WHY PRODUCTS FAIL

"In a delicate balance between risks vs returns, and innovation vs adaptation, retrospective research isn't always a reliable crutch."

This article was published in Aug 2000

HOME

BACK

NEXT ARTICLE

WHY PRODUCTS FAIL.
The sad fate of a Magazine, a Cola, a Politician and a Phone

Some products burn up faster than others. Some twist and turn slowly in the breeze, until the market causes them to crash. The Edsel (of 1957) and New Coke (1985) were the twentieth century symbols of product failure, but they are nothing compared to some of the more recent wreckages.

Last month, LIFE magazine, that venerable symbol of the print industry that began in 1936, breathed its last. Reports indicate that it had been ‘modestly profitable’ for the past few years, but had actually been on a life support system for a long time. In 1972 the publishers suspended the magazine for 6 years.

But being reborn at a time that saw the rapid proliferation of special interest media (such as CNN and Sports Illustrated), and instant media gratification (digital cameras and Webzines), LIFE magazine had lost it’s raison d’etre. Or, did its readers move on?

Which brings us to an important question: How do products and services keep pace with changing consumers’ needs? Or more specifically, what can a company do to check the pulse of the market so as to build or modify its products? This is not the regular old media vs new debate. Ad agencies and consultants sometimes help. Few CEO’s stay around to generate the next big thing like Steve Jobs and the legendary iMac. And research? Contrary to popular wisdom, research is not always reliable. Coca-Cola was the most spectacular example of how research alone can be a dangerous leg to lean on. In the New Coke debacle, before changing the formula, extensive blind testing was carried out to find out which taste was preferred. The sweeter taste came out stronger, so Coca-Cola used it as evidence that consumers’ tastes had changed. But to a lot of people Coke was much more than sugar-syrup and carbon-dioxide. Changing the product was akin to tampering with a piece of culture or toppling an icon. The market not only rejected the new product, they demanded the return of the old. Similar examples abound in every industry, where to customers, the whole has greater meaning than the sum of its parts. Market research predicted that Star Wars and E.T would not be viable, but if movies are products, and cinema goers are consumers, look at how the market has responded.

BORING VS RELEVANT
The biggest mistakes happen when marketers surround themselves with people who are like themselves, but who are no reflection of the market. The 54-year old MTV CEO, Tom Freston, surrounds himself with people much unlike him saying, "if (MTV) was dependent on my taste we would be out of business by now." An interesting product flop was seen in the US political arena recently when the more vibrant Republican candidate, John McCain, with stronger leadership attributes, a better agenda and higher approval ratings, lost out to a more ‘boring’ product, from the same party, George W. Bush. As political commentators often put it, campaign staff who pour over the opinion polls see what they want to see. Besides, they are enveloped by advisors, lobbyists, the media and the opposition, all of whom are highly aware of the candidate’s stand on certain issues. The problem is, the electorate isn’t always as attentive.

From within this bubble, it is easy to give the candidate (or product) a packaging that’s quite out of sync with the voter (or consumer). McCain went after reform, something that struck a chord with a country tired of the corruption and lies that oozes out of Washington. Yet, his packaging was far too radical for its time and McCain was unceremoniously rejected. Interestingly, McCain had the strongest ‘brand recognition’ that any candidate can ever want. The product features were also impressive. He was, after all, a POW in Vietnam, and had returned a hero. Images of him in crutches (the product shots) were compelling. He was marketable –a hero who sacrificed much for his country. Then there was his record of being one of the few who took on cigarette companies, back in the days when Big Tobacco was invulnerable. So why couldn’t the market sustain him? With America going through an economic boom, and no cold war in sight, it was like trying to launch a condom in a town that believes in large families. He’s did not fill a need.

Being unable to adapt to changing market conditions turns pioneers into also-rans. Netscape, which practically invented the Web browser category seemed invulnerable, based on the now-questionable Positioning theory (Positioning advocates held that being first was a ticket to longevity). People wanted more robust features like white-boarding, multi-media, telephony and software integration. Microsoft’s Internet Explorer, arrived late, but moved fast to fill these needs, quickly overtaking the innovator. Hewlett-Packard, on the other hand, survived. It was under siege from the dot-matrix competitors, and its vastly superior laser printers could not compete at this low end. However, when desktop publishing and digital photography turned mass-market, HP had a secret weapon. An older technology that had been languishing on its shelves, ink-jet printing, was suddenly relevant. If only Encyclopaedia Britannica had come down from its ivory tower and reacted as quickly when Encarta juggernaut came along!

