Arkaro Insights
Arkaro Insights is a podcast series produced by Arkaro, where we help B2B executives deliver better results with the latest ideas in change and innovation for your organisation.
About Arkaro
Arkaro is a B2B consultancy specialising in Strategy, Innovation Process, Product Management, Commercial Excellence & Business Development, and Integrated Business Management. With industry expertise across Agriculture, Food, and Chemicals, Arkaro's team combines practical business experience with formal consultancy training to deliver impactful solutions.
You may have the ability to lead these transformations with your team, but time constraints can often be a challenge. Arkaro takes a collaborative 'do it with you' approach, working closely with clients to leave behind sustainable, value-generating solutions—not just a slide deck.
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Arkaro Insights
The Hidden Truths Behind B2B Product Launch Failures (AI voices Arkaro content)
Welcome to the Arkaro Insights podcast. This episode is based on original content developed by Arkaro. At Arkaro, we're committed to innovation in everything we do—including how we share our insights. We've utilised advanced AI technology to transform our written expertise into this conversational format, making our content more accessible and convenient for our busy B2B audience. What you'll hear is a two-person discussion generated through AI voice technology, designed to deliver our insights in a more engaging way than traditional reading. As we continue to evolve this approach, we genuinely value your feedback. Thank you for listening to Arkaro Insights, where professional expertise meets innovative delivery.
Read the original series of articles from here: Product Launch Failure: 7 Hidden Root Causes in B2B
Ever wondered why so many exciting B2B product launches fall flat despite solid technology and genuine innovation? The answer lies not in the final marketing push or sales execution, but in decisions made months or even years before launch.
In this deep dive episode, we unpack the startling reality that only 25% of B2B product launches meet revenue targets, and we reveal the seven hidden root causes behind this persistent problem. Like building a house, the commercial launch is just the housewarming party - if the foundation is cracked, no amount of party planning will make it a success.
We begin by examining how organizational culture forms the bedrock of successful innovation, with cross-functional collaboration delivering 1.5 times better launch results than siloed approaches. From there, we explore how the absence of clear innovation strategy leads organizations into the trap of "zombie innovation" - going through motions without delivering value. We dissect weak value propositions, showing how companies frequently misunderstand customer needs or underestimate B2B switching costs.
The conversation moves through flawed business models that fail to profitably deliver innovations to customers, inadequate prototyping that misses critical real-world issues, problematic scale-up transitions, and finally, poor governance that fails to kill doomed projects early. Each section provides practical, actionable frameworks to transform your innovation process.
What separates this analysis from typical innovation advice is our focus on the entire system rather than isolated symptoms. We demonstrate how companies with effective governance see marketplace success rates 2.5 times higher than poor performers. Whether you're leading an innovation team, managing a product portfolio, or overseeing commercial strategy, these insights will fundamentally change how you approach product development and commercialization.
Ready to build an innovation system that consistently delivers value? Listen now and discover the strategic shifts that will transform your product launch success rate.
Welcome to the Arkaro Insights Podcast. We're here to help B2B executives like you deliver well better results. Really, we do that by digging into the latest ideas in change and innovation for your organization. Today, we're doing one of our deep dives. We're looking into a topic that probably keeps a lot of B2B leaders awake at night, and that's why so many product launches fail, even when the technology itself seems perfectly sound. You know your first thought might be oh, it's poor marketing, or maybe the sales execution wasn't quite right. But what if the real problems, the roots of the failure, were actually planted much, much earlier in the whole innovation process? The statistics on this are well, they're pretty sobering. Actually Research from Serious Decisions. They're part of Forrester, now right, that's right yeah.
Speaker 1:They indicate that only about 25% of B2B product launches actually meet their revenue targets, which suggests I mean that's a huge 75% shortfall rate.
Speaker 2:It's staggering, isn't it? And Simon Kutcher and partners found something similar 65% of B2B products failing to meet financial objectives. It's not just a small problem, it's a really consistent significant challenge.
Speaker 1:Yeah, it really is, you know. I often think of the innovation process, like building a house. Yeah, the commercial launch, that's just the housewarming party.
Speaker 2:Right.
Speaker 1:But if the foundation of that house is cracked, you know, if the walls aren't square or the roof leaks, well, honestly, it doesn't matter how fancy the party is, nobody's going to want to live there.
Speaker 2:Exactly. A leaky roof doesn't make for a good home.
Speaker 1:So, in this deep dive, we're going to unpack seven hidden root causes, the things that typically lead to these disappointing outcomes, and we're going to start right at the beginning with the very foundation of successful innovation.
Speaker 2:Your organizational culture, let's dig in.
Speaker 1:That house analogy is spot on your organizational culture. Let's dig in. That house analogy is spot on. It really sets the stage because culture isn't just some soft skill, something nice to have, it's genuinely the bedrock. It's the environment where innovation either well, it thrives or it withers.
Speaker 2:And it goes way beyond any formal processes you might have like a stage gate system. What's really fascinating? Formal processes you might have like a stage gate system. What's really fascinating, I think, is its predictive power. Cultural factors consistently predict innovation outcomes better than say how sophisticated your processes are, even how much funding you throw at it.
Speaker 1:Wow, so you could have the best process on paper.
Speaker 2:Exactly All the right steps, all the money you need, but if the culture isn't collaborative, isn't supportive, you're still basically setting yourself up for failure.
Speaker 1:Right and one of the most common cultural issues we see. The real innovation killer is when teams operate in silos.
Speaker 2:Oh, absolutely.
Speaker 1:R&D over here, product management there, marketing, sales, customer service all doing their own thing, often with pretty limited sharing of information. How does that typically show up first? What are the signs?
Speaker 2:Well, it causes a whole raft of problems, but one of the clearest signs is what you could call lost insights, your technical teams. Maybe they get tunnel vision. They're focused purely on performance metrics, the tech specs.
Speaker 1:Right the engineering challenge.
Speaker 2:Exactly and they might not really grasp the customer value or, crucially, how that value might be changing over time. Meanwhile, your market-facing teams they might not effectively communicate those evolving needs back to R&D.
Speaker 1:So you end up building something in a vacuum.
