NEW PRODUCTS MANAGEMENT

Merle Crawford & Anthony Di Benedetto 9th Edition

New Product Development

Part I: Overview and Opportunity identification/Selection Part II: Concept Generation Part III: Concept/Project Evaluation Part IV: Development Part V: Launch

Part I
Overview and Opportunity identification/Selection

Opportunity Identification and Selection

CHAPTER ONE THE MENU

Huge activity: big business, thousands of new products every year, huge funds spent on technical development & introduction yearly New products may hold answers to most organizations biggest problems The benefits of success and the cost of failure Challenge, fun and excitement, risk and reward Developing new products about human achievement, and financial gains. NP make life simpler and more pleasurable! NPD keeps company young, a step ahead of competition New products are great morale-boosters. For many leading firms, one third or more of sales comes from products that are less than five years old. 6

Why is this an important field of study?

Why is this an important field of study?

Not an established discipline like chemistry, accounting or management. This subject (body of knowledge) is developing all the time. Complicated process so must be studied in detail. Detailed & proper procedure increases chances of success New things are constantly being created, but developers are not sure about what they will be, their final cost, exactly who will want them, distribution & sales set-up, reaction of government regulator - NPD is TENTATIVE 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 are particularly crucial to the firm. Technology leaders view business growth through innovation 7 as a major challenge facing them today.

Some Hot New Products

Apple iPod, iPod Nano, and iPhone Motorola PEBL cell phone Yamaha Morphous scooter Microsoft Xbox 360 and Nintendos 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

Intelligent refrigerators will track food inventories, and will either provide a hard-copy shopping list or send 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 permit parents to watch their children at daycare; camera-surveillance systems will keep an eye on latchkey kids home alone. Lasers and decay-preventive gum and toothpastes will minimize the need for the dentists drill. Robots will dispense gasoline, and know your preferred grade. Smart heart pacemakers will be placed in the wrist.

Be MULTIFUNCTIONAL, CREATIVE, use HEURISTICS (rules of thumb which result from experience it maybe unscientific, but it WORKS!), To use SIMPLE INTUITION hunch, gut feel. Learn to Select People You Can Rely On may not be the best but stable, consistent and dependable. Remember that new products must deliver VALUE must have quality and be low in price. Learn to delegate, depend on others, team members. We are dealing with people under intense pressure.
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Are There Special Slants We as Students Should Be Aware of?

Process Innovation & Product Innovation

Process Innovation: applies to functions, esp.

manufacturing or distribution process and every new product benefits from this type of innovation. Product Innovation: total operation by which a new product is created and marketed.

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Not All New Products Are Planned

Serendipity - the process may sometimes be accidental, but accidents do happen to prepared mind

only a scientist could relate the falling apple to gravity

In each of the following case, an accidental discovery -- but someone knew they had something when they saw it!

Microwave ovens Aspartame (NutraSweet) Scotch-Guard fabric protector Teflon Penicillin X-rays Dynamite

New-to-the-world (really-new) products (10% of new products): Inventions that create a whole new market. Ex.: Polaroid camera, Sony Walkman, Palm Pilot, Rollerblade skates, P&G Febreze and Dryel. New-to-the-firm products (20%): Products that take a firm into a category new to it. Ex.: P&G brand shampoo or coffee, Hallmark gift items, AT&T Universal credit card, Canon laser printer. Additions to existing product lines (26%): Line extensions and flankers that flesh out the product line in current markets. Ex.: Tide Liquid, Bud Light, Apples iMac, HP LaserJet 7P. Improvements and revisions to existing products (26%): Current products made better. Ex.: P&Gs continuing improvements to Tide detergent, Ivory soap.
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What Is a New Product?

Repositionings (7%): Products that are retargeted for a new use or application. Also includes retargeting to new users or new target markets. Ex.: Arm & Hammer baking soda sold as a refrigerator deodorant; aspirin repositioned as a safeguard against heart attacks; Marlboro retargeted as a mans cigarette. Cost reductions (11%): New products that provide the customer similar performance but at a lower cost. May be more of a new product in terms of design or production.
Variations not commonly accepted as new products: New to a country, new channel or distribution, packaging improvements and different source or method of manufacture.

What Is a New Product?

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Easier Said Than Done?

Top innovators such as Intel and Gillette stay focused and committed to innovation as a long-term strategic goal. Without such focus, firms can fall back to tweaking existing products and relying on minor product improvements, instead of true product innovation that results in new-to-the-world products or really new product lines. The best new product firms do not give in to this temptation, but continue to commit to innovative products. The biggest factor contributing to success is having a unique, superior product that adds value for the 15 customer.

