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Success Factors in Product Innovation

Article  in  Industrial Marketing Management · August 1987

DOI: 10.1016/0019-8501(87)90029-0

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 Success Factors in
Product Innovation
R. G. Cooper and E. J. Kleinschmidt
INTRODUCTION
Management of the 1980s and 1990s faces a dilemma
in product innovation. On the one hand, there is increas-
ing pressure to develop and launch more new products;
Booz-Allen and Hamilton report that firms expect new
products to grow from 33% of corporate sales to 40% in
the 198Os, and that the number of new products intro-
duced will double [l]. On the other hand, product in-
novation remains a very high-risk endeavor, fraught with
difficulties and littered with failures. New product failure
rates remain high (estimated to be about 33% at launch
[2, 3, 7]), while almost half the resources that U.S. in-
dustry devotes to product innovation is spent on inno-
vation duds-products that fail commercially or never
make it to the marketplace [ 1, 2]!
If businesses are to survive and prosper, managers must
become more astute at selecting new product winners,
and at effectively managing the new product process from
product idea through to launch. These two challenges-
better project selection and more effective process man-
agement-point to the need for a greater understanding
of the components of success in product innovation. We
set out to gather evidence to help answer the question,
“What makes a new product a success?” by looking at
the new product experiences of a large number of firms.
Address correspondence to Professor R. G. Cooper, Faculty of Business,
McMaster University, 1280 Main St. West, Hamilton, Ontario, CANADA
LSS 4M4
Indusfrial Marketing Management 16, 215-223 (1987)
0 Elsevier Science Publishing Co., Inc., 1987
52 Vanderbilt Ave., New York, NY 10017
This article reports on some of our findings and
conclusions.
DEFINING SUCCESS
Before we describe the results of the investigation, here
is some background to help explain the rationale for the
study, and how the study was undertaken. In recent years,
there have been a number of investigations into the suc-
cess factors in product innovation: SAPPHO in the United
Kingdom, NewProd, Rubenstein’s U.S. study, and most
recently, the Stanford Innovation Project, are all notable
examples [4, 5, lo- 131, and have yielded many insights
into why new products succeed or fail.
One criticism of such studies, however, concerns the
definition of “a new product success.” Traditionally,
new product success has been measured in one way,
namely in financial terms. But as one research team points
out, “While financial return is one of the most easily
quantifiable industrial parameters, it is far from the only
important one” [9]. For example, a new product might
achieve a limited financial return, yet be considered a
great success because it had a major impact on its market,
or introduced a new technology to the industry, or opened
up a new window of opportunity to the firm. We too
have been guilty of too narrow a definition of new product
success in our previous NewProd studies. Indeed, one
wonders if a preoccupation with financial results and fi-
215
0019-8501/87/$3.50
 Over 200 new product case histories were
investigated.
nancial gauges of success may have had some detrimental
effects on the field of product innovation [8].
THE INVESTIGATION
The current investigation-NewProd II-takes a much
broader perspective of new product success. Questions
we addressed were:
How can new product success be measured, and are there
independent dimensions or different ways of looking at
success?
What are the components of success when success is
viewed in different ways-are the components the same
regardless of the way we measure success?
To answer these questions, we investigated over 200
new product case histories in 125 industrial product firms.
All products had been launched; 123 products were suc-
cessful, 80 were duds. We conducted lengthy personal
interviews in mid-to-late 1985 with the managers most
familiar with the products, and obtained information in
five key areas for each product:
The nature of the product itself, including the product’s
differential advantage.
The nature of the product’s market-how attractive the
market was.
The nature of the purchase, in particular whether or not
this was a high-risk purchase for the customer.
The synergy or “goodness of fit” between the new
product project and the firm’s resources, skills, and
experience.
The “determinateness” of the project-how well de-
fined the project or “protocol” was prior to product
development [6].
Approximately seven to ten questions were asked to each
of the above areas to characterize the product for a total
of 40 items or measures. Most often we used zero-to-ten
scales. Finally, we gauged new product success in each
216
of ten different ways, including financial, market share,
and opportunity window measures. These are listed in
Exhibit 1.
THREE DIMENSIONS OF PERFORMANCE
Three dimensions of new product performance were
uncovered in our investigation. When the 203 products
were compared on the ten performance gauges, it was
found that these measures were often related to each
other. Using a statistic technique called factor analysis,
we were able to identify three independent and strong
dimensions that characterize new product performance. ’
These three dimensions and their composition are shown
in Exhibit 2, and include:
Financial Pegormance: captures the overall financial
success of the product. This dimension is comprised of
