New Products
Management
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New Products
Management
Eleventh Edition
Merle Crawford
University of Michigan—Emeritus
Anthony Di Benedetto
Temple University
NEW PRODUCTS MANAGEMENT, ELEVENTH EDITION
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Library of Congress Cataloging-in-Publication Data
Crawford, C. Merle (Charles Merle), 1924New products management / Merle Crawford, University of Michigan-Emeritus,
Anthony Di Benedetto, Temple University. — Eleventh edition.
pages cm
ISBN 978-0-07-802904-2 (alk. paper)
1. New products—Management. I. Di Benedetto, C. Anthony. II. Title.
HF5415.153.C72 2015
658.5'75—dc23
www.mhhe.com
2013042977
Remembering
Dr. C. Merle Crawford (1924–2012)
PROFESSOR, UNIVERSITY OF MICHIGAN
Merle Crawford created this pioneering textbook and was its sole author for the
first five editions, published in 1983, 1987, 1991, 1994, and 1997. Beginning with the
sixth edition, he invited C. Anthony Di Benedetto to join him as co-author. The frequency of publication of the book’s editions increased as the need for skills in new
products management became recognized, and the book has become a foundation
for this emerging profession, appealing to both managers and students alike. Merle
joined the faculty of the University of Michigan as an associate professor of marketing in 1965 after rising to the position of marketing director at Mead Johnson
and Company and serving in other roles in that company for a decade. He retired
from Michigan in 1992, taking his final year as a sabbatical leave. The combination
of work in industry and in academe gave him a unique and valuable perspective
that ultimately led him to become the primary force in the creation of the Product
Development & Management Association in 1976. Simply put, Merle felt that academic researchers could do their best work when addressing challenges faced by
leading managers, and that those leading managers would benefit from dialogue
with leading academics. Merle served the PDMA in many capacities, beginning
as its charter president for two years (1977 and 1978) while doubling in the role of
secretary-treasurer for both years, collecting dues and publishing occasional newsletters. He operated the association from his university office as a volunteer from
PDMA’s founding until 1984 and also served in many other capacities including
VP research (1984 and 1985), VP publications (1989), and as a director in seven
years of the eight years that followed (1987–1988 and 1990–1994). During this time
Merle was joined by many others, many of whom he enlisted, to help the PDMA
develop into the world’s leading association of new product development professionals with membership exceeding 1,700 by the end of his final term as a director.
Merle worked to create the first regularly scheduled executive development
program in new products management offered by a university in the United
States, recruiting colleagues from the PDMA and Michigan and other universities
to join the program’s charter faculty. The course began as a three-day program,
offered quarterly, beginning in 1979. Due to its popularity, it soon transformed
into a five-day program that continued for over 20 years. This course, along with
subsequent growth of the PDMA, encouraged Merle to write the first edition of
this book, published in 1983. The book was used by managers and executives in
the course, making that program a living laboratory for extending the ideas he included in its pages. Merle’s research documented actual new product failure rates
following launch in 1979, helping to demolish the resilient myth that “most new
v
vi
Remembering Dr. C. Merle Crawford (1924–2012)
products fail.” He refined his original concept of the Product Innovation Charter through discussions with program participants and colleagues, and he created
concise templates for product concept statements and his original depiction of the
product protocol. These emerged as fully defined tools in his textbook and have
become foundation skills for today’s professionals. Merle continued to refine them
in subsequent editions of this book. Another of his enduring gifts to our profession was his development of a comprehensive glossary of new product terms, first
published in the third edition of his book and continuing as the foundation for the
glossary now presented in three languages on the PDMA’s website.
The PDMA honored his role as founder and champion of innovation with the
creation of the order of Crawford Fellows of Innovation, appointing Merle the first
Fellow in 1991. Appointment remains a highly exclusive honor, with four Fellows
subsequently appointed to receive this honor.
