Innovation & New Product Strategy

7/30/2019 Innovation & New Product Strategy

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STRATEGIC MARKETING & PLANNING


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New products opportunities offer superior value to customers andcould range from totally newproducts, to only improvements inexisting products.

What are new products? What dothey offer?


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Customer needs is an importantdeterminant of value opportunities

identified through the process of customer value analysis.

The intention is to find GAPSbetween value expected & valuedelivered .


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CustomerExpectations

Customer

SatisfactionGapActualProduct

Performance(ValueDelivered)

OPPORTUNITIES

(1) New Products(2) Improved products(3) New, ImprovedProcesses(4) Improved supporting

services.


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Customer value analysis finds gapsbetween expectations & satisfaction|

Constant & objective assessment of organizational capabilities is required.Organizations normally havecapabilities for product lineextensions & incremental innovations.

A step-change requires radicalaction!


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Three types:1. Transformational innovation :

radically new, resulting in significantvalue creation e.g. ATMs, iPad;

2. Substantial Innovation: significantlynew, creating important value for customers e.g. CNN CitizenJournalism, Diet Coke;

3. Incremental innovation : improvedperformance or greater perceivedvalue e.g. new fragrance, salted

peanuts.


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Customers are often NOT a good guideto creation of totally new products.In such circumstances managementmust form a vision & be willing to takerisks.Corning Inc. developed opticalfiber technology & succeeded.Apple has severalinnovations to its credit thatfall under transformationalinnovation.


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Study between competing US &Japanese companies revealed that bothtransformational & incremental

improvements can be practiced bycompanies with success.

BUT, radical innovations have the

potential to disrupt existing(sustaining) technologies but that isoften the intention the company has!


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As business evolved IBM ended upcreating three SBUs to match theneeds of each customer type. SBUswas not the innovation, but a new way

of working was: Horizon one business : for traditional,

mature lines e.g. main-frames; Horizon two business : for current

growth businesses; Horizon three business : for many

young businesses.


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Not all new products technology

are breakthroughs! Idea of Post-it Notes came from aresearcher at 3M who put slips of paper to mark songs in his hymnbook but theykept falling. Until he used a failedadhesive.Initial samples sent to office-supply

vendors were rejected not stickyenough! Samples sent to Fortune 500 companies

executive assistants wanted MOREof it!


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1. Developing an innovative culture:HOW?

Open communications across alllevels;

Setting specific New ProductObjectives;

Communicating the role of NewProducts across the organization;

Defining areas of strategic focus(Product, Scope, Markets,Technologies);

Including long-term discontinuousprojects & incremental projects in


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2. Developing an effective planningprocesses

a) Systematic planning , coordination,

decision-making, activities, & functionsrequired;Generating a stream of new productideas;Implementing procedures andmethods for evaluation.

Contd .


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Contd

2. Developing an effective planningprocesses

b) Involving different business

functions: better coordination &integration; c) Setting challenging time frames to

create healthy competition;d) Managing resources linked to delivery

of results;e) Developing products & services in

tandem.


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3. Assigning responsibility for NewProduct Planning?

Coordination at a high level in thehierarchy;

Creating a separate project taskforce for New Product Planning (NPP);

Making NPP team responsible for inter-functional coordination; Sometimescreating a permanent

design center.


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1. Sources of Ideas : Process starts with a

checklist of questions clarifying what isrequired : Should the search be targeted or open-

ended ? How extensive? How aggressive? What sources can be tapped? How? Should ideas come from customers -

How? Should alternative (or disruptive)

technologies be considered? Who manages the idea-search?


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METHODSOFGENERATING

IDEAS

Direct/ IndirectSearch

IncentivizingEmployees

IncentivizingValue-ChainMembers

ApplyingCreativeMethods

Customer ResearchStudies

Alliances/ Acquisition/

Licensing

ReviewingTechnologicalInnovations


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Microsoft Corp : Microsoft Research, hasa separate division , with a budget, topursue new technologies and generateideas;

Sonera Corp : leading wireless carrier inFinland, distributes cameras inhouseholds across Europe, askingpeople to send activity photos. Those are

studied for ideas!Some companies rely on existingcustomers to generate new productideas.


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Beth Comstock at GE corporateheadquarters called herself a little bit ofthe crazy, wacky one - an apt description

for a woman like her who works at GeneralElectric Co.

Comstock, 44, was charged withtransforming GEs culture famouslydevoted to process, engineering, &financial controls - to one thats more

agile and creative.


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Chairman & CEO Jeff Immelt tapped theformer communications chief to becomeGEs first -ever CMO.

The job came with a critical twist: goal ofdriving innovation through the companys300,000 plus ranks.

Creativity is still a word were wrestlingwith, Comstock conceded. It seems a bitindisciplined, a bit chaotic, for a place likeGE.


