I see this time and time again: companies decide whether to develop new products based on an immediate customer need, a gut feeling, an acute observation of the competition, or an unchecked assumption. Such impulsive decisions consequently tie up a great deal of development capacity, incur high costs, and often fail to deliver commercial success in the end.
That is why it is important to first understand exactly what product development actually means: it is about enabling users, through a product innovation, to carry out a specific task more easily, better, faster or more cheaply. Many products fail to meet this core requirement because companies lack an in-depth understanding of their customers and their needs. The question of the target audience is also crucial: for whom are we developing the new product? For the purchasing department, the service department, or the customer’s own customers? Often, an entire buying centre needs to be addressed – not just from a sales perspective, but through the product itself.
“If I’d asked people what they wanted, they’d have said: faster horses.”
(This quote is attributed to Henry Ford.)
Understanding customer needs
Economic conditions are subject to constant change – from (geo)political upheavals, through wars and environmental factors, to tariffs. Henry Ford understood this: Technologies and solutions change. Yet the fundamental customer need often remains the same. If car manufacturers internalise the fact that customers want to get from A to B as individually, quickly and conveniently as possible, they will realise that this requirement hardly changes, even under dynamic or unstable external conditions.
The cost of a poor product development process
If companies do not understand customer needs and invest in developing the wrong product, this ties up a great deal of capacity throughout the entire project lifecycle. Firstly, there are visible costs, such as:
- salaries of development staff
- Costs for the production of samples, tools and prototypes
- Costs of implementing new manufacturing processes
In the B2B sector, these costs can sometimes be very high.
The second cost category is invisible, frequently underestimated and often even greater: the opportunity costs. What genuine innovation could we have developed in the same amount of time? From a business management perspective, this question often remains unanswered. Added to this is the market side: staff from marketing and sales familiarise themselves – sometimes at great expense in terms of time – with the specific features and advantages of the new product. Yet if the customer does not buy the product, the end result is a financial loss.
For an average medium-sized business, poor product development processes can lead to losses in the six- to seven-figure euro range per year. Companies risk this sum year after year if they fail to rectify the following mistakes.
Mistake 1: Failing to understand the customer’s problem.
If companies do not know which task for which customer can be solved better, faster, more cheaply or more easily by the new product, there is no sales pitch and no marketing message. The product is virtually impossible to market. Why should customers spend money on it if they cannot see the benefit?
How can this mistake be avoided?
Those responsible for product development – usually the product managers – must thoroughly understand market requirements. It is not enough simply to talk to customers and ask what they would like to see done differently and what they dislike about existing products. It also involves understanding how customers use a product to solve a specific problem.
The tool for this is the so-called Job Map. Map out the individual steps currently required to fulfil the customer’s job. This will show you at which point in this chain there is room for improvement . What matters is the outcome for the customer. A solid ‘job-to-be-done’ analysis and a buying centre analysis across multiple customers provide a robust basis for this.
Expert tip
Link solution development to the ‘job to be done’ and work in short, iterative development cycles. Assess the validity of the prioritised customer outcomes in light of the current market situation and prevailing conditions. This minimises the risk of the new product flopping, whilst enabling you to work on future-proof concepts.
How can senior management tell that this change is working?
- The actual development may begin later, but it will be built on a solid foundation. Product development proceeds in a much more targeted manner.
- Project stakeholders are more motivated because they are aware of the customer benefits from the outset.
- Marketing and sales can launch their initiatives whilst development is still underway, because a robust ‘Job-to-be-done’ analysis inherently incorporates the marketing narrative. If you know which ‘job’ the new product does better, faster, more easily or more cheaply, you also know what story to tell the customer.
Mistake 2: Developing solutions without a problem.
Enthusiasm for technology often leads to product developers working on solutions for which there is no customer demand at all. The question “What challenge are we addressing with this?” often remains unanswered. Yet solutions that work but do not solve a problem create no added value whatsoever. The same mistake can also occur when customers shout “Here!” all too loudly. Powerful stakeholders who declare that this or that is needed often create the same problem.
