Why does new product development fail 80 percent of the time?

Somewhere between 50 and 80 percent of ideas from new product development fail.

To the outsider, this figure seems wildly exaggerated. But somewhere along the line, this statistic has made its way to becoming the accepted norm.

What makes a staggering failure rate normal? Sometimes failures are known to the public or considered a “failure” but called by a different name. The prime example would be recalls, such as a vehicle or product recall due to a safety issue. This is a post-launch failure and can be costly both financially and time-wise, not to mention negatively impacting the brand’s public reputation.

Other times, failures occur before the product launches. Common today are the failures stemming from mistakes late in the production cycle because companies don’t have the right knowledge or the knowledge of the technology to make and correct mistakes sooner. Many of the biggest reasons for new product failures are preventable. Which new methods used by best-in-class New Product Development and Introduction (NPDI) organisations can help you reduce and eliminate failure?

New product development: the situation today

We live in a disposable world. As technology advances, electronics just a few years old are considered out-of-date. From phones to clothes, disposable products are the norm and rare is the consumer interested in buying anything second hand, especially when new can be cheap.

Not long ago, it was just the Western culture that wanted to buy the latest and greatest consumer products. But as emerging markets such as China and India, where rural areas have been replaced by sprawling urban landscapes, continue to transition to manufacturing, they, too, are eager to adopt the lifestyle the West has enjoyed.

While the market demand for consumer products is at an all-time high, it will only continue to rise. It is expected that by 2021, there will be an estimated 27.1 billion smart devices in active circulation. Wireless technologies such as near-field communication, cellular and now 5G are bringing IoT connectivity to even the most basic products. Complexity, along with market demand, is also at an all-time high.

Within the semiconductor industry, one of the biggest upcoming disruptions is extreme UV — a wavelength used to print multiple layers onto silicon chips. The transition from 10nm to 7nm to put more real estate on a chip is set to proliferate disruption across all industries.

Industries are converging as regulations are tightening. The medical device sector is one example of how electronics have permeated other industries. We see embedded software proliferation across this space and such regulations as the European Medical Device Regulations 2020 (EU MDR 2020) and In Vitro Diagnostic Regulations (IVDR 2022) imposing stricter governance around such devices.

Regulatory concerns in the autonomous vehicle industry around safety and ISO-26262 are prevalent. On top of that, incumbents are being challenged by innovative new software-backed firms. Out of the 20 or so companies aiming to put a fully autonomous car on the road, many of them such as Google and Lyft have never launched a production vehicle before.

On one hand, there is a huge increase in the amount of market demand for new products and the need to shorten NPDI cycles from years to months. On the other hand, the complexity and regulatory challenges of these products are exponentially increasing.

The company crisis with new product development

Companies are not managing this crisis well.

When leaders are too busy fighting fires, they don’t have time to prevent the fires. They’re essentially too busy being busy, thus focusing on short-term problems and not long-term solutions.

Combine that with solution-fatigue – salespersons from tech companies knocking on doors insisting they can fix whatever is broken – and decision-makers remain skeptical, deciding to keep old processes in place instead.

Therefore, many organisations are simply relying on old-fashioned ways, dictating that if you go from one person working on one unit of work to needing four units, you scale by hiring three more people. This just multiplies business processes rather than uses technology to match complexity. The level of commitment, from hiring and training to payroll and taxes, consumes resources, whereas the right technology can cost-effectively reduce the need to scale.

The systems and tools designed to manage complexity are themselves complex. If the manufacturing department has a problem, they get a system or tool to replace it. If the marketing department has a problem, they too implement a new system or tool. This creates silos where no one on the same team is communicating, and information to prevent product idea failure is never received.

On top of all of this, products still need to be made competitively. To address this, companies are more reliant on external manufacturing partners to maintain these cost goals. “Outsource everything,” was the mantra ten years ago, but this comes with huge problems.

Take the automaker, for example. In the early days of automotive manufacturing, almost everything was made in-house. Now, they just assemble the parts after their suppliers and contractors ship it to them: one problem with a supplier’s product, and the assembly line stops.

And, all of this has to be managed while under the constant threat of disruptive competitors.

Why new product failure happens

So what are the challenges when it comes to NPDI? On the surface, budget overruns and delays are the biggest barrier to profitable new products. When you dig a little deeper, you see there are five big underlying causes leading to mistakes and failures:

• Increasing complexity in new products (mechatronics, embedded software, integrated circuits)
• Knowledge transfer and translation in New Product Introduction
• Emotional decisions at the stagegate
• Inaccurate cost estimations
• A lack of iterations or prototypes

This series will showcase some of the latest research and insight into these challenges, and how the best-in-class companies are addressing them.

This concludes part one of our series on increasing your success with new product development. In part two, we examine the first three of these five challenges in more detail and discuss how companies can counter them.

About the author
Everything I do is for the sake of my children’s children. I want them to enjoy the things that we take for granted, but I feel we need to make significant changes to the way we consume and manufacture products. This motivation drives both my personal and professional worlds. I believe Industry 4.0 and digitalisation allows for a significant step change in wastage in manufacturing. I think Dr. Seuss said it best, “Unless someone like you cares a whole awful lot, nothing is going to get better. It’s not.”