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SaaS business

10 Reasons Why Products Fail (So You Can Prevent It)

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27 Jan

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2023

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… really good teams assume that at least three quarters of the ideas won’t perform like they hope.

Marty Cagan

In articles on project management, you can find scary (and somewhat overused) statistics: 70% of projects fail “scary sounds”. When I saw it for the first time, I had many questions. What do they consider a failed project? Moreover, how do they define a project?

So, I started looking for the source. It turned out to be a research from 2010 by KPMG New Zealand, an accounting advisory company. They made a survey of “100 businesses across a broad cross section of industries”, and 70% of organizations reported that they have suffered at least one project failure in the prior 12 months.

Well, 100 businesses is not the most representative sample. And the research is a bit old. Does it mean that we shouldn’t worry about projects failing en masse? No, because believing that the situation has changed drastically since then would be too optimistic.

We are the Eleken design agency and we help businesses succeed. But in this article we’ll talk about how to survive the step that preceeds success, or in other words how not to fail (and show some examples of projects that failed).

How big is the probability of failure

Let’s get back to the infamous 70%. Why is this result so shocking? First reason: we had no idea about the success rate of projects. Second reason: the survivor bias. 

We think that “people reach success when they work hard enough” because that’s what Hollywood tells us. At the same time, failure stories are much less popular genre because new products that failed don’t become famous and don’t have that voice. We see the survivors, while the non-survivors remain invisible.

Even when you think of failure stories, the most known ones are from famous people who reached success and then tell a story of their old failures, proving the rule of “working hard enough”.

To get away from the biases, let’s take a look at the statistics. 

A more recent study from PwC (2014) overlooked 10,640 projects from 200 companies in 30 countries and across various industries. The result showed that only 2.5% of the companies successfully completed 100% of their projects.

But the projects that don’t fail still often get the results that are far from the plan. A research by McKinsey and the University of Oxford found that “large IT projects run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted”. All of the 5,400 IT projects in the study had initial budgets over $15 million, so imagine how big these 45% were.

percent of IT projects with given issue

These numbers prove that the problem with failures is real. Whether it already happened to you or not, it’s time to understand why products fail and how to prevent it.

What are the reasons of product failure?

When looking through PwC research, I stumbled upon this picture showing cases of expensive project management mistakes. It shows the reasons like “failure to apply AML procedures” and IT “glitch”. Among them, there are even the wrong trains purchase.

It’s a story about how SCNF, French state train company, purchased new trains worth 15 billion euros and then found out that they are too wide for some old stations and simply can’t fit there. To fix this, they had to invest in renovation of these stations, spending over €50 million.

What does this failure story teach us?

Everybody fails sometimes. And the reason to that can be anything.

However, it makes sense to go through the most common reasons of IT products failure. These are the ones we can learn from and increase the chances of success.

Marty Cagan wrote a book Inspired. How to create tech products customers love, where, among other, he described ten root causes of product failure. Each of them is related to a phase in product development, as seen on this picture.

  1. Idea. The product starts with an idea, and the failure can start with an idea, too. When it is sourced from top to down, without team participation, it is likely to miss this initial validation phase.
  2. Business case. It’s made to plan the financial questions and prevent failures, right? The problem with business case at this stage, however, is that nobody knows how long will it take, how much will it cost, and how much money it will bring. That’s why making a business case without any real data is worse than not making one.
  3. Product roadmap. Similar to the previous one, the roadmap at this stage is an overestimating of one’s ability to see the future. What most product managers don’t want to see in the future is that half of their ideas won’t work and even those that work will need some iterations to get to the point that we can call success.
  4. Gathering and documenting requirements is a job of product managers. The root of failure here is that many don’t understand that product manager’s role is much more than that (read our article on product management to find out more).
  5. Role of design is another thing that is underestimated and misunderstood often. When designers are given a ready solution to create an interface for it, there is little they can do to make the product itself better. To make sure that design works on the success of the product, read our article on product designer role.
  6. Engineers are involved too late. To create a product that is truly innovative and user-oriented, both designers and engineers have to be involved in the process at the early stages.
  7. Agile… is also involved too late. As it is often believed to be a framework for developers team mainly, the development stage is when it starts to work. But when introduced only at the stage of development, it brings only 20% of potential value it could bring if started earlier.
  8. Project-centricity. It’s a logical and comfortable situation for companies to think of their work in terms of projects. The problem here is that projects are outputs, while products need outcomes. As was said earlier, a finished project doesn’t equal success.
  9. Customer validation happens in the end of the process. Which means that after all the design and development, the project might come to a conclusion that… the idea doesn’t work and customers don’t like it. And they have to start all over again. That’s why testing and validation should happen as early as possible — to decrease the sunk cost.
  10. Where did the time go? Wasted. As well as all the wonderful things that could have been done during this time. That’s what is called opportunity cost: the time spent on the projects that were likely to fail. When tested earlier and changed earlier, there would have been less time spent in vain.

Product failure examples

Let’s see some real-life examples of product failures. And who do you think have many stories of failures to tell? Industry giants! If you want to learn from successful companies, it’s good to learn from their failures, too.

Tesla Motors

This company has a long track of failures. Tesla’s history was constantly accompanied by huge delays and overruns, worsened by the crisis of 2008, and recalling the cars twice for errors in engineering. A cherry on top was when Tesla’s new car, which claimed to have armoured glass, had this very glass broken during the presentation, when the head of design hit it with a metal ball.

This story is about how tech challenges paired with errors in project management can cause problems for a company (and how state loans can solve them, but that’s a story for another day).

Facebook Home

A new app from Facebook appeared when the company was already leading the world of social media. The app was supposed to make Facebook feed more accessible (as if it was too hard to get before). It was placed literally on the main screen when it was blocked.

The app immediately received lots of negative feedback. The addictive nature of social media was already a problem for many, and Facebook Home app could only worsen the situation. I never had a chance to use it, but can imagine the constant “doorway effect” that it must have produced. The product failed because it wasn’t properly validated with customers.

MoviePass

A story of how gaining millions of customers can cause harm to business when the pricing is wrong. MoviePass, a movie subscription service (real movies in real cinema theaters), decided to make a flat rate subscription of $9,95 per month.

As a consequence, the number of users rised to three millions, but soon the company realized that the business case was not viable. They tried to fix it by limiting movies and rising the price, but the subscribers just dropped the service and it had to shut down later.

Google Glass

When Google Glass appeared in 2013, it was a huge innovation and nobody could predict that it wouldn’t be successful. Yet, for a number of reasons, it wasn’t a success on the market. There were a few reasons for that: high price, privacy issues, wrong positioning, and simple failures in performance.

Image credit: Tedeytan

In the end, the product failed in mass usage, but worked for enterprises. Correcting the positioning and improving the product was helpful.

How to avoid product failure

Facebook, Google, Tesla… Examples of product failures include many famous names. It can be somehow comforting to know that world’s biggest enterprises fail just like the others. Occasional failures are something that all people and companies have in common. 

The difference is the cost of failure. For such giants as Facebook and Google, a failed product is a sad case, but it’s just a drop in the ocean. For a newly established company, a failure can be fatal. When you don’t have spare millions of investment money, you have to be careful and learn from other people’s mistakes and avoid the most common pitfalls.

And if you want to get a failure-proof design, get in touch with our product design experts.

Masha Panchenko

Writer at Eleken