Classic Brand Names

Budweiser Ivory Coca-Cola Maxwell House Kodak General Electric Steinway Wrigley Kleenex Waterford

L.L. Bean Ford John Deere Maytag JCPenney Sears Colgate Hershey Gillette Ticonderoga

Which of these have the most value today as launch pads for new products?

What About New Services

The process is essentially the same Continuum of intangibility. The simplest approach is to talk about new products, whatever the ratio of goods and services in them.

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Global Product Development

Products for global market: the innovation is even more challenging, greater details and studies different cultures, subcultures. Study and involve your users/customers deeply. Increased globalization make NPD even more challenging today!

Procter & Gamble products are developed globally in the firms 22 research centers located in 13 countries. Market research and testing of the Swiffer mop occurred in the U.S. and France. Apple did product design and customer requirement definition in the U.S. and Japan in developing the iPod. Ikea identifies unmet customer needs and commissions inhouse and outsourced designers to compete for the design. Worldwide manufacturing partners compete for the manufacturing rights. The firm also has excellent global logistics for product delivery to stores and customers.
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Globalization and New Product Development

Top firms deploy over 50% of their R&D spending in foreign countries. Global product teams allow firms to leverage their new product skills across their subsidiaries. Design, R&D, and manufacturing may occur in different subsidiaries around the world. Difficulties: coordinating the efforts across multiple countries to launch a successful new product. Having a global innovation culture being aware of differences in business and cultural environments and being open to global markets is important to success.

The New Products Process is All About Teams

The new products team is a cross-functional team with personnel from marketing, R&D, engineering, manufacturing, production, design, and other areas. All members of the team make a contribution to the new products process and the success of the team depends on how well they interact. Try to avoid narrow functional viewpoints and stereotypes.

Complexity of operations & decisions. Special emphasis on the following for NP Mgmt.

On What Basic Ideas or Concepts Is This Field of Activity Built?

Mistakes are natural, even by capable NPD people. Innovation is unnatural, so it has to be pushed People resist change (desire to hold onto something worthwhile social status or job.) Change is expensive many people avoid it. The desire to perpetuate a lifestyle or a comfortable way of doing things discourages innovation. The inherent tendency of a group to force conformity on all its members. The fear of change and the resistance to it is called Kainotophobia.

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What Is a Successful New Product?

Percent of Products that Fail
90 90 80 70 60 50 40 30 20 10 0 Sometimes Quoted in Press

40

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Research Reports

Sometimes Claimed

Although you may hear much higher percentages, careful studies supported by research evidence suggest that about 40% of new products fail -- somewhat higher for consumer products, somewhat lower for business-to-business products.

Best Practices in New Products

For every 100 ideas,

Fewer than 70 make it though initial screening Fewer than 50 pass concept evaluation and testing A little more than 30 make it through development About 30 make it through testing About 25 are commercialized 15 of these 25 (about 60%) are successful. Success rate is lower in consumer goods (51%) and as high as 65% in healthcare.

Source: Comparative Performance Assessment Study, PDMA, 2003.

Comparing the Best New Product Firms vs. the Rest

For the top new product firms, about 49% of company sales and profits come from products that were introduced in the last five years. For other firms, this average is about 21%. Lesson: firms that maintain their commitment to new products are rewarded with sales and profits!

The Conflicting Masters of NP Mgmt. Time, Quality, Cost = Value

The new product process must respond to the three unique inputs the right quality product, at the right time, and at the right cost a difficult job.

Quality

The Three inputs tend to conflict with each other, though there are synergies too. The three inputs contribute to the value of new products, but in different ways and in different amounts from project to project.
Time

Value

Issue: How to optimize these relationships between time, cost, and quality - in each new product situation?
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Cost

Dont Most Real Innovations Come from Small Firms and Inventors?

Some small firm owners are willing to take great risks, big firms may not. hence the impression that small firms/innovators contribute more. Many of todays big firms like 3M etc. have big NP programs; technology is a big player today. No one has ever figured out the actual numbers about how many big or small firms/owners are great risk taker. The problem of definitions. Lots of individuals have tried to innovate; we remember only the ones who became prominent.
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Breakthrough Innovations that Changed Our Lives Answering Machine

Personal Computer Microwave Oven Photocopier Pocket Calculator Fax Machine Birth Control Pill Home VCR Communication satellite Bar coding Integrated Circuit Automatic Teller

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

This list was compiled in the early 1990s. Since then one would certainly have to add the Internet. Anything else you would add? Which would you delete?

Is New Product Management an Art or a Science?

It is a combination of both art and science.

