Having a good working product is definitely important, for one it brings more trust towards the project itself. Members will feel more comfortable with investing in a project that has an physical product. If a working product is not available, then a prototype or a demo is needed that will show how the actual product will work.
I agree, and I say it is because there are so many ICOs and projects coming out every now and then that it is so hard to judge and choose which ones would prosper and which ones are destined to fail. Having said that, I think that ICOs with good and new concepts and products, or at least, those which offers a great improvement from their predecessors, should be a good indicator for projects that has a better fighting chance because people tend to support projects that has new ideas to offer rather than old ones.