Merle was skilled in building bridges to connect new products professionals
who may have come to the profession from diverse backgrounds. In the first edition of this book’s introduction he wrote, “. . . the new products process is both
an art and a science. That process demands creativity and emotional commitment,
but it also allows and rewards thorough and sophisticated analysis. Both aspects
of the new products process are emphasized here.” Those words were powerful
and framed a foundation for the growth our profession enjoys today. Perhaps one
thing would have disappointed him. He defined new products inclusively, including both tangible goods and intangible services. Today, common usage separates
these forms with the word product restricted to tangible goods, separate from
services. He might smile, though, at the irony that most of us realize that there are
very few tangible products that lack a significant intangible service component
(including customer support), and intangible services that lack any sort of tangible
element, whether taking the form of a physical location, accessible Web site, or
supportive elements of form and technology that help to frame their successful
delivery.
Merle passed away on November 11, 2012. He was a friend and champion of
innovation. We owe him a great debt.
Thomas P. Hustad
August 7, 2013
About the Authors
Merle Crawford was Professor of Marketing (Emeritus) at the University of Michigan,
where he taught from 1965 until his retirement in 1992. Prior to his appointment at
Michigan, he was Marketing Director at Mead Johnson & Co. Professor Crawford
was an original member of the Product Development & Management Association
from its founding in 1976, and he served as the charter president from 1977 to
1978 and on the Board of Directors until 1994. He authored the first edition of the
groundbreaking textbook New Products Management, published in 1983 and still
widely used by managers, executives, and business students.
Anthony Di Benedetto is Professor of Marketing and Supply Chain Management
and Senior Washburn Research Fellow at Temple University, Philadelphia, PA,
and Professor of High-Tech Entrepreneurial Marketing, TU Eindhoven, The Netherlands. He has held visiting professorships worldwide, lecturing on product
development and management. He was named one of the 50 leading research
scholars worldwide in Innovation and Technology Management by the International Association of Management of Technology. Professor Di Benedetto served
as Editor-in-Chief of the Journal of Product Innovation Management for nine years.
vii
Preface
New products have always been of interest to both academics and practitioners,
and organized, college-level instruction on the subject of new products management traces to the 1950s. By the 1990s, a new products management discipline
had evolved. The Product Development & Management Association (PDMA) has
flowered to close to 3,000 members in some 50 countries around the world, and
there are over 20 local chapters in the United States alone, plus international affiliates in a dozen countries. Over 300 colleges have courses on the subject of new
products, and the field’s journal, the Journal of Product Innovation Management, has
a 30-year track record of publication. The job title of new products manager or director is becoming much more common and is offering much earlier entry than 15
or 20 years ago; we also see the emergence of higher level positions for careers to
build to. The PDMA now offers a practitioner certification (New Product Development Professional, or NPDP), recognizes the best product developing firms (with
its Outstanding Corporate Innovator award), and has been able to do what those
in many fields have not, that is, merge the thinking and activity of professors and
practitioners. Information on the PDMA can be found at www.pdma.org.
How This Book Views the Field of New Products Management
Such exploding growth means that we still take a variety of approaches to the
teaching of the new products subject—marketing, technical, creative, design, and
so on. This book provides the management approach with the perspective of marketing. In every organization (industry, retailing, government, churches, and any
other kind of institution) there is a person or group of persons who, knowingly
or unknowingly, are charged with getting new goods and services onto the market. More and more today, those people are new products managers, or project
managers, or team leaders. They lead a multifunctional group of people, with the
perspective of a general manager, operating as a company within a company. They
must deal with the total task—strategy, organization, concept generation, evaluation, technical development, marketing, and so on. They are not finished with
their work until the new product has achieved the goals assigned to the team—this
usually means some form of sales or profit, and certainly means the task is not
finished when the new product is put onto the shipping dock.
