A new report by Forrester Research, Inc. (Nasdaq: FORR) challenges personal computer and consumer electronics companies to rethink their approaches to creating new digital products. The report, “The Secret To Device Success,” explores the dynamics of new-product development and demystifies the factors behind its success or failure. Forrester asserts that devicemakers must concentrate on people — not technology — to drive device and category domination by improving common, cumbersome experiences in a way that resonates with consumers.

“PC and CE makers alike wrestle with their heritage when designing new products,” said Bruce Kasrel, senior analyst at Forrester Research. “Both camps often spend millions of dollars on concepts like Internet appliances that exploit the technology but miss the mark among their core consumers, whose behaviors and needs are sidelined in pursuit of the next digital breakthrough.”

For this report, Forrester interviewed executives at 25 leading CE and PC firms about their design and marketing methods. Forrester found that despite some successful crossover innovations like PDAs and MP3 players, most digital devices fail to gain traction because both industries focus on technology over consumer needs, hampering the development of new device categories with mass-appeal potential.

Specifically, while CE manufacturers have a history of strong design, device simplicity, and quick time-to-market, consumer demand for technology integration often clashes with this simplicity — forcing users to fend for themselves when trying to integrate different devices. Similarly, while PC complexity won¿t be tolerated in the entertainment-centric home market, Forrester believes the PC will dominate in new digital devices because it is better at guiding consumers through tricky integration issues.

“Serving the growing digital-enthusiast market requires a completely different R&D mindset than today’s devicemakers are used to,” added Kasrel. “If a behavior is common and bothersome, and a new product improves it at a reasonable cost and little hassle, success is far more likely.”

For instance, successful products like VCRs targeted the behavior of watching and recording movies, consumer PCs simplified word processing, and cell phones enabled people to make calls on the go. Conversely, Internet appliances, which addressed browsing the Internet, failed because Web access wasn’t cumbersome enough to require enhancement. Nor have eBooks taken off because they are much pricier than cheap paperbacks, the more traditional form of portable reading. Although laserdiscs were pumped up to rival other digital media, there simply weren’t enough movies and quality differences to best the VCR.

To help companies pinpoint which behaviors to target, Forrester created the C5 method — five key criteria used to evaluate new-device categories. Behaviors that are common and cumbersome to do stand the greatest chance of success in a new-device solution that must be cost-effective, connected to other devices, and content-ready.

By analyzing these criteria, manufacturers can better understand why past products succeeded or failed and predict new-product prospects. However, passing the C5 test alone doesn’t guarantee product success — proper implementation and the right marketing mix does. Successful devices feature usability upfront and make the product a dream to use. Products that excel at both usability and utility lead to satisfied customers who in turn evangelize the product to others. Forrester developed a unique Device Review that can be modeled to measure how well products serve user behaviors in real-world scenarios.

Forrester evaluated 12 products in four categories — PDAs, MP3 players, digital cameras, and digital-media terminals that house large music libraries. On the whole, all products in the PDA category and three individual products across two other categories received passing scores. Forrester also found that PC vendors dominated CE in every category tested, including innovation, while CE makers’ product-simplicity push backfired. Mature products with strong C5 potential, like PDAs, scored higher than new categories like MP3s and digital-media stations because the mature devices consistently provided a superior user experience.