relative profits and sales, meeting profit and sales objec-
tives, profitability level, and payback period.
Opportunity Window: portrays the degree to which the
new product opened up new opportunities to the firm in
terms of a new category of products and a new market
area for the firm.
Market Impact: describes the impact of the product in
both domestic and foreign markets_‘omestic market
share and foreign market share-and to a lesser extent,
relative sales and meeting sales and profit objectives.
The identification of these three performance dimen-
sions helps to clarify what is meant by “new product
success.” Success is not a simple, one-dimensional con-
cept, as has been assumed in previous studies. Nor are
the many possible measures of success-in our investi-
gation, ten measures-independent of each other; but all
‘SPSS routine; varimax rotation; three factors were generated with eigenvalues
in excess of 1.0; a total of 77.7% of variance in the original variables was
explained by the three factors; each factor had at least two variables with
loadings in excess of 0.60 loading upon it.
 Three key factors: financial performance,
opportunity window, and market impact.
Exhibit 1
Ten Measures of New Product Success
Projirabiliry level”: The degree to which the product’s profitability exceeded
or fell short of the minimum acceptable profitability level, however prof-
itability is measured (This is the traditional success/failure measure.)
The product’s payback period’: The number of years from launch required
to recoup the initial outlays (a negative measure: the higher the value, the
worse the performance).
Domesfic marker share‘: The estimated market share in the domestic market
in year three after launch.
Foreign marker share’: The estimated foreign market share in foreign target
markets (averaged across intended target market countries) in year three.
Relarive sales? Dollar sales level of the product relative to other recent new
product introductions by the firm (last 5 years).
Relative proj@: Profit level of the product relative to other recent new
products introductions by the firm.
Sales vs. objectives”: Extent to which the new product’s sales (dollars)
exceeded or fell short of sales objectives.
Profits vs. objecrives? Extent to which the new product’s profits exceeded
or fell short of profit objectives.
Window on new caregot&‘: Extent to which the product opened a window
of opportunity on a new category of products for the firm.
Window on new mark&‘: Extent to which the product opened a window
of opportunity on a new market for the firm.
“This measure was obtained on a - 5 to + 5 anchored scale.
‘These measures were obtained on zero-to-ten anchored scales.
‘A direct, numeric measure.
these measures can be greatly simplified and represented
by three key concepts: financial performance; opportunity
window; and market impact.
The fact that there are at least three different ways of look-
ing at new product success raises questions about the mean-
ing of the term “success factors.” Since there are different
dimensions of success, then conceivably, there could be
three independent sets of success factors. The implication is
that what leads to one type of success may not lead to another
type, or could actually detract from it! In short, there may be
no simple prescriptions, and that the “success factors”
likely depend on what type of success-financial, market, or
window-is desired. Our results reported below shed light
on this question of what leads to new product success, when
success is viewed on each of the three independent dimen-
sions of performance.
Financial Performance
Project definition, product superiority, and synergy
were the keys to a strong financial performance in new
products. Exhibit 3 shows the results graphically. Here,
the components or correlates of the success dimension,
financial performance, are revealed; the length of the bar
indicates the strength of the correlation. We show only
the most significant success components in this exhibit.*
What stands out in a review of these results is how
strong some of the correlations are, and also, how varied
the components of financial success are. But character-
istics that describe having a superior, high quality product
that delivers unique benefits to users, having a well-de-
fined new product project prior to beginning product de-
velopment work, and having strong technological,
management, and marketing synergy dominate the list.
Equally important, consider some of the factors that do
not impact strongly on financial performance. With the ex-
ception of customer need level, none of the 15 characteristics
that describe the market and purchase type were strongly tied
to financial success. These “noncomponents” included
characteristics such as market size, market growth, strength
of competition, and importance and risk of the purchase to
the customer. We saw above and from Exhibit 3 that product
advantage was key to financial success; but other, common
product characteristics-a product that made use of new or
advanced technology, featured industrial design in a major
way, was innovative, enabled the customer to perform a
unique task, or was lower priced-were not decisive to fi-
nancial performance. Synergy was a major component in fi-
nancial success; but certain types of synergies--notably
advertising synergy and production synergy-were much
more weakly linked to success, and are not shown in Exhibit
*Correlations are based on Pearson product-moment correlations. Only cor-
relation coefficients statistically significant at the 0.001 level or better are
shown.
217
EXHIBIT 2
The Three Performance Dimensions and Their Composition’

