t259

NEW PRODUCT INNOVATION PROCESS: A CASE STUDY FROM THE

METAL MANUFACTURING INDUSTRY

JAzu SALO
University of Oulu, Facultyof Economicsand BusinessAdministration,Departmentof
Marketing,P.O.BOX 4600,90014Finland
jari.salo@oulu.fi
I{EIKKI KAzuALUOTO
University of Oulu, Facultyof Economicsand BusinessAdministration,Departmentof
Marketing,P.O.BOX 4600,90014Finland
heikki.karjaluoto@oulu.fi
FIANNA ruSSILA
University of Oulu, Facultyof Economicsand BusinessAdministration,Departmentof
Marketing,P.O. BOX 4600, 90014Finland

ABSTRACT
The purpose of this paper is to study the new product innovation processof a large
specialized metal manufacturer in Europe. The analysis will cover new produit
innovation processranging from the new technologydevelopmentto the utilization of the
technology to create new products for existing customers. For mangers our research
suggestthat while new product innovation processis seen in theory to consist of stages
and phaseslike technology developmentand new product developmentit should be seen
as.oneentity which is managed.Informationfor both R&D and marketingis requiredand
mixed developmentteamsarewelcomed.

INTRODUCTION
Innovationis studiedextensivelyin the fields from social sciencesto appliedsciences.
The emphasisadvocatedhere is to evaluatenew product innovation processin its totality
becausenew to the market technologiescan be deployed in various new productsand
even more importantly, the technologJ can be patented and licensed to others.
Developing new products basedon old technologiesis many times more costly and
successin commercializationis limited, thus productsbasedon new technologiesmay
have higher change to survive when new products have lower production costs, better
quality and _sometimes even lower prices. With the use of a case study from the special
metal manufacturingcompany,we illustrate that it is beneficial for companiesto consider
and assessnew product innovationpossibilitiesby focusing on technologyand product
development rather than just new product development. The case firm succ-ssfully
launchednew to the market technology by deploying its intemal competenciesrelatedto
metallurgyand customerinsights.This technologywas later on usedto produceradically
improved (see Garcia and Calantone,2002) products for their customersand hopefully
due to the product superiority it will replaceother productsdevelopedfor samepurpose.

The aim ofthe study is to highlight the new product innovation processfrom the start to
end in the specializedmetal manufacturingindustry context in Europe.The disposition of
the paper is as follows. First, literature depicting new product innovation processis
reviewed and a framework is compiled. Second,we presentthe methodology of our study
and after that the case study elaborateson the new product innovation process in the
business-to-businessmetal industry context. Finally, the results are presented and
implications for researchand managementare discussed.
1260

NEW PRODUCT INNOVATION PROCESS

According to Thompson (1965) innovation means "generation, acceptanceand
implementationof new ideas,processes,productsor services".Similar to knowledge,
also new innovations are more or less based on what is already known and being
introducedto the market,thus varying degreesof innovativeness
are possible(Garciaand
Calantone,2002,p.1 12).

In here we focus on the new product innovationprocessin its totality. New product
innovationprocessis seento encompassfour stages:front end of innovationprocess(see
e.g. Khuranaand Rosenthal,1997;1998),new technologydevelopment,new product
development(Cooperand Kleinschmidt, 1987)and launchor commercializationprocess
(Hultink et al., 2000) that are usually dealt separatelyin literature.The literatureof new
product innovation usually separatesnew technologydevelopmentactivities from new
product developmentactivities (Eldred and McGrath, 1997a)and as such this causes
separatelines of research.In here it is suggestedthat more overlappingresearchwould
benefit all stakeholders.Front end of innovation processhas been studied widely in
innovation literature(see e.g. Buckler, 1997; Kurana and Rosenthal,1997',1998).Also
new technology developmenthas been researchedextensively(Eldred and McGrath
1997a;Jolly, 1997,p.l-30; Lynn et al., 1996).Furthermore, new productdevelopment
researchhas retaineda high level of popularityover the last 30 years(Ernst, 2002). The
literaturein this field is large and fragmentedwhich makesit difficult to graspwhat is
actually known (Brown and Eisenhardt 1995). The approachesto new product
developmentand innovationin generalare almost as numerousas the numberof papers
that have beenwritten. In addition,successfactorsof all phasesare studiedwidely (Craig
and Hart, 1992 ZhangandDoll, 200I ).

