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6
0
6
0
6
0
BY DONALD R. LEHMANN
COVER STORY
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most
new product ventures
end in failure can limit
enthusiasm for emerg-
ing products, innova-
tion and growth. How-
ever, a low success
rate may be accept-
able, or even appro-
priate, if the potential benet (the
prot) of a new product is suf-
ciently greater than the cost of fail-
ure. For a 20-percent success rate,
as long as the potential gain is four
times the size of the potential loss
(ignoring benets such as learn-
ing or product-line synergy and
costs like reputation tarnishing),
then one should go ahead with the
launch on an expected value basis.
In spite of the high failure rate,
the drive for new-product-driven
growth stems from two principal
motivations. First, there is hope
for a right-tail result (i.e., a spec-
tacular success, such as Google,
Facebook, the iPod or the Model
T). The allure of spectacular suc-
cess is particularly strong for small,
young rms that have relatively
little to lose in terms of brand eq-
uity or capital if they fail. In larger
companies, successful outcomes
make heroes out of the developers/
architects (Steve Jobs, Sergey Brin,
Henry Ford) and generate huge -
nancial windfalls for the companies
that market them.
Second, there is tremendous
pressure for publicly traded com-
panies to produce high growth
rates, thereby justifying and/or
increasing price/earnings ratios
and stock price. This second force
explains why companies often
acquire other companiesand
frequently overpay for them in the
process. A parallel force exists for
small family-owned rms as the ar-
rival of new generations produces
a need for more cash to sustain the
growing extended family.
6
0
6
0
6
0
COVER STORY
THOUGHT LEADERSHI P FROM MSI 50
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1974-1994 1994-1996 1996-1998 1998-2000 2000-2002
DEVELOPING
NEW BUSINESS
OPPORTUNITIES (1)
AND IMPROVING
THE NEW PRODUCT
DEVELOPMENT
PROCESS (3)
SUCCESSFULLY
INTRODUCING REALLY
NEW PRODUCTS (1)
Forecasting adoption/
diffusion; incorporating
customer reactions and
input
Anticipating future
scenarios
Marketing-driven
vs. market-driven
development: The
benefits of leading
vs. following
INNOVATION
AND REALLY NEW
PRODUCTS AND
MARKETS (2)
Discovering and
testing really new
products and services
Concept testing
Developing
organizational
processes and culture
for innovation
MARKETING
INNOVATION:
CREATING
CUSTOMERS,
CREATING REALLY
NEW PRODUCTS (6)
Best practices
for identifying
breakthrough new
product platforms
Best practices for
identifying fresh
consumer/customer
insights
How marketing can
play the most effective
role
NEW PRODUCT/
INNOVATION (6)
Market research
that provides timely
consumer insights
Speed to market
Evaluating new
products and projects
FI GURE 1: Change i n Pr i or i t i es

Given the key role of growth, in general, and new products,
in particular, it is interesting to see how both their importance
and the aspects of them considered most crucial have evolved
over time. To assess this evolution from the perspective of busi-
ness, it is useful to focus on the research priorities developed by
the Marketing Science Institute. Beginning in 1974, MSI has
surveyed its members (currently 72) to ascertain what issues
were most crucial and needed more attention (research). Figure
1 highlights the change in priorities over time.
First, somewhat surprisingly, developing new products was
not identifed as a high priority topic between 1974 and 1992,
although developing business opportunities was the highest
priority topic from 1984 to 1985. By contrast, from 1992 on,
some variation on new products, innovation and growth has
consistently been a top priority.
More interesting is how the specifc focus has evolved over
time. Through the 1980s, the top priorities concentrated on
improving (innovating) the marketing mix, with no special
focus on new products. The 1992-1994 priorities spotlight
improving the new product development process (i.e., effcien-
cy). For 1994-1996, the top priority was forecasting both new
product sales and future environments.
From 1996-1998, attention turned from minor (lemon-
scented) innovations to really new (discontinuous) innova-
tions, which created or revolutionized product categories. In
addition, interest began to focus on not just single innovations,
but on developing organizations capable of producing multiple
new products over time.
From 1998-2000, attention was focused on the topic du
jour: best practices. While observing the practices of other
successful companies can indeed provide suggestions/
hypotheses about what works, it is far from scientifc or
reliable. Problems include:
the failure to see if unsuccessful companies follow
the same practices;
the possibility that other (unnoted) practices that are
correlated (occur concurrently) with the best practice drive
the result; and
the question of whether the practice leads to success
or vice versa.
