9 Out of 10

In his book “Why Companies Do Dumb Things,” Calvin Hodock the former Chairman of the Board of the American Marketing Association, states that over the last 60 years 9 out of 10 new products launches have failed. In the food category alone, he estimates the cost of these failures to be nearly $30 billion. Oh and by the way, who do you think has paid for these failures – the consumer.

Why, you may ask, are these failure numbers so high? As someone who has led innovation initiatives for one of the world’s largest companies and who has served as a consultant to others, I have my point of view.

First, no one really teaches marketers how to develop product innovation. Sure there are some business school courses that exist, but they have the same basic flaw. The focus is always on best practices. In my view, it should be worst practices.

Why you ask?

I believe most innovation fails because marketers continue to make the same mistakes over and over. Maybe marketers would be well served to look and learn from this history of failure. After all, those who forget their history - tend to repeat it.

Failure can be a rich instructional tool. Many of the best professional (and personal) lessons I have learned are directly linked to an initial failure. But most marketers are loath to talk to their professional failures and are more inclined to adopt what I call the No-Bad News Policy.

Why you ask?

Marketing groups within large global CPG companies tend to serve as a “Marketing Kindergarten” – a training or proving ground for inexperienced marketers. Here the goal is to see how quickly you can vault to your next role versus spending the required time and rigor to develop a true case for product innovation. As such, the focus is on quickly developing innovation strategies that will be perceived as meaningful and then moving upward to the next assignment before implementation and imminent failure can set in. This becomes a true recipe for failure.

The recipe usually begins with fuzzy front end strategic development that has been formulated through an unclear discovery period. Secondly, you blend in a lack of respect / full understanding for marketing research. Next you let the calendar drive your launch date by setting a timeline that is unrealistic. Of course you must stir in a sales forecast that meets or exceeds expectations, but likely fails to understand trail versus adoption. Finally this get baked into a glitzy innovation presentation intended to sell the virtue of the initiative to senior management, but is delusional in thinking competitors will do nothing in reaction (untrue especially with testosterone brands).

What’s missing? Well intuition based on some experience for one. And also creativity. Plus getting into the minds of the consumers and really understanding how they shop the category – and what really drives preference.

Why you ask?

Let’s take a look at History 101.

In 1983, Procter & Gamble launched Citrus Hill orange juice nationally and positioned it as the sweetest and best tasting juice in the market. In test markets in Indiana and Iowa during the previous year, Citrus Hill had reportedly grabbed a respectable 14% to 17% market share. P & G supported the Citrus Hill entry into this $3 billion category with a $100 million media blitz.

P & G does everything in a big way. When they enter a category, competitors view the marketing assault as a massive invasion. Said a Tropicana spokesman at the time, “We intend to aggressively defend every area where we’re doing business.” So what happened? Citrus Hill failed and was out of the market 10 years later.

Why you ask?

P & G failed to understand the category. Orange juice was and still is a price promotion category. It’s not necessarily about taste. Consumers purchase based on buying 2 for $5.00 and generally are not willing to pay more for a brand because of taste. Besides, the perception is they all taste about the same. Citrus Hill’s mistakes included marketing misjudgments and positioning issues. Being positioned as a better tasting juice was insignificant to consumers. The product and the benefit were out of sync.

Additionally P & G underestimated the competition which fought back by sticking to traditional price promotion strategies that where more relevant to shoppers.

The failure rate for new products is staggering. Let’s face it; Corporate America does not do innovation well. They talk about it. It’s something they all want. And they think anyone can develop new products.

Cost of innovation is a barrier. Most CEOs look to generate short term results to create shareholder value. Rarely can innovation be implemented at the same cost as the status quo. My challenge in leading a corporate innovation team was justifying the cost to bring something new to market and showing how it would generate increased revenue through the sale of more units.

So how do you improve the product innovation process? I see the need for innovation advisory committees made up of internal and external constituents (including consumers) that act as consultants – making recommendations, not decisions – to steer corporate marketing teams. These committees would look at best and worst practices and provide the foresight to understand markets and consumers before moving forward. But most importantly, they would be focused on embedding the business of product innovation within an industry that has a history of failure – 9 out of 10 that is.

Innovation is too important a contributor to economic growth for us not to do well. It is the engine of business growth. The real danger is that the engine will keep stalling unless we get innovation right.

What Corporate America has done with innovation makes no Brand Sense; it's really...Brand NonSense.