New technology developmentand new product developmentprocesseswith market

launch are here called togetheras a new product innovationprocess.Innovationprocess
is composedof seriesof steps.Betweendiflerent stepsor stagesof the processthereare
decision points where it is decided if to continueto the next stage(see Cooper, 1993,
p.75-120). Figure I depicts in detail the phasesor stepsconstitutingthe new product
innovation process.It goes without saying that each step in the new product innovation
processcould be broken into smaller stepsand explainingin detail the whole processis
out of the scope of the paper. In brief, it is basedon analysis and synthesisof four
contributions(Cooper,1993;Eldred and McGrath, 7997a;1997b:Hultink et al., 2000).
 t26l

New technologt
development

Sensedtechnolory

Technologyfeasibility
point

Second idea generation

Businesscase

Launch plan &

ready product

Modified launch
plan & product

Figure l: New productinnovationprocess

1262

METHODS
We aimed to understand the new product innovation process in the metal
manufacturingcontext.As such, a qualitative casestudy method is appropriatefor this
purposesince we are dealingwith a phenomenonwhich the researcherhas only little or
no control over occurringeventsin a real-life context(Stake,1995p.435-454).A crucial
phasein case study researchis case selectionand literatureprovidesmany advicesto
selectcases(e.g. Eisenhardt,1989).However,the researchermakesthe final decisionon
the number of cases(Romano, 1989).The casecompanyis selectedbasedon its proven
innovativeness,performance,industrialcontext,relativebig size and availableaccessto
the company. The main data source consistsof four semi-structuredinterviews (e.g.
Arksey and Knight, 1999). An appropriatelevel of saturationwas reachedas answers
beganto repeatthemselves.For reasonsof confidentialitythe companyand inten'iewees
stay anonym. Inten'ieweesfrom different functions were chosenbasedon company's
contact persons' recommendations and they had long history in the companywhich is
seento improve the validigi of the insights provided about the new product innovation
process.Intervieweeswere asked first general questionsabout the company and its
reputationas innovativecompanyand then about the phasesof the caseproject focused
on.

Role on interviewee Years in the firm Date and duration

Research Manager, Over l0 years April I1,2005, lh 5min
R&D
Marketing Manager, Over l0 years October21,2005,1h 3 min
Technicalcustomerservice
SalesManager, Over l0 years October,26,2005, I h l0 min
Sales
Director,SpecialProducts Over l0 years October10.2006. I h 15 min
Table l: Interviewdata

All interviews were taped with interviewees' permissionand then transcribedand

analyzedaccordingly.The interviews and other material were employed in qualitative
data analysisin order to bring meaningto the bunch of data (seeMiles and Huberman,
1984). Also documentationsuch as industry reports, memos, databasesnapshots,
brochures,news articles,presentationsand emails were collectedin order to triangulate
the respondents' answers, ils suggested in literature (Patton, 1987; Yin, 1994).
Furthermore,to find clarificationfor conflicting answers,additionalquestionswere also
e-mailedafterwardsto interviewees.

NEW PRODUCT INNOVATION PROCESS IN TIIE METAL

MANUFACTIJRING INDU STRY
The casecompanyis operatingin the metal manufacturingindustryand suppliesbasic
metal productsas well as higher degreeof upgradingmetal-basedproductsand services.
Their industrial customers use these products and services as their material or as
componentsand systemsin their processesor end products.The company operatesin
over 20 countriesand employs over 10,000 people. Opening up of the Europeanand
global marketsis tighteningthe competitionalso in this industry.Thereare two generally
 1263

noticed ways to achieve competenceadvantagein the industry; by consolidatingand

seekingeconomiesof scale or by specializingto strong niches and serving them with
products including higher degree of upgrading. The case company has selected
specializationstrategyto beat the competition. In-depth knowledge of materialsforms the
base for the strategy implementation. Also the development work in cooperation with
customersand end-usersas well as concentratingon customer-orientedway of working
and enhancingtheir customerserviceare highlightedin the strategyimplementation.The
openingup of Europe is bringing to marketscompaniesthat have lower cost structures,
which is tighteningprice competitionin the market.Therefore,new productdevelopment
is seenvery importantfor the successof the casecompanyas it makesit possibleto get
incomesfrom more specializedproductswhen the old and conventionalonesare facing
high pressuresfor price decreases.Moreover, having innovative new products in the
assortmentalso improvesthe company'simage in the eyesof demandingcustomersand
differentiatesthe casecompany from the competitors.

