Lecturer: Trần Thị Thanh Vân

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 Introduction to Innovation and
1 Creativity
Blue Ocean Strategy vs. Medici
2 Effect
Content
Theories of Innovation
3
Innovative Culture Within Firms
4
New Product Development (NPD)
5Entrepreneur & Small Business
Development
6
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 Business model creation
BUSINESS MODEL BUSINESS MODEL BUSINESS MODEL
STRATEGIC TOOLS
DESIGN TOOLS TESTING TOOLS IMPLEMENTATION
• Persona • Target group • Thinking Hats • Business Plan
• Focus group selection • Business Model • Marketing Cards
• SWOT analysis • Business Model Stress Test • Marketing Mix
• PESTLE analysis Canvas • Return on • Business Model
• Poster’s Five • Value Builder Investment Roadmap
Forces • Business Model Calculator • Wheel of Skills
• Competitor Cards • Business Case Customer Journey
analysis • Partner Analysis • Balanced
• Partner Value Scorecard
Matrix • Critical Success
• STOF Business Factors
Model • Process Journey
• Pricing Strategy • Profit Calculator
Cards • Deadly Waste
Canvas

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 EVALUATION

PROCESS Attendance
Assignment in
20% class/homework

MID-TERM
Models assignment
30%

FINAL
Assignment & Presenting
50%

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 TEXTBOOK

Osterwalder, A., Pigneur, Y., 2010. Business model

generation: a handbook for visionaries, game changers,
and challengers Wiley and Sons, New Jersey.

Laverty, M., Little, C., 2020. Entrepreneurship. Rice

University.

Website: https://businessmakeover.eu/

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 LECTURER INFORMATION

TRAN THI THANH VAN Phone: 0902070899

Email: tg_tranthithanhvan@tdtu.edu.vn
thanhvan.tt@gmail.com

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 CHAPTER 1 – INTRODUCTION TO
INNOVATION & CREATIVITY

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 ENTREPRENEUR

GEID (2017) - An entrepreneur is a person with the vision to see an innovation and the
ability to bring it to market

Handong (2017): Entrepreneur – some one who can recognize opportunities where
others see chaos or confusion; they are aggressive catalysts for change within the
marketplace; they challenge the unknown and continuously create the future

OECD (2007): Entrepreneurs - are those persons (business owners) who seek to
generate value, through the creation or expansion of economic activity, by identifying
and exploiting new products, processes or markets

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• An entrepreneur is someone who identifies and acts on an idea
or problem that no one else has identified or acted on.

• This combination of recognizing an opportunity to bring

something new to the world and acting on that opportunity is
what distinguishes an entrepreneur from a small business
owner.

• A small business owner is someone who owns or starts a

business that already has an existing model, such as a
restaurant, whereas an entrepreneur is someone who creates
something new.  This new creation can be a new process or
product, a business that identifies a new or unique target market,
or a combination of ideas that creates a new approach or
method, for example.
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12
13
14
 Roles of an entrepreneur

Initiating and leading business activities

Allocating employees' duties
Forecasting business changes
Creating jobs
Identifying business opportunities
Creating and sharing wealth
Improving the standard of living
Taking up and reducing business risk
Building strategic partnerships
Digitalizing business operations

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16
17
18
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Businessman with multitasking lots of arms doing various office tasks in
lotus pose. Keep calm!
20
 ENTREPRENEURSHIP

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 Entrprenuership is the pursuit of opportunity
beyond resources controlled

(Howard Stevenson)

Tinh thần khởi nghiệp là sự dấn thân theo đuổi

các cơ hội mới vượt quá các nguồn lực
bị/được kiểm soát
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Nine different types of entrepreneurship

Small business Large company Scalable startup

entrepreneurship entrepreneurship entrepreneurship

Social Innovative Hustler

entrepreneurship entrepreneurship entrepreneurship

Imitator Researcher Buyer

entrepreneurship entrepreneurship entrepreneurship

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03/22/2024 704024 - Chương 1 24
 INNOVATION

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 CREATIVE

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 INVENTION

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 CHOOSE A TOPIC FOR
ENTREPRENEURSHIP

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 CHAPTER 2 – BLUE OCEAN STRATERGY VS
MEDICI EFFECT

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 BLUE OCEAN

• A slang term created in 2005 The idea behind it is the

referral to the vast marketing options that occurs when an
unknown industry or innovation occurs

• The term blue ocean was coined by professors W. Chan

Kim and Renee Mauborgne in their book Blue Ocean
Strategy: How to Create Uncontested Market Space and
Make the Competition Irrelevant (2005)  the authors
define blue oceans as markets associated with high
potential profits

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 BLUE OCEAN STRATERGY

• Definition: Blue Ocean Strategy is referred to a

market for a product where there is no competition
or very less competition. This strategy revolves
around searching for a business in which very few
firms operate and where there is no pricing
pressure

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 BLUE OCEAN STRATERGY
• Description: Blue Ocean Strategy can be applied across sectors or
businesses. It is not limited to just one business

In today's environment most firms operate under intense competition and try
to do everything to gain market share. When the product comes under pricing
pressure there is always a possibility that a firm’s operations could well come
under threat. This situation usually comes when the business is operating in a
saturated market, also known as 'Red Ocean'.