Practical example
A managing director realised that there was a competitor’s product missing from their own portfolio – and demanded the development of a comparable solution. However, it remained entirely unclear which problem this new product was supposed to solve better, faster, more cheaply or more easily than the existing solution.
I have time and again seen that supposed gaps in the portfolio give rise to products that essentially just expand the company’s range without providing any real benefit. Such haphazard development often has unpleasant side effects. If the product initiative originates from a very powerful stakeholder, those tasked with implementing it are often sceptical from the outset. They do not really enjoy the process because they suspect the innovation will flop anyway.
How can this mistake be avoided?
On the one hand, it is important to check whether the planned new product addresses a genuinely widespread and relevant market need. On the other hand, the product management team should bring the stakeholders together and have a frank discussion with them. The problems must be laid out on the table, and there needs to be open communication. This is the only way to prevent investment in products that nobody needs.
Mistake 3: Failing to prioritise properly.
Within product development initiatives, there is often a lack of genuine prioritisation, i.e. project portfolio management. The reason is understandable: every product development is considered equally important because, in the best-case scenario, it addresses a customer need. When two, three, four or even more product developments are running in parallel, it is usually neither clearly defined which project takes priority, nor according to which criteria scarce development resources should be allocated.
How can this mistake be avoided?
Prioritise product developments according to customer benefit, strategic fit, market potential, effort, risk and cost-effectiveness – not according to which project currently appears to be the most urgent.
Mistake 4: Postponing objectives to save on investment.
Changing product requirements are normal and therefore part of traditional change management. Changing objectives, on the other hand, are a problem area in their own right. The sequence of events is typical: a product development is already well advanced, and everything looks promising. Then the first technological problems arise. Instead of questioning the development itself, companies redefine the product objective. Why? To protect the investments made so far. This is not a good approach. The typical fallacy behind this is the sunk-cost effect: because companies have already invested a great deal of money, time and personal energy, it is difficult to fundamentally question a project.
How can this mistake be avoided?
Answer one key question: Is the development still economically viable at this stage? In addition to recalculating the business case, a reliable answer requires thorough monitoring of the product features: Which of the features already implemented actually make sense – in light of the product’s new direction? What additional investment might be necessary? If the full range of functions is retained, this can significantly drive up the product price – especially as there is a risk that the product will ultimately be developed out of step with the market.
5. Mistake: Treating the business case as a ritual.
In traditional development processes, reviewing the business case is a standard procedure. Yet many treat it as a ritual. The typical scenario: Development begins because a customer has signalled an immediate need for a product innovation. This need is incorporated into the business case and determines the direction of development. If the customer’s needs change, the product remains the same nonetheless – on the assumption that there are many other customers who need the existing product. Companies often fail to check whether this is actually true.
A major mistake. Market conditions and the wider environment can change so drastically that it is no longer worthwhile to continue developing a product. In such cases, it may make sense to put development on hold or discontinue it. Clinging to a product against one’s better judgement prevents companies from spending their budget on more sensible developments.
Anyone who fails to carry out such a review therefore increases the risk of a product flopping. If you do not know how sales of the new product will develop, you are equally unaware of how it can generate profit. Yet that is precisely what it is all about in the end.
How can this mistake be avoided?
Reviews are needed throughout the development process – regardless of the development concept on which it is based. These reviews enable companies to
- to scrutinise the technical solution and
- to scrutinise and cross-check the costs, revenue potential and other parameters.
To ensure that such a review actually leads to decisions and is not merely a formality, several conditions must be met within the organisation:
- Processes must be documented.
- Ancillary processes should be avoided. Where they are necessary, they must be documented.
- Roles must be clearly defined.
- Project participants must have the freedom to make decisions. If no one dares to make decisions, or if stakeholders have no interest in making decisions, the review process will fail.
6. Mistake: Leaving interfaces and responsibilities undefined.
The product development process consists of interfaces between product management, development, marketing, sales, procurement, production and service. These areas are staffed by very active people. However, it is often unclear who actually has the final say. If development makes a request of procurement, this can be counterproductive to what product management envisages or what the strategy dictates.
