Lessons Learned from Innovation Blunders

About the Book And Author

Over the years I watched with amusement but also genuine concern as American corporations struggled with their product innovation initiatives. The source of my confliction was simply this. The best corporations in America continued to make the same innovation mistakes over, and over, and over. They were content to fail stupid by not learning to avoid the eight most common mistakes associated with innovation efforts. Isn’t it better to fail smart with new mistakes particularly if the learning from them illuminates the darkness.

Failure is inevitable in product innovation. Companies must not be averse to taking risks. Thomas Watson once said at IBM, “The way to be creative is to double your failure rate.” But surely Watson also believed that the understanding of failure could be a rich instructional tool.

We decided to study the cadavers of 400 new product failures. Our autopsy revealed eight common miscues associated with innovation malpractice. They range from fatal judgments about core competency and “dead-on arrival products” like the Pontiac Aztek to “fatal frugality” and even dishonesty driven by marketing’s Freudian id. Yes, marketing does have a Freudian id. I saw these same mistakes in play at companies like Johnson & Johnson, Gillette and Bayer where I won my marketing spurs in senior management positions.

Despite increasing sophistication in marketing and marketing research, the statistic— nine out of ten new products fail— has hung over the marketing landscape like a storm cloud for six decades. Nothing has changed except the beat goes on. A modest improvement—like only seven out of ten fail—would improve the bottom line of corporations and make their shareholders more prosperous and happier

It is easy to be a Monday morning quarterback. Where’s the beef? We not only show the underlying reasons for innovation mistakes, but we offer a meaty set of prescriptives to achieve innovation success. How do boards sort out fiction from truth about innovation initiatives recommended by professional management? How do they stand up to charismatic professional managers with persuasive PowerPoint presentations that shade the truth. Corporate boards have finance, audit, nominating, and compensation committees. Why not audit marketing’s performance via an innovation committee composed of objective outsiders—not yes men and women—to counsel complacent or comatose boards in assessing dubious ventures like Heinz’s blue French fries. The innovation committee audits the new product in a systematic, objective process that allows the board to raise the hard questions not being asked. Their observations might come as a surprise—perhaps even a jolt—to the board’s tranquility. The board then decides what action should be taken.

How about this? Annual reports should have summary sections showing the cost of product innovation over the past ten years providing a historical context for innovation initiatives in the company. No more sweeping expensive new product mistakes under the rug. Shareholders have the right to see how their money is being used and abused in the innovation game.

Here’s another tidbit. Marketing research departments have been beaten into submission. The majority of new product failures had heavy marketing research budgets associated with their development—think Pepsi Blue, New Coke, Crest Rejuvenating Effects and so many others. How can this be? Many marketing research departments do not understand the concept of value-added which requires a special kind of leadership and training to make it work. We’ll show you how to get it. Or, if you don’t want it, there is the alternative: let the inmates run the asylum with their sanitized optimism that leads to an inevitable chain of new product failures.

There’s more. There are three important players in the innovation game: investors, corporations, and business schools. For each, we offer a set of prescriptives that can help cope with innovation malpractice. Both investors and corporations prosper with innovations like the all-in-one- iPhone or Mach 3. But all product innovations are not created equal; failures widely outnumber successes, and a hefty price gets paid by both parties because of this. We offer four tips for investors to confront the frivolous innovation emasculating their shareholder value.

Corporations need to improve their innovation batting averages. In our book, we serve up ten prescriptives for consideration. Implementing even a few of these would drastically improve the success ratio and boost bottom line performance. The last remaining silo for profit enhancement in corporations is attacking frivolous innovation—bottom lines could easily be doubled.

Business schools also have a stake in the innovation game as it is currently played. New product courses in business schools tend to focus on best practices. There should be more of an upside-down-look, because the high failure rate is the direct result of worst practices. The teaching of best practices isn’t doing much to reduce it. Business schools can’t teach new products courses effectively until they better comprehend the marketplaces realities of the innovation process.