Speaker 2:Precisely. It might be technically brilliant, but it completely misses what customers actually need or want, and that disconnect leads straight into costly handoff problems. Think about it as a project moves from R&D towards commercial launch critical knowledge, just it doesn't transfer properly.
Speaker 1:It gets lost in translation somewhere.
Speaker 2:Totally, and this causes huge misalignment in the messaging, the positioning, even just the basic understanding of what the product is. Imagine a sales team trying to sell something they don't fully grasp.
Speaker 1:Yeah, that sounds like a nightmare.
Speaker 2:It is, and these aren't just minor bumps. They impact your entire commercial strategy. There's data showing companies with strong cross-functional collaboration are one and a half times more likely to have successful launches. That's a massive advantage.
Speaker 1:It really is, yeah times more likely to have successful launches. That's a massive advantage. It really is, and that advantage, or the lack of it, is directly shaped by leadership behaviors, isn't it? Leaders don't just set the tone. They are the tone If they work in silos themselves, or if they're competing for resources instead of working together for the overall result. The rest of the organization just follows that lead.
Speaker 2:It cascades down.
Speaker 1:And this creates behaviors that actively undermine collaboration Things like resource hoarding, maybe, or credit claiming, where one department tries to grab all the glory instead of celebrating together.
Speaker 2:Yes, exactly, and internal competition, where leaders actually encourage teams to compete against each other.
Speaker 1:Right, losing sight of the bigger goal.
Speaker 2:Yeah.
Speaker 1:You mentioned zombie projects earlier. That's such a great term, these initiatives, that well objectively, they should probably be shut down.
Speaker 2:But they just keep going.
Speaker 1:Yeah, Consuming resources, time, talent but never really getting anywhere. Strategic how do these competitive cultures keep those zombies alive? What's the real cost there?
Speaker 2:It's a really stark contrast. Organizations with highly competitive internal cultures often have way more active projects on the books than collaborative ones, but and here's the paradox they deliver far fewer successful launches.
Speaker 1:Why is that?
Speaker 2:Because that internal competition makes people very reluctant to kill projects. Nobody wants to be seen as failing or giving up on their initiative right, the politics of it? Exactly. So these zombie projects just linger, sucking up resources, talent, budget management, attention that could be focused on genuinely promising innovations. And this links directly to another crucial piece psychological safety and honest feedback. Psychological safety, it's basically creating an environment where people feel genuinely okay taking risks, feeling safe to risk concerns, maybe offer an idea that sounds a bit out there, without worrying about being embarrassed or punished.
Speaker 1:Being able to say, hey, I don't think this is working.
Speaker 2:Precisely Feeling safe enough to admit when something isn't working. When you have that, when people can share candid feedback and constructive criticism without fear, that's when innovation really takes off. You get these open feedback loops that allow for constant refinement, catching flaws early.
Speaker 1:Before they become really expensive, late stage problems.
Speaker 2:Exactly, you know. Steve Jobs famously said innovation comes from people meeting up in the hallways or calling each other at 1030 at night with a new idea. Right. Those spontaneous moments, those sparks they only really happen when people feel safe enough to share them.
Speaker 1:And that safety, that openness. It unlocks the power of collective intelligence too, doesn't it?
Speaker 2:It really does. Innovation thrives on diversity of thought. When you bring together people with different thinking styles, different backgrounds, varied experiences, they naturally approach problems differently. They have a broader, more nuanced view of customer needs.
Speaker 1:Different perspective.
Speaker 2:Exactly, researchers call it collective intelligence. It's this enhanced problem solving ability that emerges when you combine diverse viewpoints in a truly collaborative way. You get insights that, honestly, no single person could have come up with alone. It leads to much stronger, more robust solutions and, ultimately, if you manage to build that collaborative culture, you're building a sustainable competitive advantage. Think about it unlike a specific product or a piece of technology, a collaborative culture well, it can't be easily copied by your competitors.
Speaker 1:That's a really good point.
Speaker 2:So organizations that get this right, they gain this lasting edge. They get better at identifying unmet needs, they develop more holistic solutions, they align the whole organization behind launches more effectively and, crucially, they learn and adapt faster, both from successes and failures.
Speaker 1:So those symptoms you see at launch, like a poor plan or bad marketing materials.
Speaker 2:They're usually just the symptoms, not the disease. They're manifestations of those deeper, earlier cultural problems. So for you, listening, a strong collaborative culture means that when things inevitably go wrong because they sometimes do you'll recover faster, adapt better and succeed more often. It really is the foundation of that innovation house.
Speaker 1:Okay, that's crystal clear Culture is foundational. But how do you actually build this kind of culture? It sounds great, but what are the practical steps you can take in your own organization, based on what we see work? We've got five sort of actionable pieces of advice for you. First, create cross-functional innovation teams and I don't just mean sticking names on a list. These need to be active participants, people with actual decision-making authority, drawn from R&D, marketing, sales, operations, customer service, right from the very start of any major project.
Speaker 2:Involvement from DAO1, crucial.
Speaker 1:Second implement innovation immersion programs. Basically, create ways for your technical folks to actually go out and see customers using products in the real world. Get them out of the lab.
Speaker 2:Feel the customer's pain points.
Speaker 1:Exactly and flip side, get your sales and marketing people to spend some time understanding the technical development process. It builds empathy, shared understanding.
Speaker 2:Bridges those gaps.
Speaker 1:Third, align incentives across functions. Take a hard look at how you measure performance. Are different departments incentivized to cooperate or are they basically set up to compete? Make sure successful launches are seen as a win for everyone involved, not just one group.
Speaker 2:Shared rewards for shared success.
Speaker 1:Fourth, establish clear decision rights. Be really explicit about who has input, who makes recommendations and, critically, who has the final say at each stage of the innovation process. No ambiguity, no finger-pointing later.
Speaker 2:Clarity avoids conflict.
Speaker 1:And finally, number five model collaborative leadership. This has to come from the top. Senior leaders need to visibly demonstrate collaboration. They need to be the ones breaking down silos through their own actions, showing everyone else how it's done.
Speaker 2:Lead by example, absolutely essential.
