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.

INC. contributing editor Joel Kotkin interviewed Maidique this spring at his home in Los Altos, Calif.:

INC.: How did you come to study the success and failure of individual products, rather than focusing on the success or failure of the companies themselves?

MAIDIQUE: I realized that the reasons why companies were successful were varied and numerous, making the analysis of any particular company's success a rather complex affair. There could be economic conditions, pressures from one product to another, politics within the company, an enormously complicated set of factors. So, at that point, I decided to change what researchers call the unit of analysis to an easier unit to study. I decided to study products rather than companies. Even though the United States produces about two-thirds of the significant innovations in the world, there had never been a study of this type done in the United States.

INC.: Did you set out in search of ground-breaking products?

MAIDIQUE: No, and -- as it turned out -- all the 224 products we studied were either minor or significant innovations. None of them were radical innovations like the CAT scanner or the transistor. They were improvements, changes, modifications, and extensions. None of them radicalized an industry like the first calculator did, for example. Products like that are produced by intense research and development work, which sometimes results in useless products and sometimes results in innovation. But for 99.99% of the world, it is the minor and significant innovations that really make the difference. Very few innovations really result from a state-of-the-art breakthrough. Breakthroughs are too difficult to predict. No matter how much good sense you have about the market, the breakthrough is going to create conditions no one can anticipate. So the risks are much higher.

INC.: Then again, isn't it also true that the payoff on a successful breakthrough product is likely to be considerably higher?

MAIDIQUE: I'm not trying to discourage people from trying daring things. What I'm trying to say is that the more daring you are, the more important it is to know what impact the thing might have, rather than just doing it for the sake of being there.

INC.: In any case, one of the strongest points in your study seems to be that it is not the state-of-the-art breakthrough that really matters. Your results instead stress the supreme importance of communication.

MAIDIQUE: Internal and external communication. We need to perceive a company the way Chester Barnard [former vice-president of American Telephone & Telegraph Co. and author of Functions of an Executive] perceived it half a century ago. He was one of the great management thinkers of America, and he believed that the customer should be viewed as part of the organization. We need to close the boundaries within the company, and between the company and the customer, so that we better perceive what is of value to the customer. The strongest factor in predicting new-product success was product planning, developing a product that satisfied the needs of the customer rather than the needs of some engineer. Maybe the customer didn't give a damn about speed, didn't give a damn about accuracy, but just wanted something he could plug in and forget. If that's what the customer values, by golly, that better be the thing you deliver to him.

INC.: That's external communication. What about internal communication?

MAIDIQUE: If you have a multiproduct company, it is probably surviving on established products, which require resources, time, machines, equipment, and manpower. Well, a new product will require those as well. So someone has to make the trade-offs. If manufacturing has a goal to ship a certain amount of old product at a certain cost, and if the new product needs part of that manufacturing system to be tested and developed on a pilot run, there is incompatability of goals. So competition for resources will develop in any multiproduct organization And that has to be resolved by management if the new product is going to see the light of day.

INC.: Those precepts of internal and external communication seem to be as applicable to low-tech businesses as they are to the electronics manufacturers you studied.

MAIDIQUE: I think most of the lessons we learned are worthwhile outside electronics. We chose electronics because it was economical, it was convenient, and it's an area where we had a lot of background. But I think if you look at Thomas J. Peters and Robert H. Waterman Jr.'s study of a much broader segment of American industry [In Search of Excellence], you'll find very similar conclusions. The person that establishes the value of what you do is not you internally; it's not some panel of blue-ribbon scientific advisers or scientific judges; it's the customer. And if that's the person that's setting the value of your activities, you just have to be very close to him as a philosophy and as an intricate part of the way you manage your business. I think that cuts across all segments of American business.

INC.: Did you find any significant differences between new companies and more established companies, in terms of new-product success?

MAIDIQUE: A new-product development, whether in a new or old company, will be successful for the same reasons. To succeed, a company must consider the new product as if it were a totally new venture.

INC.: What about differences between large and small companies?

MADIQUE: We broke the sample into two groups, large and small companies, with small companies being companies that were less than $20 million, and we found that those small companies rely more on technological advances to synthesize useful performances for customers than did the large companies. They seem to take larger risks in trying new technologies. That paid off for them because it is one of the few ways they have to compete. If you can't compete against IBM in marketing and service, you have to compete with technological superiority.

