Today’s TopicToday’s Topic

R&D: R&D: Market-focused Market-focused

Product DevelopmentProduct Development

Course ScheduleCourse Schedule

The Marketing Function (Lenovo)The Marketing Function (Lenovo) Sales & Sales Channels (GolfLogix)Sales & Sales Channels (GolfLogix) Internet-based Marketing (HubSpot)Internet-based Marketing (HubSpot) R&D: Product Development (Guidant)R&D: Product Development (Guidant) Operations (Crocs)Operations (Crocs)

Product Launch (Invisalign)Product Launch (Invisalign) Final Exam on Product Launch (Emotiv)Final Exam on Product Launch (Emotiv)

Today’s AgendaToday’s Agenda

Market-focusedMarket-focused product developmentproduct development

More on More on product decisions product decisions (resources, (resources, objectives, positives-and-negatives)objectives, positives-and-negatives)

Next week’s case & assignment: Next week’s case & assignment: Operations (Crocs)Operations (Crocs)

Learnings: R&DLearnings: R&D

CharacteristicsCharacteristics of of market-focused new market-focused new product product development processes development processes

Process dimensionsProcess dimensions: What? How? How well? : What? How? How well? (objectives, structure/discipline, execution (objectives, structure/discipline, execution quality)quality)

New product development New product development “best practices”“best practices”

Homework ReadingHomework Reading

Guidant: Cardiac Rhythm Guidant: Cardiac Rhythm Management Business (A)Management Business (A)

Guidant: CRMB in 1997Guidant: CRMB in 1997

Guidant spun-off from Eli Lilly in 1994Guidant spun-off from Eli Lilly in 1994 Guidant is a medical device companyGuidant is a medical device company CRMB is a division of GuidantCRMB is a division of Guidant CRMB was profitable in 1996 (see Exh. 1A, CRMB was profitable in 1996 (see Exh. 1A,

income statement)income statement) Two product lines: Two product lines:

- - pacemakers (brady - for slow heart beat) pacemakers (brady - for slow heart beat)

- defibrillators (tachy - for fast heart beat)- defibrillators (tachy - for fast heart beat)

Guidant case….cont’dGuidant case….cont’d

CRMB is the market share leader (#1) in CRMB is the market share leader (#1) in tachy tachy

(hint: identify the key factors in their success)(hint: identify the key factors in their success)

CRMB is a follower (#4) in bradyCRMB is a follower (#4) in brady

Significantly revised their tachy new Significantly revised their tachy new product development processes in the product development processes in the early/mid 90’s early/mid 90’s

Decision on new R&D initiatives Decision on new R&D initiatives

(additional investment in brady (additional investment in brady oror atrial atrial fibrillation fibrillation oror congestive heart failure?) congestive heart failure?)

Homework AssignmentHomework Assignment List the dozen or more changes Guidant/CRMB List the dozen or more changes Guidant/CRMB

made to its tachy product development process; made to its tachy product development process; which three do you think had the which three do you think had the greatest impact,greatest impact, and why? and why?

Does Guidant/CRMB have the financial resources Does Guidant/CRMB have the financial resources to pursue new initiatives?to pursue new initiatives?

What objectives (decision criteria) should CRMB What objectives (decision criteria) should CRMB use in making the decision on whether to invest use in making the decision on whether to invest more in its brady business?more in its brady business?

What are the What are the positives-and-negativespositives-and-negatives of CRMB of CRMB devoting additional resources to the “brady” devoting additional resources to the “brady” business in order to improve its brady market business in order to improve its brady market position and financial performance? position and financial performance?

(identify at least five of each)(identify at least five of each)

Effective Product Design Effective Product Design and Developmentand Development

What were the product What were the product development process changes development process changes

made by Guidant CRMB?made by Guidant CRMB?

Which 3 changes, in your Which 3 changes, in your opinion, had the greatest opinion, had the greatest

impact?impact?