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Comstock found a more comfortableterritory using the term imaginativeproblem-solving , encouraging people tothink WHAT IF? yet always with the aimof driving growth.One of Comstocks first moves: bring inanthropologists to audit GEs culture who found that GEs famous work ethic wasgreat, but employees wanted morewow more discoveries from the

company founded by Thomas Edison.


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Comstock assumed a role, whoseimportance is spreading throughout BigBusiness she became a self-styledINNOVATION CHAMPION.

She studied the best practices at companies such as Procter & Gamble,FedEx, and 3M . She brought in creativityconsultants, futurists, and design gurus tolead sessions with different operations .


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The consulting firms had names that joltedthe GE types:

A) Play , a Richmond (VA.) group thathelped execs think different , &

B) Jump, based in San Mateo, CA., which

researched how people used things .THE RESULT??


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GE hired more designers to bringbusinesses closer to customers .

Comstock staged dreaming sessions where Immelt, senior execs, andcustomers debate future market trends.Comstock concededs some managersviewed the workshops as a waste of

time. We have a long way to go. But for GE, theres no turning back. Source: Bruce Hussbaum , How to Build Creative

Companies ,BusinessWeek, August, 2005, 77.


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Screening: Removing unpromising ideas,

reducing risk of rejecting good ideas:Tight screening may eliminate good

ideas as well; Eliminating ideas at other stages of

product development process;

Analyzing impact on business &deciding for or against the idea; Determine strategic fit with company

&/or SBU objective.


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Contd Determine strategic fit with company

&/or SBU objective on TWO factors :

Compatibility with organizationalmission & objectives: matchescapabilities & resources;

Commercially feasibility : marketattractiveness, technical feasibility, social/ environmental concerns met.


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Concept Evaluation:

Take ideas through stages: what clearsfirst stage , must go in for detailedevaluation;

Research , decided upon, beforebeginning product development &committing resources;

Testing concepts agreed:Acceptable or unacceptable,Favorable or unfavorable.


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Business analysis: Analyzing commercial performance ; Refining tools based on feedback.

Process:A) Revenue Forecasting: Issue : Influence of newness of product,

market-size & competition quality of

projection ; Ease in established markets: successnorms already exist.


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Business analysis:B. Developing preliminary MarketingPlan: Deciding on key elements: market

target, positioning, marketing mix.C. Cost estimation: Preparing initial cost estimates - likely

to be revised as project progresses.

D. Profit projections: Exercises like breakeven analysis to

estimate likelihood/ timing of projectprofitability.


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NEW PRODUCTCONCEPT

PRODUCTDEVELOPMENT& USE TESTING

MARKETINGSTRATEGY

DEVELOPMENT

MARKETTESTING

LAUNCH


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Development of new product: Product design Packaging design What to make & what to buy?

Product Development Process: Product Specifications/ Industrial Design Prototype Use Tests Process DevelopmentCollaborative Development : e.g. HP Faxdeveloped in collaboration with Matsushita of Japan.


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ProductConcept

R&DPrototype

ProductionPrototype

Product

TargetPositioningPricePromotion

DistributionService

Plan

Concepttest

Productuse test

Marketingcomponents test: Ad

copy,pricing etc.

Markettest

Final productfor national

launchFinal plan for

national launch

Product Marketing plan


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Monitoring & ControlReal-time trackingRole of InternetMatch product performance metrics

with performance targets.


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How Is Intel Changing?We still are driving our core [microprocessor]business as hard as ever, and its still doingpretty well. But weve supplemented it with newgrowth initiatives , which are very exciting andvery different for us. That acquiring companies ,

equating people , and putting a new image on top of the big, powerful chip monster that eatsthe world.


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Whether its networking for cellular communications, solar appliances, or server farms, theres a lot more buzz and energy ,which is causing the company to change theway it behaves.Its not just a big machine continuing to hold on.

We have a bunch of smaller businessesstarting up, which are forced to compete,scratch, and claw for market share.


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Why such a massive overhaul of business?The PC was at the center of computing duringthe 90s, but if you look at the next decade, theInternet is clearly it. The PC is still veryimportant in the Internet era. But if you want to

be involved in this new era, you have to lookfor new growth opportunities. Thats exactlywhat youre trying to do.


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Standard new product planning works inmost cases but other factorsincreasingly influence the process:

1. Technology Push : where newtechnology becomes the force behindnew products & the process driver;

2. Optimizing Platform Products : whenan existing platform is used for newproduct development;


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3. Using Existing Process: when anexisting capability is used e.g. Pepsiintroducing Sierra Mist;

4. Creating Customized Products : largescale busnesses e.g. Aircraftmanufacture;

5. Proactive cannibalization : where acompany deliberately edges out oldproduct to maintain competitiveadvantage & higher profits. E.g. Gillette.


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CustomerNeeds

Analysis

Business

Analysis

Screeningand

EvaluationIdea

Generation

MarketingStrategy

Development

ProductDevelopment

Testing

Commercialization

Innovation & New Product Strategy

Documents

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