Exam 6: Prototyping and Validating a Solution

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No matter which source you consult, the failure rate for new consumer products is somewhere between 70 and 90 percent, although failure rates do vary by industry and by type of product. For this reason, a number of studies have supported a lower failure rate of about 40 percent. In any case, failure is an important topic. A significant body of research has revealed that the principal reason for new product failure is lack of good market and industry analysis. Additional reasons for product failure include:Industry architecture . The way an industry works makes it easier or more difficult for entrepreneurs to succeed depending on whether they are producing a complete solution and control all the complements or whether they are part of an industry where they are offering only part of the solution; that is, others in the industry produce parts that entrepreneurs need for their product.
Technical problems . The path from laboratory to production is fraught with challenges and obstacles, often because the product development team has not spent enough time correctly defining the problem they're solving. Consequently, the product definition may be incorrect, or worse, provide features and benefits that the customer does not value.
Insufficient resources . Unlike most startups, most large corporations have separate departments responsible for research and development (R&D), engineering, and testing. In many cases, the budgets for these departments are astronomical, reflecting the high cost of new product development. Entrepreneurs have a dilemma: how to perform R&D that will result in a high-quality, engineered prototype as quickly and as inexpensively as possible with limited resources.