Growing the top line through innovation: research shows that companies that follow the five "golden rules" of new product development have a greater chance of success. (Cover Story).

All companies must generate innovative new products and services if they are to stay healthy and grow. Increased competition, new technology, and changing customer demands have created a marketplace that is tougher than ever. But just one innovative product can alter the future of a single company, lead to entirely new families of products, and may usher in a whole new industry.

Creating innovative products can be a challenge like going down a road with rocks and ruts the whole way. Out of approximately 3,000 raw ideas come 125 small projects, 9 that will go to early development, 4 that continue to major development, and fewer than 2 that actually make it to market. One recent study found that newly launched industrial products failed 33 percent of the time; new consumer packaged goods fail to live up to management's expectations 80 percent of the time.

Examples of costly failures are legion. In today's dollars, Federal Express lost $294 million on Zap Mail. NeXt lost $250 million on its computer workstation. GM lost $420 million on the Wankel Rotary Engine. DuPont lost over $1 billion on Corfam. Ford lost over $2 billion on the Edsel. Polaroid wrote off $197 million in inventory alone for Polarvision instant movies. Xerox invented the personal computer ahead of Apple but failed to commercialize it. Motorola invested over a decade and more than $360 million in its cellular telephone project before taking a single major order.

Making matters worse, studies have shown that companies are not getting any better at creating new products and services. We believe companies can do better.

How does a great new product -- a blockbuster -- come into being? Is there a way to analyze what blockbuster new product development teams right? And can your teams learn from these extraordinarily successful reams? We have been searching for the answers to these questions for over a decade. In the process, we have investigated the policies and practices of hundreds of new product development teams, including several which created some of the most successful products ever developed, household names such as the Black & Decker Dustbuster, the IBM PC, and Corning optical fibers.

The blockbuster teams whose "secrets" of success we uncovered had enormous impacts nor only on their companies, but their industries as well. Consider:

Colgate Total Toothpaste became the best-selling toothpaste in its first month on the market, knocking Crest from its vaunted position after 35 years. Motorola's cellular telephones created a whole new multibillion-dollar division for the company. The Zip Drive computer storage device saved Iomega from near death in 1994. CAT scanners allowed General Electric to dominate the medical imaging field for two decades. Photocopying led to Xerox, which spawned a whole new industry. The Apple lie cemented Apple's leadership in the industry for six years -- several lifetimes in the world of high tech -- and in the process made personal computers a reality for the home user. The Handspring Visor, a personal digital assistant, captured 25 percent of the U.S. market a mere month after launch. Corning's optical fiber turned the company around from a glass manufacturer to a provider of telecommunications equipment and, along the way, revolutionized long-distance communication.

How did they do it? What were their "secrets?" Did the companies that developed these blockbuster products have anything in common? And if they did, could we generalize from their formula for success so that other companies could follow it when creating new products? The answer in a nutshell: yes.

After analyzing new product development reams from disparate companies that made everything from Army tanks to chewing gum to computers, after studying teams that created blockbusters and those that developed flops, we believe we've discovered their "secrets," the five critical practices that the blockbuster teams followed but that the losers did not.

These insights were developed by applying a technique similar to benchmarking, a system developed at Xerox, where it is defined as "the continuous process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders."

We created a derailed survey or "innovation yardstick," and began collecting data from all kinds of NPD teams. We asked some companies if we could survey them, and as our research became known, companies invited us to evaluate theirs, as well.

By 1999, we had enough data to allow us to get answers to our questions. We first classified the product teams into three groups: failure (215), moderately successful (296 non-award winners), and blockbuster award-winners (49). The last group included product reams that not only won awards but that were also top performers on all of our success criteria.

