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What are new products? What do they offer? New products opportunities offer superior value to customers and could range from totally new products, to only improvements in existing products.

Customer needs is an important determinant of value opportunities identified through the process of customer value analysis. The intention is to find GAPS between value expected & value delivered.

Customer Expectations Customer Satisfaction Gap Actual Product Performance (Value Delivered)

(1) New Products (2) Improved products (3) New, Improved Processes (4) Improved supporting services.

Customer value analysis finds gaps between expectations & satisfaction| Constant & objective assessment of organizational capabilities is required. Organizations normally have capabilities for product line extensions & incremental innovations. A step-change requires radical action!

Three types: 1. Transformational innovation: radically new, resulting in significant value creation e.g. ATMs, iPad; 2. Substantial Innovation: significantly new, creating important value for customers e.g. CNN Citizen Journalism, Diet Coke;

3. Incremental innovation: improved performance or greater perceived value e.g. new fragrance, salted peanuts.

Customers are often NOT a good guide to creation of totally new products. In such circumstances management must form a vision & be willing to take risks. Corning Inc. developed optical fiber technology & succeeded. Apple has several innovations to its credit that fall under transformational innovation.

Study between competing US & Japanese companies revealed that both transformational & incremental improvements can be practiced by companies with success. BUT, radical innovations have the potential to disrupt existing (sustaining) technologies but that is often the intention the company has!

As business evolved IBM ended up creating three SBUs to match the needs of each customer type. SBUs was 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.

Not all new products technology are breakthroughs! Idea of Post-it Notes came from a researcher at 3M who put slips of paper to mark songs in his hymnbook but they kept falling. Until he used a failed adhesive. Initial samples sent to office-supply vendors were rejected not sticky enough! Samples sent to Fortune 500 companies executive assistants wanted MORE of it!

1. Developing an innovative culture:


Open communications across all levels; Setting specific New Product Objectives; Communicating the role of New Products across the organization; Defining areas of strategic focus (Product, Scope, Markets, Technologies); Including long-term discontinuous projects & incremental projects in

2. Developing an effective planning


a) Systematic planning, coordination, decision-making, activities, & functions required; Generating a stream of new product ideas; Implementing procedures and methods for evaluation. Contd.

Contd 2. Developing an effective planning processes 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.

3. Assigning responsibility for New

Product Planning? Coordination at a high level in the hierarchy; Creating a separate project task force for New Product Planning (NPP) ; Making NPP team responsible for inter-functional coordination; Sometimescreating a permanent design center.

1. Sources of Ideas: Process starts with a

checklist of questions clarifying what is required: Should the search be targeted or openended? 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?

Alliances/ Acquisition/ Licensing

Direct/ Indirect Reviewing Search Technological Innovations METHODS OF GENERATING IDEAS Incentivizing Employees Customer Research Studies Incentivizing Value-Chain Members

Applying Creative Methods

Microsoft Corp: Microsoft Research, has a separate division, with a budget, to pursue new technologies and generate ideas; Sonera Corp: leading wireless carrier in Finland, distributes cameras in households across Europe, asking people to send activity photos. Those are studied for ideas!

Some companies rely on existing customers to generate new product ideas.

Beth Comstock at GE corporate headquarters called herself a little bit of the crazy, wacky one - an apt description for a woman like her who works at General Electric Co. Comstock, 44, was charged with transforming GEs culture famously devoted to process, engineering, & financial controls - to one thats more agile and creative.

Chairman & CEO Jeff Immelt tapped the former communications chief to become GEs first-ever CMO. The job came with a critical twist: goal of driving innovation through the companys 300,000 plus ranks. Creativity is still a word were wrestling with, Comstock conceded. It seems a bit indisciplined, a bit chaotic, for a place like GE.

Comstock found a more comfortable territory using the term imaginative problem-solving, encouraging people to think WHAT IF? yet always with the aim of driving growth. One of Comstocks first moves: bring in anthropologists to audit GEs culture who found that GEs famous work ethic was great, but employees wanted more wow more discoveries from the company founded by Thomas Edison.

Comstock assumed a role, whose importance is spreading throughout Big Business she became a self-styled INNOVATION CHAMPION.
She studied the best practices at companies such as Procter & Gamble, FedEx, and 3M. She brought in creativity consultants, futurists, and design gurus to lead sessions with different operations.

The consulting firms had names that jolted the GE types: A) Play, a Richmond (VA.) group that helped execs think different, & B) Jump, based in San Mateo, CA., which researched how people used things. THE RESULT??

GE hired more designers to bring businesses closer to customers. Comstock staged dreaming sessions where Immelt, senior execs, and customers debate future market trends. Comstock concededs some managers viewed 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.!

Text handout: To be read!

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.

Determine strategic fit with company &/or SBU objective on TWO factors: Compatibility with organizational mission & objectives: matches capabilities & resources; Commercially feasibility: market attractiveness, technical feasibility, social / environmental concerns met.

Concept Evaluation: Take ideas through stages: what clears first stage, must go in for detailed evaluation; Research, decided upon, before beginning product development & committing resources; Testing concepts agreed: Acceptable or unacceptable, Favorable or unfavorable.

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: success norms already exist.

Business analysis: B. Developing preliminary Marketing Plan: 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 project profitability.


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 Development Collaborative Development: e.g. HP Fax developed in collaboration with Matsushita of Japan.

Product Product Concept R&D Prototype

Marketing plan Concept test Product use test Marketing component s test: Ad copy, pricing etc. Market test Target Positioning Price Promotion Distribution Service Plan Final plan for national launch

Production Prototype

Final product for national launch

Monitoring & Control Real-time tracking Role of Internet Match product performance metrics with performance targets.

How Is Intel Changing? We still are driving our core [microprocessor] business as hard as ever, and its still doing pretty well. But weve supplemented it with new growth initiatives, which are very exciting and very different for us. That acquiring companies, equating people, and putting a new image on top of the big, powerful chip monster that eats the world.

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 the way it behaves. Its not just a big machine continuing to hold on. We have a bunch of smaller businesses starting up, which are forced to compete, scratch, and claw for market share.

Why such a massive overhaul of business? The PC was at the center of computing during the 90s, but if you look at the next decade, the Internet is clearly it. The PC is still very important in the Internet era. But if you want to be involved in this new era, you have to look for new growth opportunities. Thats exactly what youre trying to do.

Standard new product planning works in most cases but other factors increasingly influence the process: 1. Technology Push: where new technology becomes the force behind new products & the process driver; 2. Optimizing Platform Products: when an existing platform is used for new product development;

Using Existing Process: when an existing capability is used e.g. Pepsi introducing Sierra Mist; 4. Creating Customized Products: large scale busnesses e.g. Aircraft manufacture; 5. Proactive cannibalization: where a company deliberately edges out old product to maintain competitive advantage & higher profits. E.g. Gillette.

Customer Needs Analysis Idea Generation Screening and Evaluation Marketing Strategy Development Testing Commercialization Business Analysis Product Development