INC.: But did you find any difference between large and small companies in the way they market a new product?

MADIQUE: Small companies do so well because they are essentially new products with a corporation wrapped around them. And small companies tend to be very close to the customer because the marketing guy, the guy who visits customers, the guy who does the design, the guy who makes the decision is often the same person. But in a large bureaucracy, you're likely to have the decisions made by someone who hasn't seen a customer in years.

Let me give you a small vignette. I went to see the CEO of a $30-million to $40-million company, and I asked him how often he saw customers. He said, "I really don't have too much time to do that. I have to represent my company to the stockholders; I have financial issues; I have organizational meetings; I have my staff that I have to compensate and a lot of administrative tasks. So I leave it to my vice-president of marketing."

So then I went and I talked to the v.p. of marketing, and he said, "Well, I have a rather considerable staff. I have a sales force; I have advertising; I have promotions. So I really don't have the time. But we have a very highly trained sales force, and they are talking to customers all the time, bringing back ideas."

Then I went and talked to the salespeople and asked them if they could sense customer inputs and perceptions. They said, "We get them all the time. But nobody in management listens."

INC.: So how can a company avoid that pattern?

MAIDIQUE: Let me give you a counterexample from another company. In this particular company, the concept of the product was developed by the CEO. The CEO also worked on the design with the v.p. of engineering. When the first order came in, the sales v.p. referred it to the CEO for ultimate negotiations. So the CEO got on the phone and modified some of the specifications for the first major customer, a customer who wanted to order a couple of million dollars' worth of the product. Then he got off the phone and talked to the engineer to determine whether the changes were possible. Then he called the customer back and closed the deal. I don't think it has to be the CEO doing this, but whoever has a responsibility to move around the resources that are going to be combined to make new products and processes has to be involved closely with the company's lead customers. Otherwise he is delegating away the potential for success.

INC.: Have you seen larger companies that have been able to keep the necessary closeness?

MAIDIQUE: At Hewlett-Packard, close interface with the customers seems to be a religion all the way from the general manager down to the youngest engineer in the line. It occurs in other companies, too, but the fact that it occurs at one point in time doesn't ensure that it will occur tomorrow. We found that success creates fantasies about why the success was attained, and those fantasies cause companies to decouple themselves from the environment. Take Marine Technology [a pseudonym for one of the companies studied]. They were increasingly successful selling ever smaller versions of their product, until they felt they had the secret of success -- to make their product smaller and smaller. So they guarded their secret perfectly, withdrew from the environment, and produced a whopping failure. They didn't realize that they had already made the product smaller than their customers realIy needed.

INC.: You mean they had become enamored of their ability to manipulate the technology, but had forgotten the real-world needs?

MAIDIQUE: Exactly. The Concorde supersonic jetliner is another good example of performance for performance's sake. It turned out that people weren't willing to pay two or three times the cost in order to fly somewhere two or three hours faster. Another classic case is the Lockheed L-1011, perhaps one of the best jetliners ever produced. The L-1011 had more backup than any other plane. For example, it had four or five hydraulic control systems while the DC-10 had only three. It was an overdesigned product, an extraordinarily good airliner, but, at the same time, it was priced out of the range and had to be dropped by Lockheed as a commercial airline. Meanwhile, Boeing was continuing with their everyday 747, and just ate up the world market with it. Boeing did a lot of incremental changes to make the 747 better and better over time, but they didn't win a lot of awards for designing it.

INC.: I guess a classic example of a company decoupling from the real world is Apple Computer, and the way it botched first the Apple III and then the Lisa.

MAIDIQUE: Well, the Apple III didn't fail because they misread the market; that's a somewhat different situation. With Apple III, they realized the need for an 80-character display, a self-contained disk drive, any number of things customers are clamoring for. But the Apple II had been a very easy machine to make -- open it up, and there was very little inside. So they became arrogant. They said, "Hey, we can do anything. We're Apple Computer. We were successful making Apple II, and we'll be successful making Apple III. It's no big deal." So they were rather cavalier about the way they handled manufacturing, and that came back to haunt them with a vengeance. At one point, some 20% of the Apple IIIs didn't work. And, as a consequence, Apple lost critical time and allowed IBM to really come into the market. They're still paying for that. What is interesting about Apple III, though, is that that failure caused a thorough revamping of Apple manufacturing, so when Lisa came out it was a product that worked and had high quality.