We spent the following two years looking at how these 49 blockbuster teams did what they did, surveying every phase of their development process from conception to launch, and often following up with lengthy personal interviews. We interviewed over 400 individuals including project leaders, team members, senior executives, and CEOs who were intimately involved in the development and launch of these products. Some individuals we interviewed up to five separate times to clarify and verify the facts. We looked at what the team members did on a day-today basis -- how well they communicated, how they met deadlines, what impact the deadlines had on the team, how often they held meetings, how these meetings were structured, how well they stayed focused on the product's initial vision, how they tested their new products, how much senior management was involved, how they got funding, and so on. The interviews and the quantitative surveys together gave us a mountain of information. We filtered out those factors that we re beyond the control of the team, such as, the competitive climate, or the spark of inventive genius that cannot be predicted accurately or systematically managed. We identified five critical practices that characterized blockbuster teams. What made the five practices so obvious was the level to which they were present on the blockbuster teams, and their relative absence on the moderately successful and unsuccessful teams.

These five practices fit together like interlocking pieces to a puzzle, and it was this "fit" that helped teams create blockbusters. Implementing one or two of the practices is not enough. This is an important finding, because over the past two decades a plethora of books on new product development have come out, each focusing on a single piece of the new product puzzle. Some concentrate on teams and teaming, some on the process, some on marketing, some on prototyping, and some on radical, or disruptive, technologies. None of them put the new product puzzle all together.

We believe that if your organization excels at these five practices, its probability of failure is virtually zero. That's our promise, and it's a promise that we have demonstrated statistically. The second bit of good news is that these practices are all within your control. We do not say that you must, for example, launch a product into a market that is not competitive, because you may not have a choice. We do not suggest that your new product must be technologically 10 years ahead of the competition, because that may be impossible. We do not suggest that your new product has to be 10 times better than the competition's. We understand that many times you have to play with the cards you are dealt, that you must launch your new product in the world as it is.

Success is almost never easy. Your team must implement all five practices to succeed. There is no shortcut. If you implement four out of the five practices, your chances of success go down significantly. Several strategies for corporate growth have been followed over the past decade, and some of these strategies have resulted in spectacular failures. The evidence suggests that companies that ignore new product development do so at their own risk. The creation of blockbuster new products that knock the socks off the competition, sets a new standard for your industry, and even creates new market categories are ultimately the surest way to growth.

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RELATED ARTICLE: THE 5 CRITICAL PRACTICES

So what were the five "golden rules" of new product development that made the difference? Let's take a look:

(1) COMMITMENT

Blockbuster teams had the full cooperation of the highest level of management. Senior managers were either intimately involved with every aspect of the process, or they made it clear that they completely backed the project, and then gave the team the authority it needed to proceed.

(2) CLEAR AND STABLE VISION

Blockbuster teams stayed on course by establishing "Project Pillars" early on -- specific, immutable goals 1for the product that the team must deliver.

(3) IMPROVISATION 

Blockbuster teams did not follow a structured, linear path to market. Instead they moved "lickety stick." That is, they were flexible, trying all kinds of different ideas and iterations in rapid succession (lickety) until they developed a prototype that clicked with their customers (stick).

(4) INFORMATION EXCHANGE

Blockbuster teams did not limit their information exchange to formal meetings. They shared knowledge in dozens of small ways, from coffee klatches to videoconferencing to streaming in and out of a room covered with Post-It notes.

(5) COLLABORATION UNDER PRESSURE

Blockbuster teams focused on goals and objectives as opposed to interpersonal differences. They built coherent teams, yes, but they were not especially concerned about building friendships or even insisting that everyone like each other.

Gary S. Lynn is a leading scholar on new product development. Formerly a design engineer at General Electric, Lynn founded the Innovation Research Institute, a company that designs and launches medical products. Richard R. Reilly is a nationally recognized expert on individual and team assessment. He is also a former research psychologist for Bell Laboratories and AT&T. Lynn and Reilly are both on the faculty of the Wesley J. Howe School of Technology Management, and they are co-authors of Blockbusters: The Five Keys to Developing GREAT New Products, to be published by HarperBusiness in October. They can be reached at [e-mail] and [e-mail].