Many business leaders at enterprises today survey the headlines about successful disruptors with almost a sense of desperation. They worry about little guys eating their lunch and urge their product innovation teams to think more like startups. That might not be entirely bad advice—that is, as long as enterprises don’t disregard the realities and business context of launching products within a large organization.
Big brands have always had to grapple with the risk of new product flops when executing on innovation. Digital disruption adds additional variables to the innovation risk equation. When enterprises chase new models for developing and rolling out their products, they often increase the odds of innovation failure for the chance of a breakout success.
As such, enterprises could stand to learn as much from product failure post-mortems as from disruptive product success stories. That’s according to a pair of subject-matter experts at Nielsen BASES, who say the high rate of failure in the fast-moving consumer goods (FMCG) industry offers a particularly rich set of failure data. That category alone sees an 80% to 85% failure rate, according to “Setting the Record Straight on Innovation Failure,” a report by Nielsen BASES’ Ramon Melgarejo, senior vice president of product leadership, and Kamal Malek, senior vice president of data science.
Their analysis shows that three main factors commonly surface among this large pool of innovation failures.
Not Enough Product Experience Testing
Poor product experience increases innovation failure by 15x
When enterprises worship at the altar of market speed above all other considerations, bad things happen to innovation success rates.
“Manufacturers striving to be more agile are streamlining their product testing prior to launch, increasing the likelihood that consumers’ first experience with their products will be suboptimal,” Melgarejo and Malek reported.
Almost half of the organizations that make speed to market the top priority tend to sacrifice in the area of product testing and refinement. This can greatly impact product experience, which will have a domino effect on product success. Innovations with poor product experience are 15 times more likely to fail than those with strong performance on this dimension, according to the report.
“Closing this gap through fast, efficient pre-market testing has considerable advantages over experimenting in-market,” the SVPs said.
Too Much Focus on Niche Innovation
Many smaller disruptors gain their initial footholds through niche products, premium offerings, and other innovations with narrow appeal. While more established players can certainly grow their businesses through long-tail opportunities, the report warns that enterprise launches must always keep incremental growth in the fore. And that’s really tough to accomplish when a product doesn’t serve a broad customer need.
Nielsen’s data shows that only 5% of innovations with niche appeal deliver above-average incrementality to the brand.
“In other words, launches considered niche are rarely incremental and could actually shrink the brand depending on how much support is misdirected to them,” Melgarejo and Malek explained in the report. “The safest and most realistic path to innovation success is to develop a product with broad appeal.”
Poor Long-Term Marketing Support
About one in three product innovations tank due to a lack of marketing support.
“An exceedingly strong product or proposition would’ve made little difference for these launches—they simply didn’t have the baseline marketing support needed to get the ball rolling,” Melgarejo and Malek explained.
1 in 3 product innovations tank due to a lack of marketing support
Some of the most disappointing failures can come due to a lack of sustained marketing. Many products die on the vine after the first year of rollout because the marketing team disappears after the initial launch.
“Eventually, this results in a loss of distribution and inevitable decline in years two and three,” Melgarejo and Malek said. “This chain reaction explains why two-thirds of new products decrease in volume during their second year in market.”