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19
The Management
of New Product
Development, and
Entrepreneurship

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Innovation, Technological Change and
Competition
Technology refers to the skills, knowledge,
experience, body of scientific knowledge, tools,
computers, machines used in the design and
production of goods and services.
Quantum technological change: fundamental shift
in technology that results in innovation.
 The Internet and genetic engineering are examples.
 Incremental technological change: refinements of current
technology over time.
 Most firms seek incremental product innovations which allows
constant, but small, improvements.

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Effect of Technological Change

 Many products undergo constant change and
improvement.
 Electronic products provide a great example.
 This change can be a threat to firms that are slow to
improve but provides benefits to firms that adjust.
 Technological change is both a threat and an opportunity.
 Smith Corona typewriter company missed out on word
processing and is now out of business.
 Microsoft was quick to embrace graphic user interface
programs and now is dominant in the software business.

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Product Life Cycles

 Refers to demand changes for a product over time.
 Embryonic stage: product is not widely accepted and
has minimal demand.
 Growth stage: many consumers seek out the product
and buy it for the first time.
 Mature stage: demand peaks since most buyers already
have the product and only buy replacements.
 Decline stage: demand falls off perhaps since the
product is obsolete.

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Product Life Cycles

Figure 19.1

Demand
Embryonic Growth Mature Decline
Stage Stage Stage Stage

Time
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Relationship Between Technological
Change and Life Cycle Duration
Figure 19.2
Rate of Technological
Change

Length of Product Life Cycles

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Rate of Technological Change

 The rate of change determines the length of the product
life cycle demand curve.
 The computer industry, life cycle is about 18 months; in
the steel industry, it is many years.
 Fads and fashions also impact the life cycle duration.
 Style changes alter the demand for goods.
 Usually, goods subject to fads and fashion changes will
experience shorter life cycles.
 In general, life cycles are getting shorter, forcing
managers to be more responsive to customers.
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The Four Goals of New Product
Figure 19.3
Development
Reduce
ReduceProduct
Product
Cycle
CycleTime
Time

New
NewProduct
Product
Maximize
Maximize Maximize
MaximizeFit
Fitwith
with
Development
Development
Product
ProductQuality
Quality Customer
Customerneeds
needs
Goals
Goals

Maximize
Maximize
Manufacturability
Manufacturability
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The Four Goals of New Product
Development
1) Reduce Product Cycle Time: reduce time needed to
develop a product from conception to market
introduction.
 Early to market products can command premium prices
and will have a longer life cycle.
 Can add new features before competitors
2) Maximize fit with Customer Needs: most products
fail because they were not designed to fit customer
needs.
 Ensure customers want the product features before adding
them to the product.

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The Four Goals of New Product
Development
3) Maximize Product Quality: be sure new products
are of superior quality.
 Poor quality in a new product can doom its acceptance
even if quality is fixed later on.
 Quality problems usually result from rushing product to
market.
4) Maximize Manufacturability: the efficiency with
which the product is built impacts its time to market.
 Ease of production can shorten development time.
 Efficient production can also avoid production
problems and improve quality.

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Stage-Gate Development Funnel
Principles
 Principle 1: Use a Stage-Gate Development Funnel;
managers often try to fund too many projects at once.
 Stage 1 considers all new ideas. Those that are feasible
and meet the strategic goals of the firm go through Gate
1.
 Stage 2 focuses on the product development plan and
then evaluated at Gate 2. Only the best continue.
 Stage 3 issues a contract book and focuses on
responsibilities, budgets, resources, etc. This is the
symbolic launch of the formal development.

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Stage-Gate Development Funnel

Figure 19.4

Gate 1 Gate 2

Ideas
Ship

Stage 1 Stage 2 Stage 3

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Cross Functional Teams Principles

 Principle 2: Cross functional teams seem to be a crucial
part of effective product development.
 Core members of the team are the 3 to 6 people
primarily responsible for the development effort.
 Must ensure there is coordination and communications
between team members.
 Often are located physically together
 Successful teams will develop a clear sense of their
objectives and share a common mission.