We try to avoid a functional myopia, and it is rare today to hear that “Marketing tells everyone what to do” or “R&D runs our new products activity.” When
a functional specialist is assigned leadership of a new products team, that person
must learn the general manager viewpoint, but one usually has to succeed as a
functional member of new products teams before getting a shot at being a team
leader. Marketing people, working as team members or as team leaders, need the
types of information in this book.
viii
Preface
ix
Some Basic Beliefs That Guided the Writing
People who have used the first 10 editions of this book know its unique viewpoints on the subject. But for newcomers, and of course all students are newcomers, here are some of them.
1. Product innovation is one single operation in an organization. It has parts
(strategy, teams, plans, etc.) but they are all just parts. Any operation that
runs as separate pieces misses the strength of the whole.
2. The field is still new enough that it lacks a systematic language. This makes
it very difficult for students, who are accustomed to studying subjects where
a term means one thing, and only that one thing. We use all product terms
consistently throughout the book, and we urge students to use them. Naturally, new terms come and go; some survive and some don’t.
Because of the terminology problem in a rapidly growing field, every term
that might require definition has been made bold the first time it is used, and
the index directs the reader to that section. We don’t include a glossary, but a
useful one is available at the Product Development & Management Association Web site.
3. Ideas learned without application are only temporary residents in your
mind. To become yours, a concept must be applied, in little ways or in big
ones. Thus, the book is peppered with applications, short cases, and other
opportunities for using the concepts studied. Projects are encouraged in the
Instructor’s Manual. There are many examples from the business world, and
up-to-date references on all important topics.
4. As much as we would like them and have diligently tried to find them, we
believe there is no standard set of procedures for product innovators, nor
particular sets for makers of consumer packaged goods, or of consumer durables, industrial goods, services, and so on. Like a marketing plan, there is a
best plan for any particular situation. A manager must look at a situation and
then compile a set of tools and other operations appropriate to that situation.
All large firms use scores of different approaches, not one.
5. Next, there is the halo effect, which is a problem in the field of new products. The halo effect shows in the statement, “It must be a good thing for
us to do—Apple does it, or GE does it, or Honda does it.” Those are excellent companies, but one reason they’re good is they spend lots of time and
money studying, learning from others. They have huge training programs
in product innovation and bring in every expert who appears on the scene
with what looks like a good new products management idea. They assume
everything they do is wrong and can be improved. You should too. This book
does. Citations of their actions are given as examples, not recommendations.
These well-known firms have many divisions and hundreds of new products under development at any one time. Managers there can’t know what
other managers are doing, nor do they care, in the prescriptive sense. Each
group aims to optimize its situation, so they look around, see what others in
comparable situations are doing (inside and outside their firm), and pick and
x
Preface
choose to fit the situation. To the extent there are generalizations (e.g., there
should be some form of strategy), these will stand out as you work your way
through the course. But what strategy, and exactly how should one determine it—that is situational.
6. An example of this lies in rejection of the belief that new products strategy
should rest on the base of either technology or market. This choice has been
argued for many years. But most firms seek to optimize on both, a dual-drive
strategy. Of course, true to the previous point, firms will build on one or the
other if the situation seems to fit—for example, DuPont’s platform program
to find applications for the superstrength fabric Kevlar, or auto components
firms that rely on process development engineering to better meet the needs
of original equipment manufacturers. And yet, DuPont works to advance
that technology, and the components firms are evolving their own research
and development operations.
7. We believe that students should be challenged to think about concepts they
have been introduced to. This book contains lists of things from time to time,
but such lists are just a resource for thinking. The above belief about the best
approach being situational is based on the need to analyze, consider, discuss,
apply. The great variety in approaches used by businesspeople is not a testimony to ignorance, but to thinking. On a majority of the issues facing us
today, intelligent people can come down with different views. Decisions are
the same—they are not necessarily right or wrong at the time they are made.
Instead, the manager who makes a decision then has to work hard to make
that decision turn out right. The quality of the work is more important than
the quality of the decision. An example of this phenomenon is the sadness
we feel when a manager says, “We’re looking for the really great idea.” Managers of product innovation make ideas great—they don’t come that way.