That is, successful frms can afford, and hence are more
likely, to engage in a number of activities, such as support-
ing social causes, providing employee benefts like day care
and spending on research and development or advertising.
Untangling what causes what is non-trivial and requires data
over multiple time periods, as well as careful (econometric)
analysis.
More interesting than the focus on method (best prac-
tices) are the topics identifed as high priority. First, break-
through product platforms (aka really new products)
remained a central concern. Second, attention was directed
toward the now common topic of customer insights.
The 2000-2002 priorities showed a lessening in concern
about new products, as attention shifted to the Internet
and new media. In terms of specifcs, interest in consumer
(customer) insights, speed to market and evaluating/selecting
among products remained high.
The 2002-2004 priorities showed both a re-emphasis on
the topic and an important shift in emphasis. For the frst
time, growth was identifed as the key aspect, with innovation
and new products now appropriately thought of as means to
this end/goal. Second, the role of metrics in assessing product
development, including the more qualitative aspect of idea
generation, became more prominentespecially as they
related to predicting success and failure.
The 2004-2006 priorities marked the ascension of growth
to the top priority, a position it has held for three of the last
four sets of priorities. Discontinuous growth strategies ef-
fectively combined the older emphasis on really new products
with growth. The emphasis on organic growth signaled the
increased emphasis on internal growth (vs. external via
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BRI EF LY
Despite high product failure rates, marketers continue to be motivated
by the possibility of spectacular new product successes and importance
of growth for fnancial performance.
The emphasis has moved from the lone inventor to teams and collaborative approaches.
Future efforts may favor structured creativity tools and seek improvements through
product design and execution.
2002-2004 2004-2006 2006-2008 2008-2010 2010-2012
GROWTH,
INNOVATION, AND
NEW PRODUCTS (4)
Improved metrics/
ROI for new product
introduction/failures,
idea generation and
offering (product)
portfolio
Early prediction of
marketplace acceptance
Development and
validation of better
prediction/forecast
methods
GROWTH (1)
Ensuring customer-
relevant innovation
Organic growth
Discontinuous growth
strategies that reshape
the industry
CONNECTING
INNOVATION WITH
GROWTH (1)
Engaging customers
through innovation and
design
Aligning product
innovation with
customer expectations
Creating a culture of
innovation
INNOVATION (4)
Novel approaches
to new product
development
Service innovation
Co-creation
Testing and
forecasting
USING MARKET
INFORMATION
TO IDENTIFY
OPPORTUNITIES FOR
PROFITABLE GROWTH
(1)
Identifying
opportunities enabled
by technology
Identifying
opportunities arising
from economic
conditions
Social issues shaping
marketing practice
mergers and acquisitions) now prominently espoused by lead-
ing companies such as General Electric and Procter & Gamble.
The 2006-2008 priorities conjoined innovation with
growth. It also highlighted the growing emphasis on involving
customers in the innovation and product-development process,
and formally identifed design as a key (and emerging) focus. In
addition, it returned to the topic of the organization, specif-
cally a culture of innovation.
The 2008-2010 priorities continued the evolution of
emphasis by identifying other aspects worthy of exploration,
including service, while retaining a focus on product develop-
ment co-creation and technology.
The current (2010-2012) priorities again place proft-
able growth at the top, highlighting the roles of information
and technology. It also, unsurprisingly given the state of the
economy, identifes the role of economic conditions and social
issues as particularly relevant aspects.
Examining these priorities across time reveals an interest-
ing progression. The focus has moved from innovation aimed
at improving the mix in general, to, initially, new products, and
then to really new products/discontinuous innovation. In-
novation itself then emerged as a major theme, including idea
generation, creativity and aspects of design. Most recently, the
focus has shifted to organic growth, with new products seen
more as a means to this end.
A complementary perspective to the priorities identifed by
managers can be observed by examining the academic litera-
ture on the topic. Given the large body of work in this area,
it is impossible to adequately cover all of it. Nonetheless, by
examining award-winning and other relevant papers, one can
get a pretty good sense of the developments over time. Specif-
cally, award-winning papers through 2010 were examined from
Journal of Marketing (H. Paul Root), Journal of Marketing
Research (William F. ODell), Marketing Science (Frank Bass
and John Little) and Journal of Consumer Research (Robert
Ferber).
An impressive fraction of award-winning papers addressed
the general area of new products, innovation and growth.
These were then supplemented by papers in these journals that
appeared on the top fve pages of a Google search based on the
words new products, innovation, growth and market-
ing. Papers in the most focused journal in the area, Journal of
Product Innovation Management, were not included because they
were so numerous (i.e., the entire May 2011 issue was devoted
to product design). Clearly, it is an important resource for
anyone interested in the topic.
