The process of product development could itself stand a bit of development. Studies indicate that nearly two out of three new products fail after launch. Compounding that, companies in many sectors are under continual pressure to speed up the pace of product development—even to adapt products that are still in the pipeline to the demands of a constantly changing marketplace. A new formula is needed.

Companies have stepped up to such challenges in the past. Some market leaders can rightly boast that they have reduced, by a third or more, the time needed to develop and launch new products, while squeezing costs and quality problems out of the process. But recent efforts have yielded largely incremental performance gains: progress in speeding up development cycles is faltering, and even products pumped to market in a heartbeat fail to win customers far too often.

The problem is the process, which in most companies has become an inflexible sequence of activities, like a production line. Because it is inflexible, it is disconnected from marketplace changes that may determine the fate of new products. The solution is to inject more customer-related information into the process and to make it flow better. By transforming...