The economic impact of such unclear lines of responsibility manifests itself on several levels.
- Generally speaking, everything takes longer because the coordination processes are unclear.
- Wrong decisions are regularly made because people who are unaware of the overall context make incorrect assumptions – and thus wrong decisions – during discussions.
How can this mistake be avoided?
From an organisational perspective, a documented product development process is required, in which the process chain is mapped out exactly as it actually operates. This also includes the short chain of command. It should form part of the process analysis and be taken into account in the process design, so that no inconsistencies arise and decision-making pathways remain transparent . Everyone who needs information to ensure the project moves forward must be familiar with this process. And it must be clearly defined which process participants can actively influence the process.
For product management, this means two things:
- to manage stakeholders so that everyone is on the same page
- Clearly define who is authorised to make which decisions and when
How can senior management tell that an interface is actually working and not just described in formal terms?
By the fact that the project runs more or less without a hitch, information is available in good time and there is very little friction throughout the project. If things get stuck, if there are contradictions, or if an above-average number of conflicts arise, something has often gone wrong in the process coordination because the interfaces are not clearly defined. In such cases, action must be taken to ensure that the conflicts are limited to factual issues.
7. Mistake: Leaving the launch date to chance.
If the launch takes place later than planned, this causes considerable direct and indirect costs – not just within the project itself. It is the opportunity costs that really take their toll: other projects are delayed because resources remain tied up for longer than planned. This is a major cost trap.
However, an earlier date is not automatically a better one. Launching too early can also lead to difficulties, as it may increase the risk of complaints.
How can this mistake be avoided?
The launch date is not a matter of gut feeling, but of the definition of launch readiness criteria. It must be clearly defined what needs to be delivered for a product to be ready for launch. It is also necessary to determine where a compromise might be possible – and where it is no longer feasible. Drawing this line is a laborious but unavoidable task to avoid unnecessary time pressure.
Mistake 8: Failing to learn from your own projects.
It is a truism, yet it does occasionally happen that companies fail to learn from their experiences. At the very latest after the launch, it makes sense to carry out a review. An even better and tried-and-tested practice is to carry out reviews at defined interim project stages. This is because the lessons learnt from these are important for subsequent product developments or development stages, as they usually increase their efficiency.
How can this mistake be avoided?
In a recap session at the end of a product development process, you can identify what went well and where there is room for improvement. You’ll identify which developments actually added value for the customer. You can reflect on how a decision was reached and how you can make better decisions next time. This leads to increased value for the company and for customers.
From error prevention to genuine product innovation
Eliminating these eight mistakes makes the product development process more efficient. To create truly innovative products, you must align all processes with the customer and the market. This means, first and foremost, having a precise understanding of market requirements and customer requirements. And then aligning the entire process chain accordingly. Innovation does not automatically mean incorporating the very latest technologies into new products. This can be innovative, but it does not have to be. A novelty is only an innovation if customers are prepared to spend money on it. Innovation must deliver value. If this is not the case, the product remains, at best, an invention.
The interplay between senior management and product management
Product management must ensure that all new products address a genuine customer need and deliver value.
The senior management, for its part, is required to empower product management and enable it to assume this responsibility – both technically and formally.
How can you tell if you need an outside perspective?
If there are increasing conflicts between marketing, sales, product management and development, it may be worthwhile to seek an outside perspective. You should also critically examine the history of your product development:
- When was the last time a product flopped?
- When did a product fail to achieve the success envisaged in the business plan?
Anyone grappling with questions of this kind would be well advised to seek external help to analyse the situation and get to the root of the causes of the failure.
From an internal perspective, an objective assessment is only possible to a limited extent. Every person involved and every stakeholder has their own view of the situation and may tend to pinpoint the problems elsewhere. Malice is rarely the underlying cause. Ultimately, however, everyone is trying, from their own perspective, to achieve the best for the company. The challenge lies in reconciling the various interests. This is what good stakeholder management achieves. External facilitation can help to reveal patterns, distinguish between different interests and refocus the discussion on facts and shared objectives.