Speaker 1:Okay. So with that foundation of culture hopefully a bit more solid in our minds, let's move to the second hidden root cause the absence of a clear innovation strategy. This is like setting off on a trip without a map, without a destination, maybe without even knowing why you're going right just wandering, yeah too often, organizations jump straight into generating ideas without first defining why are we innovating or where should we focus our efforts?
Speaker 1:and the data here is frankly the betroubling. While a record number something like 83 percent of companies now rank innovation in their top three priorities.
Speaker 2:Which sounds good.
Speaker 1:It does. But actual innovation readiness has apparently plummeted. Boston Consulting Group says only 3% of companies are in what they call the ready zone today 3%, that's tiny. It is, and this creates what BCG calls zombie innovation Organizations. Just you know, going through the motions, this endless loop, wasting resources on stuff customers don't actually want or value.
Speaker 2:And that disconnect really points to three critical strategy failures that we see over and over again. The first one is having an unclear or overly broad strategy. This is where that zombie innovation trap really springs open. Without clear strategic direction, companies just they develop products customers don't want, don't value resources down the drain. Compare that to say a company that states clearly okay, precision application technology is a strategic growth area. We have the tech capabilities, there's growing market demand, so our innovation will focus on solutions that cut input costs for farmers by 15% or more without hurting yield.
Speaker 1:Much more specific.
Speaker 2:Exactly. You see how that defines a focused domain, specific success criteria. That kind of clarity guides decisions and leads to much higher success rates. The second failure is a missed focus on innovation domains. Companies that lack this strategic focus often try to chase too many opportunities at once.
Speaker 1:Spreading themselves too thin.
Speaker 2:Precisely, which means they don't develop deep expertise anywhere, they stretch resources and ultimately they build very little competitive advantage in any single area. Think about companies like Novo Nordisk or Eli Lilly.
Speaker 1:Right with the diabetes and obesity drive.
Speaker 2:Exactly their decades literally decades of strategic patience and deep focus on diabetes research put them in the perfect position to develop those breakthrough obesity treatments. That wasn't an accident. It was the result of focused, cumulative knowledge building in a specific domain. And the third critical failure is poor market segmentation. Companies often overestimate demand because they don't truly understand customer needs or they don't segment the market properly.
Speaker 1:They think everyone wants their new shiny thing.
Speaker 2:Pretty much. There's this optimism bias. Ey pointed out that companies with exciting new materials often assume they'll appeal to a much broader market than they realistically will. This leads to these diffused marketing efforts trying to appeal to some theoretical average customer.
Speaker 1:Who doesn't actually exist.
Speaker 2:Right. Effective strategy needs granular segmentation. You need to understand which specific segments have the most urgent needs, which align best with our capabilities and goals. Where are the real economic opportunities? Without that clarity, you're just guessing.
Speaker 1:Which is exactly why connecting your innovation strategy to your overall business strategy isn't just optional, it's completely essential, non-negotiable. Your innovation strategy can't just float around on its own. It has to be anchored to your main business goals, and when that link is strong, the results are clear. Companies see a significantly higher share of sales coming from new products. Bcg's research backs this up strongly. Companies with strong links way outperform those with weak or no links.
Speaker 2:The data is compelling.
Speaker 1:So how do you actually forge that vital connection? How do you create those clear blueprints for your innovation house? Well, we recommend a framework with five key steps. First, identify strategic growth vectors. Figure out which combination of markets, customer segments and needs offers your best growth opportunities. Second, assess your capability strengths. Be really honest about where your organization has distinctive capabilities, things that could give you a real competitive edge. Third, map domain opportunities. This is where you find the sweet spot, the intersection between those growth opportunities and your unique strengths. Where should you play?
Speaker 2:Finding the intersection.
Speaker 1:Exactly. Fourth, develop domain strategies For each priority area you identify, define what success looks like. What resources will you commit? What specific customer problems are you going to solve? And finally, fifth, communicate strategic boundaries. This is crucial. It's not just about what you will do, but also being really clear about what you won't do. These are the guardrails that keep your innovation efforts focused.
Speaker 2:And once you have that strategy, it absolutely must drive action. It can't just be a document gathering dust. Right, it needs to be active. It has to directly inform all the major decisions how you allocate resources, r&d commercialization budgets, how you manage your portfolio, balancing different types of projects, which partnerships you pursue, what to build versus what to buy or borrow, even talent development. What skills do you need to build for the future?
Speaker 1:It touches everything.
Speaker 2:It really should. Without that sharp innovation strategy tightly linked to your business strategy, giving you clarity on target customers and where to focus, while even the most efficient agile innovation system will ultimately fail to create real value, it's like having a perfectly tuned engine in a car with no steering wheel You'll go fast, but probably off a cliff.
Speaker 1:That's a great image. So, OK, what can you, the listener, do to make this shift in your organization? How do you get that steering wheel installed? Here's some actionable advice. First, audit your current innovation activities. Look at your whole portfolio. How does it stack up against your strategic priorities? Be honest what percentage of your resources are going into projects that aren't clearly aligned?
Speaker 2:A reality check.
Speaker 1:Definitely. Second, engage leadership. Have conversations with senior leaders specifically A reality check. Communicate strategic intent. Make sure everyone involved in innovation understands not just what you're doing, but why. How does this project connect to the bigger business strategy? That why is critical.
Speaker 2:Share an understanding.
Speaker 1:And fourth, review your governance models. Look at your stage gate process. Or whatever you use. Do the criteria explicitly evaluate strategic alignment at every single decision point? If not, revise them.
Speaker 2:Build it into the process.
Speaker 1:Exactly Because without that strategic clarity, even fantastic value propositions will struggle, you'll waste resources, you'll confuse customers. Getting this foundation right ensures every innovation effort is pulling in the same strategically important direction. Okay, so let's say our cultural foundation is solid and our strategic blueprints are clear. What if the actual appeal of our house, the product itself, just isn't strong enough? That brings us neatly to our third hidden root cause weak value propositions.
Speaker 2:Ah yes, the core promise.