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Members of a Cross-Functional New
Figure 19.5
Product Development Team

Team
Leader

Core
Members

Peripheral
Members

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Concurrent Engineering Principles

 Principle 3: Concurrent Engineering: Traditional
approach follows a sequential flow between steps.
 This results in long development times and poor quality
when managers do not communicate between
departments.
 Development managers may design the product without
talking with manufacturing, resulting in problems.
 By working concurrently, design and production issues
are considered together.
 Production concerns are addressed while the product is
designed and can still be changed.

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Sequential v. Parallel Development
Figure 19.6
Processes
Opportunity
Opportunity
Identification
Identification
Concept
Concept
Development
Development A Sequential Process
Product
Product
Design
Design
Opportunity
Opportunity Process
Process
Identification
Identification Design
Design
Concept
Concept Commercial
Commercial
Development
Development Production
Production
Product
Product
Design
Design
Process
Process A Partly Parallel Process
Design
Design
Commercial
Commercial
Production
Production
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Bring in Customers & Suppliers

 A key reason the products fail is that they do not meet
the needs of the customers.
 Customer ideas and needs should be included in the
design process.
 Solicit customer input from many sources.
 Suppliers are also critical to the success of a product.
 Embrace them during concurrent engineering.
 Seek their ideas and input early in the process.

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Product Development Problems

 Successful product development is a critical component
of a successful firm.
 While most managers know this, it can be difficult to
actually carry out good development strategies.
 Many managers have difficulty in releasing control of
their part of the process and allowing groups to take
part.
 Conflict management skills can address this.
 Product development often requires a break in the
traditional organizational culture to be highly successful.

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Entrepreneurship
Entrepreneurs are people that notice
opportunities and take the initiative to mobilize
resources to make new goods and services.
 Many entrepreneurs work for themselves and start new
firms.
 Intrapreneurs: work in large companies and contribute to
innovation in the firm.
 Intrapreneurs that become frustrated with the lack of
opportunity at some large firms often leave and form their
own business called a new venture.

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Entrepreneurship and New Ventures

 Characteristics of entrepreneurs--most share these
common traits:
 Open to experience: they are original thinkers and take
risks.
 Internal locus of control: they take responsibility for
their own actions.
 High self-esteem: they feel competent and capable.
 High need for achievement: they set high goals and
enjoy working toward them.

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Entrepreneurship and Management

 To become involved in an entrepreneurial firm:
 Start your own business as an entrepreneur.
 Work for a growing entrepreneur in their firm.
 Many entrepreneurs enjoy starting a business, but not running
it.
 Develop a plan for the new business
 Design a plan to guide the business similar to a product
development plan.
 The Stage-funnel concept can work well here.
 Firms with no plan usually fail
 Franchising allows you to purchase a plan and experience
of existing firm to reduce risk.

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Steps in Developing a Business Plan

Table 19.1
Notice Product opportunity and develop a basic
Step 1 business idea: What Goods/services to produce
and who are the Customers/Markets?

Step 2 Conduct Strategic Analysis (SWOT) to identify:

Strengths, weakness, opportunities, threats.

Step 3 Is the Business opportunity feasible?

Prepare a detailed Business Plan including

Step 4 Mission, goals, strategic and financial objectives,
resources required, and a timeline of events.
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Intrapreneurship
 A learning organization encourages employees to act as
intrapreneurs. To help, form:
 Product Champions: person that takes ownership of a
product from concept to market.
 Skunkworks: group of intrapreneurs kept separate from the
rest of the firm.
 Allows workers total flexibility and innovation.
 New Venture Division: allows a division to act as its own
smaller company.
 Rewards for Innovation: link innovation by workers to
valued rewards.

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