Dimensions of Dimensions of Process ChangeProcess Change

What? --------- objectives andWhat? --------- objectives and

philosophyphilosophy

How? ---------- structure andHow? ---------- structure and

disciplinediscipline

How well? ---- excellent executionHow well? ---- excellent execution

Getting Products to Market:Getting Products to Market:from concept to product launchfrom concept to product launch

(various names/labels for this activity)… (various names/labels for this activity)…

R&D/Engineering (a misnomer)R&D/Engineering (a misnomer) New product development (NPD)New product development (NPD) Product realizationProduct realization Product innovationProduct innovation Product commercializationProduct commercialization Product development & managementProduct development & management … …etc…etc…

What’s a “New” Product?What’s a “New” Product?

NewProduct

Line

Core Product

Revisions

Product Enhancements

LineExtensions

CompletelyNew

Repositionings

New to thecompany

New to theworld

Many new products fail…

“ “35 percent of all new [IT] products 35 percent of all new [IT] products now fail to achieve minimum now fail to achieve minimum acceptable market share or financial acceptable market share or financial return --and the failure rate is rising.”return --and the failure rate is rising.”

VAR Business, November 1999VAR Business, November 1999

New Product Failure RatesNew Product Failure Rates

For every 4 projects that enter development, only 1 makes it to the market.

At launch, at least 1 of 3 products fail despite research and planning.

An estimated 46% of all resources allocated to product development and commercialization by

U.S. firms is spent on products that are cancelled or fail to yield an adequate financial return.

             Source : Winning at New Products, Dr. R.G. Cooper, 2001

What are some reasons that a new What are some reasons that a new product might “fail” ?product might “fail” ?

(i.e., fail to meet the market and (i.e., fail to meet the market and financial objectives set for it)financial objectives set for it)

Some Reasons for Product FailuresSome Reasons for Product Failures

Mismatched to market needsMismatched to market needs Little/no competitive differentiationLittle/no competitive differentiation Late to marketLate to market Too costly (price and/or COGS)Too costly (price and/or COGS) Poor qualityPoor quality Inability to deliver to customersInability to deliver to customers Poor service/supportPoor service/support Ineffective sales/channelsIneffective sales/channels Unrealizable objectivesUnrealizable objectives Poor execution/teamworkPoor execution/teamwork … …

Product Development Process:Product Development Process:Overall StructureOverall Structure

Linear (“Linear (“handoffshandoffs”)”)

Parallel/Parallel/concurrentconcurrent (multifunction (multifunction involvement at all/most stages)involvement at all/most stages)

Core Product Team and RolesCore Product Team and Roles

Marketing Marketing - - leader, product definition, leader, product definition, project management, marketing program, project management, marketing program, sales training, forecasts, financialssales training, forecasts, financials

R&DR&D - - product development (milestones and product development (milestones and dates), tech support for marketing/sales, dates), tech support for marketing/sales, transfer to manufacturing, support for transfer to manufacturing, support for trials/betas, product fixes/revisionstrials/betas, product fixes/revisions

OperationsOperations - - manufacturing engineering, manufacturing engineering, manufacturing (ramp), product costs and manufacturing (ramp), product costs and quality, logistics and service planquality, logistics and service plan

Other Team MembersOther Team MembersDepends on the Product, Market and Depends on the Product, Market and

Company PracticesCompany Practices

Sales? Friendly customers?Sales? Friendly customers? Finance?Finance? Information technology/MIS?Information technology/MIS? Field operations (installation and service)?Field operations (installation and service)? Public Relations?Public Relations? Partner companies (esp. manufacturing Partner companies (esp. manufacturing

and/or sales and service)?and/or sales and service)?

Product Development Process:Product Development Process:Common ElementsCommon Elements

Stages/phases with “gates” Stages/phases with “gates” Customer involvement and/or inputCustomer involvement and/or input Concept-through-lifecycle tenureConcept-through-lifecycle tenure Goals/measurements/rewards Goals/measurements/rewards

focused on overall successfocused on overall success

Example of NPD Example of NPD StagesStages & & GatesGates

                                                                                                

Product Development Process:Product Development Process:Some Best PracticesSome Best Practices

design-to-market (customers/needs)design-to-market (customers/needs) design-to-cost (COGS)design-to-cost (COGS) concurrent engineering concurrent engineering requirements “freeze” requirements “freeze” time-driven milestonestime-driven milestones time-to-market or time-to-volume time-to-market or time-to-volume fast iteration fast iteration cross-team communicationcross-team communication team goal compensationteam goal compensation

Example: Traditional Milestone PlanningExample: Traditional Milestone Planning

Ready-to-

Ship(time)

Features andPerformance

Cost andQuality

Team Resources

Why might it be important to get a Why might it be important to get a product to market sooner rather product to market sooner rather

than later?than later?

