Opportunity Identification and Selection

Why Do Firms Need Strategic Planning

for New Products ?
 To chart the group’s/team’s direction
 What technologies?/what markets?

 To set the group’s goals and objectives

 Why does it exist?

 To tell the group how it will play the game

 What are the rules?/constraints?

 Any other key information to consider?

Corporate Strengths Provide Direction for the Team

New products in this firm will:

• Use our fine furniture designers (Herman Miller)
• Gain value by being bottled in our bottling system (Coca-Cola)
• Utilize innovative design (Braun)
• Be for babies and only babies (Gerber)
• Be for all sports, not just shoes (Nike)
• Be for all people in computers (IBM)
• Use only internal R&D (Bausch & Lomb)
• Meet the needs of Ford engineers (Budd)
• Offer genuine value (Lexus)
• Offer more protection with less material (Sealed Air)

Note that some of these involve technologies, some markets, and some
company guidelines.
Opportunity Identification: Greenfield Markets

 Find another location or venue. Once McDonald’s had taken up the best
locations for traditional fast-food restaurants, it continued its U.S.
expansion by placing stores inside Wal-Marts, in sports arenas, and
elsewhere. Starbucks Coffee complemented coffee-shop sales by selling
its coffee beans and ice creams in supermarkets.
 Leverage your firm’s strengths in a new activity center. Nike has moved
into golf and hockey, and Honeywell is looking into casino opportunities.
 Identify a fast-growing need, and adapt your products to that need.
Hewlett-Packard followed the need for “total information solutions” that led
it to develop computing and communications products for the World Cup
and other sporting events.
 Find a “new to you” industry. P&G in pharmaceuticals, GE in broadcasting
(NBC), Disney in cruises, Rubbermaid in gardening products – either
through alliance, acquisition, or internal development.

 Source: Allan J. Magrath, “Envisioning Greenfield Markets,” Across the Board, May 1998, pp. 26-30.
Opportunity Identification: Emerging Societal Trends

 “Just-in-time” life (ZipCar)

 Sensing consumers (cholesterol home testing kits)
 The transparent self (23andme)
 In search of “enoughness” (“slow food” products)
 Virtual made real (virtual-city websites)
 Co-creation (product configurators)

 Source: A. Hines, J. Calder, and D. Abraham, “Six Catalysts Shaping the Future of Product Development,” Visions, 33(3), October 2009, pp.
20-23
What is the Product Innovation Charter (PIC)?

It is the new product team’s strategy.

 It is for Products (not processes).

 It is for Innovation (think of the definition of new

product).
 It is a Charter (a document specifying the conditions

under which a firm will operate).

Typically, it is a document prepared by senior
management designed to provide guidance to the
strategic business units (SBUs) on the role of innovation.
Do Many Firms Have a PIC?
Most do, according to research, even if they don’t call it by that name.

PDMA study:
 75% of firms have a formal new product policy of some type (a partial
PIC)
 29% have a formal, written complete PIC
 80% of firms have formalized at least a few of the phases in the new
products process
 86% of the “Best” firms have a PIC and only 69% of the “Rest”
According to an independent study:
 The more detailed and specific the PIC, the higher are the firm’s
innovation rates
 The more specific the corporate mission and senior management
direction is spelled out in the PIC, the better is the performance of the
firm’s new products
The Product Innovation Charter
Background
Key ideas from the situation analysis; special forces such as
managerial dicta; reasons for preparing a new PIC at this time.

Focus
At least one clear technology dimension and one clear market
dimension. They match and have good potential.

Goals and Objectives

What the project will accomplish, either short-term as objectives or
longer-term as goals. Evaluation measurements.

Guidelines
Any "rules of the road," requirements imposed by the situation or by
upper management. Innovativeness, order of market entry,
time/quality/cost, miscellaneous.
An Illustrative PIC for Orosound

 Background: There is an opportunity in the marketplace due

to noise pollution which constantly surrounds us.
Companies are especially concerned about the health and
well-being of their employees and reduction of ambient
noise can lead to higher workplace satisfaction. While there
are competitive headphones, there is none that offers all of
the benefits that the Tilde provides.
 Focus: Orosound has technology and R&D strength, and
owns several patents in acoustics that led to the
development of the Tilde. On the marketing side, the Tilde
satisfies an unmet need in the workplace – for effective, yet
controllable and selective, sound filtering which improves the
well-being of workers. Given the growth of workplace
collaboration, the ability to filter out ambient noise and still
carry on a conversation is a definite plus.
An Illustrative PIC for Orosound

 Goals and objectives: Due to intense interest in France

and Japan, Orosound targeted those two countries at
first, allowing for an assessment of marketplace
acceptance and some accurate sales forecasting for
future global targets. The individual consumer market is
a secondary target for the moment.
 Guidelines: Orosound wants to take advantage of the
growth in workplace collaboration, for which the Tilde is
ideally suited. The product should make the workplace
a more productive and happier place. The Tilde should
be an indispensable part of any workplace
environment.
Purposes of PIC

 Focus and integrate team effort

 Permit delegation
 Establish the size and range of the “sandbox”
Risks of Poor PIC Development

 Scope creep: Product definition keeps changing: who

is the customer? Is it a standalone product or a
platform?
 Unstable product specifications: Required performance
level keeps changing.
 Both of these risks are elusive targets (“moving
goalposts”) that occur because the sandbox was never
defined, or vaguely defined.
PIC Steps: Background, Focus, and Goals

 Background: “Why did we develop this strategy?”

 Focus, or Area: technology and market drivers that (1)
fit and (2) have good potential.
 Goals and Objectives: profit, growth, market status.
Dual-Drive Strategy: Technology and Market

 Relying solely on technology is risky.

 Letting customers’ stated needs drive product
innovation rarely works well.
 The best solution is a balanced or dual-drive strategy.
 Hewlett-Packard requires a strong market
commitment behind every new product program
 Frito-Lay, P&G have major research facilities to
address market needs
 T-P-M Linkage: converting technical specifications to
product features and market needs.