The empirical investigationin this casestudy is focusingon the innovationprocessof

product A in the case company. Novel products are in this case a base material for
customersof the company. There are generally international standardsfor the products
the company is producing and marketing. The purpose of these standards is to help
customersto compareproducts of different suppliers and save in the costs becausethere
is no needfor a doubleinspectionwhen a standardis guaranteeing the characteristicsofa
product. Becausethe strategy of the company is to specialize and to do high quality
products, it is producing products which are better than the standardsrequire and give
that way some extra benefits to their customers.This makes it also possible to price the
productshigher.

Early phases ofnew product innovation

New product developmentin the companydid not utilize formal product development
process with stages and gates. New process technology was originally developed to
productsthat alreadyhave substitutesin the markets.However,the idea of usingthis new
processtechnology to produce new kind of product came up later in the meetings where
the development projects of the factory were discussed.The difference between these
productslies in the customerindustriesand applicationswherethey can be used.The idea
of new productjust came up without any offrcial idea generatingactivities.The decision
to develop new product was made basedon information already available and it can be
said that it was done quite intuitively. At leastthe customerswere not the sourceof ideas.

"...
ll/ell, customers couldn't ask product like that, at least not from us,
becausethey did not btow that we can do that kind of products." (Interviewee
2)

Productdefinition includesdefinition of the target market, descriptionof the product

conceptand its benefitsto the customer,delineationof the positioningstrategy,and list of
product features, attributes, requirements and specifications prioritized. The case
company formed the description of the product concept and the benefits the product will
bring to the customer as well as the list of featuresof new product. In the market, there
1264

are not any direct substitutesfor the product A and there is neither any skndard for it.
The developmentteam formed a vision of the product by connectingtheir knowledgeof
characteristicsof new processtechnologyto the informationcollectedfrom the literature
and about competitors' products.Some feafuresof the product A has been developed
systematicallyright from the beginningand competitorshave a long way to cometo beat
the new product's benefitsfor the customer.Generallybenefitsof the productA for the
customersare savingsin maintenanceand preparingcosts for their end-customersand
enhancedend-productperformancealike the benefits of the product already produced
with new processtechnology.The definition of target market and the delineationof the
positioning strategy were rough. The target market was not clear even there were some
thoughts of the customer industries.The precise size of the market was unclear but
assumedto be big and growing quite fast. Forming a businesscaseincludeswith product
definition also productjustification and project plan. Productjustification revealswhy a
company should invest on the project and is usually based on businessreview with
financial,profitability, and risk considerations.
It seemsthat this productjustification has
been done really roughly and market athactivenesswas the only part, which was
considered.Rough project plan from developmentto the launchwas probablyformed to
structure the developmentwork. In sum, all componentsof businesscase were not
consideredin the decision-makingin the front-endactivitiesand use of market research
was very limited.

When the productwas createdin the technicalsenseand the experimentswere over, it

was time to think about launchingit. The productwas launchedto the marketas soonas
possiblebecausethere was expectedto be demandfor it. In next section,new product
launch is discussedunder the themesof strategicand tactical launch decisions,testing
andvalidation,implementinglaunch,and post-implementation review.

Product latmch
Before launchingproductA many issueswere decided.Theseissuesare next discussed
as strategicand tactical launchdecisions.Somestrategicand tactical launchdecisionsare
compared with the decisions of competitors,which was difficult becausedefining
competitors for the product A is challenging.Competitors for the product are here
defined broadly; if there could be any caseor customerapplicationwhere the products
can compete,they are seenas substitutes.If the competitionis consideredmore specific,
the product is quite unique and bears special features that any other product does not
offer. Strategiclaunchdecisionswere mainly done during the product development.The
decisionsare presentedin Table 2 and comparedto the literatureand to the suggestions
of the study by Hultink et al. (2000). As a product strategy decisions,the company
launchedmore innovativeproduct,which developmentdid not take long time. This is
maybedue to that productA is more improvementthan highly radical new product.As a
market strategydecisions,the companytargetedthe product to a growing niche, where
the stage of the life cycle of the product is introductory or already in growth. The new
product is launchedto marketswith severalcompetitors,when competitorsare defined
broadly, and the product advanceis basedon performanceimprovement.In domestic
markets,wherethe productwas launchedfirst. therewas mainly one competitorwho had
leading position in this kind of products.Thesetwo decisionsdescribethe competitive
 t265