When there is limited room to grow, businesses try and look for verticals or
avenues of finding new business where they can enjoy uncontested market
share or 'Blue Ocean'. A blue ocean exists when there is potential for higher
profits, as there is now competition or irrelevant competition.

The strategy aims to capture new demand, and to make competition irrelevant
by introducing a product with superior features. It helps the company in make
huge profits as the product can be priced a little steep because of its unique
features.
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 RED OCEAN VS BLUE OCEAN
STRATERGY

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 6 PATHS FRAMEWORK

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 EXAMPLE OF
BLUE OCEAN STRATERGY
• Ford Motor Co.
In 1908, Ford Motor Co. introduced the Model T as the car for the masses. It only came
in one color and one model, but it was reliable, durable, and affordable. At the time, the
automobile industry was still in its infancy with approximately 500 automakers
producing custom-made cars that were more expensive and less reliable. Ford created
a new manufacturing process for mass-producing standardized cars at a fraction of the
price of its competitors. The Model T's market share jumped from 9% in 1908 to 61% in
1921, also officially replacing the horse-drawn carriage as the principal mode of
transportation.
• Apple Inc.
Apple Inc. found a blue ocean with its iTunes music download service. While billions of
music files were being downloaded each month illegally, Apple created the first legal
format for downloading music in 2003. It was easy to use, providing users with the
ability to buy individual songs at a reasonable price. Apple won over millions of music
listeners who had been pirating music by offering higher-quality sound along with
search and navigation functions. Apple made iTunes a win-win-win for the music
producers, music listeners, and Apple by creating a new stream of revenue from a new
market while providing more convenient access to music.
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 EXAMPLE OF
BLUE OCEAN STRATERGY
• Cirque du Soleil: This Canadian entertainment company began in the 1980s as a
bunch of “crazy people” with a vision of what the modern circus could be.
Traditional circus performances were lighthearted affairs targeted toward children,
whereas Cirque offered a more sophisticated experience with some of the world’s
best performers. In fact, many of Cirque’s shows included astonishing acts that
couldn’t be seen anywhere else. While kids are still part of the target audience, the
much higher ticket price guaranteed the primary customers would be adults. Cirque
du Soleil did not attempt to be another circus with clowns and performing animals—
its Blue Ocean Strategy completely reinvented the market.

• Backroads: This company turned travel into something more challenging and
engaging than the typical relaxing itinerary of an all-inclusive cruise or beach
vacation. Backroads expanded the industry to offer something novel: luxury active
travel. These meticulously designed, fitness-based trips include guides who take
guests hiking, biking, camping, and more. Backroads’ Blue Ocean Strategy
appealed to a much different audience than vacationers looking to relax, and has
played a major role in expanding the industry to include travelers who want to feel
fulfilled and accomplished at the conclusion of a trip.
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 MEDICI EFFECT
• According to Frans Johansson, these innovators are changing the world by
stepping into the Intersection: a place where ideas from different fields and
cultures meet and collide, ultimately igniting an explosion of extraordinary
new discoveries. Johansson calls this proliferation of new ideas ‘the Medici
effect’ —referring to the remarkable burst of creativity enabled by the
Medici banking family in Renaissance Italy. In this fascinating book, he
reveals how we can find intersections in our own lives and turn the ideas
we find there into pathbreaking innovations

• The core of it is about two types of ideas:

– Directional ideas
– Intersectional ideas

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 MEDICI EFFECT

• Directional innovation improves a product in fairly predictable steps,

along a well-defined dimension. Examples of directional innovation are all
around us because they represent the majority of all innovations. This is
what we call incremental improvements (Innovation is in my opinion a bit
on the optimistic, even window-dressing side)

• The goal is to evolve an established idea by using refinements and

adjustments. The rewards for doing so are reasonably predictable and
attained relatively quickly. People and organizations do this all the time
through increasing level of expertise and specialization. It is absolutely
necessary if one does not wish to squander the value of an idea. Even an
intersectional idea will, once it has become established, develop and
evolve along a specific direction.

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 MEDICI EFFECT

• Intersectional innovations, on the other hand, change the world in

leaps along new directions. This is what Guy Kawasaki calls
“jumping the curve”. These ideas are game changers. I am
preparing a whitepaper on how NIBC (Nano, Info, Bio, Cogno))
technologies are major game changers.

• Although intersectional innovations are radical, they can work in

both large and small ways. They can involve the design of a large
department store or the topic of a novella; they can include a
special-effects technique or the product development for a
multinational corporation.

