Categories of Product Failure
It dawns on me after having worked in product for two similar, but very distinct, companies over the past 15 years that the way we look at the success or failure of products as we introduce them into the market is very unscientific and lacks the appropriate rigor to be able to maximize outcomes given the state of the company.
This is a major problem, because once a product has already been created, and is underachieving its business objectives, we are trained to think about that product itself as a sunk cost, potentially seeking to kill it early in its public life. But the reality is that what we’re trying to consider as sunk cost is actually the basis for future options. If we immediately look at the failure as sunk and unworthy of additional investment we write off a large set of opportunities that we now have in front of us.
It’s not always the case that there’s something attractive ahead, but to ignore the value that has been created is to ignore the building blocks that sit in our toolbox. As a result, I’m jotting down my perspective on how this process works and how we might consider it differently.
With successful product lines, we have evaluation matrices like the BCG Growth-Share Matrix, that highlights how to consider the future investment plans for the successful product lines we already have. But that assumes we’ve made it past the initial post-launch hump and generated a product line into a viable existence.
BCG Growth Share Matrix - Courtesy of BCG
But what happens in the period immediately following a product launch? In the period where the entire business is eagerly tracking the initial results of a new product in the market? Many companies use this as a key indicator of the value of their investments in innovation.
At the initial release of a new product (or pre-release funnel building), business metrics are put in place to track the “success” of the product (orders, sales, new contacts, etc). It is often the case that these metrics are very aggressive out of the gate and may be based on some aggressive (often unvalidated) assumptions. This can lead to the determination that a product has “failed.” However, this classification and the response to it should be systematically evaluated to determine what type of “failure” it truly is, and what the options for response are.
In juxtaposition to the BCG Growth-Share Matrix, I’ve categorized product failures into 4 main categories, each with examples, the implications for our business economics and potential countermeasures that can be taken. These are non-exhaustive lists, but are a good starting point to help evaluate the affinity of a given product toward the essence of the category.
While I don’t have a clever name for this idea and haven’t formalized it into a true framework, I hope that the essence of this idea and the ideas below will be helpful to get us thinking about how to evaluate our “failures” more thoughtfully so that we may maximize our outcomes without falling victim to our own bias created by the narratives we apply.
Here are the categories…
Unrecoverable
Types / Examples:
Missed market window
Integrated outdated technology no longer competitive in the market
Went after a market / segment that has evaporated
Technology required to be successful cannot exist early enough to close the business case
Economic Implications:
Not advisable to put any additional investment into the product
Forward looking objective is to minimize future downside
Potential Countermeasures:
Shed excess material
Look for internal leverage of components and IP
Document case study on path to failure
Wait and see
Types / Examples:
Product and technology is top tier, but initial demand is soft
Market window isn’t ramping as quickly as expected
One or more target segments has faded
Recession has stalled investment plans
Economic Implications:
Objective is to hold additional investment, track market signals, and use those to trigger new economic investment evaluation
Potential Countermeasures:
Pivot to the research community and focus on technology leadership
Put it out on the market through the strengths of its technical capability and allow the market to deliver our emergent strategy
Give it a nudge
Types / Examples:
Solid product but no channel
New information about customers needs has come to light during development - PRS defined only 90% -> 10% additional investment required to maximize result
Missing key GTM relationships or capabilities (integration partners, classifications, marketing support, etc.)
Competitors beat you to market with new technology that you could integrate quickly (“drop in”) to meet/exceed competitive threat
Economic Implications:
Evaluate additional investment based on its forward looking promise only
Projected returns for the “Do Nothing” vs. incremental investment scenarios
Do not consider sunk cost despite the human temptation
Objective is to see how to maximize upside based on current state relative to “do nothing” scenario (keeping in mind ROI vs. other product/project options)
Potential Countermeasures:
Cultivate new GTM capabilities or partners
Seek acquisition to close key gaps
Run an accelerated PM Toolkit sprint to re-validate customer needs and market segments
Pivot and go/grow (key subset of “Give it a Nudge”)
Types / Examples:
Great product, wrong market segment or persona
Economic Implications:
Objective is to re-create and re-validate the business case for the new market/segment/persona, etc. that you are pivoting to. Ensure financials are sound, then determine available additional investment decisions based on future-looking ROI
Potential Countermeasures:
Re-focus the value prop and go-to-market
Do you have additional thoughts on this topic? Email me to discuss at ideasfromtheapex@gmail.com. I would love to hear your thoughts and flesh this out further for the benefit of all business leaders.
-Chris