new product management chapter 1

8/14/2019 New Product Management Chapter 1

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Chapter 1

The Menu



Why Study New Products?

• New products are big business! – $100 billion spent annually just on technical

phase.

– Uncounted new products are marketed everyyear.

– A single Web site may market hundreds orthousands of products.

– For many leading firms, a third or more ofsales comes from products that are less thanfive years old.




• Innovation as an Investment: A successful

new product does more good for an organization

than anything else that can happen

– Investment in innovation is critical to firm

growth and even survival. – Radical innovations (those that displace or

obsolete existing products) are particularlycrucial to the firm.

– Technology leaders view “business growth

through innovation” as a major challenge

facing them today.




• New products process is exceedinglydifficult! The amount at stake and the risk of

failure are high.

• NPD is fun and exciting!



Some Hot New Products

• Apple iPod, iPod Nano, and iPhone

• Motorola PEBL cell phone

• Yamaha Morphous scooter

• Microsoft Xbox 360 and Nintendo’s Wii

• Kodak EasyShare-One camera

• Plantronics Discovery 640 Bluetooth headset

• Dyson Root 6 Hand Vacuum

• Merck Gardasil cancer-preventing vaccine

• Mazda CX-7

Can you add more?



Products of the Future (1)

• Intelligent refrigerators will track food inventories,and will either provide a hard-copy shopping list orsend an electronic list to a home-delivery service.

• Intelligent wallpaper will transform a wall to a

television, a computer screen, works of art, etc.• Robotic lawn mowers will tend the grass within

any specified boundary.

• “Nanny-cams” hidden in teddy bears permitparents to watch their children at daycare;camera-surveillance systems will keep an eye onlatchkey kids home alone.



Products of the Future (2)

• Holographic storage will be used to store andretrieve home videos.

• Lasers and decay-preventive gum andtoothpastes will minimize the need for the

dentist’s drill. • Robots will dispense gasoline, and know your

preferred grade.

• “Smart” heart pacemakers will be placed in thewrist.



Global Product Development

• Increased globalization make NPD even more

challenging today! – Procter & Gamble products are developed globally

in the firm’s 22 research centers located in 13countries. Market research and testing of the Swiffermop occurred in the U.S. and France.http://www.youtube.com/watch?v=PFbeP6YqHzg&NR=1

– Apple did product design and customer requirementdefinition in the U.S. and Japan in developing theiPod.

– Ikea identifies unmet customer needs and

commissions in-house and outsourced designers tocompete for the design. Worldwide manufacturingpartners compete for the manufacturing rights. Thefirm also has excellent global logistics for productdelivery to stores and customers.

http://www.youtube.com/watch?v=PFbeP6YqHzg&NR=1

http://www.youtube.com/watch?v=PFbeP6YqHzg&NR=1



Not All New Products Are Planned

• Serendipity - In each of the following case, anaccidental discovery -- but someone knewthey had something when they saw it!

─ Microwave ovens ─ Aspartame (NutraSweet) ─ ScotchGard fabric protector ─ Teflon ─ Penicillin ─ X-rays ─ Dynamite



What Is a New Product?

• New -to -the-wor ld (real ly-new ) produc ts(10% of new pro ducts ): Inventions that create awhole new market. Ex.: Polaroid camera, SonyWalkman, Palm Pilot, Rollerblade skates, P&GFebreze and Dryel.

• New -to -the-f i rm produc ts (20%): Products thattake a firm into a category new to it. Ex.: P&G brandshampoo or coffee, Hallmark gift items, AT&TUniversal credit card, Canon laser printer.

• Add i t ions to exist ing p roduc t lines (26%): Line extensions and flankers that flesh out the productline in current markets. Ex.: Tide Liquid, Bud Light,

Apple’s iMac, HP LaserJet 7P.



What Is a New Product?

• Improvements and revis ions to exis t ingpro ducts (26%): Current products made better.Ex.: P&G’s continuing improvements to Tidedetergent, Ivory soap.

• Reposi t ion ings (7%): Products that are

retargeted for a new use or application. Also includesretargeting to new users or new target markets. Ex.: Arm & Hammer baking soda sold as a refrigeratordeodorant; aspirin repositioned as a safeguard againstheart attacks; Marlboro retargeted as a man’scigarette.

• Cost reduc t ions (11%): New products thatprovide the customer similar performance but at alower cost. May be more of a “new product” in termsof design or production.



Easier Said Than Done?

• Top innovators such as Intel and Gillette stayfocused and committed to innovation as a long-term strategic goal.

• Without such focus, firms can fall back to“tweaking” existing products and relying onminor product improvements, instead of true

product innovation that results in new-to-the-world products or really new product lines.



What About…

• New Services?

• New Business-to-Business Products?