Speaker 1:And this is arguably the single most critical failure point in the whole process. If you can't convincingly answer that basic question, why would someone buy this? Then, honestly, everything else is pretty much wasted effort.
Speaker 2:All the downstream work becomes pointless.
Speaker 1:Exactly. It's a harsh reality, but something like 80% of new B2B products fail in their first year, and so often the reason is that the value proposition was built on internal assumptions, maybe wishful thinking, not on genuinely validated customer needs. We see this value proposition disconnect constantly. A really stark example is Forward Health. This health care company burned through what was it? $650 million.
Speaker 2:An incredible amount.
Speaker 1:Building something that, frankly, it turned out nobody really wanted their idea for clinics with no doctors or nurses, relying purely on tech pods. It just didn't resonate with patients. They completely misjudged what customers actually valued.
Speaker 2:A classic case of building it because you can, not because you should.
Speaker 1:Precisely it happens when companies develop value propositions based on what they think is important, not what customers actually care about.
Speaker 2:And that leads us into three really distinct failure modes for value propositions. The first is just a fundamental misunderstanding of customer needs. This isn't just about not doing enough research. It's about actively misjudging what people truly require or desire.
Speaker 1:Like forward health assuming.
Speaker 2:Efficiency trumped human interaction driven care, assuming that's what patients wanted, when in reality patients valued trust, empathy, human connection with medical professionals. Contrast that with Bosch, they took a very systematic approach. They focused first on gathering evidence for the existence of jobs, pains and gains of customers before they even started building anything. Evidence first Right, and that rigor led them to retire over 70 percent of their initial ideas, because they simply lacked enough customer evidence. Think of the waste they avoided.
Speaker 1:Huge savings yeah.
Speaker 2:The second failure mode is insufficient differentiation. Even if you do address a real need, your product can still fail if it doesn't stand out in a meaningful way from what's already out there or if its benefits aren't clearly superior.
Speaker 1:The Me Too products.
Speaker 2:Exactly Just copying something without adding real value. Or sometimes you see this utopian illusion coupled with risk disequilibrium. Companies get infatuated with, say, the properties of a new material, but they completely overlook its downsides or the risks involved.
Speaker 1:Like the early HDPE example.
Speaker 2:Perfect example High-density polyethylene was pushed as superior, but the producers initially overlooked how difficult it was to mold and its tendency towards stress fractures. Result A mass customer exodus and warehouses full of unsold room. Took them two years to fix it.
Speaker 1:And carbon fiber in planes took decades right.
Speaker 2:Over 20 years for primary structures, despite being developed in the mid-60s. Why? Because the perceived risk, the consequences of failure in an aircraft, massively outweighed the benefits for a very long time. And the third critical failure mode is inadequate switching value this is huge in B2B. New products need to offer enough extra value to justify the cost, effort and risk of switching from established suppliers or processes.
Speaker 1:It's not just about being slightly better.
Speaker 2:Not at all. Innovators consistently underestimate these switching costs. We're talking technical validation, process changes, retraining staff, managing new inventory, mitigating risks disrupting existing relationships. It all adds up.
Speaker 1:Like the soybean seed, example.
Speaker 2:Exactly. Farmers face significant costs over $13 an acre just to change brands, maybe up to $15 an acre to change seed types because of equipment adjustments, sunk costs, learning curves, relationship factors. So they often stuck with what they knew, even if something technically better came along. And this often involves ignoring value chain dynamics. Sometimes the resistance doesn't even come from the end user. It comes from other players in the value chain whose business models feel threatened by your innovation.
Speaker 1:Ah, the intermediaries.
Speaker 2:Right. Remember, PVC pipe Took nearly 15 years to get widely adopted in housing, even though it was cheaper and durable. Why? Because it made life harder or less profitable for plumbers and pipe distributors. They became the losers in the value chain and systematically resisted it, often through things like building codes. This also feeds the myth of the drop in replacement. Companies assume their new material or component can just swap in easily, but then they hit unexpected integration problems like plastics replacing metal and cars failing due to thermal stability or coding issues. The whole system matters.
Speaker 1:Okay, so those are some serious pitfalls. How do you actually develop strong value propositions that avoid them? What are the key practices for our listeners?
Speaker 2:Well, here are five things to really focus on in your approach. First, start with customer jobs to be done. Don't just list features. Really dig into what the customer is fundamentally trying to accomplish functionally, emotionally, socially. What are their real pain points? What outcomes are they desperately seeking?
Speaker 1:That beyond the surface level.
Speaker 2:Exactly. Second, quantify the complete value equation, especially in B2B. You have to put numbers on it. Understand the customer's current costs, direct and indirect, their performance limits, their risk exposure. Then show precisely how your solution improves their economics and, crucially, factor in all those switching costs we just talked about.
Speaker 1:The total economic picture. Third validate with progressive disclosure. Don't wait for one big bang test at the end. Test your value proposition incrementally. Start with concept testing, then maybe prototype testing with real users, then conduct economic validation with finance stakeholders and finally really test the adoption requirements. Can they actually make the switch?
Speaker 2:Learn and adapt as you go.
Speaker 1:Fourth, map the full adoption journey. Think beyond just the product itself. What's the entire process for a customer to become aware, evaluate, implement and then successfully use your solution on an ongoing basis? Map it all out and finally, fifth, address the complete value chain. Make sure your value proposition works not just for the end user, but for all the key stakeholders who influence the buying decision or enable delivery. Identify those potential losers in the chain and figure out how to either win them over or bypass them.
Speaker 2:You have to make it work for everyone involved.
Speaker 1:Absolutely, Because that strong value proposition, it's the bedrock for your launch. If it's weak, honestly, no amount of brilliant marketing or sales execution is going to save it All right. So even if you nail the value proposition, your amazing product can still crash and burn if the business model is broken. And that brings us to hidden root cause number four flawed business models.
Speaker 1:Moving from the what and why to the how Exactly your value proposition answer is why buy this? The business model answers how will we profitably deliver this to customers? And that how of profitability is so often neglected. Think about that cautionary tale of New Age Eats. They burned through $32 million developing cultivated meat that actually worked.
Speaker 2:Technologically impressive.
