Managing Innovation

and New Product Development

 Innovation/New Product
 Why new product/innovation is important for firms?
 New product is the answer to all problems of firm:
◦ Growth of the business e.g. sales
◦ Product differentiation
◦ Premium price/good margin e.g. profit
 According to recent survey,
◦ 45% of profit and sales derived from the new products
introduced in last 5 years.
◦ New products profit margin is approx. 33%
 Most of the top performing firms regularly introduce
new products in the market.
 E.g. Apple, GE, IBM, 3M.
 Innovation/New Product
 How many companies actually innovate /introduce
new products regularly?
 Very few
 Why?

 New Product Risks

 Significant investments/resources are required,
 Likelihood of failure is high
 According to one study,

- Failure rate in new product development is from 40 to

60%.
New Products development barriers
 Recently Introduced New Products
 5G Wireless
 3D Metal Printing
 Block chain
 Google Translate
 Google Lens
Artificial Intelligence
Type of Innovative/new product projects
 Derivative projects
 Incremental product enhancements e.g. feature
 Incremental process improvements e.g. low cost mfg.
process
 Incremental changes on both dimensions
 E.g. a feature enhanced and cost reduced mobiles
 Platform projects
 It create design, technology and components shared
by set of products.
 E.g. Android operating system 6-sense technology by
Whirlpool
 Innovative/new product projects
 Breakthrough projects
 Establish new core products or new core processes
that differ fundamentally from previous generation of
process/product.
 E.g. 3-D printing technology, Robotic manufacturing,
Internet.
 Research and development projects
 It creates knowledge of new materials/technologies
that eventually leads to commercial development.
 E.g. satellite based communication technology
 Seattleite phone, d2h services
 Pharma firms develop new molecules that can be used
to make drugs and vaccines.
 Sources of New Product Ideas
Internally from:  Externally from:
1. Salespeople 1. Channel Members
2. Employees 2. Competitive Moves
3. R&D 3. Industrial Customers/
4. Marketing Research Lead users
5. Serendipity
 Strategies for Innovations
 What kind of strategies or behaviors are appropriate
for innovation?
 Induced Strategic Behavior or Intended Strategy
 Top down approach
 Formal and in-line with existing strategy (products &
markets) of the firm. E.g. Savlon
 Influence behavior through rewards and monitoring
 NPD department identify the opportunity for new
product development.
 Formal project approval process
 Structured communication
 Formal group is formed for the new product idea
 Administrative process
 Strategies for Innovations
 Induced Strategic Behavior or Intended Strategy
 Strategies for Innovations
 Autonomous Strategic Behavior or Realized Strategy
 Bottom-up approach
 Depart from the current strategy (products & markets)
of the firm. E.g. 3M
 High autonomy and freedom
 Individuals work on their personal ideas
 Organization provide free time and resources for
working on personal ideas.
 Informal group and ‘product champion’
 Similar to entrepreneurship
 Political process
 Once ideal is finalize, it follows the formal process.
 Strategies for Innovations
 Autonomous Strategic Behavior or Realized Strategy
 Disruptive Innovation
 Disruptive innovation occurs when a totally new
innovative product is developed that interrupts the
way business does things.
 Examples: Train, automobile, mobile, computers, TV
and Internet. (when introduced first time)
 A disruptive innovation represents the product or
service that is not as good as currently available
alternatives.
 Disruptive innovation offers other benefits such as
products are simpler, more convenient, and less
expensive products that appeal to new or less
demanding customers.
 E.g. Xerox high-speed photocopier machine v/s
Canon’s simple table top copier.
Disruptive Innovation
 Sustaining Innovation
 Sustaining product innovation often leads to product
developments that offer much more capacity than the
“mainstream” market needs.
 A sustaining innovation targets most demanding,
high-end customers with better performance than
what was previously.
 Sustaining innovation lead to incremental product
improvement or breakthrough feature of the product.
 E.g. TV has been improved from black & white to
color, flat screen, hd, smart tv, 4k tv etc.
 Improvement in photocopier machine from photocopy
to scanner and printer (All in one).
Sustaining Innovation
 The Disruptive Innovation Model
Performance

gr ess
al Pro
c
n ologi
h
Tec
ac e of
P
ns
ov atio
n
g In Range of
s t ainin
Su Performance
that Customers
Performance that
Can Utilize
Customers Can Utilize
or Absorb

Disruptive
Innovations

Time
 Types of Disruptive Strategies
 Disruptive strategies can take two forms:
 1. Low-end disruptions 2. New-market disruption
 1. Low end Strategy
 In this strategy, product performance should be good
enough to meet the performance requirements at the
low end of the mainstream market.
 Serve the over-served customers in the low end of the
mainstream market.
 Uses a distinctive business model or discount
strategies to win the business.
 There should be customers at the low end of the
market who are ready to by good enough product at
low price.
 E.g. Indigo Airlines
 Types of Disruptive Strategies
 2. New-market disruption
 In this strategy, product performance will be lower on
key attributes but enhanced performance on new
attributes. E.g. simplicity and convenience
 Target those customers who lacked money or skills to
buy and use the product. (They must be there)
 Business model must make money at lower price per
unit sold and at small production volume.
 E.g. Cannon desktop photocopier, sales force CRM
for SMEs.
 Guidelines for new product

 Approach: Build from the ground, reflect the reality

of the users, deliver solution not features.
 Focus on the customers and their problems.
 Do not use disfeaturing for new product.
 Technology: Latest technology or better than the
existing one.
 Price: Affordable to masses
 E.g. Lullaby primer by GE for Rural India
Thank You

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