The art dimension is based on intuition, experience, hunch, or gut feel. Something might not have been done before, but managers should deny themselves the use of analytical techniques that would make a better product, and use their hunches etc. Science: in some situations the new product management is a science, as marketing science tackles various tests, concept test, product use test, market test, tradeoff/conjoint analysis, financial sensitivity testing, sales forecasting with mathematical models etc.

Innovation can be taught; every project set up to produce new products can benefit from the proven methods of new products management.

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Does This Field of Activity Have a Unique Vocabulary?

Yes, it does, for two reasons. It is an expanding field, new tasks and performing them in new ways and picking new words/terms as they go along. Second, it is a melting pot field, bringing in the language of scientists, lawyers, advertisers, accountants, marketing planners, corporate strategists, organizational behaviorists, and many more. This vocabulary is ever EXPANDING.

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Does the Field of New Products Offer Careers?

Offers three specific jobs

Functional representative on a team. Project Manager or team leaders New Products Process Manager (in big companies, where many projects are running simultaneously

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SOME CAREER TIPS

Be multifunctional, Have experience in more than one function (marketing, manufacturing, etc.). Be risk takers, willing to do whatever is necessary to bring a product to market jealousy/anger of coworkers etc. Think like a general manager. Cease being scientists and sales managers to be successful new product managers. Be a combination of optimist and realist, aggressor & team player, leader & follower; look at both sides & understand fully Develop your creative skills, both for new product concepts and for new ways of doing things. Be comfortable in chaos and confusion. Learn to work with depressives and those with no emotion at all.
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The Strategic Elements of Product Development

The New Products Process (Chapter 1 & Chapter 2)

A phased process that takes the new product idea through concept development, evaluation, development, launch, and post-launch. A strategy for new products that ensures that the team develops products in line with firm objectives and marketplace opportunities. A way to assess which new products would be the best ones to add to the existing line, given financial and strategic objectives.

The Product Innovation Charter (Chapter 3)

The Product Portfolio (Chapter 3)

The Basic New Product Process

Phase 1: Opportunity Identification/Selection Phase 2: Concept Generation

Phase 3: Concept/Project Evaluation

Phase 4: Development Phase 5: Launch

NP Process

Starting with Strategy for the overall product innovation program and for each project or team assignment. During this stage opportunities are identified, and best ones are given preliminary strategic statement to guide further work this stage is also known as Overview and Preparation. The second stage is composed of the task of Concept Generation, i.e. how we come up with new concepts, which would ultimately be converted into new products. The concept/project evaluation stage; also known as the Pre-technical stage (early evaluation stage), here we see how good these concepts are, both now, and later as they evolve through later stages where concepts are fleshed out.
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NP Process Contd.

Fourth stage is the Development, it comprises both marketing activities and the technical development. Here costs estimates become budgets, manufacturing processes become factories, and sales plans become sales calls. Other things decided in this stage include design, team management, and issues like, product use testing etc. Lastly we move to the Launch stage, which involves implementing & managing the commercialization of the plans and prototypes developed earlier. We also look at the Public Policy Issues; product safety, pollution etc.

These phases are not sequential, compartmentalized, or phases. They are almost fluid, and overlap each other.
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Principles and Issues in the New Products Process

Between the phases of the process are evaluation tasks or decision points, where hard Go/No Go decisions are taken. There is pressure to accelerate time to market (speed the product through this process), and phase overlapping and cross-functional teams are used to accomplish this. Fuzzy gates are commonly used: this is a conditional Go so as not to slow down the process in analysis. Still, fuzzy gates must have teeth! A potential problem is that the result should be No Go but the project goes through anyway. Another problem: hollow gates (the Go decision is made but no financial support is provided).

Third-Generation New Products Process

Most firms use what is called a Third-Generation process.

This is a flexible interpretation of the basic process, which allows overlapping phases and fuzzy gates.

This flexibility is particularly important in the development of new-to-the-world, breakthrough products.

The New Products Process Interacts With the Other Strategic Elements

Without the strategic direction provided by the Product Innovation Charter, the firms attempts at product development will be unfocused. The PIC helps the team identify opportunities and focus efforts. Product Portfolio considerations help the firm decide whether a new product opportunity adds financially and strategically to the current line and avoids spreading scarce financial and human resources too thin.

Does All This Actually Work?

Check the efforts of the best product developers in the business: the Outstanding Corporate Innovator award winners as selected by the Product Development & Management Association Recent winners: Hewlett-Packard, Dow Chemical, Maytag, Harley-Davidson, Bausch & Lomb, Keithley Instruments, New Pig Corporation. All have had a sustained commitment to innovation, with remarkable results in terms of new products.