NPD Management Corner

Are you Learning from New Product Failures?

Have you ever engineered a new product that made it to production readiness, only to find the revenue figure is way below the plan, maybe even zero? While working on this poor revenue-generating product, other potentially more successful opportunities were put off, further straining the business financials. The bottom line is that it costs a bundle for new product failures; as a result it is essential to continually assess and change the opportunity selection process based on the valuable learning’s an unsuccessful product will provide.

As an example of cost, consider a small-scale project where there is an average of five people working on it for a year. For this example let’s say the fully loaded employee cost is $150K/yr. This gets to a labor only figure of about $750K for a one-year effort. Throw in masks, silicon, packaging, tools and other overhead for another $250K and we can easily hit the $1M mark for a typical small-scale project.

Now consider the lost revenue opportunity. While the team was working on a new product failure, the more lucrative new product opportunity was waiting in queue while that market was drifting away. Considering both development and lost opportunity figures, the outlay for a new product failure can easily be from several million to well into the tens of millions, a very expensive price tag that should demand significant attention. Taking into account the major fiscal impact for a product failure it is essential to pay very close attention to the risk/benefit analysis for any new product opportunity.

Calculated product risk is an important ingredient of a business that needs to grow; think risk intelligence, not risk averse. Gaining insight from past product failures brings a sharp perspective to future risks, when the learning is allowed to occur. To fail and not uncover a takeaway is a grave injustice to the portfolio management process. Go ahead and take calculated new product risk while remaining ever vigilant in learning from those products that did not make a passing grade. Below are some questions to stimulate learning from new product failures:

How solid was the biz case and what assumptions were made that failed to come through?

Were did the risk analysis fail?

Was market timing playing a key factor and if so was it well understood in planning?

Did market intelligence fail?

Was it over featured or under featured? Why?

Was there an error made on a few specific requirements?

Did the requirements elicitation process fail somehow?

Was the development adequately monitored throughout to ensure the scope was still on target for the current market?

Why wasn’t the effort killed before tapeout?

Was the marketing and/or sales channel adequately engaged?

Was there an emotional element to the new product approval? If so, why did that carry through?

If it was a custom product, did the customer have enough skin in the products success?

Was there adequate accountability in the new product definition function?

Accountability is often associated with the design, product engineering, test engineering and production release functions of a new product. What about the functions responsible for defining and proposing a new product effort to the business such as marketing, systems or product definers? How accountable are these functions for delivering on a product that generates the revenue, as per the business case? If products are failing to produce revenue I suggest that there might be some focus lacking on the product definition and the opportunity assessment portion of the new product development spectrum.

Learn from failures and improve the opportunity assessment process, apply better methods for monitoring ongoing projects and learn to kill projects earlier based on solid analysis of current information. Do this well and deliver increasing levels of new product success to the product portfolio. Fail to learn from product failures and expect new product costs to quietly continue limiting the businesses financial success.