So maybe…..Time-driven Milestones ?So maybe…..Time-driven Milestones ?

Ready-to-

Ship(time)

Features andPerformance

Cost andQuality

Team Resources

Information SourcesInformation Sources

Product Development and Mgmt Product Development and Mgmt Assoc (PDMA) Assoc (PDMA) www.pdma.orgwww.pdma.org

Product Development Solutions Product Development Solutions www.npd-solutions.com/bokwww.npd-solutions.com/bok

New Product Dynamics New Product Dynamics www.newproductdynamics.comwww.newproductdynamics.com

Guidant case: a great example of Guidant case: a great example of best practicesbest practices

Homework AssignmentHomework Assignment ListList the dozen or more changes Guidant/CRMB the dozen or more changes Guidant/CRMB

made to its tachy product development process; made to its tachy product development process; which three which three do you think had the do you think had the greatest impactgreatest impact,, and and whywhy? ?

Does Guidant/CRMB have the financial resources Does Guidant/CRMB have the financial resources to pursue new initiatives?to pursue new initiatives?

What objectives (decision criteria) should CRMB What objectives (decision criteria) should CRMB use in making the decision on whether to invest use in making the decision on whether to invest more in its brady business?more in its brady business?

What are the What are the positives-and-negativespositives-and-negatives of CRMB of CRMB devoting additional resources to the “brady” devoting additional resources to the “brady” business in order to improve its brady market business in order to improve its brady market position and financial performance? position and financial performance?

(identify at least five of each)(identify at least five of each)

““More Brady?”More Brady?”

MarketMarket

TechnologyTechnology

CompetitiveCompetitive

FinancialFinancial

Topic for Next ClassTopic for Next Class

Operations Operations (Manufacturing and Logistics)(Manufacturing and Logistics)

Making and delivering products,Making and delivering products,with consideration ofwith consideration of

time-to-market, costs, responsiveness, time-to-market, costs, responsiveness, outsourcing ---- outsourcing ----

and how these things impact and how these things impact R&D and MarketingR&D and Marketing

Readings for Next ClassReadings for Next Class

Can Marketing and Manufacturing Can Marketing and Manufacturing Coexist?Coexist? -- read to understand the 8 issues -- read to understand the 8 issues listed in the article’s Exhibitlisted in the article’s Exhibit

Crocs: Revolutionizing an Industry’s Crocs: Revolutionizing an Industry’s Supply ChainSupply Chain-- an example of the -- an example of the importance of Operations in the success of a importance of Operations in the success of a businessbusiness

Assignment for Next ClassAssignment for Next Class In what ways can technical people (R&D, technical In what ways can technical people (R&D, technical

sales, etc) sales, etc) assist with the resolution assist with the resolution and/or and/or minimizationminimization of the marketing-manufacturing issues of the marketing-manufacturing issues cited in the first reading? Provide one cited in the first reading? Provide one thought/example for each of the 8 issues in the thought/example for each of the 8 issues in the exhibit in the “Coexist” reading.exhibit in the “Coexist” reading.

What are Crocs’ competitive advantages? Which of What are Crocs’ competitive advantages? Which of these are related to its operations function?these are related to its operations function?

To what extent do each of these growth strategies To what extent do each of these growth strategies leverage Crocs’ competitive advantages: (a) internal leverage Crocs’ competitive advantages: (a) internal manufacturing of raw materials used in compounding, manufacturing of raw materials used in compounding, (b) internal development of new products, (c) (b) internal development of new products, (c) acquiring companies to get new products, and (d) acquiring companies to get new products, and (d) acquiring companies to get new customers?acquiring companies to get new customers?