Why Products Fail

It is a report with implications that should reverberate throughout the American economy. It looks at a new industry and asks an old question: What are the most important factors in a produsts's success or failure?

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The study -- sponsered by Stanford University and due out later this year happens to focus on high-technology products, but its conclusions hold true across the board. Whether your product is a breakfast cereal or a silicon chip, the surest guarantee of new product success is to learn to listen to the customer.

"If you're a technologist, it's easy to delude yourself into thinking that it's the gadgetry that makes the success," argues Modesto A. Maidique, one of the principal authors of a study entitled Towards an Evolutionary Model of the Product Development Process. "But looking back at the research, I now realize that the key was that the product added value to the customer. It's not the technology that matters, but how you shape it for the customer."

Maidique bases his conclusions on research into 224 product innovations at more than 100 electronics companies with median sales of $20 million, as well as on interviews with company presidents, vice-presidents, and functional managers, conducted by himself, his co-author Billie Jo Zirger, and a team of 48 Stanford University Business School students. Why, the executives were asked, did your successful product introductions succeed? Why did the failures fail?

It is interesting to note that their answers had little to do with technology, and a great deal to do with the skills necessary to succeed in any business. Technological lead and technical capability were named by less than 2% of the study sample. Instead, some 16% of the executives cited marketing as the single most important factor distinguishing success from failure. Another 13% cited the benefit/cost ratio for the customer. Seven percent cited the ease or difficulty of market development.

For Maidique -- a 44-year-old doctor of solid-state electronics from Massachusetts Institute of Technology and a graduate of the Program for Management Development at the Harvard Business School -- the answers came as something of a surprise. Not that he is an ivory tower academician; his resume includes stints as vice-president and division general manager of Analog Devices Semiconductor (a then-independent subsidiary of Analog Devices Inc.), responsible for supervising the development of 25 new products; and as interim chief executive officer of Collaborative Research, a Boston-area biotech company. "But we are all prisoners of our experience," he admits. "And although it wasn't clear to me at the time, most of the new product ideas and the sensing of the market was done by very experienced hands at Analog Devices. [At the division level,] we worried about the technology of products, the designs, the motions, the marketing, the advertising, the organizational aspect, the accounting. But most of the product ideas were suggested by Analog's president, Ray Stata. That led me to the illusion that the important thing is to hit the target, not to identify the target. But after talking to literally hundreds of people, I came to the conclusion that it is probably more important to do the right thing than to get things right."

Maidique believes the study identifies three practical steps to help managers "do the right thing" when trying to develop a new product:

* Get a very clear understanding of the customer's business. Learn what he is doing and what he wants to do.

* Stress internal coordination. In particular, make certain that there is easy communication between marketing, engineering, and manufacturing.

* Be sure top management is fully committed to the new project. To develop new products, a company's decision-makers have to be willing to take money away from the current line of business.

These three steps, Maidique insists, are relevant guidelines for product development in every type of business. "I think the principles we found are basic and 100% applicable outside high technology," he says. "The difference is only in degree, to the extent that the rate of change in electronics is so much faster. But with the movement of computers into so many industries, it's becoming harder to find many old, stable, buggy-whip companies anyway. Technology is effecting every industry today."

Characteristically, the peripatetic Cuban-born professor is not content to present his findings solely for the edification of his academic colleagues. He plans to leave Stanford in the fall for a post as professor of management and director of the newly formed Institute for Innovation and Entrepreneurship at the University of Miami. He also plans to apply his principles as he continues his 10-year interest in seed venture capital, searching for investments for his firm, American Technology Fund, and for Hambrecht & Quist, the San Francisco -- based venture capital firm that recently appointed him a senior partner with special responsibility for southern Florida.

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