Next, a convenience sample of three professors was asked
to go over the list and add key references. Finally, the author
added a few personal favorites. The result is a relatively unsci-
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entifc and potentially biased, but hopefully useful, perspective
on academic research in the area addressed over the last 60
years.
In examining past research, it is useful to divide the research
and problems into fve broad areas. The frst has to do with
creation and includes aspects such as ideation and design. A
second key area is forecasting, both in terms of whether a new
initiative will succeed and the actual sales (and proft) level it
attains over time. A third area, and one particularly relevant to
academics, involves understanding how and why new prod-
ucts come into being and how markets respond to them. A
fourth area of great importance (albeit receiving less academic
scrutiny) involves the management of development and imple-
mentation. This includes issues of organizational culture (e.g.,
market and customer orientation), incentives, inter-functional
coordination and alliances/partnerships. Finally, there is a need
to evaluate new products and initiatives, including their impact
on the stock market. (Some research has shown that major
innovations have a positive, if not totally immediate, impact on
stock price). This Appendix provides a list of key papers, orga-
nized by decade and general focus. To access it, please see an
extended version of this article on the Marketing Management
page at MarketingPower.com.
Signifcant work on creation and design emerged in the
1980s. The work initially focused on conjoint analysis and was
followed by methods for incorporating consumer insights via
the use of focus groups, lead users and the voice-of-the cus-
tomer approach. Most recently, the focus has been on enhanc-
ing creativity via structured methods and incenting individuals
to contribute to the innovation process.
Efforts to predict the success of new products date at least
back to Fourt and Woodlocks 1960 paper. Bass seminal paper
provided a parsimonious model for durable adoption. From the
late 60s and through the 80s, a legion of new product fore-
casting models appeared including SPRINTER, ASESSOR,
LITMUS and NEWS, elements of which are found in the
current standard, BASES. More recently, attention has turned
to examining the benefts to pioneering and modeling sales
takeoff, as well as methods such as information acceleration and
stock trading, to provide early prediction of product sales.
Work on understanding is more diverse. The 1950s are
largely forgotten. Nonetheless, in 1955 the key topic of word of
mouth got a major boost from Elihu Katz and Paul Lazarsfelds
book Personal Infuence (Transaction Publishers, 2005). Given
the current focus on Web-based infuence via blogs, tweets,
social networks and customer reviews, it would be instructive
to re-examine classic work in this area, including Arndts 1967
Journal of Marketing Research paper on product-related con-
versation. Recently, word-of-mouth work has again become
prominent, largely focused on the Internet and social networks.
Another stream of research relates to how customers view
and evaluate new products, specifcally how they categorize
them and evaluate specifc features as exemplifed by Everett
M. Rogers classic work, Diffusion of Innovations (Free Press,
2003). Considerable effort has also gone into understanding
what characteristics of the product and the frm lead to market
success and failure, as well as the impact of satisfaction on
subsequent purchases.
A managerial focus has been evident for a long time, begin-
ning with Wendell Smiths work on product differentiation in
the 1950s. Considerable effort has been directed at identify-
ing the optimal strategy for new product introduction, as well
as responses to competitive introductions. In contrast to the
other areas, valuation had received relatively little attention
with the exception of the Chaney et al paper, The Impact of
New Product Introductions on the Market Value of Firms
(Marketing Science Institute, 1991). Since 2000, however,
spurred by the increased emphasis on metrics, several articles
have examined the impact of innovation and R&D spending on
stock prices.
Figure 2 provides a classifcation of the papers in the
online Appendix by topic area over time, with several observa-
tions emerging. First, academic research has concentrated on
forecasting, understanding and managing new products and
CREATE PREDICT UNDERSTAND MANAGE VALUE
50s 2 1
60s 3 3
70s 1 5 1
80s 4 6 4 3 1
90s 2 6 6 8 1
2000s 2 2 10 13 5
TOTAL 9 22 26 25 7
FI GURE 2: Appendi x Cl assi f i cat i on
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43
growth much more than on creating or
valuing it. Second, while prediction has
been a steady area of interest, work on
understanding and managing continues
to grow and essentially dominates the
literature examined here. Finally, valua-
tion seems to be emerging as a key topic.
Where will the emphasis be in the
future? Recognizing the fallibility of
forecasts (hence the recurring interest
in better forecasts in the MSI priorities).
The following areas, outlined in Figure
3, seem likely to be important.