There are major ethical issues associated with innovation that has gone astray. These cover a scale from outright lying and fudging P&L’s to over- enthusiasm to over-optimism to not understanding the cumulative effects of bright, sunny optimistic assumptions to over-reliance of simplistic assumptions. These issues are seldom taught in MBA new product courses and many of the marketers engaged in this behavior are MBA graduates from our finest business schools. There is more to ethics than Jeffrey Skilling, and that’s why we offer three prescriptives for MBA programs.

Flawed innovation is everybody’s problem from Wall Street to Main Street. Corporations struggle with it. Over 90 per cent of the innovation initiatives in corporate America failed to achieve their ROI targets. Business schools naively focus their teaching efforts on “best practices” while the new product failure rate in the real world remains abysmally high. Employees get exploited. When Polaroid missed the digital image trend and declared bankruptcy, their work force lost their retirement and pension benefits.

Now American consumers have shifted their preferences to “gotta have cars” from the Asian connection during a period of three decades where Detroit practiced innovation malfeasance. The state of Michigan is a mess with dwindling tax receipts from the once prosperous industry. Communities like Anderson, Indiana with a 100-year dependence on the automobile industry became ghost towns overnight. The blue collar aristocracy in America has ended as Detroit’s labor force confronts job loses, relocation, personal bankruptcy, and faces a future of regret, uncertainty, and despair because the shrinking Big Three lost their innovation edge.

While many factors fueled the Detroit decline, one of the prominent ones was lackluster styling and design. The Pontiac Aztek looked like the hunchback of Notre Dame. Cars like the Buick LaCrosse look like they were styled for grandmas. Ford’s MBA crowd destroyed Jaguar’s styling and design legacy by attempting to market a cheap Jag that looked like a Taurus. The young, restless, and affluent prefer the styling of foreign brands. My two daughters have never driven an American-made car in their lifetime. They never will. Detroit has lost them forever.

Here’s the marketing implication for this country. In the innovation war, styling and design can be a potent weapon. Therefore, American companies, many of which have products with bland styling, are blissfully naïve if they assume their global competitors will not focus on this weakness. An English professor colleague returned from her trip to Europe and asked me, “Why are the products in Europe better designed than ours?” If an English professor noticed this weakness, so will the design conscious Germans, Scandinavians, and the Asian connection. Are there other American industries with product creativity issues ready to experience a Detroit-type melt down?

When I became Chairmen of the Board of the American Marketing Association, we initiated the Edison awards to recognize innovation excellence in corporate America. Yes, it does exist—think iPod and Crest Whitestrips—products that reconceptualized how people listen to music and whiten their teeth. And when I teach the new product development course, the classroom focus is on—yes you guessed correctly—worst practices. Students are amazed that these new product miscues take place. Their typical response: “How can this happen?” To quote a favorite phrase from the Mitt Romney campaign trail, “That’s a good question.” They can now read my book to learn the rest of the story. And so can you.

There is more to life than wallowing in the quicksand of bad new products. When not lamenting the state of product innovation in America with my academic colleagues or others like the board members of a startup company that I am associated with, I find it therapeutic to romp in the backyard with my frisky Labrador “Harbor” named after that day of infamy December 7, 1941. Another passion of mine is watching the Princeton University Tigers both the women and the men teams play lacrosse. The passion became hyper-addictive when both of my daughters played high school lacrosse. I lament the decline in Tiger Power as new and formidable competitors surfaced like Albany and Northwestern. Nothing is forever in collegiate lacrosse and, hopefully, the same applies to product innovation in America’s corporate corridors.

A good place to start: Think about our recommendations or prescriptives as well as those from other sources. Which players in the innovation game are ready to shake and bake? Our bets are placed on the deadliest of games: innovation roulette. The outcome impacts all of us— investors, corporations, employees, and, yes, even America.

300 pages • ISBN 978-1-59102-568-9 • Hardcover: $25.95 (6 x 9) • Prometheus Books

Publication: September 2007

Available at Amazon.com, Barnes & Noble, Borders or your favorite little book store on the corner