INC.: But wasn't the Lisa also a case of decoupling? In their rush to produce the best personal computer, they produced one that the market did not want.

MAIDIQUE: That was part of the problem. But, with Lisa, Apple was still paying the price for having done so poorly with the Apple III. The Lisa was already unappealing to customers because of the negative experiences with the Apple III. Then they corrected the problems, but they created new problems by creating a flashy technology that was high-priced. I think what they needed in the Lisa was a streamlined and economical product with a lot of service and software support, something that would communicate to the customer that this is a completely different deal than Apple III.

INC.: So how can companies avoid this kind of trap?

MAIDIQUE: You can rotate people around, rotate engineers to marketing and marketers to engineering. You have to reduce the normal cultural boundaries that exist between the different pieces in a company. When a new product is about to be conceptualized, get the manufacturing people involved early on. Get a group of people that have different views of the product-development process involved so that you don't wind up later with a product that has extraordinary performance but can't be manufactured, or a product that has just the extraordinary performance but that no one needs. As the president of one company told me, the thing you have to watch out for is that the most difficult performance parameter to achieve may not really be the one the customers value the most. Often engineers will go after some objective that is very important to them technically, but that is far less important than perhaps ease-of-use or size or some other secondary characteristic. At Marine Technology, they had an internal communication problem. The marketing guys weren't even involved with the product. It was done secretly by engineering with the support of the president, so there'd be no leaks.

INC.: But isn't there a tremendous risk when you are developing a new product that by involving so many people you might end up by tipping your hand to a competitor?

MADIQUE: It's a far greater risk to not know the secret of success in the customers' minds than for your competitors to know the secrets of your technology. I would argue in favor of an open company that may let information out but that certainly brings critical information in. The real competition is not against each other, but it's a competition to see who can best understand what the customer would value.

INC.: What did your survey discover about the importance of a company's level of R&D spending in relation to the odds of their producing a successful new product?

MAIDIQUE: I don't think there is anything we learned about R&D spending. What we did learn is that it took about as much money to make a failure as it did to make a success. On the average, the successes seemed to cost about 20% more than the failures, but some of the failures were abandoned midstream, so the difference between the funding of a success and a failure wasn't significant. So money is not the answer.

INC.: Doesn't that contradict the common argument that increasing R&D levels is the key to America's future industrial competitiveness?

MAIDIQUE: A lot of the arguments with respect to a lack of industrial competitiveness rest on the implicit assumption that we should dominate every field. But realistically, other developed economies are bound to tie us or even lead in certain areas. By saying that our success depends simply on investing more in technology masks the real issue. Our competitors internationally now spend a lot more money, so what we have to do is not simply spend more too; we have to learn from what they are doing, just as they learned from what we were doing when they were spending a lot less. What the Japanese have shown is that if you're really good at communicating and at extracting knowledge from other societies, you don't need the big breakthroughs in order to be successful. You can take the knowledge from other companies and other organizations and turn it into products. I think that challenges a long-standing U.S. belief that he who has the ability to make the significant breakthrough will always capitalize more than those who follow.

INC.: To what extent did the managers in your survey point to Japanese competition as causing new-product failure?

MAIDIQUE: We had 500 responses, and not one mentioned Japanese competition as the reason for the failure of the new product. What that says to me is that the real issue is designing a product with value to the customers and having that product in quality and quantity out there, not whether the Japanese are in the market or outside the market.

INC.: That certainly contradicts the conventional wisdom. It seems that, in the last decade, virtually every industry -- steel, autos, computers, apparel -- has, at one time or another, blamed their problems on the Japanese.