Over time, the emphasis moved from the
lone inventor as almost mythical hero
to teams/labs (e.g., Xerox PARC, Bell
Labs and GE, which has recently expanded its R&D spending).
More recently, external collaborations have been emphasized,
including alliances/partnerships with other companies and with
customers via lead users and beta sites. Attention has shifted to
listening to common folk and customers and incorporating
their ideas and Duct-Tape solutions to problems. Particularly
interesting in this regard is the importing of non-U.S., less-
developed-country designs to industrialized country company
product lines (i.e., reverse innovation).
In the future, two areas seem ripe for further exploration.
One is further development of structured creativity devices to
identify growth options. The other is design. Beyond aesthetic
design, some important industrial design issues remain critical,
including design for:
Effcient production in terms of both cost and resource use;
Repair;
Easy upgrade; and
Disposal and/or repurposing.
Another area that is relatively under-researched is imple-
mentation/execution. As anyone involved in sports knows, a
well-executed strategy can beat a poorly executed oneeven
if the second strategy is logically/potentially superior. Thus,
areas such as cross-functional coordination, use of beta sites
and means for scaling up (and the ability and willingness to
scale back in the face of weak demand) will remain important.
Organization culture and market orientation, as well as the
ability to coalesce around a strategy either by consensus or via a
(hopefully charismatic) leader, such as Steve Jobs of Apple, also
play important roles.
A third area, organic creation, is really an extension of the
frst. So-called customer engagement, in the form of customer-
developed and customer-refned (and evaluated) designs/prod-
ucts, is increasingly recognized for its potential to drive organic
growth. In effect, these recognize the new normal (i.e., that
frms are no longer in charge of their products). Flexibility,
rather than improvements within the
classic new product funnel, is likely the
key to future success.
Another direction for future
research (and company efforts) is
increased emphasis on brand and cus-
tomer vs. product-based growth. These
other perspectives provide additional
ways to imagine growth. They also pro-
vide important standards for evaluating
growth: Essentially a successful innova-
tion requires a superior product that is
consistent with (or enhances) a com-
pany brands image and appeals clearly
to either existing customers (leading
to expanded margin per customer) or
new customers (generating customer
acquisitions).
The fnal area is less pleasant. To many constituencies,
growth is not seen as a mechanism for economic improvement,
but rather as a drain on resources and a means to encourage a
more wasteful and less-fulflling lifestyle. Failure to consider this
position and respond to some extent seems to be a recipe for
confict, if not disaster. Hopefully doing a better job in the other
areas in general, and design in terms of effcient use of resources
and provision for disposal and re-purposing in particular, will
help counteract the current criticism. MM
This article is one of a series based on presentations from the
Marketing Science Institutes 50th anniversary conference, where
marketing thought leaders gathered to celebrate MSIs achievements
and explore the future of marketing.
DONALD R. LEHMANN is George E. Warren professor of business at
Columbia University in New York. He may be reached at DRL2@columbia.edu.
Need More Marketing Power?
GO TO marketingpower.com
AMA Articles
Managing Sales Force Product Perceptions and Control Systems in
the Success of New Product Introductions, Journal of Marketing
Research, 2010
Back to Basics: Managing Valuable Product Knowledge and Data
Aberdeen Group, 2009
AMA Webcast
Growing Constituent Engagement, Loyalty and Lifetime Value,
Convio and The NonProft Times, 2011
Structured Creativity
Design for
Production efciency
(cost + resources)
Repair
Upgrade
Disposal/Re-Purposing
Implementation
Cross-Functional Plus
Beta Sites
Scaling Up; Shutting Down
Organic Creation/Internet/
Opportunistic
Customer Engagement
Customer Developed and Rened
Flexibility VS. The Funnel
FI GURE 3: Futur e Di r ect i ons
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Create/Design
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52 | MARKETI NG MANAGEMENT | W I N T E R 2 0 1 1
Understanding
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Coleman, J.S., E. Katz and H. Menzel (1966),
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Goldenberg, J., D.R. Lehmann and D. Mazursky
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of Its Emergence as Predictors of New Product
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Hauser, John, Gerard J. Tellis and Abbie Griffin
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Johnson, Joseph and Gerard J. Tellis (2008),
Drivers of Success for Market Entry Into China
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Katz, E. and P. Lazarsfeld (1955), Personal
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Mittal, V. and W.A. Kamakura (2001),
Satisfaction, Repurchase Intent, and
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[ODell]
Montoya-Weiss, Mitzi and Roger Calantone
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Moreau, C. Page, Donald R. Lehmann and
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