An Ecological Perspective on New Product Failure: The Effects of Competitive Overcrowding

Abstract

Practitioners and researchers have carefully explored the causes of new product failures. Studies have been conducted, results analyzed, and recommendations offered. Yet despite these efforts, new product failure rates have not decreased. In fact, they appear to be increasing in some product categories. Are we missing something?Noting that most research on new product failures has focused on a firm's activities in specific projects, William H. Redmond proposes that new product outcomes might also be influenced by macro‐level or environmental factors. By focusing on environmental factors rather than a firm's activities in specific projects, we might better understand why competent firms in one industry consistently experience higher failure rates than those of firms that are no more competent, but operate in a different industry. For example, failure rates for new food products are consistently higher than those for new industrial products. With no evidence that product development professionals in industrial firms are simply superior to their counterparts in the food industry, Dr. Redmond suggests that we need to look beyond specific product development projects and consider the effects of the market in which these products are introduced.Encouraged by past successes, many firms in the food manufacturing business seek sales growth through the development and introduction of additional new products. Over time, this creates a market in which customer demand is fragmented into increasingly small niches and distribution channels are flooded with product choices. As a result, the failure of a new product is more likely than it might have been under less crowded conditions. In much the same way that the population of deer on an island is limited by the available food and physical space, food products are apparently faced with the market equivalent of natural selection. In the absence of available market niches and a clear competitive advantage, a new product's chances for success are meager. In a market that is overcrowded by existing products and new product introductions, it becomes increasingly difficult and uneconomical to identify opportunities for meaningful differentiation.On the other hand, industrial products face a much different set of environmental conditions. Compared to the food manufacturing business, relatively few new industrial products are introduced, and those introductions are typically successful. In most cases, the new products are simply replacements for inefficient or obsolete products. In such an environment, failed introductions are probably the result of errors in the product development process.