activities, for all 203 projects. (A similar breakdown for dollars spent was also determined but is not shown here) (8). The typical project represented about 1000 person-days.

cooper_fig2

What stands out in an analysis of these spending patterns is how little is spent on some of the pre-development activities. For example, the typical failure had about five person-days devoted to a detailed market study. This represents approximately 0.5 percent of the total project manpower cost, yet deficiencies here remain the Number 1 cause of new product failure.

Another conclusion is that successes generally had more time and money spent on them. This is particularly true in the early stages of the process: overall, successful products had about 75 percent more person-days devoted to the pre-development activities than did failures.

The only steps where failures received more manpower were in the activities immediately following development: customer tests, trial sell, and trial production. By this point, troubles had already appeared; manpower was allocated in a desperate attempt to “fix the project,” but the effort was in vain. Had some of this energy been applied much earlier in the project, the results would no doubt have been more positive.

Key Lessons for Success

The findings of our research point to a number of ways to improve new product success rates. (While these findings and lessons focus on new products, they could apply to process research as well, where the customer is a manufacturing facility.)

1. The #1 success factor is a unique, superior product. — Product superiority— delivering unique benefits to users, as described above—separated winners from losers more often than any other single factor. This result should come as no surprise to product innovators. However, it apparently wasn’t obvious to everyone: much time and energy was devoted to projects that yielded “me too,” undifferentiated products and 82 percent of such efforts failed.

The important point is that “superiority” is defined from the customer’s viewpoint, not the eyes of the R&D or design departments. Think of the product as a “bundle of benefits” for the user, and a benefit as something customers view as having value to them.

Superiority is derived from design, features, attributes, specifications, and even positioning. But the definition of “what is unique and superior” and “what is a benefit” must be based on an in-depth understanding of customer needs, wants, problems, likes and dislikes. This leads to Lesson 2, the need for a strong market orientation.

2. A strong market orientation is critical to success. — Thorough understanding of customers’ needs and wants, the competitive situation and the nature of the market was found to be a major ingredient in new product success. Our finding has been supported in virtually every study of product success factors. Conversely, the major reasons for new product disasters include a failure to undertake the needed market assessments.

A market orientation must prevail throughout the entire new product project. It begins with idea generation: Companies must devote more resources to market-oriented idea generation activities, such as focus groups with customers, market research to determine customer need areas, etc.

A market orientation also has a vital role in the actual design of the product. Too often, market research—when done at all— is misused in the new product process. It tends to be an afterthought, done after the product is developed and to verify that the product has market acceptance. If the results of the market study are negative, most often they are conveniently ignored and the project is pushed ahead.

The mistake is clear: market research must be an input into the design decisions, and not solely an after-the-fact check. Investigations to determine users’ needs, wants and preferences, and to identify competitive product strategies, strengths and weaknesses, are invaluable guides to the design team.

3. Pre-development activities – the homework – are vital. — More homework prior to the initiation of product design and development is a key factor in success. However, most firms confessed to serious weaknesses in the “up front” or pre-development steps of their new product process. The evidence from the data on resources spent shows pitifully small amounts of time and money devoted to these critical steps. Yet the quality of execution of the pre-development steps—preliminary market and technical studies, market research, business analysis, etc.—was closely tied to the product’s financial performance.

4. Sharp and early product definition improves the odds of winning. — Some companies undertake excellent product and project definition before the door is opened to a full development program. This definition often includes:

  • Definition of the target market, including precisely who the intended users are.
  • Description of the product concept and the benefits to be delivered.
  • Delineation of the positioning strategy.
  • A list of the product’s features, attributes, requirements, and specs (prioritized among “must have” and “would like to have”).

This definition is developed with inputs and agreement from the functional areas involved: Marketing, R&D, engineering, manufacturing, etc., and a signed agreement is obtained from these functions.

Projects characterized by sharp project definition prior to development are considerably more successful. Here’s why:

  • Building a definition step into the new product process forces more attention on the up-front or pre-development activities. If the homework hasn’t been done, then arriving at a sharp and acceptable definition is next to impossible.
  • The definition serves as a communication tool and guide. All-party agreement means that each functional area involved in the project has a clear and consistent definition of what the product and project are.