• New International/Global Products?



What Is a Successful New Product?

90

40

10

0

10

20

3040

50

60

70

80

90

Sometimes Quoted

in Press

Research Reports Sometimes Claimed

Percent of Products that Fail

Although you may hear much higher percentages, carefulstudies supported by research evidence suggest that about40% of new products fail -- somewhat higher for consumerproducts, somewhat lower for business-to-business products.

Th C fli ti M t f N P d t



The Conflicting Masters of New ProductsManagement

• Three inputs to the newproducts process: theright quality product, atthe right time, and at the

right cost.• These conflict with each

other but may havesynergies too.

• Issue: how to optimizethese relationships in anew product situation.

Quality

Time Cost

Value

B kth h I ti th t Ch d O



Breakthrough Innovations that Changed OurLives

• Personal Computer

• Microwave Oven

• Photocopier

• Pocket Calculator

• Fax Machine

• Birth Control Pill

• Home VCR

• Communication satellite

• Bar coding

• Integrated Circuit• Automatic Teller

• Answering Machine

• Velcro Fastener

• Touch-Tone Telephone

• Laser Surgery

• Apollo Lunar Spacecraft

• Computer Disk Drive

• Organ Transplanting

• Fiber-Optic Systems

• Disposable Diaper

• MS-DOS• Magnetic Resonance Imaging

Figure 1.6

This list was compiled in the early 1990s. Since then one would certainly

have to add the Internet/World Wide Web. Anything else you would add?

Which would you delete?



So, Does All Of This Actually Work?

• Check the efforts of the best product developers

in the business: the Outstanding CorporateInnovator award winners as selected by theProduct Development & Management

Association

• Recent winners: Hewlett-Packard, DowChemical, Maytag, Harley-Davidson, Bausch &Lomb, Keithley Instruments, New PigCorporation.

• All have had a sustained commitment toinnovation, with remarkable results in terms ofnew products.



Chapter 2

The New Products Process



The Evaluation Tasks in the New Products



The Evaluation Tasks in the New ProductsProcess

Opportunity Identification/Selection

Concept Generation

Concept/Project Evaluation

Development

Launch

Direction;Where should we look?

Initial Review:

Is the idea worth screening?

Full Screen:Should we try to develop it?

Progress Reports:Have we developed it?

Market Testing:Should we market it?

2-21



Phase 1: Opportunity Identification/Selection

• Active and passive generation of new productopportunities as spinouts of – the ongoing business operation – new product suggestions – changes in marketing plan

– resource changes – new needs/wants in the marketplace

• Research, evaluate, validate, and rank them (asopportunities, not specific product concepts).

• Give major ones a preliminary strategicstatement to guide further work on it.

Activities that Feed Strategic Planning for



Activities that Feed Strategic Planning forNew Products

• Ongoing marketing planning - e.g., need tomeet new aggressive competitor

• Ongoing corporate planning - e.g., seniormanagement shifts technical resources frombasic research to applied product development

• Special opportunity analysis - e.g., a firmhas been overlooking a skill in manufacturingprocess engineering



Sources of Identified Opportunities

• An underutilized resource (a manufacturing

process, an operation, a strong franchise)

• A new resource (discovery of a new material withmany potential uses)

• An external mandate (stagnant market combinedwith competitive threat)

• An internal mandate (new products used to closelong-term sales gap, senior management desires)



Phase 3: Concept/Project Evaluation

• Evaluate new product concepts (as they begin tocome in) on technical, marketing, and financialcriteria.

• Rank them and select the best two or three.

• Request project proposal authorization when

have product definition, team, budget, skeleton ofdevelopment plan, and final PIC.



Stages of Concept/Project Evaluation

• Screening (pretechnical evaluation)• Concept testing• Full screen• Project evaluation (begin preparing

product protocol)

Note that the first stages of the new productsprocess are sometimes called the fuzzy fron t

end because the product concept is still fuzzy.By the end of the project, most of the fuzzshould be removed.



Phase 4: Development (Technical Tasks)

• Specify the full development process, and itsdeliverables.

• Undertake to design prototypes, test and

validate prototypes against protocol, design.

• Validate production process for the bestprototype, slowly scale up production as

necessary for product and market testing.



Phase 4: Development (Marketing Tasks)

• Prepare strategy, tactics, and launch detailsfor marketing plan

• Prepare proposed business plan and get

approval for it

• Stipulate product augmentation (service,packaging, branding, etc.) and prepare for it.



Phase 5: Launch

• Commercialize the plans and prototypes fromdevelopment phase

• Begin distribution and sale of the new product(maybe on a limited basis)

• Manage the launch program to achieve the

goals and objectives set in the PIC (as modifiedin the final business plan).