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 CHAPTER 3 – THEORIES OF INNOVATION

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• It is remarkable how many people are under the false assumption that
companies are either innovative or not. This is a very polarizing and
simplistic perspective that does not take into account the different types of
innovations that companies can and do pursue.

• Break down innovation into two dimensions: Technology and Market,

which gives us the following 4 types of innovation

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 Disruptive vs.
sustaining innovation
• Clayton Christensen was the first to introduce the concept of disruptive
innovation in 1995.

• Disruptive innovation, by definition, refers to a concept, product or

service that creates a new value network either by disrupting an existing
market or creating a completely new market.

• In the beginning of the life cycle of an innovation, disruptive innovation

generally provides lower performance, and while these kinds of
innovations often aren’t “good enough” to satisfy current customers, they
appeal to a different market instead.

• Sustaining innovation, on the contrary, refers to the type of innovations

that exist in the current market and instead of creating new value
networks, it rather improves and grows the existing ones.
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 Radical vs.
incremental innovation
• Both sustaining and disruptive innovation can be either radical or
incremental.

• Radical innovation happens when a new technology completely

disrupts existing business or economy and creates a new business
model.

• Only about 10% of innovations fall into this category because they are the
most difficult to execute.

• Incremental innovation, in turn, refers to a series of small, gradually built

improvements to existing products, processes or methods to maintain
competitive position over time. The majority of innovations are incremental,
because these types of innovations are often the easiest and most cost-
efficient to implement.
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 Architectural vs.
modular innovation
• In addition to the types of innovations mentioned above, I'd also like to
briefly introduce the concepts of architectural and modular innovation.

• Architectural innovation is described as the reconfiguration of existing

product technologies, and was introduced by Rebecca Henderson and Kim
Clark in 1990.

• The main point in architectural innovation is that while the core

components of the product remain the same, the relationship between
these components changes. This type of innovation entails the overall
design, system or the way components interact.

• Modular innovation (or component innovation), on the contrary, is the exact

opposite. In modular innovations, one or more components of a product
is changed while the overall design stays the same.
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 The Innovation Matrix

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CHAPTER 4 – INNOVATION CULTURE WITHIN FIRMS

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 Business model, technology- and
marketing innovations

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 Business model innovation

• Business model innovation is all about the ability to rethink your current
business to find new revenue streams and maintain competitive
advantage. It can be done either by improving an existing business model
or by looking for new ways to provide value.

• Many previously successful company has failed in business model

innovation because instead of envisioning possible future
innovations, they've been too busy with their current operations.

• What these companies should have done instead, is to have tried

to actively challenge the basic assumptions and the dominant logic in
the industry to find new profitable opportunities.

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 Business model innovation

• Luckily, business model innovation is easier when done in a systematic

manner:
• Analyse your current business model – Identify your target market and your
offering. How exactly is your value proposition created and your revenue
generated?
• Confront your current business model – Engage in ideation to challenge
common assumptions and current way of doing things. Sometimes,
questioning your long-held assumptions may help you to come up with those
infamous “out-of-the-box ideas” especially if you’re suffering from a creative
block.
• Ensure the consistency of a business model – Make sure your new
business model is consistent with your long-term vision.
• Build a pilot and test it – Make iterations based on your findings, always
keeping success factors and possible pitfalls in mind.

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 Technology innovation
• A general misconception is that innovation breakthroughs are always
based on fascinating and costly technologies.

• Creating positive change doesn’t necessarily require the most tech-

savvy personnel or large technological investments. However, most of
the great innovations still utilize new technology, in one way or another.

• For many industries, technology is the major player when seeking a

competitive edge and increasing profit margins

 Generating new ideas based on technology, capability or

knowledge to produce a new solution to a real or perceived need and
to develop this solution into viable entity.

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 Technology innovation

New technology can be used to:

• Accelerate your innovation processes

• Realize new possibilities in the market

• Generate ideas and build them into innovations

• Model your products and services for the market

• Experiment and test these new concepts

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 Marketing innovation
• For a business to succeed, marketing innovation is claimed to be as
important as product innovation.
• This makes sense, as there’s no point spending time and money on
business model- and product development if no one is able to find it and
benefit from it.
• However, marketing innovation isn’t just about finding new unique
channels and tactics to promote your offering but about finding new
markets and creating new value propositions that others aren’t able to (or
do not want to) provide.
• This can be done by launching your technology, product or business
model in new unconventional places or by promoting your existing offering
in a way it hasn’t been promoted before.
• Classic marketing innovations are such where an existing product is
used to a whole new purpose and it provides a different value
proposition for a completely new segment.

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 Ten types of innovation

• The model describes itself as The Discipline of Building

Breakthroughs and aims to provide a way to identify new potential
opportunities beyond products and revisit existing strategies to
develop viable innovations.

• The ideology behind these types of innovations is that building new

products isn’t the only way to innovate and might actually provide
the lowest return on investment with minimum competitive advantage.