Speaker 1:Totally, but they shut down with zero revenue. Why? Their tech hit all the milestones, but their commercialization strategy was flawed. The regulatory path was incredibly long 10, 20 years maybe with no way to generate revenue. In the meantime, Brilliant tech Broken business model.
Speaker 2:A fatal flaw, even with great science.
Speaker 1:And we see this pattern again and again. Innovations fail not because they aren't good ideas, but because nobody figured out a viable way to actually get them to customers and make money doing it.
Speaker 2:And that leads directly into three critical business model failure modes. The first is channel inadequacy. This happens when your chosen distribution channels simply can't deliver the product's value effectively.
Speaker 1:The pipes are clogged, so to speak.
Speaker 2:Pretty much. You might have superior technology, but it hits unexpected roadblocks in distribution that have nothing to do with the product itself. Think about agriculture again. Farmers might want innovative tech, but the dealers, the channel partners, face hurdles Like what, well, there, channel partners face hurdles Like what?
Speaker 2:Well, there's a big training burden. Dealers need to learn about new tech. Invest time without any guarantee of return. Established products basically sell themselves because they're familiar. Plus the financial reality. Established suppliers often offer better margin or volume discounts. For a dealer operating on thin margins, those immediate financial benefits often trump long-term technical advantages.
Speaker 1:So the channel rewards the status quo.
Speaker 2:Often, yes, it makes it harder for truly innovative products to break through traditional channels, even if they are better Then moving beyond just the channel. The second failure mode is value chain resistance. This is where intermediate players, not the end user, actively block adoption because your innovation threatens their business model.
Speaker 1:Protecting their turf.
Speaker 2:Exactly the poultry exchange, that digital marketplace. It failed despite clear demand because it threatened the existing brokers and distributors. The founder basically said the industry just wasn't ready for that disruption. Intermediaries systematically resisted the change that would bypass them and the vertical farming example Valerie farming right huge valuation, hundreds of millions raised.
Speaker 2:Technology worked but they shut down. Why? Because the retailers, a critical link in the value chain, couldn't make good enough margins selling their produce, mainly due to the high energy costs involved in vertical farming. The business model didn't work for a key player. The third failure mode and selling their produce, mainly due to the high energy costs involved in vertical farming. The business model didn't work for a key player. The third failure mode is coordination complexity. This crops up when adopting your innovation requires simultaneous changes across many different stakeholders. It creates huge coordination headaches and drags out timelines.
Speaker 1:Like getting everyone to agree at the same time.
Speaker 2:Precisely Polycarbonate. Automotive glazing. The plastic windows for cars offers big weight savings. But adoption stalled because of a catch-22 between the car manufacturers, OEMs, and their suppliers. Suppliers wouldn't invest heavily without firm OEM commitments, but OEMs wouldn't commit without a guaranteed stable supply chain. Snail mate.
Speaker 1:A classic chicken and egg problem.
Speaker 2:Exactly. And New Age Eats again beyond the regulators. They needed simultaneous buy-in from investors, manufacturers, retailers and consumers, all operating on different timelines, different metrics. When the regulatory delays stretched out, that whole complex ecosystem just collapsed. Not a tech failure, a business model, coordination failure.
Speaker 1:Wow, these are significant hurdles. So, given all that, how do you build business models that are actually resilient? How do you avoid these traps?
Speaker 2:Well, the key insight, I think, is that commercialization demands just as much rigor, just as much careful thought as the technical development itself. You can't just invent something brilliant and assume it will find its way to market profitably.
Speaker 1:And build it, and they will come fallacy, absolutely so. Here are five actionable steps for your organization to develop more viable business models. First, map the complete go-to-market journey. Don't just think about value creation. Map out precisely how your product will reach the customer, which channels, what capabilities are needed along the way, what support, how will you build awareness? Second, validate economics across all stakeholders. You absolutely have to make sure your model creates value, meaning profit or clear benefit for every essential player in the value chain. Understand their costs, the required margins, the pricing dynamics. Does it work financially for everyone involved?
Speaker 2:Don't forget the middlemen.
Speaker 1:Never. Third, test channel acceptance early. Don't wait until the product is finished. Engage potential channel partners during development. Get their feedback. How does this fit their portfolio? What support would they need? Get their buy-in early. Fourth, develop multiple business model options. Build in flexibility. Don't bet everything on one approach. Could you go direct and indirect, offer it as a product or a service, license the tech or manufacture it yourself? Having options lets you adapt as you learn from the market, hedging your best Exactly. And fifth, continuously refine based on learning. Your initial business model is just a hypothesis. It needs to evolve as you interact with customers, as you get market feedback. Use those insights to constantly tweak and improve your go-to-market approach.
Speaker 2:It's an iterative process.
Speaker 1:It has to be, because a viable business model is what bridges that gap between a great value proposition and actual commercial success. Right.
Speaker 1:If you tackle these issues proactively, think about the how as much as the what, you dramatically boost your chances of a successful launch. It's about the whole ecosystem, not just the product in isolation. Okay, let's pivot now to our fifth root cause inadequate prototyping. This is that critical phase where you know the theory meets reality, where your elegant concept runs headlong into the messy, complicated real world. It's really the moment of truth for your innovation.
Speaker 2:Where the rubber meets the road.
Speaker 1:Precisely, and think about the stark contrast between, say, juicero and Theranos. Juicero raised $120 million for a $400 juicer. The prototypes worked fine. The engineering was actually quite impressive.
Speaker 2:Over-engineered perhaps.
Speaker 1:Massively Because customers quickly figured out they could get the exact same result by just squeezing the juice packets by hand. Juicero solved a really complex engineering problem that customers didn't actually have. That's what we call technical over-delivery.
Speaker 2:Right, solving the wrong problem brilliantly.
Speaker 1:Then you have Theranos on the other end Raised $700 million for revolutionary blood testing, but later FDA reports showed the device fundamentally could not do what they claimed.
Speaker 2:A catastrophic failure of the core technology.
Speaker 1:That's technical underdelivery, both massive failures originating in the prototyping phase, but for completely opposite reasons. It just shows how treacherous this transition can be.
