For most firms, re-launching failed products requires understanding the ways in which the failed product has met the value needs of different customers and the quality of execution. Re-launching a failed product should be done with the help of outsiders who were untarnished by the first failure. But the experience gained from a failed launch can be helpful in the second launch. The process of re-launch should be mapped against a series of stage gates or review points to ensure that the probability of a second failure is reduced and can be caught early.

If you are reading this article, then you are likely struggling with what to do with a product or service that has failed. My qualifications as author are that in my career, I have worked to help many companies improve their performance. Many but not all of my clients have been technology-based, that have failed with their products. I have also helped some of them turn around their failures as an interim CEO.

There is a consistent pattern of failure with high tech products and most of the lessons apply to all industries.

This may seem like a dumb question, but it isn't. Sometimes, the value of failed product is that it provides superb market research and insight that allows you to generate a second generation product that is successful.

Sometimes a success is actually a disaster. You have established that a market is viable, but your economics and resources don't let you capture the opportunity. Someone else steps in and takes over the market.

This overtaking was the experience of Apple in the early days of PCs. Having established a great brand, IBM with a superior brand in the area of business walked off with the market. Ironically, IBM's poor technology strategy caused it to lose its position of dominance, primarily due to its inflexibility and the fear of cannibalizing its core mainframe business.

Another common type of failure is the financially successful product where the company is unable to invest sufficiently to maintain its position of leadership.

A key issue here comes from financial theory. People argue over how you measure success. Common approaches include:

Market share success is based upon the theory that there is typically only room for one or two major players in a market: the larger you are, the higher your cumulative cost advantage. So, people believe, if we are big, then, we will be the most profitable, and will be the survivor. The key caveat here is that you have to achieve profitability, however you define profitability.

Profit success is seductive. Who would not want good profits? But, there are two elements here. Sometimes the definition of profits is inadequate and the profit does not reflect the cost of reinvesting to stay in the business. And secondly, sometimes those with high profits hold a price umbrella under which new entrants can enter and eat away at market share.

Cash flow success is a pretty good measure of success in stable markets. But in a growing market, staying at the same size may in fact mean your competitive position is deteriorating.

Which is why “cash flow after reinvestment to maintain the business”, something that profits ought to show, but often does not, is a key measure.

But the strongest measure of success is the very hard to define “cash flow after reinvestment to grow the business and improve market share” (profits and cash flow).

Finally, in some business, measurement has to be strategic in nature, over the entire customer acquisition, sign up, servicing and relationship cycle. In donut chains, the key measurement is not a $2 coffee and donut, really the key measure of success is the annual relationship of purchase of breakfast, worth perhaps $500 per year.

4. A product where you were never able to put sufficient resources behind the product to determine whether it would sell.

Generally, this is a product that has had no success in obtaining any or paying customers. A number of excuses are believed to be true. The economy is down. People are not buying. Sales cycles are longer than we thought they would be.

There are few solutions for this type of product if the product has been built without market research to figure out what causes people to write checks quickly.

The fundamental problem here is that the product concept was probably wrong, the attractiveness of the market was misjudged. No or poor competitive analysis was performed.

Product design failures are typically products that just plain don't work. In many cases, the problem can be broken down into:

The solution here is new leadership and management. A strong new product or project manager is required. Period. End of statement.

If resources are inadequate, or timing does not permit a redevelopment process, a strategy not often considered is to “can” the development process and license/resell a competitor's product. This approach provides a breathing space and the ability to generate profits to finance the next new product attempt.

Innovation is required in framing the value proposition to clients. A new value proposition that increases the value proposition to clients is required. An example that sticks out as an excellent model is Dell. By eliminating the retail profit margin, it developed an attractive self financing value proposition.

A common requirement today is ironically in the opposite direction of Dell and it is adding value to the core product or service. Amazon provides reviews of books and the option of buying used copies. Many software companies such as PeopleSoft or Oracle are being forced to become service providers, providing and pricing their product as a service rather than a capital acquisition. Sales people have to help the purchasing process by providing economic justifications for their clients.

The single largest cause of new product success is offering a differentiated high value product or service. If you compare the top twenty percent of companies in this category with the bottom twenty percent, research by Bob Cooper, probably the leading researcher in the field, at McMaster University, suggests a 20-25X difference in economic performance.

Increase the value of your offering to your target segment. Bear in mind that value varies by segment and that value is not just about changing your price. It is the relationship between perceived value and price.

There are two common symptoms here. One group includes technical products where features rather than benefits are pushed. The second group consists of products where the problem is not getting heard - not getting above the general noise and clamor of competitors.

Refocus the message on issues that customers care about. Use low cost, high effectiveness messaging such as e-mail, click through advertising, newsletters, viral marketing, etc.

A key requirement here is using an external consultant who can understand both your product and your customer. Most companies with technical products lose their perspective and are unable to put themselves into the mindset, language and situation of prospects and clients.