The Life Cycle of a Concept

Corresponding New Products Process Phases:Opp. Identification Concept Generation Project Evaluation Development Launch

Techniques for Attaining Speed in a New



Techniques for Attaining Speed in a NewProduct Project

Accelerating Product Development throughManaging the Organization

• Use projectization: project matrix and venture teams.

• Use small groups to thwart bureaucracy.• Empower, motivate, and protect the team.

• Destroy turf and territory.

• Make sure supporting departments are ready.

• Clear the tracks in shared departments.

Techniques for Attaining Speed



Techniques for Attaining Speed(continued)

Intensify Resource Commitments• Integrate channel members and customers, use parallel

or concurrent engineering

Design for Speed• Computer-aided design, rapid prototyping, design-aided

manufacturing, common components

Prepare for Rapid Manufacturing• Simplified documentation and process planning, just-in-

time delivery (flexible manufacturing)

Prepare for Rapid Marketing• Use rollouts, invest in immediate market awareness,

facilitate trial purchasing



Key Characteristics of Short-Cycle-Time Firms

• Extensive user involvement early in the newproducts process.

• Cross-functional teams are dedicated to the newproduct.

• Suppliers are extensively involved.• The firms adopt effective design philosophies

and practices.

• The most adept firms are effective atorganizational learning.

S ?



What About New Services?

• Successful new services tend to come fromfirms that use a systematic process much likethe new products process – the tools all fit.

• Iterations may be more frequent since they are

less expensive.• Unique, superior service, providing value and

benefit as perceived by the customer, must bedelivered, to achieve success.

• Speed to market with services is important,especially in enhancing reputation, image, andcustomer loyalty.



What About New-to-the-World Products?

• The challenges are different, but the first phase

remains the same: opportunity identification anddevelopment of a strategic statement.

• Clear connection required between the radicalinnovation and the firm’s strategic vision.

• A firm may establish a transition managementteam to move the R&D innovation project tobusiness operating status.

• The new products process is more explanatory:need to bring in Voice of the Customer (VOC)early.

• Lead users may be critical here (see Chapter 5discussion).

The Probe-and-Learn Process for New-to-the-



The Probe-and-Learn Process for New-to-the-World Products

• Focused (limited-performance) prototypes

– Example: Iomega Zip Drive: over 50prototypes were built to test out ideas with

customers.• “Lickety-Stick” iterative process: non-

linear, more flexible process in which

dozens of prototypes may be tried(“lickety”) before settling on one that

customers like (“stick”).



Chapter 3

Opportunity Identification & Selection:Strategic Planning for New Products

O t it Id tifi ti d S l ti



Opportunity Identification and Selection

Figure I.1



Why Does a Firm Need a New Products Strategy?

• To chart the group’s/team’s direction

– What technologies?/what markets?

• To set the group’s goals and objectives

– Why does it exist?

• To tell the group how it will play the game

– What are the rules?/constraints?

– Any other key information to consider?

C t St th



Corporate StrengthsFigure 3.1

New products in this firm will:• Use our fine furniture designers (Herman Miller)

• Gain value by being bottled in our bottling system (Coca-Cola)

• Utilize innovative design (Braun)

• Be for babies and only babies (Gerber)

• Be for all sports, not just shoes (Nike)

• Be for all people in computers (IBM)

• Proliferate our product lines (Rubbermaid)

• Be almost impossible to create (Polaroid)

• Use only internal R&D (Bausch & Lomb)• Be offered to the market hard to get (Ganz Webkinz)

• Have high value to us and to the customer (Kodak)

P d t Pl tf Pl i



Product Platform Planning

Many firms find that it is not efficient to develop a singleproduct.

Platform: product families that share similarities in design,development, or production process.

• Car industry: $3 billion price tag on a new car platform is spread out

over several models.• Sony: four platforms for Walkman launched 160 product variations.

• Boeing: passenger, cargo, short- and long-haul planes made fromsame platform.

• P&G: Liquid Ariel for European market, Liquid Tide for North America, and Liquid Cheer for Japanese market.

• Black & Decker: uses a single electric motor for dozens of consumerpower tools.

Opportunity Identification:



Opportunity Identification:Greenfield Markets

• Find another location or venue. Once McDonald’s had taken up the

best locations for traditional fast-food restaurants, it continued its U.S.expansion by placing stores inside Wal-Marts, in sports arenas, andelsewhere. Starbucks Coffee complemented coffee-shop sales byselling its coffee beans and ice creams in supermarkets.

• Leverage your firm’s strengths in a new activity center. Nike has

recently moved into golf and hockey, and Honeywell is looking intocasino opportunities.

• Identify a fast-growing need, and adapt your products to that need.Hewlett-Packard followed the need for “total information solutions” that

led it to develop computing and communications products for the WorldCup and other sporting events.