• Instead of solely focusing on developing different features of the

product, the ten types of innovation-framework approaches innovation
in a more holistic way, claiming that the best results can be achieved
when all of the following categories are considered.

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 Ten types of innovation

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 Innovator’s Dilemma

• One of the most significant and widely recognized theories in history,

is designed to explain psychological and economic phenomenon
regarding disruptive innovations

• The core: In the beginning, innovation, and most specifically

disruptive kind, is inferior to the existing products and services on the
market. Because product improvement takes a lot of time and requires
multiple iterations, the value for the customer is minimal, at the
bottom of the S-curve

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 Innovator’s Dilemma

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 Innovator’s Dilemma

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 Jobs-To-Be-Done Framework
• A theory and a methodology by Strategyn, focuses on Outcome-Driven
Innovation. The fundamental idea of the theory is that people buy products and
services to get jobs done, and while different products and services come and
go, the underlying job-to-be-done stays the same.

• The difference between traditional innovation and outcome-driven innovation is

that most traditional innovations are just improved versions of existing
products, whereas outcome-driven innovations are more focused on the job
that needs to get done.

• This outcome-driven approach allows you to learn more about customer's

needs and which of those are unmet.

• The reason for this is that outcome-driven approach directly addresses specific
metrics the customer has in mind that define the successful execution for the
job.
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 Jobs-To-Be-Done Framework

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 Crossing The Chasm
• Moore believes that the most difficult transition is from the early
adopters to early majority, referred here as the chasm. The chasm
occurs because the expectations between these two adopter categories
are significantly different.

• The basic idea is that the entire market can be represented with a bell
curve that can be divided into segments based on how eager the
customers are to adopt new technology with each segment having their
own sets of expectations and desires.

• The left side of the curve, the early market, consists of people who want
the newest inventions, whereas the ones on the right, in the mainstream
market, are more interested in real, convenient solutions.

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 Crossing The Chasm

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 Crossing The Chasm
• The early market type is typically expecting intuitive solutions and are
often motivated by future opportunities. The mainstream market,
however, is more analytic and willing to bear smaller risk, whereas the
late majority is usually motivated by real-life problems that are present
at the moment. Typically, people who fall into this category only want to
pursue things that are extremely likely to happen.
• For companies to be able to cross the chasm, they need to find
new ways to make their products more attractive in the eyes of the
early majority.
• Developing the product and changing the way you talk about it to suit
the majority can often mean making compromises that alienate the
innovators and the early adopters that allowed your early success. This
can be a very painful process that many companies find difficult, not
only psychologically, but also in practice.

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 Crossing The Chasm
The best way to win over the mainstream is to focus on segmentation and
do it extremely well. Here’s a few tips:

• 1. Vertical vs horizontal – define your target market and brand yourself

as a specialist in that specific niche. This obviously won’t work if your
business idea is to provide a single solution for all types of users. Either
way, you must pick either one as you cannot provide everything for
everybody.

• 2. Focus on one niche at a time

• 3. Acknowledge differences – Make sure your product, pricing and

distribution meets the expectations of the mainstream market.

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 The Three Horizons of Growth
The three horizons of growth, created by McKinsey & Company, is a well-known
model for organizations to structure their initiatives and finding an appropriate
balance between short- and long-term projects in their portfolio.

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 The Three Horizons of Growth
The point of the three horizon model is that for an organization to maximize
their growth potential, they need to simultaneously work on projects within
all three horizons:

• Horizon 1: Initiatives related to the core business

• Horizon 2: Development of new opportunities in emerging businesses
• Horizon 3: Creation of new, transformational businesses

 To maximize growth potential, you need to simultaneously work on

projects for all three horizons

You can’t guarantee a bright future without a balance between all of the
three horizons and by finding that, you’ll not only maximize your growth
potential, but also decrease the risk of your business portfolio.
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 70-20-10 Rule
• To put the three horizons model into practice, you can use the 70-20-10 rule,
pioneered by then Google CEO Eric Schmidt, which is a simple rule for
allocating resources between “the core”, “the adjacent” and “the innovative
stuff”, often referred to as “the transformational”.
• Here the core refers to the activities that make up the majority of existing
business, whereas the adjacent means new improvements and logical extensions
for the current business. The transformational, however can mean anything
brand new for the organization that isn’t related to the core.
• To get the best possible result, try to allocate 70% of your resources on the core
business initiatives, 20% on projects related to your business, such as new
markets, and the rest 10% on creating something completely new.
• In addition to anecdotal evidence from Google, has also seemed to confirm that
companies that allocate their resources in this manner, typically outperform their
peers by a margin of 10-20% (measured with their P/E ratio). The research also
identified that the long-term returns for each type of investments are actually the
inverse of the resources invested.

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 70-20-10 Rule

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 70-20-10 Rule

Because the
three horizon
model of growth
and the 70-20-10
rule are talking
about the exact
same thing, we
can combine
these two for a
more practical
look at the issue.

