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HomeTrend
Forecast
August 4 2009 Issue
How to Increase Your New Product "Hit" Rate
Silicon Valley entrepreneur and blogger Andrew Chen recently wrote a blog about the importance of having a culture of "Failure is OK". He used industrial design firm IDEO as an example of a company that, in Chen's words, "takes the central part of a process and assumes failure, and then builds up a support system around it."
In IDEO's case, the central part of the process is the new product idea brainstorming that the company does as part of every project. The assumed failure is the recognition that any individual idea is likely to be bad. The support system the company has built around the process -- structured brainstorming, rapid prototyping, and field research - enables the company to test new product ideas cheaply and quickly. That way, they can quickly eliminate the "bad" ideas.
In fact, having a system for doing quick and easy testing of new product ideas early in the new product development process differentiates the most successful companies from the rest, according to a best practices study conducted by the Product Development and Management Association (PDMA). The study compared the new product development processes used by the "best" companies (defined as those that are simultaneously either the most successful or in the top third in their industry AND above the mean in sales and profit success from new product development) with the "rest".
The PDMA found that in the "best" companies, one in four ideas results in a commercial success (versus one in nine for the rest.) One of the reasons the "best" companies have a better new product "hit" rate is because significant effort is spent on understanding customer needs and the cost ramifications of design decisions early in the development process.
The PDMA study reveals that new product success is closely linked to a set of activities that take place before actual product development ever starts. Such critical "upfront" pre-development activities as needs assessment, initial screening, preliminary market assessment, and detailed market study.
If you want to increase your new product "hit" rate, take a page from the IDEO playbook: develop a process for testing new product concepts cheaply and quickly - at the initial idea stage, at the product concept stage, and during the development stage.
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