Adams: Three years after a launch, the product -- or service -- is no longer available. In the United States, companies spend about $260 billion annually on new products that fit this description.
BNET: Can you give me an example?
Adams: Sure, the Iridium satellite phone system. Iridium was a Motorola subsidiary -- it eventually was spun out and went bankrupt -- intended to provide a satellite alternative to land lines and cell phones for international business travelers. Motorola spent $8 billion building the satellite system and handsets. Then the product launched in the early '90s, and no one used it! Motorola had gotten all wrapped up in building the system but had never paused to find out if there'd be a demand for it. It's a common mistake among companies launching new products.
BNET: Why would any company act so irrationally?
Adams: One of the most common excuses I hear is, "we don't have time to do this." Instead, they put their foot on the product-development gas, get a product out the door, miss the market, and repeat the process. But if a market is so competitive that taking 60 days to research it before executing is the only difference between success and failure, I promise that it's not a lucrative market to begin with.
BNET: What should companies do in those 60 days?
Adams: Let's say you've got a $1 million budget for a new product. Instead of hiring engineers to design it and pushing for production, stop. Take five percent of the budget -- $50,000 in this case -- and do 60 days worth of work to validate the market. Start by spending two days to assess the market fundamentals. This involves objectively evaluating your experience in your proposed market: how well do you really know it? You'll also need to weigh issues including the size of the market, how fast it's growing, and competitor activity.
BNET: Assuming everything looks good, what's next?
Adams: The next phase involves interviewing at least 100 people in your target market, either face-to-face or over the phone. You'll spend most of your time and money here. Don't solicit current customers for this information. They'll just tell you what you want to hear. Instead, find prospective customers to interview the same way you'd find real ones -- purchase lists from publications that target your market, contact trade group members and trade show participants, use social media to reach out to consumers. It's far easier to find people who are willing to talk about what they'd like to see in a product than it is to try to sell them something.
BNET: What happens when you determine that people want what you're thinking of selling?
Adams: You have to make sure that the shift from information gathering to product development is effective, a step that includes setting the right sales and marketing budget, creating a Product Requirements Document that outlines how the market validation results will be translated into features and functionality, and getting the product out as quickly as possible. You don't want all the material you've collected and analyzed to end up on a shelf as you default to the stomp-on-the-gas-pedal model and rush a product out the door.