Financial Performance Market Impact

Opportunity Window

New Markets

New Product

“Each pie chart shows the composition of each of the three performance dimensions in terms of the
original ten performance measures, and based on factor loadings. Only measures with loadings over
0.3 are shown

3. 3 Finally, financial synergy-having a good fit in terms of
financial resources--had absolutely no impact on financial
outcome: money alone does not guarantee success!
Opportunity Window
Some new products were judged as successes because
they opened up a new opportunity for the firm-a window
on new markets or new product categories. What are the
components of these types of success stories? Exhibit 4
shows our findings. Again, the success factors are varied,
but this time, the list is much shorter, and the correlations
weaker.
Success factors appear to focus on product unique-
ness-the product performed a unique task or solved a
problem the customer was having-in a changing or dy-
namic market or industry: changing customer needs;
many product introductions; and new and advanced tech-
nologies. None of the synergy measures and none of the
project definition or protocol measures were linked to
opportunity window.
Market Impact

The third performance dimension was market impact.

These two synergy measures-advertising synergy and production synergy-
New products that scored high on this dimension were
were significantly correlated with financial performance at the 0.01 level with
correlations of 0.231 and 0.237, respectively, but were not significant at the ones that achieved high market shares, both domestically
0.001 cutoff level used in this study. and abroad. The components of a market success are

218
EXHIBIT 3
Components of Financial Performance’

COMPONENTS IMPACT

Having customers’ needs, wants, preferences and product

requirements well deflned prior to product development.

lntroduclng a superior product versus competltlve

products In the eyes of the customer.

Havlng mtrong syr)ergy or 111between the needs of the

project and management resources and skills.

lntroduclng a hlgher quality product than competitive

products, however, quallty Is defined prior to product development.

Havlng the product concept - what the product would be

and do - will deflned p&r to product development.
Havlng atrong technological synergy - a strong 111between the 307
needs of the project and the firm’s RID and product
development skills and resources.
Havlng the target market - who the product would be ,370
almed at - clearly defined prior to product development.

lntroduclng a product that offered unlque beneflts to .342

customer - benefits not found In competltlve products.

Havlng a strong fit between the needs of the project and 332
the firm’s marketlng research skills and resources.

Havlng a strong 111between the needs of the project .329

and the firm’s englneerlng skills nnd resources.

Havlng the product requirements and speclflcatlons .329

well deflned prior to product development.

Introducing a product that solved a problem the 318

customer was havlng wlth a competing product.

Facing a market wlth s’ hlgh customer need level .313

for the product strategy.
Havlng a good 111between the dlstrlbutlon and sales .301
force requlrement for the new product and the flrm’s dlstrlbutlon
and salesforce resources.
Intro&&g a product that reduced the customer’s .258
total coda - operatlng and purchase.

Having strong fit between the needs of the project and .256
the llrm’s customer service skills and resources.

“Numbers are Pearson product-moment correlation coefficients, which are also indicated by the length of the bars. All correlations are significant at
the 0.001 level.

shown in Exhibit 5. Like financial performance, the cor-
relations are fairly strong; but the success factors are
fewer and far more focussed-focused largely on product
advantage. Indeed, five of the seven major components
of market impact all describe the product itself: intro-
ducing a superior product, a high quality product, a prod-
uct featuring unique customer benefits, a product that
solved a customer’s problem, and a product that made
use of advanced technology.
With one exception, market characteristics were absent
from this list of market success components. It would
appear that the external conditions-market size, growth
rate, etc.-have little to do with the eventual market share
achieved by a new product. The exception was the pro-
portion that foreign markets made up of the total target
market. The implication is that new products that are
destined to compete in international markets coincidently
do better at home as well! Project definition or protocol
was only moderately linked to market share: defining
customers needs, wants, and preferences, and to a lesser
extent, defining the target market prior to initiating prod-
uct development were correlated with market impact.

219
EXHIBIT 4
Components of Opportunity Window

COMPONENTS IMPACT

Introducing a product which enabled the customer 304

to perform a unique task.

Entering a market where customers’ needs and wants for .299

products in this category were changing quickly.