• Find a “new to you” industry: P&G in pharmaceuticals, GE in

broadcasting (NBC), Disney in cruises, Rubbermaid in gardeningproducts – either through alliance, acquisition, or internal development.



What is the Product Innovation Charter (PIC)?

• It is the new product team’s strategy. • It is for Products (not processes).

• It is for Innovation (think of the definition of newproduct).

• It is a Charter (a document specifying theconditions under which a firm will operate).

• Typically, it is a document prepared bysenior management designed to provideguidance to the strategic business units(SBUs) on the role of innovation.

D M Fi H PIC?



Do Many Firms Have a PIC?

• Most do, according to research, even if they

don’t call it by that name. • PDMA study:

– 75% of firms have a formal new product policy ofsome type (a partial PIC)

– 29% have a formal, written complete PIC. – 80% of firms have formalized at least a few of thephases in the new products process.

• According to an independent study: – The more detailed and specific the PIC, the higher

are the firm’s innovation rates. – The more specific the corporate mission and senior

management direction is spelled out in the PIC, thebetter is the performance of the firm’s new products.

Th C t t f P d t I ti Ch t



The Contents of a Product Innovation Charter

Background

Key ideas from the situation analysis; special forces such as managerial dicta; reasons for preparing a new PIC at this time.

Guidelines

Any "rules of the road," requirements imposed by the situation or by upper management.

Innovativeness, order of market entry, time/quality/cost, miscellaneous.

Goals-Objectives

What the project will accomplish, either short-term as objectives or longer-term as goals.

Evaluation measurements.

Focus

At least one clear technology dimension and one clear market dimension. They match and

have good potential.



A Sample PIC for a Chemical Product

Focus: The XYZ Company is committed to a program of innovation

in specialty chemicals, as used in the automobile and othermetal finishing businesses, to the extent that we will become themarket share leader in that market and will achieve at least 35percent ROI from that program on a three-year payout basis.We seek recognition as the most technically competentcompany in metal finishing.

Goals-Objectives: These goals will be achieved by building on ourcurrent R&D skills and by embellishing them as necessary so asto produce new items that are demonstrably superior technically,in-house, and have only emergency reliance on outsidesources. The company is willing to invest funds, as necessary,

to achieve these technical breakthroughs.

Guidelines: Care will be taken to establish patent-protectedpositions in these new developments and to increase the safetyof customer and company personnel.

PIC Special Guidelines



PIC Special Guidelines

• Degree of Innovativeness

– First-to-market

– Adaptive product

– Imitation (emulation)

• Timing

– First – Quick second

– Slow

– Late

• Miscellaneous

– Avoidance of competition with certain firms

– Recognition of weaknesses

– Patentability

– Product Integrity

Tips for PIC Development



Tips for PIC Development

• Note where you are starting -- what decisions

have already been made?• Watch for any and all opportunities.

• Confirm interesting opportunities.

• Keep balance between focus and freedom --wildcatting can pay off too.

• Speed usually assumed a well-established,close-to-home PIC.

• PICs less useful in cases where personal tastesrule (art, games, foods) or where the biggesttask is developing a new technology (wait till youhave it).

More Tips



More Tips

• Poor implementation will still ruin a good PIC(e.g., Bic perfume in lighter fluid package).

• Watch for PIC conflicts -- e.g., a “flood themarket” line extension strategy may hurt real

innovation. Some charters dictate separateorganizations.

• Once in place, live by it. Use at all stages --organization, concept generation, concept

evaluation, technical, and, yes, marketing!• Change it only when necessary, or when you get

information you have been waiting for.

Dimensions for Assessing Strategic Fit



Dimensions for Assessing Strategic Fit

• Strategic goals (defending current base of productsversus extending the base).

• Project types (fundamental research, processimprovements, or maintenance projects).

• Short-term versus long-term projects.

• High-risk versus low-risk projects.• Market familiarity (existing markets, extensions of current

ones, or totally new ones).

• Technology familiarity (existing platforms, extensions of

current ones, or totally new ones).• Ease of development.

• Geographical markets (North America, Europe, Asia).

Strategic Portfolio Model for One SBU in Exxon



gChemical

Low Market Newness High Market Newness

Low Product Newness Improvements to Existing Products(35%)

Additions to Existing Product Lines(20%)

Medium Product Newness Cost Reductions

(20%)

New Product Lines

(15%)

High Product Newness Repositioning(6%)

New-to-the-World Products(4%)

Source: Adapted from Robert G. Cooper, Scott J. Edgett, and Elko J. Kleinschmidt. Portfolio Management for New Products, McMaster University, Hamilton, Ontario, Canada, 1997, p. 63.

A Portfolio Diagram at a Hewlett-Packard



gDivision

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