Chapter 14 Notes

Innovation management and NPD

New product development requires multiple fields to work together such as Marketing, Economics,
Design and Engineering, R&D, and production management.

Considerations when developing an NPD strategy

On going corporate planning means setting the overall corporate strategy which determines where the
business will be in the future.

On Going Market planning mean thee decisions that thee marketing department takes based on market
data

On going technology development refers to the activities of research which the R&D department already
does

There are other activities that happen by chance when employees are working hard

Main Inputs into the decision making process

External environmental changes and internal organizational inputs affect the decision making process in
addition to the ongoing corporate strategy , marketing strategy and R&D technology

NPD as a strategy for growth

Business can grow by applying new product development (NPD) as a strategy, Ansoff’s matrix considers
two opportunities market opportunities and product opportunities.

If the business is focusing on current products and current market then it is doing a market penetration
strategy (increasing sales of current products to same type of customers ) like Zara Women doing a sale
to target the same target customers.

If the business is focusing on current product but new market. Then the business is doing a market
development strategy such as Zara selling the same clothe to people in Africa by opening a branch there
assuming it did not have one there in the first place.

Matrix for product development strategies

If the products objectives are no technological change and no market change then the product
development strategy is sustain.

If the products objectives are technological change and market change in the form strengthened market
to exploit more fully the existing markets for the present company’s products then the product
development strategy is Remerchandising to increase sales to consumers of types now served by the
company.

If the products objectives are no technological change and market change in the form new markets to
increase the number of types of consumers served by the company then the product development
strategy is New Use meaning to find new classes of consumer that can utilize present company
products.
If the products objectives are improved technology with no market change then the product
development strategy is reformulation which is to maintain an optimum balance of cost, quality, and
availability in the formula of present products.

If the products objectives are improved technology and a strengthened market to exploit more fully the
existing markets for the present company products then the product development strategy would be
improved product to improve present products for greater utility and merchantability to consumers.

If the products objectives are improved technology and a new market to increase the number of types
of consumers served by the company then the product development strategy would be market
extension to reach new classes of consumer by modifying the product.

If the products objectives are a new technology to acquire scientific knowledge and production skills
new to the company and no market change then the product development strategy is replacement to
seek new better intendants of formulation for present company products in technology not now
employed

If the products objectives are a new technology to acquire scientific knowledge and production skills
new to the company and strengthened market to exploit more fully the existing markets for the present
company’s products then the product development strategy product line extension to broaden the line
pf products offered to present consumers through technology

If the products objectives are a new technology to acquire scientific knowledge and production skills
new to the company and a new market to increase the number of types of consumers served by the
company then the product development strategy would be Diversification To add to the classes of
consumer served by developing new technology knowledge

A New Product is Multi dimensional

We can create a new product by changing packaging, technology, quality specifications, features,
packaging, level of service , brand name or piece

Newness depend on what came before the product.

Only 10% of the products are considered new to the world ( the market and the firm )

Classification of New Products

New to the world products:

Very small minority of products that create a new market and contain a significant development in
technology (the first car, the first phone, the first AC)

New product line new to the firm:

Products that are not new to the market place but new to the particular company. Like if Apple made a
car for example

Additions to existing lines (line addition)

This is a product within an already established product line like apple making a special iPhone with a way
better screen than other iPhone.

Improvements and revisions to existing products:

This is replacements of existing products such as apple regularly introducing a new iPhone

Cost Reductions:

This refers to reducing production costs which provides significant added value such as Apple Improving
its manufacturing so now it can make the iPhone for only $50 and sell it is for a $1,000.

Repositioning:

This refers to changing consumer perception about the product to find new applications for product
( new ways of using the product ) like Apple marketing the Iphone as a gaming phone for gamers

The extant of marketing mix effort required for each NPD:

If we have no change in marketing and no change in the product then the extant of marketing mix effort
required for the NPD is no change.

If we have no change in marketing and a modified product then the extant of marketing mix effort
required for each NPD is Facelift ( Appearance )

If we have no change in marketing and a technology change in the product then the extant of marketing
mix effort required for each NPD is Inconspicuous substitution ( Technology, Materials , and
Manufacturing).

If we have a modified marketing and no change in the product then the extant of marketing mix effort
required for each NPD is Re-merchandising ( Name, Promotion, Price , Distribution , and Packaging )

If we have a modified marketing and a modified product then the extant of marketing mix effort for
each NPD is Re-launch ( Costs , Promotion , Price and Distribution).

If we have a modified marketing and a technology change then the then the extant of marketing mix
effort required for each NPD is a Conspicuous Substitution ( Technology, Materials, Name , Appearance ,
Price , Promotion, and Distribution)

If we have a new marketing segment and no change in the peodug then the marketing mix effort
required for each NOD is intangible repositioning ( Name , Promotion , Price , Distribution, Target
Market and Composition ).

If we have a New Market Segment and an improved product then the extant of marketing mix effort
required for each NPD is tangible repositioning ( Name , Appearance ,Costs, Promotion , Price ,
Distribution , Target Market, and Competition)

If we have a New Market Segment and a Technology Change then the extant of marketing mix effort
that is required for the NPD is Neo-Innovation ( Technology, Materials, Manufacturing , Promotion, Price
, Distribution , Target Market and Competition).

Commonly Presented linear NPD model

Idea generation ( thinking of ideas for a product )

Idea scanning ( checking which idea is best )

Concept Testing ( checking which concepts or groups of ideas combined together are best )

Business Analysis ( checking the cashflows , revenues and expenses of an concept )

Product Development ( actually producing the product )

Test Marketing ( testing the product with a few select customers )

Commercialization ( actually selling the product in the market )

Monitoring and Evaluation ( checking how the product performed in the market )

Departmental ( Over the Wall Model )

This means that each department in the business ( engineering , Accounting , Finance , marketing .. etc )
does a certain activity which leads to the creation of a new model. Those are the first ways of developing
a new product. The engineering department comes up with a new product and the marketing
department tries to sell it.

Activity stage models:

Here we focus on the individual tasks which are required for the production of the product and this
allows for feedback between each activity so if for example something went wrong in the production of
the door of the car , we can communicate this . We can focus on multiple activities at once when
producing a new product

Cross Functional Teams (CFT) Model

Cross functional teams here we focus on creating a team of multiple people from different departments
such as Marketing , Engineering , IT, Accounting, and Finance to work on the production of new product
because a product needs multiple departments working together tin order to develop it and because we
need to keep moving the project back and forth between departments for example the IT department
works on creating the IT systems for the product while the engineering department works on designing
the exterior . This approach needs project management and other interdisciplinary fields.

Decision-Stage Models:

Decision stage model focused on viewing the production of a product as multiple decisions that need to
be taken by management according to feedback in a sequential manner one after the other . like first we
approve the interior of the product then the exterior then the price .. etc . This depends on workflow
and systems thinking (viewing the project as multiple steps that need to be done ).

Network Models for Product New Development

The network model of NPD views the project as a collection of knowledge which is developed overtime
by listening external Input from competitors, suppliers, distributers and customers at each stage Finance
, Marketing and sale , Engineering and Manufacturing and Research and Development. In Marketing
and Sales we also listen to feedback from social media and in Engineering and Manufacturing as well as
research and development we also listen to feedback form universities. All stages occure in a cycle with
no end or beginning. This network model of NPD focusss on internal activities and exterlmal linkages for
the success of NPD.