Failing technology products is a huge problem. VCs know this reality far too well, especially if they invest at the early stage.
Listen to this: The world’s top 500 companies spent $600 billion on R&D in 2018 alone.¹ According to studies from Harvard, MIT, Michigan State, and others, about 75% of all products fail (Exhibit A). Imagine if we consider annual spending by all of the companies in the world, including startups, on products that miss the mark. What a waste of time and money.
I personally think the world probably spends a trillion dollars a year, every year, on failure.
Yet at the same time, VCs and CEOs alike preach the notion of failing fast – which does make sense in context. But also, building a product that fails faster still assumes an ability to learn and iterate yourself to a product that will achieve product-market fit and catch lightning in a bottle. Even with this fail fast ethos, most startup products completely fail (70%) and a lot of these failures are due to lack of market need (40%).² Something is broken in the product development process.
The question we really need to be asking is: What does it take to achieve product success?
The real solution is not about avoiding failure, it’s about setting up a structure that will lead to success.
Last week I spoke with Pete Sinclair, serial entrepreneur, investor, and CEO of Obo, Inc. who had some great insights on this. “Product failure is a huge problem so I’ve dedicated my career to solving it as the CEO of Obo,” says Pete.
Products fail for three main reasons
Obo did research with more than 2,000 companies to pin down why products fail. He believes that products fail for three main reasons:
1. Lack of market input: Most companies simply did not look closely at market wants and needs to validate the product they were building.
2. Lack of a consistent approach or methodology for their product process: Product teams rely on a bunch of ad hoc tools and approaches — they don’t have a system like they do for CRM, so they struggle to prioritize.
3. Collaboration and communication breakdowns
“Build something the market wants early in the process – identify your customer fast.”
“If you want to build more successful products, then, you need to make sure you have sufficient market input so you build something the market wants early in the process, you have to prioritize your work in a systematic and repeatable way, and you have to collaborate effectively across the entire product team, which means including sales and customer service/success, marketing, existing customers, prospects, and your operational teams.” says Pete. With customers like C3 (formerly C3IoT), Cloverpop, Jumpshot, MariaDB, Red Seal, and Zimperium they seem to be on a roll. And I definitely suggest anyone interested in learning more, go watch the overview video on their website here.
Lastly, send me your questions, thoughts, suggestions on this product failure problem. I would love to get your insight and engage on this massive and costly problem.
Thank you, Collin West (Cofounder, Kauffman Fellows Fund)