stance.The company's strategy seemsto be more technology driven and its innovation
strategy seems to include aim for technologicalinnovation more than, for instance,
marketins innovation.

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Table 2: StrategicLaunch Decisions

It seemsthat almost all of the strategiclaunch decisionsof the company are done
according to recommendationsof either the study of Hultink et al. (2000) or other
literature.Moreover,the majority of the decisionsare madeaccordingto other literature.
Tactical launchdecisionswere not madein the companyuntil after productdevelopment,
contrary to suggestionsof literature. These decisions are presentedand compared to
suggestionsof the study by Hultink et al. (2000).
Product tactic decisions include the breadth of the product assortmentintroduced and
branding strategy.The company launchedtwo quite similar products,as discussedin the
following sectionconcemingtesting and validation,which is equal product assortment
with competitors. The company has product lines where the products are named
similarly. The new product is a product line extensionand is named accordingly as a
branding strategy.Moreover, the company's name is used in the marketing of new
product.
1266

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Table 3: TacticalLaunch Decisions

Some tactical launch decisionspresentedin Table 3 concerningproduct A in the case

company are following suggestionsof literature,some are accordingrecommendations
by Hultink et al. (2000), andthe decisionregardingdistributionexpenditurescould not be
evaluated.

Testing and validation

The company launchedthe new product first to the domesticmarketswhere existing
customers,who usedthe most similar productof the casecompany'sproductassortment,
were in the target. The product was launchedonly to domesticmarketseven though it
was known that there would not be enough volumes and customersavailable for the
maximum long-term profitability of the product. In this light the company was using
domestic markets as test markets where they tested and validated the product, its
production,and marketing.Nevertheless,it is not clearhow consciouswas the decision.
Prior to launch personnel of sales departmentwas educatedand internal marketing was
usedto convincethe productionpersonnelthat the productis importantfor the company.
Becausethe product needsmore work and attentionin the production processthan others,
workerswere motivatedto handlethem.

Implementing launch
After launchingthe new productto the domesticmarketsand adjustingmarketingplan
accordingto gained experiences,the focus in marketing moved to Europeanmarkets.
Launching new product to bigger marketsdemandedinvestmentsin order to increase
volumesin productionline. To supportthe decisionwhetherto investto the improvement
 t267

of productionline, the companywas interestedaboutthe future demandestimationsand

used somemarket researchto examine it.
Timing of the product launchwas not especiallyconsideredin the company.When the
forecastsshowed high growth rates,the aim of launching the new product as quickly as
possibleseemto be desired.Again during the launch to the Europeanmarketsinternal
marketing were needed.Employees in the salesoffices and agentsaround the Europe did
get information about the new product availableas well as informationabout customer
applicationsand potentialcustomerindustrieswere shared.
Next, a typical negotiationprocessbetweenthe casecompanyand a potentialcustomer
is shortly described(seeFigure 2). Negotiationprocessworks also as a channelto collect
customerfeedbackduring the discussionswith the customersand potential customers.
The whole process begins with recognizing potential customer. This can be done
according to the information on applications and potential industries found. Then, the
customeris contactedfrom the sales,usually by phone,and time for presentationis set. In
the presentation the engineers from the company tell about the new product and its
benefits'
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Figure2: NegotiationProcess

Summary
Table 4 depicts the combinationof the issuesare openedup and darkenedcolumns
demonstratethe company's decisions. The company is operating in its new product
innovation process like technology-oriented firm; the use of market researchis limited
and it is interestedon technologiesdevelopmentin the industry.The companydid use
market research only in the later stages of the innovation process. Firs! it used test
marketsas market researchmethod when it was respondingto customerfeedbackafter its
first launch. Additionally, they did gain information about the future demand of the
1268

market to basethe investmentdecision before launchingnew product to the European

markets.On the other hand,the characteristics of marketand the firm itself as well as the
degreeof newnessof new product are more typical for responsivelymarket-oriented
firm. This may be due to differencesin classifyingdegreeof newnessin the literature.

tre.p,i".li:.. n-,r't** -i;1,,,,,1",:i..:J

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ac\rrilt (c\ trtrlLqlrrrt trr;rrlgturl ar,.:l f nSlll('t'l rn:l
c^::ur!r!-Il!r|l.

