Why do most innovation products fail? (1/2)

A recent study done by Harvard Business School showed that between 70 and 90% of innovation products fail to find clients. Therefore, innovation products are retired from the market only 12 months after they were first launched. Given that developing an innovation product usually requires a multimillion investment, it’s easy to understand why General Manager prefer to focus on core products in core markets for core customers, rather than invest massively in innovation products whose return on investment is so uncertain. And, yet, at the same time, innovation seems more important than ever before. In Europe, Louis Gallois, EADS’ former CEO and currently the Innovation Commissioner to French Prime Minister Jean-Marc Ayrault, says that French companies have seen their margins decrease from 30 to 20% in a decade, as new companies are disrupting them. French companies have already increased significantly operational effectiveness. Therefore, innovation appears to be the only way to secure high-margin growth whether it’s through upmarket moves (“la montée en gamme”) or creating new products in new market spaces. So, succeeding at innovation is critical. And, it’s critical to develop innovation products that consumers are willing to buy.

But, here are the facts: most innovation products fail. And French innovations are no exception. Here’s why.

I/ Innovation products fail because there’s too much focus on technology

The first reason why innovation products is that there’s often too much focus on technology and not enough on understanding consumers. Recently, I was part of a jury at Centrale Paris, a leading engineering school in France, and I was asked to evaluate a number of different innovation projects. I was surprised to see that engineers presented their products in way that’s similar to how projects are presented by R&D executives in leading Fortune 500 companies. In other words, there is a continuum between the way we innovate in leading engineering schools in France and the way we innovate in leading French companies, especially in technology driven companies: I saw similar approaches, similar qualities, and formulated similar doubts. What struck me most was the love that engineers have for their technology. This explains the strong emotional attachment between the creator and his/her creation. And this what I call Pygmalion’s complex.

And the first thing that crossed my mind was the ancient Greek sculptor, Pygmalion, who sculpted a feminine figure so perfectly that he eventually fell in love with his creation, Galatea. To his delight, the sculpted figure comes to life. And it’s the beginning of a love story. But, unfortunately, while Greek myths have strong power to convey the deep forces that are structuring our psychological lives, they have less power to turn our fantasies into reality.

In other words, when an engineer develops and creates a new technology, he/she assumes that the love he/she feels for his/her creation will be communicated to others. Consumers, newly in love with this new technology, will be compelled to buy it. Unfortunately this is not true. And this explains the strong investment that many engineering-led companies are willing to make in an innovation product and, at the same time, their relative indifference when ROI targets aren’t reached. It’s as if there’s an irrational relationship between engineers and their innovations. It’s as if innovation could be left unaccounted for, in a the country that gave birth to Descartes’ Rationalism and in a time where frugality is a virtue.

Here are a couple of examples. France has developed many innovative products sometimes of unequalled complexity and sophistication. These include:

• the Concorde, the first supersonic commercial airplane,
• the EPR, the latest generation nuclear plant,
• the “Rafale”, a first rate military airplane,
• the TGV, a high-speed train,
• the “Minitel” a very innovative telecommunication systems which, in many ways, predated the Internet.

These products are engineering feats. But, at the same time, each of these products failed to find customers which were willing to buy them. It’s proven very difficult to export the EPR, the Rafale, the TGV and the Minitel.

My point is that, too much focus on product features sometimes implies an inability to find sustainable market where clients will make a decision to buy the product. For many this seems like a truism: we all know that technology-led innovations come with limitations. But, I’m surprised that we repeat this mistake over and over again.

II/ Innovation products fail because people think that being one step ahead is enough

The second reason why innovation products fail is that people believe that it’s enough to be one step ahead to be innovative. In fact, it takes many industries a couple of years to develop an innovation products, at least, from the first initial insight, to prototyping, and finally to market launch. But in many industries, the product life-cycle is so short that, when you finally launch your innovation product, the innovation product is no longer innovative. What’s considered to be an innovation product helps to keeping up with competition, no more. In the cell phone industry, there is a new phone coming out on a monthly basis. Developing a new product takes between 12 and 24 months. If you want to be innovative in the smart-phone industry, you need to think at least three or four years ahead. And it’s by creating a vision of what the market will be in four years, that you can create the basis for developing a product that may be relevant in in three or four years’ time.

Perhaps one last word: many companies use consumer testing and consumer research to test their innovation products. But again, between the time they have tested their product with consumers and the time they have launched their product on the market, there’s typically a period which may last up to two years, and during which there have been considerable market developments. These developments basically cancel out innovation features that the product effectively boasted. So that’s my second point: innovation products fail because the product life-cycle is extremely short and because being one step ahead isn’t enough.

This provides some understanding as to why there is such a recurrence of failing among innovation product. There are certainly many other reasons. I hope that this will help innovation executives get a better understanding of how to launch an innovation product that will succeed, a subject I’ve covered in another post, here. I’ll also hope that will help them maximize their return on investment for innovation. In a forthcoming post, I’ll provide describe categories of failed innovation products.

In the meantime, how would you explain why so many innovation products fail?