INNOVATION VS ADAPTATION
Not very different from soft drinks and politics is a famous flop in the technology arena: the Iridium phone. First a little background. We live in an era of global connectivity where anything short of real-time is downtime. Telephony is a huge market in search of a better mousetrap. In 1987, when some Motorola executives came up with the preposterous idea of circumventing steel towers and copper cable with a constellation of low-orbiting satellites, the Internet was a clunky academic hangout. Analog was state-of-the-art, and a cellphone was four times as expensive as a washing machine. Indeed the idea of a satellite phone didn’t spring from any focus group or university dissertation (but neither was the Mazda Miata nor Palm Pilot). The wife of a Motorola engineer wanted to be in touch with her office in Arizona when holidaying in the Bahamas. Her husband took the idea to work and eleven years later, in November1998, the geo-stationary satellite network was in place. The project had a steep price (over $5 billion) and a complex architecture -- 6 intertwined necklaces of 11 satellites each circling the globe. All this to route a call between an Iridium user and any other phone on the planet.

But a technology breakthrough is one thing. Marketing it is another. The project got a lot of media attention. This was the future it seemed. But something was amiss with customer demand. As phone calls go, the service was expensive (about $7 a minute), and the phones were way too pricey ($3000) for even the kind of people at whom it was targeted. Because the phones had to uplink directly to a satellite 485 miles above, they were bulky, with ugly antennas –a terrible thing at a time when digital phones were becoming as nifty as pagers. The satellites spun an analog network suited for voice traffic, but lacked the scalability and capacity for digital traffic such as music, financial transactions, graphics and data. How was Iridium to know a decade ago that the seemingly unrelated Internet would sideline voice transmission in favour of data traffic? More recent research had uncovered this ‘need’ but the company, stuck with its inflexible architecture, ignored the warning signs. Iridium went bankrupt in less than 10 months. Service to some 50,000 subscribers was discontinued as of March this year, and the satellites eased out of their orbit.

It’s a terrible image: 66 satellites allowed to burn up as they re-enter earth’s atmosphere. But this is marketing. Cremation is always an option. Barely one year ago WIRED magazine gushed that Iridium "signals the arrival in space of the rough-and-tumble jockeying of free-market enterprise." But who would have thought the consumer non-demand would cause such turbulence in the upper atmospheres of hi-tech?

If there is a lesson for marketers, it is all about doing one’s homework, fully understanding that predicting the future is not a science –it’s a gamble. It may be daunting, but then again, the world would have never seen the likes of Walkman, FedEx, CNN and even LMD –all of which were predicted to fail!

TOP 6 REASONS WHY PRODUCTS STUMBLE
1. The product definition is flawed. It is very easy to define the product or service in terms of what it is --its physical product attributes. The eternal question ‘what business are you really in?’ has to be asked from day one. The railways would have been obsolete today if they had not realized they were in the transportation business, rather than in the business of laying tracks. Sun Microsystems makes enterprise servers, but their product isn’t simply ‘hardware’. They are what the industry calls, ‘enablers’. Their definition: "we’re the dot in .com". If Pirelli thought itself to be in the rubber business, it would have faded into the background. The Italian conglomerate defines itself as being in the ‘transportation business’ –of people (tyres), energy (electric cables) and information (fiber optics). Brilliant!

2. Half-baked research. This is not to knock research. In-depth study is not only imperative, it would be foolhardy to not do it. Yet, research has to go beyond the comfort zone, and break with mainstream ‘scientific’ approaches. In order to keep its Nickelodeon product relevant, the MTV network uses many types of research, sometimes video-taping people’s lives. They even use hypnosis to literally get into the heads of the baby boomer audience. Usage pattern projections may paint a rosy picture, but that’s assuming you are launching the product in a perfect world with no competitor in sight to muddy your wading pool. Factor damage-control into the communication plan. No one predicted spammers and pornography, so the first versions of web browsers and Email programs did not pay much attention to filters and screening devices.

3. Hardwiring your product to the operating system. In the days of mass marketing, it was OK to base your product or service on a single distribution channel. The phone outperformed the telex, but assuming it would retain the same interface and infrastructure would have never made the wireless phone industry feasible. If AT&T was locked into the business of delivering voice via cable, it would be obsolete. The company has steadily invested in wireless and Internet technologies, anticipating a demand for cheap voice and data traffic.

4. Wise Guys. Surrounding yourself with too many smarty-pants MBA’s is a sure way to get a myopic view of the market. Let’s face it. Even ad agency copywriters aren’t really representative of your customer base. As a marketer you must check the pulse of the market using people very unlike yourself. Ask MTV and Old Navy. If only Motorola’s Iridium team had had their ears to the ground.

5. Overkill. There is a fine line between guarding your brand equity, and staying relevant, being ubiquitous and diluting the message. Nike is a good example of the wrenching problem of being a great logo. The over-use of its ‘swoosh’ devalued the brand. Likewise, Xerox is a victim of its own success with the company name becoming synonymous with photocopying. Priceline.com may not be wallpapered across every bumper sticker, toothbrush or taxi, but has enough top-of-mind awareness to make it tower among scores of similar-named competing products.

6. The Ivory Tower complex. It’s one thing to believe your product is superior to the competition, but being complacent about your market can be suicidal. You may be the pioneer, but the history of innovation is littered with copycats who crept up from behind. Unlike Lady Macbeth’s incredulous "we fail?", it’s always a good thing to question your game plan, even though your castle is fortified.