Speaker 2:It really does. And those examples highlight three critical failure modes we see in prototyping and testing. The first is exactly that technical overdelivery where engineering brilliance solves non-existent problems.
Speaker 1:Spending resources on features nobody values.
Speaker 2:Right, over-investing in sophisticated solutions that customers just don't value enough to justify the cost or the complexity. Juicero is the poster child, right, this incredibly complicated Wi-Fi connected machine for a problem that wasn't real. We saw similar things with Google Glass.
Speaker 2:Maybe the Segway too, yeah cool tech but Cool tech, but a failure to really validate if users actually wanted or needed those capabilities in their everyday lives. It creates this innovation paradox Sometimes the more sophisticated the tech solution, the higher the risk you're solving problem the customers don't actually have. Technical teams can get carried away by the challenge, the excitement.
Speaker 1:And lose sight of the user.
Speaker 2:Exactly. The second failure mode is the opposite Technical underdelivery, where the prototypes, or maybe even existing tech repurposed, just fail to deliver on the promises when they hit real world conditions. This often happens because of shortcuts, poor quality control or just insufficient rigor in testing.
Speaker 1:Cutting corners to save time or money.
Speaker 2:Often yes, or using flawed testing methods. Think about New Coke. They did 200,000 taste tests. The product technically won, but they completely missed the emotional, the cultural connection people had to the original. The testing missed the complete customer experience.
Speaker 1:Or Theranos.
Speaker 2:Theranos is the extreme, tragic example in medical devices. The Edison device simply couldn't perform its core functions Systematic failures that rigorous, honest prototyping should absolutely have caught. The tech just didn't work as promised. And the third failure mode is inadequate risk identification. This is where testing fails to uncover critical downsides because the focus is purely on the upside. Potential Companies rush products, neglecting to test for what could go wrong.
Speaker 1:Like the Starlink corn example.
Speaker 2:A perfect, costly example. It was commercialized for animal feed, but surveys showed farmers were likely selling it for human food too. Yet there were no real safeguards. The required buffer strips around fields were completely inadequate. Result widespread contamination. Half the US corn supply affected. Over 300 recalls costing hundreds of millions, maybe a billion dollars. Wow.
Speaker 1:And the tech itself worked.
Speaker 2:The core GMO tech worked, but the testing failed catastrophically to address the real world contamination risks. It highlights that dangerous speed versus rigor tradeoff, Commercial pressure makes organizations minimize testing, gloss over critical assumptions, assumptions that turn out to be wrong, expensively wrong once launched.
Speaker 1:Okay. So how do we build better prototyping and testing processes? How do we avoid over-delivering, under-delivering or missing huge risks? It clearly needs a systematic approach. Here are five practices we recommend for your organization. First, validate customer value before heavy technical development. Don't just assume Systematically. Check that the problem you're solving actually matters to customers and that your proposed solution genuinely addresses their priorities. Avoid that juicero Google glass trap.
Speaker 2:Problem solution fit first.
Speaker 1:Absolutely. Second, implement rigorous testing protocols and stick to them. Define comprehensive tests that reflect real-world conditions, not just ideal lab settings, and maintain that rigor even when timelines get tight. Never compromise safety or core quality testing for speed. Test the extremes, not just the averages. Third, test specifically for downside risks and unintended consequences. Don't just look for positive results. Actively try to break it Systematically. Test for potential negative outcomes safety issues, environmental impacts, things that could go wrong. Think beyond just technical function, Think Starlink.
Speaker 2:Proactively look for the problems.
Speaker 1:Fourth, build continuous validation throughout development. Don't leave testing until the end. Integrate rigorous testing and real customer feedback loops all the way through the development process. Catch issues when they're small, cheap and easy to fix.
Speaker 2:Early and often.
Speaker 1:And fifth, create learning-oriented development cultures. Frame your development process not just as executing a plan, but as maximizing learning Learning about customer needs, market realities, technical limits, potential risks. Encourage teams to admit when things aren't working and to pivot based on evidence, not just sunk costs or attachment to an idea.
Speaker 2:It's okay to learn. You were wrong.
Speaker 1:It has to be okay, this whole prototyping and testing phase. It's a critical filter. Successful companies don't just check if the product works. They validate that it solves the right problem, that it delivers on its promises reliably and, crucially, that it won't create unexpected disasters when rolled out at scale. Getting this right sets you up for successful scale-up. Getting it wrong? Well, that leads to our next point.
Speaker 2:Exactly.
Speaker 1:Which brings us to hidden root cause number six problematic scale-up. This is that incredibly risky transition from a working prototype to full-scale production and commercial operation.
Speaker 2:Where the real money gets spent.
Speaker 1:And where the financial risk is often highest, because errors here happen after you've already sunk significant technical investment, but before the full painful cost of commercial failure becomes obvious. It's often down to that lack of cross-functional collaboration, again, r&d making crucial scale-up decisions without properly involving operations or commercial teams.
Speaker 2:Decisions made in isolation come back to bite you.
Speaker 1:They really do. We see products launch with great promise only to stumble badly in the market. Think about Amherst Biotechnologies. They launched biofuel products, had partnerships, but the production process turned out to be too expensive and inefficient to scale up.
Speaker 2:Tech worked, economics didn't.
Speaker 1:Precisely Technical success. Commercial failure forced a pivot into cosmetics or BioAmber. Their biosycinic acid worked great in the lab. They launched commercially, yeah, but the yields dropped at commercial scale. Purification was way more complex and costs ended up being far too high around two dollars and 23 cents per kilo when the market needed under dollar 50 ouch, that gap kills you. Led straight to bankruptcy, despite a $147 million facility investment. The product technically worked, but the scale up economics were fatal.
Speaker 2:And these painful examples illustrate three really common scale up failure patterns. The first is technical scale up compromises. This is where the realities of large scale production force compromises that undermine your products, performance or cost structure, wrecking your market positioning.
Speaker 1:The lab magic doesn't translate.
Speaker 2:Often not perfectly. Maybe operations wasn't involved early enough, so the manufacturing process chosen by R&D runs into trouble at scale. You see product quality degrading. Maybe reaction kinetics change, heat transfer is different, mixing isn't as good at large volumes. Things that were negligible in the lab become major issues.