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 CHAPTER 5 – NEW PRODUCT DEVELOPMENT

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 What Is New Product
Development?
• New Product Development (NPD) is the total process that takes a service
or a product from conception to market. New or rebranded products and
services are meant to fill a consumer demand or an opportunity in the
marketplace. The steps in product development include drafting the
concept, creating the design, developing the product or service, and
defining the marketing.
• A new product opens a whole new market: It can completely replace a
current product, take over an existing product, or simply broaden the
market for something that already exists. Sometimes existing products
are introduced to new markets, repackaged, or marketed differently. New
products can improve the use of a company’s resources, launch a
company into a new market or segment of the market, improve the
relationship a company has with its distributors, or increase or defend a
company’s market share.

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 What Is Fuzzy Front End, and Why Is It So
Important in Product Development Processes?

• Process management is a technique that ensures improvements are

introduced with a consistent, structured set of activities. In your product
development processes, whether for a new or revamped product, your
process management strategies are critical to ensuring that your products
will be continuously improved. These strategies will necessarily include
your product development processes, and ensure that even very complex
products make it to market consistently and improved regularly. The four
phases of product development are:

– Fuzzy Front-End
– Design
– Implementation
– Fuzzy Back-End

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 What Is Fuzzy Front End, and Why Is It So
Important in Product Development Processes?

• 1. Fuzzy Front-End (FFE): often called the ideation step, is considered

one of the best opportunities for driving innovation in a company.

• There have been many case studies that examine how FFE is done in
different companies, looking for consistencies and best practices. Some
companies have idea management software or some type of regular way
that they generate ideas. Some companies use integrated product teams
(IPTs), a group that is responsible for defining the product. Volumes have
been written about FFE because of its relative importance in product
development, but the FFE process is unique to each company. However,
there are a few consistent activities that occur with every FFE approach,
and provide teams with critical decision points before moving forward.

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 What Is Fuzzy Front End, and Why Is It So
Important in Product Development Processes?

• Determining the innovation goal. This preliminary analysis is your

opportunity to figure out what problem you need to solve for your
customers before you make a product.

• Figuring out what your customers think about this goal. People will
buy a product or service that solves a problem for them, but the problem
itself must be present. Products that customers don’t need, didn’t ask for,
or degrade your brand loyalty are unsuccessful.

• Reviewing other market segments for possible connections or

technology to get ideas. When thinking about new products, it’s
important to collect data on how people are using the product, how much
they will pay, and whether the price for the benefit is reasonable. During
your market research phase, you should also review the market size and
conduct a segmentation analysis.
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 What Is Fuzzy Front End, and Why Is It So
Important in Product Development Processes?
• Prototyping your ideas. is a mockup of the proposed product, intended to verify
your design. The extent of the product prototype is dependent upon your company’s
needs. Some companies need a fully-functional model to show how the product
works, while some companies will only require a 3D representation  you should
test your prototype in different use-case scenarios and identify its points of failure.

• Testing your ideas with your customer base. Should conduct a customer value
assessment to obtain the opinion of a sample of your target market. This
assessment helps to adequately predict the response to the release of your
product. Experts say that early customer involvement cuts down on uncertainty and
helps make product objectives clear product  called listening to the voice of the
customer (VoC).

• Planning how to funnel these potential products into your product

development process. is the initial stage of deciding how to develop, mass
produce, & market the new prototype  opportunity to conduct a technical
assessment, and also your source-of-supply assessment.
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 What Is Fuzzy Front End, and Why Is It So
Important in Product Development Processes?

How your company performs FFE, there are How innovative they are, all new product
some deliverables you should expect to ideas must meet certain criteria for your
create for each product that moves beyond company. They must:
FFE. These include:
- A mission statement - Fit your company skill sets
- The market trends - Fit the interest of your company
- The customer benefits and acceptance data - Solve a problem for someone
- The technical concept - Be something that someone will buy
- Product definition and specifications - Be scaleable
- Economic analysis of the product
- The development schedule
- Project staffing and the budget
- A business plan
- An economic analysis

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 What Is Fuzzy Front End, and Why Is It So
Important in Product Development Processes?

