How to improve your new product success rate

It's a familiar story of too many cooks ... In 2000, European mobile phone companies bid for the then next-generation 3G licences. With these licences, mobile phone companies set about launching new data services, which would continue their growth story and drive customer spending to even higher levels.

T-Mobile won its 3G licences and set up a business unit called T-Motion. This unit was responsible for the mobile internet portal called T-Motion (later T-Zones) and performed primarily a marketing role within T-Mobile. T-Motion did not have responsibility for any of the T-Mobile messaging services (e.g. SMS or MMS). In theory T-Motion had a clear mandate – build and launch data services for the T-Mobile group and deliver on the 3G promise. The reality was that internal squabbling, overlap, confused priorities and over-optimistic forecasts derailed the ambition. This is what happened.

• When T-Motion was formed, new management was hired instead of using people from existing operations. This caused the first point of friction as 3G was seen as everything in the industry that was exciting. Existing staff, not surprisingly, resented not having a role to participate in product development for the future of the industry.
• Second, T-Motion was created as a group function and tasked with rolling out its services to each T-Mobile country. Unfortunately, because of loose governance, each T-Mobile country established its own 3G services and operations, which competed with T-Motion – effectively removing the requirement to adopt T-Motion. With limited deployment across the T-Mobile group, T-Motion became an expensive overhead.
• Third, the one source of compelling data revenue stream has been texting and this was unfortunately outside the scope of T-Motion. For a business unit without a healthy sales line and with spiralling costs it was inevitable that restructuring would take place.

At its peak the T-Motion/T-Zones business operated with almost 300 full-time and contracted staff. We estimate that more than €100m was spent over its lifetime.

Yet during that period very little return was generated. The double loss for T-Mobile has been that much of the talent hired into T-Motion has moved outside the organisation, frustrated with the difficulties. Valuable staff and experience moved to Google, Vodafone, Orange, O2 and Sky, as well as to start-ups.

T-Mobile has consequently suffered the final frustration of seeing some of its best ideas and ambitions now being delivered by its suppliers, or in some cases by competitors.

WHY FAILURES LIKE THIS OCCUR: BUSINESS FRICTION

Marketing directors and product development directors use more technology and have better data and intelligence at their finger-tips than ever before. Despite these resources the success rate of launching new products and services remains alarming and unchanging. Within the UK less than 5% of all products and services launched survive beyond two years (based on UK DTI data, 2006).

For large companies, where the sums invested in new product development are in the tens of millions, this means only a fraction of the potential return on investment undertaken is delivered back to shareholders.

So, if having the latest technology and most up-to-date customer and market intelligence is not driving new product development success, there must be other, more fundamental reasons for failure.

In this article I am specifically looking at the internal barriers that must be overcome to deliver a product to market, before even considering the external market and the competitive environment. We call this 'business friction'.

Business friction is not commonly identified or even talked about as a success factor. However, virtually every organisation has its own combination of internal barriers. They are the accumulated by-product of different departments working to different objectives and performance/reward priorities. It is inevitable when different professions and disciplines (e.g. marketing, finance, technical, sales) operate with different cultures talking different languages.

THE SYMPTOMS OF BUSINESS FRICTION

In our experience of the telecommunications and high-tech industries, the symptoms of business friction can easily be spotted within an organisation. Some of the critical interfaces for new product development – and points of friction – are defined in the table.

Different Departments Working on the Same Market Opportunity

This creates product offerings that overlap, targeting the same customers and creating internal competition. This in turn results in substantial lobbying of management to gain sponsorship and the diversion of resource in efforts to win internally, instead of focusing on external market forces.

Use of External Strategy Consultants to Provide Opinion

Extensive use is made of external consultants as a tool to establish opinion and recommendations because the internal opinion is not valued. This means that decisions are made despite consultants likely having only a 'snapshot' understanding of the business. (See Table 1)

External Appointments Rather than Internal Promotion

It is often believed that a new person with no political alignment or established track record will find it easier to make an impact on development projects versus someone internally whose characteristics are well known. As highlighted in the T-Mobile case above, frequently the opposite happens: other departments are resentful, with time lost while the new hire gets familiar with the machinations of a business.

Lengthy Decision-Making Processes

Companies tend to have decision-making forums with established agendas for evaluating new product development proposals. This typically results in a narrow band of concepts and proposals that fit the governance criteria, missing smaller, simpler opportunities as well as limiting the scope and range of opportunities considered.

Delays and Significant Project Overruns on New Product Development

Like a soap opera, once into the governance system more questions, more decisions, continuous reappraisals and more project administration limit the speed and pace of development. The results are projects that double and often quadruple the money and time it takes to bring to market.

