Enterprise product failure rates for new products are not as high as startups but research shows that over time, they can be significant. Absolute failure rates vary widely depending on the industry, market conditions, and the specific strategies employed by the company, but research and industry reports suggest the following:
· General Failure Rate: Approximately 30% to 40% of new products fail within the first year of launch.
· Longer-Term Failure Rate: Over a longer period, studies indicate that around 70% to 90% of new products ultimately fail to achieve their intended market success.
Sources: Harvard Business Review, Nielsen, McKinsey & Company, Product Development & Management Association, and Statista.
According to market research, the primary factors that contribute to high product failure rates in enterprises are not dissimilar from external market issues that affect startups and include:
- Lack of Market Research: Insufficient understanding of customer needs and market demand.
- Poor Product Fit: Products that do not meet customer expectations or solve a significant problem.
- Ineffective Marketing: Inadequate promotion or positioning in the market.
The 10% Rule and the Innovation Hurdle:
Geoffrey Moore (author of “Crossing the Chasm”) and his research highlights the “10% rule,” a critical threshold for new product success in large enterprises. For a new product to “move the needle” and significantly impact a company’s financial performance, it must typically reach approximately 10% of total corporate revenue within a relatively short timeframe (2-3 years, often coinciding with the startup Traction Gap Framework timeline).
This creates a significant hurdle for innovation in large organizations. For a $1 billion company, this requires generating $100 million in new product revenue within the Traction Gap Framework timeline – 1-3 years; for a $5 billion company, the target is $500 million. Most new products never approach these thresholds, leading to their eventual demise or relegation to “pet project” status.
So, while large companies possess the resources to pursue ambitious innovation initiatives, many struggle to scale new products rapidly enough to meet internally defined success criteria.
The Enterprise Traction Gap
I have now adapted the Traction Gap Framework and its metrics to reflect the unique realities of large organizations.
This adaptation requires acknowledging the longer timelines, larger deal sizes, complex approval processes, and organizational nuances inherent in enterprise product and market development.
By incorporating Geoffrey Moore’s insights in his book, “Zone to Win” regarding the innovation hurdle and the cost of inaction, the adaptation of the Traction Gap Framework provides enterprise teams with a practical, data-driven approach to accelerate innovation, overcome internal obstacles, and increase the probability of achieving, Geoff’s “escape velocity” objective.
The Power of Market Engineering:
To overcome these challenges, enterprises must adopt a “market engineering” mindset: similar to what I originally introduced in the first edition of “Traversing the Traction Gap”.
Market engineering within an enterprise includes everything a startup must do (i.e., category design, thought leadership, storytelling, messaging, and positioning), but on a much larger scale and include a strategy to generate initial and ongoing support from inside the enterprise.
The Second Edition
I am midway through the process of writing the second edition of “Traversing the Traction Gap”. In it, I provide updated data and anecdotal references along with two new chapters that address the unique challenges, metrics and market engineering issues associated with the Enterprise Traction Gap and consumer software startups.
The availability of the second edition is not yet confirmed but I am targeting completing the draft of the book before this summer and releasing the publication sometime in early 2026.
If you are struggling with issues associated with launching a new product from within the enterprise (or as a consumer software startup), my firm – Traction Gap Partners – can help. Contact me directly at [email protected] .