When define your

product  several
questions that you
should ask as early
in the process as
possible  disperse
these questions into
your FFE process or
put them into a
checklist before
moving to
development. These
include:

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 What Is Fuzzy Front End, and Why Is It So
Important in Product Development Processes?
• 2. Design: Once a product is more than just a notion, the next step in the product
development process is the product design. Some of these activities may have
been started in FFE, but in this step, all of the planning goes into high gear so that
you capture both the high-level design processes and detail-level requirements.
This step is mostly about validating the manufacturing feasibility of the product, and
how you’ll integrate the internal components of the design.
• 3. Implementation: During this phase of development, you will determine whether
your prototype meets your design and requirements specifications from the
previous steps, and you will also figure out how to deliver the product and provide
support for your customers. At this point, you prepare your facilities that will
manufacture, provide the supplies for, transport, and distribute the product.
• 4. Fuzzy Back-End (FBE): This stage is sometimes called the “messy” back-end of
innovation. This process is not considered as fun as the innovation process
because in FBE, fun meets the execution processes and you must be disciplined
about the release. This is the true commercialization phase where production and
product launch happen in a structured way. In other words, the FBE is where the
product truly comes to life in the marketplace, executing a company’s strategic
vision.
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 Product Development Process
Models
• Your company depends on being able to formalize your innovation process
properly. According to urban legends of new product development, between 70%
and 90% of new products fail. More conservative, peer-reviewed studies
compiled by the Product Development and Management Association actually put
that failure number between 30% and 49%. Even with these lower failure rates,
however, there is still a large amount of money at stake. Therefore, a process
model is critical to saving your company money and time. There are many
different approaches and models for innovation, depending on the needs of your
company. These include:

• Describe and evaluate actual practice

• Recommend an ideal process
• Make a system out of development activities
• Simplify development activities
• Are centered around your customers
• Are team-based within your company

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 Product Development Process
Models
• The Scorecard-Markov model: analysis model is a mathematical model
that deals with the probabilities of things happening. These things are
divided into the past, present, and future. The past isn’t as relevant as the
present, because the present gives us the probability of something
happening in the future. This model is especially helpful in scenarios where
there are transitions from one state to another. In this model, you develop a
matrix that represents the transition states and how likely they are to go
from one to another, and apply it to the Scorecard-Markov model to make
new product screening decisions. Developed to act as a scorecard for new
product ideas, the matrix includes your customers’ needs, the strength of
your marketing, your company’s competency, the compatibility of your
manufacturing, and your distribution channels. In other words, this model is
used to whittle down all of your ideas from FFE to ones that make
mathematical sense for your company. It is a formal, evidenced-based
process for the people you report to who want “real data” on why some
ideas make it out of FFE and some do not.

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 Product Development Process
Models
• The IDEO Process: This model comes from a design and consulting firm of
the same name, and is set apart because it is the “human-centered design
process,” designing from the perspective of the user. IDEO’s designers
make a point to observe real people in real situations, looking for the Form-
Fit-Function (FFF) of their designs. FFF specifies the interchangeability of
parts in a system and describes the characteristics of parts. Further, if a part
is not needed for the fit, form, or function, it should not be added. This
process following steps:

• Observation
• Ideation
• Prototype quickly
• Get user feedback
• Refine
• Implement

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 Product Development Process
Models
The Booz, Allen, and Hamilton (BAH) model: This is one of the earliest and
most well-known models for new product development. It is considered
foundational for all other models developed to the present day in any industry
and is meant to be sequential. BAH state that, “For every seven new product
ideas, only one succeeds.” This model does not take into account the need for
speed and flexibility in today’s marketplace product development. The seven
steps are:

• New product strategy

• Idea generation
• Screening and evaluation
• Business analysis
• Development
• Testing
• Commercialization
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 Product Development Process
Models
The Stage-Gate model: Also known as the Phase-Gate model, this is a
project management approach that divides up the process of developing
new products into a funnel system. Once each stage of product
development is complete, it passes through a management-approved gate
prior to moving onto the next stage. Sometimes stages are processed
simultaneously. In this model, companies save money by filtering out the
bad concepts and ideas through a funnel by the time the process is
complete.

The following eight stages were developed to improve the new product’s
marketability and your team’s productivity once you have a product idea.
After each stage is complete, you must decide whether or not to continue.

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 Product Development Process
Models
Stage 1: Generating
Your company has a product idea. The first step counts on your performance of
a SWOT analysis. It also known as a SWOT matrix, you perform a basic scan of
your organization’s Strengths, Weaknesses, Opportunities, and Threats. Strengths
and Weaknesses are internal to your company, whereas the Opportunities and
Threats are external. Things to consider during your SWOT analysis are the current
marketing trends, return on investment (ROI), and any notable costs such as
distribution. This step is where you develop the roadmap for the product. Many
experts advise developing more than one road map scaled to fit different risk levels.

Stage 2: Screen the Idea

In this step, an objective group or committee reviews criteria that you developed
and decides to either continue or drop a project. This step is done quickly so that
you drop any ideas that do not make the cut. Market potential, competition, ROI,
and realistic production costs should be part of the criteria.

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 Product Development Process
Models
Stage 3: Test the Concept
 Testing the concept with your customers. This is after the internal screening step,
so the picture itself is more firm. The customers should be able to display their
understanding of the product, and say whether they want or need it. Their feedback
gives your company some marketing ideas and potential tweaks to the product
itself.

