New product development (NPD) is a primary driver of corporate organic growth, yet the current new product failure rate hovers at 40 percent. That means nearly half of all new products launched will be shuttered within the first year. Why do companies keep getting NPD wrong?
One of the most common reasons for NPD failure is when companies overlook adjacencies in favor of blue sky ideas of launching a new product to a new market. Commonly missed adjacencies include selling your current offerings/products to new markets/customers and exploring new products/offerings for existing markets/customers. These opportunities represent critical low-hanging fruit that involves lower risk and less upfront investment, and often more profit, than blue sky ideas.
There are several measures companies can take to make sure they’re taking full advantage of all available adjacent opportunities:
- Complete a thorough Market Evaluation before venturing into the development of new products. The market evaluation should examine adjacent markets across multiple factors such as market size, trends, barriers to entry, and level of competition. Each of these factors help prioritize NPD efforts and ensure the right product or offering is explored at the right time.
- Pinpoint unmet customer needs using Exploratory Product Research. Using focus groups or in-depth interviews, Exploratory Product Research is an early-stage, qualitative methodology designed to uncover general themes related to the challenges facing target customer segments.
- Conduct a Product Portfolio Review to determine what combination of products (from among numerous potential offerings) will reach the most customers. This could include a TURF analysis or Survey and is especially useful in exploring how a new product will fare in existing markets.
So when are blue sky opportunities a good idea? We’ve seen it work when companies are seeking to totally reinvent themselves, of if they’ve seen a flattening of growth in their legacy business. Alternatively, blue sky opportunities might represent a way to deploy excess cash to secure an attractive new market and customer base. Regardless, executives should pursue blue sky with care, ensuring they have investigated the new market and customer base thoroughly, establish clear expectations, and ensure their endeavors are carefully balanced with potentially easier-to-win opportunities in the core business.
Interested in more pitfalls of the NPD Process? Download our Research Brief: Mind the Gap: Critical Pitfalls of the New Product Development Process.