What if you invested extensively in improving the performance of your product — only to realize that some potential customers don’t notice or care? In his article “Why Great New Products Fail,” Duncan Simester, the NTU Professor of Management Science at the MIT Sloan School of Management, illustrates that potential business pitfall with an anecdote about a friend of his who didn’t know much about bicycles — and whose main criterion for purchasing one was that it be red. “Think for a moment about the implications of this example for a bike manufacturer,” Simester writes. “Technical innovation would not increase the chances of a sale to this customer, no matter how much value the innovations created. More generally, the risk for companies is that they invest in innovations that customers cannot recognize.”
The solution, Simester argues, is for companies to gain a better understanding of how customers make purchasing decisions — particularly the extent to which they will search for information or rely on inferences. His article provides insights to help companies better gauge whether potential customers will appreciate their innovations.
Simester’s essay is part of a collection of articles in this issue on new product development. The collection also includes a fascinating case study of the process Cisco’s R&D unit in India went through to develop its first global product. In “Developing New Products in Emerging Markets,” Srivardhini K. Jha, Ishwardutt Parulkar, Rishikesha T. Krishnan, and Charles Dhanaraj share lessons from that innovation process that will be helpful to managers throughout multinational organizations.
Globalization is one force changing product development — and the Internet is another. In “Finding the Right Role for Social Media in Innovation,” Deborah L. Roberts and Frank T. Piller address the puzzling question of why many companies aren’t benefiting much from incorporating social media tools into their product development processes. And in “Now That Your Products Can Talk, What Will They Tell You?,” Suketu Gandhi and Eric Gervet explore how the Internet of Things is starting to change the way companies think about their products.
There are some aspects of product development that don’t change over time, such as the importance of skilled employees. In “Why Learning is Central to Sustained Innovation,” Michael Ballé, James Morgan, and Durward K. Sobek II point out that investing in technology or process improvements won’t result in better products unless companies also focus on helping their employees improve their skills and capabilities — something to which too many companies only pay lip service. That’s a timeless and important message that all of us in business would do well to remember.
Martha E. Mangelsdorf
MIT Sloan Management Review