Stage 4: Business Case Analysis

 fully formed product; the concept has been reviewed internally and externally. At
this time, you can develop a set of metrics and a business case. The metrics should
include the development time, the value of any launched products, the sales
figures, and other data that shows the utility of your process. The business case
should paint a complete picture of the product, from the marketing strategy to the
expected revenue.

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 Product Development Process
Models
Stage 5: Product Development
 where your product takes flight. You are getting ready for consumer testing, so
the technical team must complete your design. During this step, you should
complete beta versions, settle on manufacturing methods, and address packaging.

Stage 6: Test Market

 the whole concept is together and pitched to your consumer test group as the
beta test. In this way, you validate your concept. At this time, you should work out
any technical issues with the product.

Stage 7: Commercialization
This is the step that finally takes your product to launch in the marketplace.
Complete final marketing and prices, and give the finalized details to rest of your
company - especially the sales and distribution teams. Set up technical support to
monitor customer’ needs.

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 Product Development Process
Models
Stage 8: Launch!
The launch plan should be comprehensive for maximum impact. At a minimum,
include these seven things in your launch plan:

• Market research including who will buy your product

• A competitive analysis outlining how your product is different and similar to the
competition, why customers may buy elsewhere, and how you will lure them to
your product
• A marketing strategy and the test of the strategy with your focus group
• A public relations program
• A complete product
• A marketing plan timeline
• A trained and ready sales team

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 Product Development Process
Models
• It is important to understand this model, as many firms still adhere to the
traditional eight-step process. The APQC revamped this eight-step model and
consolidated into a five-step, five-gate model. The steps in this consolidated and
slightly reworked model are:

• Stage 1: Discover new product ideas

• Stage 2: Build your business case
• Stage 3: Development
• Stage 4: Test
• Stage 5: Launch

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 What Is the Product
Development Lifecycle?

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 What Is the Product
Development Lifecycle?

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 What Is the Product
Development Lifecycle?
There are many methodologies that have been incorporated into
product development. Many of these are familiar to business
professionals, as they have roots in Business Process
Management concepts. These include:

• Lean Product Development (LPD): Lean product development

uses the lean principles of innovation, shortening development time,
and redevelopment cycles, and employs low development costs,
low production cycles, and low production costs to develop new
products. Allen Ward, who wrote Lean Product & Process
Development states that Lean principles increase innovation by a
factor of ten, and increase the introduction of new products by 400%
to 500%. Lean divides new product development into what
customers wish for, want, and need.

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 What Is the Product
Development Lifecycle?
• Design for Six Sigma (DFSS): DFSS is a process management
technique that is related to the traditional Six Sigma (SS) methodology.
However, it differs from the traditional methodology in that DFSS does
not focus on improvement of an existing process or processes, but on
preventing process problems at the beginning. DFSS, like SS, focuses
on measurement. Implement DFSS by performing these steps: define,
measure, analyze, design, verify (DMADV). By contrast, the steps in SS
are define, measure, analyze, improve, control (DMAIC).

• Flexible Product Development: This methodology is counter to many

popular development methodologies such as LPD and DFSS. This
method encourages the company to continually make changes, even
late into development, by remaining agile. The techniques used to
produce this agility include modular architectures, experimentation and
using an iterative approach to design, set-based design, and allowing
new processes to develop as the product develops.
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 What Is the Product
Development Lifecycle?
• Quality Function Deployment (QFD): is a concurrent engineering
approach where quality is designed into products, not discovered as missing
or present later. Quality is defined as when a product meets the needs of
the customer while providing value. QFD pays special attention to the “voice
of the customer” through interviews, surveys, focus groups, reports, and
observation. This data is then put into a matrix for product planning and
designed from their inputs.
• User-Centered Design (UCD): known as user-driven development (UDD),
it places usability at the core of each design step  must validate each
usability assumption in real world testing. The biggest difference between
UCD and everything else is that UCD optimizes how people already do
things. There is no movement toward changing their experience.
• Design for Manufacturing (DFM) and Design for Assembly (DFA): The
manufacturing industry uses both DFM and DFA, and are examples of
concurrent engineering design. DFM designs with the idea that
manufacturing is easier to achieve, while DFA designs intentionally for the
ease of assembly. Both have specified rules to accomplish them.
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 How to Create a Product
Development Process
Especially in a tough economy, innovation may be necessary because it makes
companies more competitive. Even though the natural managerial response to an
economic downturn is to reduce spending, it would be ill-advised in development.
Innovation can reposition a company in the marketplace and grow it for the future.
Whether you are looking to improve your current processes or build new ones, there
are some best practices and mistakes to avoid.
Best practices to improve your product development processes:
• Put your customer’s needs and wants first.
• Be readily manufacturable.
• Price fairly, not greedily.
• Consider your profit margins early.
• Your quality should be “high enough.”
• Introduce at the right time.
• Anticipate your competition.
• Use a process management approach.
.
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 How to Create a Product
Development Process
Especially in a tough economy, innovation may be necessary because it makes
companies more competitive. Even though the natural managerial response to an
economic downturn is to reduce spending, it would be ill-advised in development.
Innovation can reposition a company in the marketplace and grow it for the future.
Whether you are looking to improve your current processes or build new ones, there
are some best practices and mistakes to avoid.
Best practices to improve your product development processes:
• Put your customer’s needs and wants first.
• Be readily manufacturable.
• Price fairly, not greedily.
• Consider your profit margins early.
• Your quality should be “high enough.”
• Introduce at the right time.
• Anticipate your competition.
• Use a process management approach.
.
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 How to Create a Product
Development Process
• Integrate new product development within your company, not as a separate
entity.
• Audit your projects.
• Develop databases for your projects, including notes and the processes used.
• Have your engineers use development notebooks.
• Develop a central collection of results.
• Use market research and test market results.
• Develop a project management database.
• Develop technology and marketing databases.
• Create job performance reports on each of your projects.
• Follow up projects with seminars and workshops on any issues encountered.
• Publish in technical journals, at least occasionally, to move industry standards.
• Use cross-functional teams.
• Develop a model of product development for your company.