Speaker 1:Or costs just balloon.
Speaker 2:Exactly. Production cost escalation is common Energy use, labor, equipment costs. They often exceed the pilot plant projections significantly. Or for things like agricultural inputs you see scale-dependent performance variations. Something consistent in a controlled greenhouse suddenly varies wildly across different field conditions, soils, weather patterns at commercial scale. The second failure pattern is commercial capability scaling issues. Here maybe you do successfully scale up production. The factory is humming, but the organization fails to build the necessary commercial capabilities to actually support the new value proposition in the market.
Speaker 1:You can make it, but you can't sell it or support it effectively.
Speaker 2:Right. There's often an underestimation of commercial requirements. All the focus and resources go into building the plant, scaling up manufacturing, while overlooking the need for things like new technical support teams, different distribution logistics, customer education programs, maybe specialized application engineering all things that take time and money to build.
Speaker 1:That polycarbonate glazing example again.
Speaker 2:Perfect illustration. Adoption was delayed not just by the tech but by the commercial complexity getting multiple tiers of suppliers to change simultaneously, leading to that OEM catch-22. Or think about distribution channel velocity limits. Distributors only have so much warehouse space, so much capital, so much sales bandwidth. Even if you have a breakthrough, they might simply not be able to handle the volumes you project. The third failure pattern is operational complexity escalation. This is where the organization just can't manage the complexity of running commercial operations consistently and reliably. Day-to-day execution falls down.
Speaker 2:Exactly which leads to customer dissatisfaction, returns, lost business. Maybe a research-focused company is totally unprepared for the demands of running multi-shift manufacturing operations, managing different skill levels, maintenance schedules, building a strong safety culture across a diverse workforce. You can see quality variations creep in due to inconsistent training or process control across shifts. These operational hiccups can kill profitability just as surely as a technical failure.
Speaker 1:It's clear these scale-up decisions are incredibly high stakes. They lock in constraints, technical performance, cost structures that determine success or failure for years to come. You can't easily change them once you're running commercially.
Speaker 2:The die is cast often quite early.
Speaker 1:But again, organizations with that collaborative culture, the ones that get operations and commercial leaders involved early in development, they can anticipate these constraints. They could design for manufacturability, design for cost plan, the commercial ramp up properly.
Speaker 2:Proactive planning versus reactive firefighting.
Speaker 1:Absolutely. This scale up phase is really the last chance to make sure all that R&D investment actually translates into commercial success, not just expensive disappointment. For complex things like microbial bioprocesses that transition from lab to factory can take three, five, even 10 years with massive financial risk if things go wrong. Can take three, five, even 10 years, with massive financial risk if things go wrong. So, for you, getting scale upright proactively and systematically dramatically increases your odds of building a sustainable, profitable business around your innovation. It's about connecting the lab bench to the bottom line. And that brings us, finally, to our seventh hidden root cause Poor governance.
Speaker 1:This is the critical overarching link that really determines, of all the other pieces we've talked about, culture, strategy, value props, business models, prototyping, scale up actually work together effectively. The system that manages the system Exactly. Governance is the framework for achieving consistent innovation success. It works on two levels right. There's the project level think stage gate processes, go kill decisions for individual projects. And then there's the portfolio level balancing the mix of projects, allocating resources strategically, ensuring everything aligns with the overall strategy. Those are crucial Absolutely. And the really sobering thing we see is that most so-called launch failures are actually governance failures that happen months, even years earlier, maybe 18 to 36 months before launch during development.
Speaker 2:Decisions made or not made, long before the product hits the market.
Speaker 1:Precisely these earlier governance gaps create these invisible vulnerabilities that only become catastrophically obvious at launch time. Typical failures Things like inadequate market validation at early gates, starving promising projects of commercialization resources later on, or having KPIs that accidentally reward speed over actual readiness.
Speaker 2:The system itself is flawed, leading to poor outcomes.
Speaker 1:That's it exactly, and we've pinpointed five critical governance failures that consistently sabotage commercial success. First, and perhaps the most costly, is the failure to kill doomed projects early.
Speaker 2:The zombie projects again.
Speaker 1:They keep coming back. It's the sunk cost fallacy? Maybe emotional attachment, internal politics? Whatever the reason, these projects keep consuming resources long after objective data says they should be stopped.
Speaker 2:Bosch is the counterexample here, right.
Speaker 1:They really are exemplary. That initial three month 120K evidence gathering phase purely focused on customer jobs, pains, gains. They kill almost 70% of ideas right there because the evidence isn't strong enough, and then another 74% after building minimum viable products.
Speaker 2:Ruthless focus on evidence.
Speaker 1:Their culture sees this high termination rate as essential for success, not a sign of failure. It stops them wasting millions on products nobody wants. But it requires courage, clear, objective criteria and governance bodies with real teeth.
Speaker 2:Willingness to say no.
Speaker 1:Second critical failure poor KPI design that rewards bad behavior. This is Goodhart's law in action when a measure becomes a target, it ceases to be a good measure. Inaction when a measure becomes a target, it ceases to be a good measure. Your KPIs accidentally incentivize the wrong.
Speaker 2:things Like measuring activity instead of results.
Speaker 1:Exactly Measuring the number of active projects, managers inflate their portfolios. Valuing the portfolio based on optimistic projections leads to overestimation. Rewarding stage gate advancement rates Teams push weak projects through just to hit the metric. Rewarding launch frequency leads to rushing unprepared products out the door.
Speaker 2:We've seen leaders literally refuse to kill projects because it would lower their active projects KPI and hurt their review.
Speaker 1:Madness, the solution is balanced KPIs, pairing metrics like pipeline projects and kill rates to prevent gaming the system.
Speaker 2:Third, there's strategic drift supporting projects outside the defined innovation strategy scope. This is often gradual, insidious. Individual projects get approved. Maybe each seems reasonable on its own, but collectively they pull the organization off strategy fragmenting effort.
Speaker 1:Death by a thousand small decisions.
