MIT formula predicts business success

Or at least shows how some companies fail. So says Ralph Grabowski, an MIT-trained engineer and marketing consultant.

In an article in today's Boston Globe, Grabowski describes well known failures (Polaroid, Wang Labs, Digital, Xerox) and successes (Dell, Intuit) and posits that the difference between them is the ratio of dollars spent on market research vs. engineering. He says successes tend to spend more on the former than the latter and failures the other way around.

Dell and Intuit, for instance, have ratios of 1.5, while the others hovered around 0.1 or even less during their heydays.

Now, you could argue that Polaroid and their ilk were successes for a long time before succumbing. Grabowski says, though, that they failed because they were blindsided by changes in the market they didn't see coming. 

Grawbowski's definition of market research is broad. The Globe article summarizes it as "market research, competitive intelligence, business-model building, and payback analysis." In my experience, these are all the things a product manager should be doing in a software company to direct the activities of the development team.

Link

http://www.boston.com/business/globe/articles/2007/01/14/why_good_products_fail/