A large volume of research has addressed what makes new product development successful (Ernst 2017; Florén et al. 2018). Such studies have been beneficial to a wide array of actors, including business people and policymakers who hope to replicate the successes experienced by today's most valuable corporations and harness the growth they generate. In contrast to the volume of literature on successful new product development and despite Silicon Valley's unofficial motto of "Fail Fast, Fail Often," little attention has been paid in the empirical literature to innovation failure.
Some of this inattention probably stems from the scholarly view of failure as simply the opposite of commercial success and scholars' implicit accommodation of both concepts within empirical and conceptual studies of success. Though the two concepts are related, the National Center for Science and Engineering Statistics (NCSES) within the National Science Foundation (NSF) and SRI International (SRI) have identified innovation failure as a gap in current research.
The Oslo Manual 2018: Guidelines for Collecting and Interpreting Innovation Data (OECD/Eurostat 2018) is used in developing NCSES's surveys relating to innovation and in this paper. The Oslo Manual definition of innovation does not require an innovation to be a commercial, financial, or strategic success at the time of measurement (OECD/Eurostat 2018:71). A product innovation can fail commercially or a business process innovation may require more time to meet its objectives. The Oslo Manual also states that innovation activities can create knowledge or information that is not used to introduce an innovation during the observation period. This includes knowledge from activities that fail to meet their primary innovation goals.
Unsuccessful or failed innovations often receive significant attention in the popular press. These failures also often occur despite early optimism about the ultimately unsuccessful inventions' potential to positively disrupt current business practices, markets, and entire industries. Direct understanding of product innovation failure potentially represents an untapped resource for decisionmakers in the private and public sectors. If policymakers understand the reasons for innovation failures—and as a result business failures—they may be able to develop policy to prevent those failures. Research into business process innovation failure also promises to be useful. Most current research on business process innovation focuses on the impact of such innovation on firm or macroeconomic performance rather than the determinants of why it succeeds or fails.
The work reported herein relies on case studies to identify instances of innovation failure, the causes of failure, and the points in the innovation process at which failure is likely to occur. Analysis of these case studies identifies patterns of innovation failure and common root causes. The case studies reveal a narrative that explains when and why an innovation failed and highlight when the critical actions and decisions by inventors that led to the failures occurred.
Shedding light on patterns of innovation failure provides new perspective on understanding data from NCSES surveys on firm innovation. In particular, it suggests closer survey attention be paid to qualitative differences in the reasons firms abandoned innovation activities. In many cases, companies may be giving up on innovation projects for good reasons, such as acquiring new data that suggest weak market interest in the planned innovation.
This paper uses the Oslo Manual's definition of innovation as "a new or improved product or process (or combination thereof) that differs significantly from the unit's previous products or processes and that has been made available to potential users (product) or brought into use by the unit (process)" (OECD 2018:22). The Oslo Manual distinguishes between two broad types of innovation: product and business process innovation:
The Oslo Manual defines innovation activities as follows:
Innovation activities include "all developmental, financial and commercial activities undertaken by a firm that are intended to result in an innovation for the firm" (OECD 2018:70). The Oslo Manual further notes that "a business innovation is a new or improved product or business process (or combination thereof) that differs significantly from the firm's previous products or business processes and that has been introduced on the market or brought into use by the firm" (OECD 2018:68).
The terms unsuccessful innovation or innovation failure are used in this paper to facilitate discussion. An unsuccessful innovation or innovation failure is a product or business process that did not meet a company's expectations when it was introduced to the market for a variety of reasons; it is not a comment on the quality of the product or business process.
To understand how and why a new product or business process innovation fails, the authors examined the timing of failure, starting with the product or business process life cycle. The product or business process life cycle traces the product or process from launch, through its growth phase, its maturity phase, and finally to the period during which it declines and is phased out of the market.
For the purposes of this paper, products were considered eligible to be designated as innovation failures only in the launch, growth, or maturity phases. The natural decline of a product or business process after a successful marketplace run was not considered an innovation failure. Failures at launch occur when products are burdened from the start or near-start of their commercial introduction with challenges that prevent gaining appreciable marketplace acceptance. Failures during the growth stage are when a product is successfully launched but then faces significant marketplace challenges when innovators attempt to grow rapidly. Failures in the maturity phase are rare; they occur when a widely adopted product or business process faces sudden challenges in the marketplace that abruptly and significantly diminish or destroy its marketplace value.
In addition to references to the product or business process life cycle, this paper defines the innovation horizon as the period during which innovation activities can occur (see figure 1). Innovation-related activities can happen before and after a new product is launched. Pre-launch innovation activities include ideation and product (or business process) development. Post-launch innovation failures often can be traced to development shortcomings that occurred during pre-launch activities. Innovation activities often continue after new products or processes are launched, as companies refine their offerings in response to marketplace feedback, competitive pressure, and other factors. Maturity is the final state for product or business process refinement, and so innovation activities come to a stop, by definition, once a product enters this phase. For this reason, the innovation horizon includes only the ideation, development, launch, and growth periods.
SOURCES: National Center for Science and Engineering Statistics and SRI International, special research (2020) of 2010–20 open-access articles, including MIT Technology Review, New York Times, Fast Company, U.S. General Accountability Office, and Defense News.
This paper uses the same phases of launch, growth, maturity, and decline for our analysis of business process innovations. In those locations in which the text refers to product innovation, the same concepts refer to business process innovation.