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lli.hai$tr\hin rl Not hlit r ing .A,cttr r'1r' 1'.11.t.",u4 \ctir r'lr lirlt.* in{
t1.( lt 1.r l.,li(\ l('( llnilD$rr'> trrbuololir.r
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llr-lronding to ;\(liuslins pr.r.rluct [:r{rtcrrrtrs c[:lirnr!-r{. Lrrrm.lrrrg 1..'"r
(tl\l{rf!r(l lcr.,llrrtL :tctrrlrliilg!t!\t$ul!r Itirrrc lnJ .lrrring r)rpri\r'l\l yrrrrlrri.t .rlir r
fi'trlbrck bclirri. l;tttni h l"iu rrclr
l;runsh

Table 4: The casecompany'scombinationof strategicorientationand the characteristics

ofnew productinnovationprocess

CONCLUSIONS
The purposeof this paper was to examinenew product innovation processof a large
specializedmetal manufacturer in Europe. We depicted in detail the new product
innovation process and its relevant steps. The findings indicate that new product
innovationprocessesvary especiallyin marketinformationprocessingcapabilitiesand in
the degreeof newnessof the product. For instance,the case company used only some
market researchin its innovationprocessof productA while descriptionsof incremental
new product developmentprocessin the literary suggestusing a lot of market research.
Additionally, in classifuing the degreeof newnessof new product for the purposeof
analyzingchancesin the new product innovationprocess,the micro level is adequate.In
otherwords,when innovationprocessis approachedfrom the angle of company,which is
developingnew products,it may not be so relevantto classifothe degreeof newnessat
the macro level at all.

The differences in the new product innovation processes are seen already when
classifuingthe newnesson a micro level. When the degreeof newnesson a micro level is
high and a firm is technology-oriented,a firm may not use market researchat all in its
new product innovation process, or does not use it at least in the front end of product
development,as the casestudy reveals.Responsivemarketorientationand technological
 1269

orientation may be easierto implement for a company, while proactivemarket orientation

seemto be more demandingone. When the degreeof newnessof new productis high on
even a micro level, it may not be even possibleto use traditionalmarketresearchresults
directly as a base of decision-making.There is lack of more useful market research
methods and it would demand a lot of effort from a firm to develop those. It may be
tempting to go through whole new product innovation processwithout market research
becausetraditionalresearch,which is easierto use,gives no help. This may leadto more
technological orientation. Finally in the case company, the new product innovation
process is mainly conducted by engineersand thus the firm has good resourcesin
engineering.In this study it was learnedthat establishedlargecorporationscan alsoexcel
at competition by being technology-orientatedrather than market oriented.

For mangers our case study based researchsuggest that while new product innovation
processis seenmany times in academicreferencesas consistingof stagesand phaseslike
technologydevelopmentand new product developmentit should be seenas one entity
which is managedeffectively. This could increasethe successrate of innovationand in
general make it more effective. Furthermore,basedon the casestudy, it is suggestedthat
R&D and marketing people are involved throughout the new product innovation process
in all stagesand thus,mixed developmentteamsare warmly welcomec.

Limitation of the study is the method chosenas case studiesdo not provide law-like
results. However, the case study elicits a good amount of information applicable to its
originating context. Thus, managers and researchersalike, involved in new product
innovationprocessespeciallyin metal industry relatedareasmay apply theseresultsas
they wish. Nevertheless,othersshouldbe more careful as resultsare contextspecificand
further studiesare neededto seeif other industrieshavedifferentor similar businesslogic
in new product innovation process.In addition, future studies are needed to fully
understand the new product innovation process from start to successful
commercializationand re-introduction.

Acknowledgements
The financial supportof the Finnish FundingAgency for Technologyand Innovationis
gratefully acknowledged.

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