Entering a product category or market that featured .296

many other new product introductions.

Introducing a product that solved a problem the .253

customer was having with a competitive product.

Introducing a product that made use of new or .249

advanced technology in its design.

“Numbers are Pearson product-moment correlation coefficients, which are also indicated by the length of the bars. All correlations
are significant at the 0.001 level.

Factors that did not impact success.

Finally, none of the synergy measures, that were so
strongly tied to financial performance, appeared to affect
market share.
FACTORS WITH NO IMPACT ON SUCCESS
Our results also helped to dispel a number of myths
about success factors. A handful of project characteristics
were found to be unrelated in a meaningful way to any
of the three performance dimensions.4 Yet all were in-
cluded in our study because they were thought to be
determinants of success. Here are some of our findings:
Low-priced products (relative to competition) were no
more or less successful than other products. Low price
as a new product entry strategy does not appear to be as
effective as some experts believe. But products that re-
?hese unrelated factors were not correlated with any of the three performance
dimensions at the 0.01 statistical significance level.
duced customers’ total costs had a higher financial per-
formance, as seen in Exhibit 3.
Synergy in terms of financial resources-a good fit be-
tween the needs of the project and the financial resources
of the firm-was uncorrelated with any of the three per-
formance dimensions. Money is not the deciding factor;
and other synergies are far more critical than financial
synergy.
New products aimed at large markets were no more suc-
cessful than those aimed at smaller markets. Although
large markets may appear more attractive initially, other
firms have also spotted them, rendering such markets
more competitive; and niche markets also offer excellent
opportunities.
The nature of the purchase-the purchase size and the
purchase frequency-had nothing to do with new product
success.
Products where industrial design (ergonomics, aesthetics,
etc.) played a major role were no more or less successful
than other products. This finding may be unfair to the
industrial designer; most of the products we studied sim-

