Lieutenant: "I think we can handle one little girl. I sent two units, they're bringing her down now."
Agent Smith: "No lieutenant, your men are already dead."
In the movie the Matrix, Agent Smith, addresses a police lieutenant as they are trying to capture Trinity. It's a mission doomed to failure. Your next product initiative is kind of like that scenario - doomed. The problem right now is you're the over confident lieutenant unaware of the danger.
Bringing new tangible products to markets is a complex set of activities that involves many people with very diverse knowledge bases. It's all orchestrated to create something new that works, that can be distributed into a market and that people are willing to pay a minimum price for. A new product starts with thoughts turned to paper and ends up as functional goods in someone's hands that works and has value. Yeah, doomed.
If you walk into any big box retailer (Best Buy, HHR Greg, etc.) and think that every individual product on a shelf or hanging on the wall went through a development process and then realize that those product lines turn over in 6 to 18 months, the scope and scale of new product activities really starts to come into view.
Add to the scale of R&D that on average 40% of new development projects across consumer and industrial products fail (according to a study by Kellogg Graduate School). That means the product never makes it to market. If you combine the fact that of the products that make it to market many fail to be financially profitable.
Take a look at HP's $14 billion launch disaster of its tablet computing product the Touchpad. After just 3 months in the market HP announced they would no longer be producing any tablet computers. According to Proctor and Gamble CEO Roger Crockett, only 15 to 20% of consumer packaged goods are commercially successful (profitable) in its industry space. P&G boasts a 50% success rate in the market place. This is well above industry average but substantially below potential.
How big is this challenge? In 1997 the US spent $151 billion on industrial R&D and $32 billion on military R&D. The total is the equivalent to 2.5% of US gross national product for that year.
That is a massive amount of money spent and we have a success ratio of 50%. That means all R&D is a flip of a coin - heads or tails. We then have low probability of success in financially being profitable. So fundamentally how we create products and how we bring products to market are tremendously flawed on a massive scale - yikes!
Here are the five key, high level questions you need to get answered in order to successfully bring a product to market.
- Technical Viability (can it be created and work)
- Manufacturing Viability (can it be created at an acceptable cost, in an acceptable timeline with an acceptable defect rate)
- Distribution Appeal (do distribution partners want the product)
- Consumer Appeal (will end consumers [business as well] buy it)
- Financial Viability (will it generate profits)
These deceptively simple questions hold the keys to product success. They also make for a great way for any entrepreneur or company to create an iterative go/no go research and decision matrix. You have a great idea and you want to "light the world on fire". Can you actually create your product and it will work? This is usually referred to as a technical feasibility study. It ends up being its own project and it is ABSOLUTELY worth the cost to conduct.
Even if something can be created you have to see if it can be manufactured. Usually the biggest challenge is manufacturing cost. What will it cost? What will it cost in smaller volumes? What will it cost in larger volumes? You generally can't get to real numbers for this until you've built a BOM (build of materials) and you generally know what overall assembly effort will go into producing the product. Expect cost overruns. It almost always happens that way.
You have to do A LOT of homework about distribution. How will you get your product out to market. If you do direct sales that's your answer. But otherwise you need to really hound your distributors, value added resellers and retailers about COMMITTING to the product. Hopefully this is a contractual commitment. "If it hasn't been written then it hasn't been said." Many of them are really mercenary in outlook. You will have to buy their loyalty - buy shelf space, buy warehouse space, etc.
How will you ever hope to be successful unless your end consumer really, truly values your product enough to pull out their wallet? You need to test, validate - test, validate and, again, test, validate. How do you do this? Through a succession of individuals and groups and by using the increasing set of tools at your disposal. You start with Q/A. You present industrial design drawings. You present 3D CAD photorealistic renderings. You pretend you have the product and try to sell it over the phone. You present 3D printed solid models. You present functional prototypes. You test in the field first articles of production. And at each and every phase you assume everyone hates it. Prove them wrong.
The last big question is will your whole endeavor make profits. This is really difficult to validate. You can create a revenue model through all the answers to the prior questions. You can comb through, alter and change that model as you get new and better information. But ultimately, it is the definitive answer of product life and death and it comes after you're all in, after "you've sent up two units". Minimally you want good defined standards with your whole team on how you will define success in this area and on what timeline. Most teams don't and it creates a lot of conflict down the road.
Break the mold. Focus on your high level success factors and beat the odds. It all starts by being aware of the danger.