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 How to Create a Product
Development Process
• Develop metrics for your product development process.
• Record snapshots of your design at major points during the process.
• Be consistent with your naming conventions.
• Where possible, minimize iterations of your products.
• Get team buy-in sooner, rather than later.

Some additional best practices for those companies dispersed in different countries:
• Involve your overseas subsidiaries in your development process.
• Create cross-national teams for new idea generation.

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 How to Create a Product
Development Process
Many decisions are made and practices are built at the highest levels. Sometimes
we do not realize that our carefully crafted practices can lead to bad decisions in the
future, or down the hierarchy of our company. The following are ways to head off bad
decisions in product development:
• When possible, standardize your decision-making criteria.  decision-
making is based on experience and may be difficult when you are creating a new
development process. However, you should still give your teams the benefit of
knowing what information management needs to make a decision, and give
management the “real” picture that includes risks and problems without the fear
of punitive action. With clear information requirements, your teams can give
management a clear picture.
• Make your timelines realistic. Are your timelines already based upon a launch
date? It’s tough when there is already a deadline before your team understands
the customer needs or the product’s technical challenges. If your timelines are
too aggressive, your team may be forced to put out ideas that are half as good or
that don’t really meet your customer’s needs.

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 How to Create a Product
Development Process
• Be willing to take a stand. Decisiveness is a trait of a good leader. It is absolutely
appropriate to want as much information as possible before you make a decision, but
in short development cycles, it is critical to weed out the additional options quickly so
your team can focus.
• Pull down any functional silos. A cross-functional development team has the
advantage of having the perspective of your full company. It would be frustrating and
time wasting if you didn’t consider downstream stakeholders or missed significant
opportunities simply because a representative from manufacturing or sales was not
on your team. Further, with a cross-functional team, you ensure that your company
objectives are cohesive.
• Ensure that your product is the best it can be. Companies struggle with the idea of
pushing back a launch. Remember: launching a product that is inferior to what you
first projected is not better than pushing your launch back or even cancelling it.
Should you find yourself in the unfortunate position where you have to decide to either
push your launch back, cancel your launch completely, or launch what you have, run
a cost-benefit analysis  It is true that sometimes rushing to market is necessary,
even critical to securing your product’s rightful place. At the end of the day, you must
ask yourself: Is it worth alienating your customers with a sub-par product?
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 What Is Product Development
in Marketing?
• Your product development marketing strategy helps you generate
interest around your new or revamped product. Your product
marketing strategy incorporates your new product introduction
process (NPI), which comes into effect after completing the design
and testing. This is the stage where manufacturing takes over. In
other words, this is where the prototype goes to full production and
into a sale. NPI takes over where NPD leaves off.

• A product marketing strategy should include your customer analysis,

product development, pricing, branding, and sales and distribution
plan.

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 What Is Product Development
in Marketing?
• Get Your Strategy Ready Early: customers should be able to understand what your
product does, how it compares to the competition, and what distinguishes it  should
be working on your marketing plan before your product leaves the FFE, and firm it up
through development.
• Use Social Media: should build your product’s landing page as soon as it is out of
development and vetted by your consumer test groups. Use your site’s available
features to collect even more consumer information for your launch. Continue to keep
your product momentum going by building a Facebook page and opening a Twitter
account for your product.
• Get Internal Buy-in: Everyone in your company should be a cheerleader for the
newest product. Further, anyone in your company can have an idea about its
promotion, so listen to all of them - gems can turn up in the most unexpected places.
• Designate Your Goals and Budget: As your product is making its way, you will want to
designate a team responsible for its launch. Your team can put together a
comprehensive marketing project and budget.
• Develop Your Marketing Materials: It's time to put together your product marketing
support with content, and your advertisement package. Internally, you will need to
determine the product needs for customer support, warranty, and repairs.
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