5. New product success is controllable. — New product success is very much within the hands of the men and women working on the project. Certain key activities—how well they are executed and whether they are done at all—are strongly tied to success. These activities include undertaking preliminary market and technical assessments early in the project; carrying out a detailed market study or marketing research prior to product design; performing a detailed business and financial analysis; and, executing the test market and market launch in a quality fashion. All these activities are within the project team’s control. Conversely, omitting some or all of these activities (or executing them poorly) is strongly linked to failure. In short, success is not so much a matter of the particular technology, market or product, but of how well the project is carried out.

6. There are no easy answers to what makes a winner. — The more one probes the secrets of new product success, the more one realizes that the answers cannot be reduced to a simple list of prescriptions. Our studies have revealed that new product success hinges on a large number of project characteristics and on undertaking a great many activities well. A single miscue— a poorly done step or the decision to omit an activity—can spell disaster.

The conclusion is that quality of execution at every stage of the new product project is critical; there is no one magic step or activity that will make a product a success. To build a quality new product process, clearly the necessary resources—manpower and money—must be in place. Equally important is the process itself: a complete process, with a focus on quality of execution, and with no critical errors of omission or commission, is the goal. One answer that an increasing number of firms have adopted is a new product game plan or process model to guide new product projects from the idea stage through to a successful launch.

7. Companies that follow a new product game plan do better. — A minority of companies has implemented a formal new product process or “game plan:” a standardized action plan for moving a new product from the idea stage through to market launch.

The evidence in support of a game plan is strong. Booz-Allen & Hamilton found that companies that had implemented such plans were more successful, and that those firms with the longest experience with them were even more successful (1). Our studies reveal that many firms’ new product processes are deficient or nonexistent. A game plan is one solution (3—5). In more recent research (results not yet published), we find that firms which have implemented such game plans have achieved dramatic results: faster new product introductions, less recycling to redo steps, and a higher success rate of launched products.

High-Risk Endeavors

Product innovation will always be a high-risk endeavor. Our research has helped to identify some of the key factors that discriminate between successful and unsuccessful products. The conclusions and recommendations presented here have already been implemented by some firms, with significant and positive results. Only by paying careful attention to the process by which new products are conceived, developed, and launched can corporate new product programs be the profit generators that top management desires.

References

  1. Booz-Allen & Hamilton (1982); New Product Winners and Losers (New York: Booz-Allen & Hamilton), p. 7.
  2. Cooper, Robert G. (1988); “Pre-development Activities Determine New Product Success,” Industrial Marketing Management, 17, 3, pp. 237—247.
  3. Cooper, Robert G. (1988); Winning at New Products (Reading Mass: Addison-Wesley).
  4. Cooper, Robert G. (1988); “The New Product Process: A Decision Guide for Managers,” Journal of Marketing Management, 3, 3, pp. 238-255.
  5. Cooper, Robert G. (1990); “Stage-Gate Systems: A New Tool for Managing New Products,” Business Horizons, May—June, pp. 44—54.
  6. Cooper, Robert G. and E.J. Kleinschmidt (1986); “An Investigation into the New Product Process: Steps, Deficiencies and Impact” Journal of Product Innovation Management, 3, 2, pp. 71-85.
  7. Cooper, Robert G. and E.J. Kleinschmidt (1987); “New Products; What Separates Winners from Losers,” The Journal of Product Innovation Management, 4, 3, pp. 169-184.
  8. Cooper, Robert G. and E.J. Kleinschmidt (1988); “Resource Allocation in the New Product Process,” Industrial Marketing Management, 17, 3, pp. 249—262.

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Robert Cooper
Robert G. Cooper

Robert G. Cooper is president of the Product Development Institute, ISBM Distinguished Research Fellow at Penn State University’s Smeal College of Business Administration, and a Crawford Fellow of the Product Development and Management Association. A thought leader in the field of product innovation management and developer of the Stage-Gate new product development system, he has won two IRI Maurice Holland awards (one for this very article) and has published seven books and more than 120 articles. He received his PhD in business administration and MBA from the University of Western Ontario and Bachelor’s and Master’s degrees in chemical engineering from McGill University.

*******
To reference this article:
Cooper, R.G. (1990). “New Products: What Distinguishes the Winners?” Research-Technology Management, Vol. 33, No. 6 (November-December), pp. 27-31.

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