MAIDIQUE: The Japanese serve as a good whipping boy. But that is just one of a whole bunch of old saws that people try to use to explain product failure. Some will argue that the product failed because we didn't have patent-protected technology, but we didn't find that to be significant. Another one is problems with government regulations, but that turned out to not be significant. Another one is that the economy just wasn't moving at the time. We found that that was insignificant. Still another says that the product failed because it didn't technically perform in an extraordinary way. But we found that extraordinary technical excellence, per se, is not one of the main levers of success. Those are all favorite whipping boys, but the answer lies elsewhere. The key is to find something that will make a difference in your customer's business. Successful products provide instant economic success to the users.

INC.: Yes, but only if your marketing program is effective at bringing the product to the user in the first place.

MAIDIQUE: Remember that marketing has to encompass the definition of what a product is. Marketing is not just promotion, sales, and advertising, marketing also includes product planning. When I start my course on marketing at Stanford, the first thing I say is: "Any engineer who does not see himself as a marketer is not doing his job."

INC.: Why?

MAIDIQUE: Because part of an engineer's role is to make design trade-offs, and every time an engineer makes a design trade-off, he is doing a marketing job, if not a general management job. So marketing starts with the definition of product characteristics, and often engineers unwillingly take that into their own hands without realizing the enormous impact that will have on the overall business. The tendency of technical people is to achieve technical performance for performance's sake; that leads to journal articles, but it doesn't necessarily lead to successful products. You can't go in saying, "Well, we've got s super-fast technology, and obviously speed's going to do a lot for this guy, and if he realizes this, then he'll pay us these wonderful prices for our product." You've got to go in and say, "What's your business all about? What are you doing? What do you need? What is it in the market that you'd like to see that isn't there?"

INC.: What about market surveys? Were your successful products often launched on the basis of more formal research?

MAIDIQUE: The people who learn the most about your customers through an externally conducted market survey are the people who conduct the survey. I think that market surveys are useful in two circumstances. First, if you want to get an aggregate idea of where a market is going and how big it might be. Second, if you already have an established market, say, selling cereals, and you want to know whether increasing the sugar content of your product by 2% will turn the market on or off, and whether that cost is justified within a particular market segment. So tests can be worthwhile with huge, already existing, and gradually growing markets, not with markets that are very new. The best survey for that kind of rapidly changing market is for a group of people from the company -- including the management people who are going to make the decisions -- to go out and sit down with three or four customers for a period of two or three days. You can't beat that, particularly if those customers are lead customers, customers that are doing today what the industry is going to do a few years later.

INC.: One of the most provocative points in your study is your stress on the value of failure. What is it about failure that contributes to success?

MAIDIQUE: I think that one of the best ways to learn is to fail. People who are successful often don't know why they're successful, and all of a sudden they run into a situation that's different from what they have been in, and they're surprised to find out that they've failed. People who have failed a couple of times know where the weak links are and know exactly what are the things that must be avoided. After you fail, you tend to dwell on the failures and do everything you can to compensate for them, but if you're very successful, you tend to say, "Hey, I'm just absolutely great, and I'm going to succeed no matter what." So I think failures have a way of indelibly creating in your mind traces that prevent you from failing again in the same manner. Whereas successes often encourage you to fail by decoupling you from reality, creating illusions of what reality really is.

INC.: Still, no one shoots for failure. Is there any single lesson that companies can learn that might help them launch a new product successfully?

MAIDIQUE: There is no single thing that can guarantee product success. But the things that cause product failure are several, and, thank God, they're almost all malleable; they respond to managerial practices. A new product begins either as an unfelt need or as a requirement of your customers. It starts as an idea. Then it has to be taken by your marketing or engineering staff and turned into a blueprint for action, then into a prototype, then into a product that can be manufactured and that the company can sell. For all that to happen, there's an enormous amount of communication that needs to take place among many constituencies -- customers, engineering people, manufacturing people, and marketing people -- each with different goals, backgrounds, and cultures. Integration of those different constituencies is essential because cultures typically tend to block the new, and by definition a new product requires new procedures, new organizations, and new pecking orders. It will inevitably destroy some of the status quo. So, in order to do that, you need managerial power to make those changes as easy as possible, to integrate those various cultures and make sure they communicate.

There is no one single way to accomplish all that; there is no way to take out the risk. Niccolo Machiavelli acknowledged that centuries ago in The Prince: "There is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new system." But you need to take those risks in order to succeed. You not only have to do the right thing, you have to do the right thing right.