Speaker 2:Pretty much. You end up with a scattered portfolio achieving little real impact anywhere. It just reinforces why strategy has to come first and governance have to enforce it. You need clear boundaries, what we will and won't pursue and the discipline to terminate projects that drift outside them. Fourth is resource starvation through poor portfolio pruning. This is the flip side of keeping too many zombies alive. You let too many projects reach the really expensive later stages prototyping, scale up and then there isn't enough money or people to properly fund any of them, especially the commercialization activities.
Speaker 1:Breading the peanut butter too thin.
Speaker 2:Exactly. Remember that cost curve Early stage might be $50, prototype $500, scale up $5 million. Plus One poorly governed scale up can literally eat the budget for 100 early stage explorations. The result Launch budgets get squeezed, marketing is underfunded, sales training is inadequate. Even strong products fail because they're undersupported. Better governance means being ruthless earlier, like Bosch, having exponentially increasing funding hurdles at gates, concentrating resources on the best bets and protecting dedicated reserves for commercialization. And the fifth critical failure inadequate final stage gate governance for launch readiness. Even if you have decent governance during development, it can all fall apart at that final checkpoint if it's treated as just a rubber stamp exercise.
Speaker 1:Like the final gone-ago before launch. That needs to be incredibly rigorous, doesn't it? Because this is the absolute handover from development to the commercial team.
Speaker 2:It's the final quality check for the entire innovation effort.
Speaker 1:So effective governance at this final gate needs a really systematic evaluation across, we think, seven key dimensions of launch readiness. First, launch plan governance and approval. Is there a clear, comprehensive plan Objectives, target segments, timelines, budgets, clear responsibilities. Is it approved? Second, marketing, collateral and regulatory compliance governance Are all the materials ready? Customer-centric messaging, application-specific data, technical docs Is everything compliant? Third, sales enablement governance and training validation. Is the sales team truly ready? Had they had comprehensive training features, value propment, governance and training validation Is the sales team truly ready? Have they had comprehensive training? Features, value prop, competitive positioning, objection handling and, critically, has the effectiveness of that training been validated?
Speaker 2:Now just check the box training.
Speaker 1:No way. Fourth, customer support readiness governance. Is the support team ready, qualified staff, proper documentation, clear escalation processes, agreed response times? Can they handle inquiries effectively? Fifth, supply chain and distribution governance. Can we actually make and deliver it? Production capacity validated, quality control systems in place? Channel partnerships confirmed Inventory strategy set? Sixth, competitive response preparation governance. Have we thought about how competitors will react? Do we have response scenarios planned, pricing flexibility agreed? Are we ready for a fight?
Speaker 2:Anticipating the counter moves.
Speaker 1:And seventh, post-launch monitoring and adjustment governance. What are the dashboards? How will we track performance? How will we collect feedback, analyze the market and, crucially, what are the protocols for rapid course correction if things aren't going to plan?
Speaker 2:Building an agility after launch.
Speaker 1:All seven need a green light based on evidence, not just hope, before that final gate opens.
Speaker 2:So, putting it all together, how do you actually build better innovation governance? It's not ad hoc. It requires systematic design addressing both project quality and overall portfolio health. A few key design principles really stand out. First, creating gates with teeth versus hollow gates. This means gates need clear go-kill authority. You need cross-functional gatekeeper teams with real expertise and clout. You need predetermined objective criteria that are applied consistently. Funding needs to be directly tied to passing the gate and senior management has to visibly back the tough decisions, even killing pet projects.
Speaker 1:The teeth are the consequences.
Speaker 2:Exactly. These rigorous gates are designed specifically to catch those root causes we've discussed Poor culture fit, lack of strategic alignment, weak value props, unviable business models, inadequate prototypes, scale-up risks. Second, design balanced KPI systems. Avoid those huge dashboards. Focus on maybe five, eight carefully selected metrics covering pipeline health, portfolio performance and overall system health, and build in anti-gaming measures. Paired indicators maybe. Rotate metrics periodically. Always add qualitative context, keep the metrics honest and, third, critically integrate portfolio and project governance. Gate decisions shouldn't happen in isolation. They need two parts. Part one is this individual project viable? Does it meet the criteria? Part two how does this project fit into the overall portfolio? How does it rank against other opportunities? Where does it sit in terms of resource allocation and strategic balance? This integration prevents resource conflicts and ensures the portfolio as a whole stays healthy and aligned.
Speaker 1:And the impact of getting governance right is well, it's huge Companies with effective gates with teeth see marketplace success rates that are 2.5 times higher. We're talking 63, 78% success, versus just 24% for poor performers.
Speaker 2:A massive difference.
Speaker 1:And hyper-performing companies get about 50% of their five-year sales from new products, compared to only 25% for average ones. Using structured stage gate processes boosts success rates significantly too around 70% versus 52% for those without. That's 1.6 times higher failure rate if you lack structured governance.
Speaker 2:The evidence is clear. Structure and discipline matter.
Speaker 1:They really do so. The path forward for you, listening, involves taking an honest look at your current governance, then applying systematic design principles and, crucially, committed to making those difficult, evidence-based decisions. Governance isn't red tape designed to stifle innovation. It's the framework that actually enables innovation to flourish consistently. So maybe a final provocative thought to leave you with the real question isn't whether your organization will face governance challenges. You absolutely will. The question is whether you'll address them proactively, by design, or reactively, after the failures pile up. The smart money and all the data suggests proactive investment and strong governance delivers far, far better returns. We really hope this deep dive into these seven hidden root causes of B2B product launch failure has been incredibly insightful for you. Just understanding these underlying issues, getting below the surface symptoms, is truly the first step toward transforming your innovation system, moving from one that may be consistently disappoints to one that increasingly reliably delivers value. If you'd like to learn more about.
Speaker 3:ARKARO services and how we partner with B2B executives like you to drive change and innovation. You can visit our website at Arkaro, that's A-R-K-A-R-O dot com, or just find us on LinkedIn, and if you're thinking about how these insights apply specifically to your organization's challenges and you'd like a free consultation to discuss that, feel free to email Mark Blackwell directly. His email is mark@a rkaro. com That's Mark at Arkaro. Thank you so much for listening to the Arkaro Insights Podcast.