Frustration by Partners and Suppliers

External parties responsible for part delivery of the new product become frustrated with the pace and cost of running the project. This can result in suppliers actively avoiding working with particular companies or, worse, becoming indirect competitors as they seek to by-pass and go direct to the customer.

Reorganisations as Management fails to Deliver on Objectives

Like a poisoned chalice, new product development is a high-risk business. Traditional managements rarely attempt bold and market-changing new products, instead preferring to play by the corporate rules. The uninitiated, in contrast, often overstep their mark, attempting to cut across the organisation, and their tenure is too often quickly ended.

HOW MARKETING CAN MANAGE BUSINESS FRICTION

1. Adopting A Proposition Development, Customer-Centric Approach

Product development must be customer centric from the very beginning of the process. This may sound obvious to classically trained marketers, but in the relatively immature but fast-growing and highly technical sector of TMT, the marketing function tends to be poorly developed, with lower status compared with that of the technical experts.

Consequently, the attention to consumer benefits is an exercise bolted on at the end of the process rather than integrated into the development process.

Discovering that they have developed the wrong solution – just when they are due to go to market – is disastrous. By contrast, a proposition-led approach gets the team at every stage to consider the needs of the customer and so ensure that the user experience is as true to this as possible.

Adopting this approach means that points of friction in developing a new product can be resolved by using traditional qualitative and quantitative research specialists to ensure the right questions are asked of consumers from the beginning.

2. A Much Wider Role for Marketing is Required

In most companies the job of the marketing department is disproportionately taken up with the increasing complexities of promoting brands. Too much of an external focus and not enough internal.

To successfully launch and build a viable market for a new product or service, the marketing department must work much more closely with its organisational peers. In this capacity the marketing project team needs to work closely with other functions planning and designing shared project areas such as the following.

• Business plan – setting a challenging target without raising expectations that mean underperformance 12 months from launch.
• Developing a product roadmap – balancing technical intuition with hard market facts on customer needs, ensuring investment is spread appropriately between development, business change, market launch and in-market support.
• Channel strategy – impacting customer support models, pricing points, channel training and production of a joint marketing plan that clearly articulates the benefits of the solution to the end customer as well as to the channel for selling a solution.
• End-to-end customer experience – covering awareness, choice, purchase, use, support and replace/cross-sell.

Furthermore, once the new product or service has been launched, marketing must then go on to take on the performance management role, ensuring delivery against the design and addressing features of the product and the promotional approach that need redevelopment or improvement.

These interfaces require a proper project structure, even for relatively small projects, to ensure that for each interface there is: identification of the decisions required; a forum for discussion; a structured process to drive consensus on agreed actions and the way forward.

3. Working with and Managing a Multi-Disciplined Project Team

New product development requires relationships to be built with many different departments and their disciplines. But these relationships can't be managed using a single marketing resource.

Instead, a multi-disciplined team is required that can bring the skills and knowledge to work with different disciplines, but still represent the interests and objectives of the marketing function.

In recent times, TMT companies have begun to recruit classically trained marketers on brand communication but in most cases they still don't have such sophisticated marketers upstream at the product development stage.

Here the business is still very much driven by the technology experts, who are product focused rather than customer focused. It is vital that marketers are involved at an early stage in helping to define the user experience to ensure the end product is consistent with customer needs and the marketing messages.

4. Using Interim Resources to Enable Marketers to Expand their Role

Inculcating a marketing orientation into a technology company takes time, resources and often politically difficult restructuring to do properly. For many companies a better solution is to use interim resources to help expand the marketing function on a project basis.

Specialist agencies have been set up that have experience of working end-to-end for clients (i.e. from finding the right insights to agreeing what the end product and its customer benefits look like) and so are well positioned to ensure that the proposition, when released into the market, addresses customer needs.

In the telecommunications market, companies such as Vodafone, BT and Orange have been early adopters of such an approach. They have used interim resources to augment their core expertise, and have then back-filled with full-time resources once comfortable with the approach and structure.

SUMMARY

Companies need to achieve new product success. Following an accelerated proposition approach is proving popular not only among marketers but CFOs and CEOs.

Enhancing the capabilities of the marketing department can help reduce business friction, cut product development costs and improve in-market success

Marketers can enhance their profession and their careers by taking steps to proactively manage business friction with the use of interim resources who specialise in enabling multi-disciplinary teams to function constructively.

This article featured in Market Leader, Autumn 2006.

NOTES & EXHIBITS

TABLE 1