Most small firms don't have good distribution. A high sales cost and a low volume of prospects approached are typically symptoms.

2. Raise prices (which may require rethrinking your value proposition) and target clients who you can afford to sell to.

3. Share distribution costs by cooperating with complementary suppliers or riding someone else's distribution capability.

Some products and services fail because the delivery approach is poorly implemented. A simple example is in a restaurant where a patron is asked by a server how the meal was. When a customer gives negative feedback, poorly trained staff often look hurt and confused. They rush away from the table. The customer wonders why they were asked in the first place.

In a well managed operation focused upon customer profitability and repeat purchase, something symbolic is done. “May we offer you a free dessert?” “We won't charge you for that course if you were dissatisfied.” The goodwill obtained and the value of the relationship is not threatened as result.

In my first company, we had developed an innovative product, but with rare exceptions we could not get much in the way of repeat purchase. A few technically sophisticated firms did make large purchases, but in general our business model, predicated upon repeat purchase did not work. We moved to a service model and with better knowledge of customers, were able to develop and sell larger assignments and develop new more profitable tools.

In some industries, this lack of repeat purchase is the death knell for a product, but it may not be the death knell for a relationship.

This is a challenging situation. You need to determine whether the problem is that you have misjudged usage or whether there are additional blockages to purchase. In most cases, the situation is caused by a misjudgment about usage patterns and the benefits perceived by users.

In this situation, working with an outsider is often helpful. Those who have developed products are often emotionally committed to them and have a too rigid view of customer needs. Often changing the value proposition, the pricing, the product features, the basis of the relationship are all required. Prioritizing which requires both judgment and research.

Often the experience of having been a customer is exceptionally valuable. Lou Gerstner was successful in turning around IBM because he had been a customer and had experienced the arrogance of IBM, something no insider would know viscerally as he did.

Many companies have difficulty selling new products to existing customers. The symptoms are typically that customers are not very profitable and have weak relationships and loyalty to suppliers.

4. Changing pricing to encourage repeat purchase or purchase of bundled products e.g. MS-Office or Adobe's recent re-packagings of its software.

Many products and services fail because of external events. Recent examples have included wars, 9/11, SARs, power outages, weather, destruction of a key supplier, the list goes on.

Deeper pockets - in an uncertain world, you need to plan different and build in a larger cushion of financial resources.

Convert fixed costs to variable costs - this view made popular as “on demand business” by IBM. Attempt to mitigate risk by transferring the cost of volume fluctuation to suppliers. While clearly not possible in all businesses or in all areas of business, managing a virtual value chain where conscious decisions are made about cost vs. risk is a key strategy here.

A key task in re-launching a failed product is re-motivating the organization. When a product fails, organizations often write off the product. A key task in deciding to re-launch is deciding how much to invest to determine whether and how to re-launch.

Obtaining a customer from whom you gain new insights. In the high tech field, this is often a “reference site”. For some companies, repositioning the product as the basis for a consulting engagement can allow the opportunity of evaluating the merit of the product.

Market research to identify the value of dimensions of the product, service or potential solution that you can offer and building a business case to justify a new approach to the market.

“Spray and pray”: a low cost experiment to determine uptake rates in a wider range of customers than was previously pursued. Spray and pray can be done cleverly so that you can learn from the exercise or less intelligently so that lessons are harder to draw. But a little randomness here can sometimes be revealing.

Often “failing” products are succeeding, but insufficient measurement activities are being undertaken to measure the areas of success. So a key task is to understand what success you are actually having.

Measurement is critical with re-launching products. Because the critical task in re-launching a product is not re-launching it, but rather defining hurdles which allow you to terminate the product or reinvest for the next stage.

For, if you re-launch a product, you may decide to kill it, because the re-launch does not work either. So defining a series of gate points at which you will re-evaluate your product is key.

But assuming that your re-launched product passes each of the successive gates, improving your product is still important. Some people talk about “cycles of learning” or “iterative prototyping” or “rapid development”. For many products, failure occurs because of slow cycle times. Redesign of product development cycles to speed up development and learning from the market is often the key task in improving the overall improvement in a single or family of products.

There is a famous story about a senior manager in the early days of IBM called to the CEO's office after causing a large and expensive failure. Expecting to be fired, he was surprised when the CEO forcefully indicated that the manager would not be fired. The CEO wanted the benefit of the learning from the failure.

This lesson is lost on many companies. Failure often reveals important lessons that cause improvement and changes in strategy that lead to eventual success. What is problematic is being embarrassed about failure. Frank discussion of failure can create value. Denying failure leads to no learning.

In the same way, that when you learn a foreign language, you need to be honest about what you understand and don't understand, or you will never learn; so in the same way, learning the language of success about a new product requires openness and frank discussion. It also frequently requires the help of a dispassionate outsider.