220
EXHIBIT 5
Components of Market Impa&
COMPONENTS
lntroduclng a superior product versus competitive
products In the eyes of the customer.
Introducing a hlgher quality product than competitive
products, however quality Is defined.
Introducing a product that offered unique benefits to
customers - benefits not found In competitive products.
Entering a market where the foreign market represented
a large proportion of the total target market.
Introducing a product that solved a problem the
customer was havlng with a competitive product.
Having customers’ needs, wants, preferences and product
requirements well defined prior to product development.
Introducing a product that made use of new or
advanced technology on its design.
“Numbers are Pearson product-moment correlation coefficients, which are also indicated by the length of the bars. All correlations are significant
at the 0.001 level
ply didn’t offer that much opportunity for industrial
design.
TOWARDS BETTER
NEW PRODUCT MANAGEMENT
Besides the findings cited above and the list of success
components shown in Exhibits 3,4, and 5, here are some
specific lessons for the management of new industrial
products that we have gleaned from our investigation of
these more than 200 new product winners and losers:
Lesson I: New product success is a multidimensional
concept. This was one of our important findings. If your
firm only looks at one measure of success, then your
view may be myopic. We identified three independent
and underlying dimensions of new product success: fi-
nancial performance, opportunity window, and market
impact. Each dimension was comprised of a variety of
specific measures, and each captures a different facet of
success (Exhibit 2).
IMPACT
.421’
.345
.331
.331
.324
.257
.249
Lesson 2: There is a consistent and logical pattern to
new product success. We found a number of strong re-
lationships between project outcomes-success and fail-
ure-and the nature of the product, synergy, project
definition, and market environment (Exhibits 3, 4, and
5). Further, we found that the components of success for
one type of performance-for example, financial per-
formance-were different than for other types of per-
formance. That is, the type of success desired, or the
objectives of your firm’s new product program, will affect
the success factors, and could lead to, for example, dif-
ferent screening criteria for project selection.
Lesson 3: Product advantage is a dominant factor in
success, notably for both financial performance and mar-
ket impact. Firms must redouble their efforts in the quest
for a differentiated product with significant customer ben-
efits: a superior product in the eyes of the customer; a
high quality product; a product that delivers unique ben-
efits to the user; and a product that solves a customer
problem or performs a unique task. All too often, how-
ever, we found the opposite in this investigation. The
221
typical new product suffered from “me-too-ism” and
simply lacked advantage. Note also that product advan-
tage must be customer related, rather than solely tech-
nology based. This means that management must have a
sound understanding of what the customer considers to
be “a superior product.” The implication is that a thor-
ough investigation of customer needs, wants, and pref-
erences should precede the product design and
development stage in the new product process.
Lesson 4: A well-defined project prior to the devel-
opment stage is critical to success, notably financial per-
formance, and to a lesser extent, market impact. Our
finding concurs with Crawford’s plea for a “protocol”
stage, or agreement on product and project strategy, as
one of the predevelopment activities [6]. In our study,
four elements of such a definition were found important:
Defining the target market.
Defining customers’ needs, wants, preferences, and prod-
uct requirements.
Defining the product concept-what the product would
be and do.
Defining the product’s specifications and requirements.
Projects where these elements had been clearly defined
prior to product development work beginning had a much
higher success rate. Even though these elements were
strongly tied to performance, we found serious weak-
nesses in many firms and many projects in this definitional
stage.
Lesson 5: Synergy is vital when it comes to achieving
financial performance from a new product. Our investi-
gation strongly supports rules such as “stick to the knit-
ting, ” “attack from a position of strength,” and “stay
close to home,” in new product management. Our evi-
dence is clear: the new product should build on the ex-
isting resources and skills already in the firm; and
questions that gauge synergy or “corporate fit” in a va-
riety of areas-management resources and skills, R&D
and product development resources, market research abil-
ities, engineering resources, salesforce and distribution
resources, customer service abilities, production re-
sources, and advertising skills-must become key screen-
ing criteria in your firm’s project selection scheme.
Lesson 6: The market environment itself appears to
have relatively little impact on new product outcomes.
One possible reason why market characteristics appear
so low on the list of success ingredients is that products
facing highly negative markets were likely scrubbed
much earlier in their development. A second reason may
222
be that a new product can be successful in the face of a
wide variety of market conditions. Strategic or control-
lable variables, such as product advantage, synergy, and
project definition are more decisive in determining prod-
uct outcomes than external or environmental conditions.
CONCLUSION
No company can escape the effects of rapidly changing
technologies and markets. Existing products become ob-
solete, and are replaced by new or improved products;
others simply continue as a drain on corporate resources
as low profit items in highly competitive, commodity-
type markets. Product innovation is one route to corporate
survival and prosperity for many firms. But the innova-
tion route is also plagued by difficulties, barriers, and
high risks. Yet some companies we visited during our
investigation had an enviable new product track record,
and some products we studied were exceptional winners.
It is only by studying these companies and these projects
that we will learn the secrets to new product success. The
hope is that the current investigation has shed some light
on what makes a new product a winner.
REFERENCES
1. Booz-Allen & Hamilton, New Product Managementfor the 1980’s, Booz-
Allen & Hamilton Inc., New York, 1982.
2. Cooper, R.G., Winning at the New Products, Addison-Wesley, Reading,
Mass., 1986.
3. Cooper, R.G., The Performance Impact of Product Innovation Strategies,
European J. Marketing 18, 3-54 (1984).
4. Cooper, R.G., Project NewProd: Factors in New Product Success, Eu-
ropean J. Marketing 14, 271-292 (1980).
5. Cooper, R.G., The Dimensions of Industrial New Product Success and
Failure, J. Marketing 43, 93-103 (Summer 1979).
6. Crawford, C.M., Protocol: New Tool for Product Innovation, Journal of
Product Innovation Management 2, 85-91 (1984).
7. Crawford, C.M., New Product Failure Rates--Facts and Fallacies, Re-
search Management (September 1979), pp. 9-13.
8. Hayes, R.H. and Abernathy, W.J., Managing Our Way to Economic
Decline, Harvard Business Review (July-August 1980), pp. 67-77.
9. Maidique, M.A., and Zirger, B.J., The New Product Learning Cycle,
Research Reporf Series, Innovation & Enterpreneurship Institute, School
of Business Administration, University of Miami, Coral Gables, FL,
February 1985, pp. 85-101.
10. Maidique, M.A. and Zirger, B.J., A Study of Success and Failure in
Product Innovation: The Case of the U.S. Electronics Industry, IEEE
Trans. Engineering Management EM-31, 192-203 (November 1983).
11. Rothwell, R., Factors for Success in Industrial Innovations:-Project 12. Rothwell, R. et al., SAPPHO Updated: Project SAPPHO Phase II, Re-
SAPPHO-A Comparative Study of Success & Failure in Industrial In- search Policy 3, 258-291 (1974).
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