8. Last, we have tried to implement more clearly the view that two things are
being developed—the product and the marketing plan. There are two development processes going on in tandem. Marketing strategy begins at the very
start and runs alongside the technical work and beyond it.
Changes in the Eleventh Edition
Past adopters of New Products Management will notice major changes in this edition. While there are some changes in virtually every chapter, some of the most
substantial changes are as follows:
1. We have made major additions and updates to the cases to provide more
plentiful and more current examples. We retired several cases from the previous edition, wrote many new cases, and thoroughly updated many others.
New cases for this edition include: corporate strategy at LEGO (Chapter 2),
open innovation at Pillsbury (Chapter 4), positioning and competition in the
smartphone industry (Chapters 6, 9, and 16), the turnaround at Domino’s
Pizza (Chapter 9), product protocol development at Fisher & Paykel (Chapter 12), business product development at DuPont (Chapter 12), corporate
Preface
xi
culture at Provo Craft (Chapter 14), and the development of the Ford Fusion
(Chapter 14). Substantial upgrades were also made to the following cases:
Rubbermaid (Chapter 7), WiLife (A) and (B), now listed as Logitech (Chapters 10 and 12), and Gillette (Chapter 13). We also kept the Palm Pilot case
(Chapter 13); though this case describes an older product, it is such a great
illustration of how to respond to competitive challenges and customer requirements through excellent design that we leave it in as a good basis of
discussion. As always, we aim to offer a mix of high-tech products and consumer products and services in the set of cases.
2. In addition, we have substantially updated examples throughout the text
wherever possible. We try to make use of illustrative examples that will resonate with today’s students wherever possible. For example, we use the Hapifork (a fork that monitors one’s eating speed and provides health benefits) as
an example of how to bring a product concept to product form, and how to
make trade-offs and decisions at product protocol development. (Also, when
trying this case out in class, it seems to stimulate a discussion of whether the
claims made by the manufacturer are believable, making it a good illustration of “pre-use sense reaction” in product use testing.) Of course, we welcome the reader’s comments and suggestions for improvement.
3. There continues to be much new research in new products, and we have tried
to stay current on all of these topics. The newest Comparative Performance
Assessment Study (CPAS), published by the PDMA, was released shortly before this revision and provided many new statistics reflecting the state of the
art in product development. Readers will also notice new or expanded coverage of serial innovators, spiral development, portfolio management, voice of
the customer, open innovation, user toolkits, social media, crowdsourcing,
conjoint analysis, design-driven innovation, product forecasting, concept
testing, launch planning, postlaunch management, product development for
emerging markets, and sustainable design, among other topics.
4. We continue the practice of referencing Web sites of interest throughout the
text, from the Product Development & Management Association and the Consumer Product Safety Commission, to Web sites referencing failed products
or bad designs, and we have added several new ones. Rather than a collective
list of sites, we chose to place each reference in a suitable context in the book.
We have received positive feedback from users of the last edition, so we have
not made changes to the basic 20-chapter format. We still use analytical models
to integrate the stages of the new products process. As in previous editions, perceptual mapping is introduced early in the new products process, during concept
generation, but its output may guide selection of attributes in a conjoint analysis task, and may later be used in benefit segmentation and product positioning.
Conjoint analysis results may be used in concept generation or evaluation and
may provide a set of desired customer attributes for house-of-quality development. The sequence of three smartphone end-of-chapter cases illustrates how the
analytical models bind the new products process together. As in previous editions,
many other concepts—Product Innovation Charter, A-T-A-R models, evaluation
xii
Preface
techniques, the multifunctional nature of new products management—are also
used to integrate topics horizontally throughout the text.
Because this book takes a managerial focus and is updated extensively, it is useful to the practicing new products manager. It has been used in many executive
education programs. Great pains have been taken to present the “best practices”
of industry and offer footnote references to business literature.
From the first edition, the ends of chapters do not have a list of questions. Rather,
we have culled mainly from many conversations with students the questions and
comments they received from business managers on their fly-backs. These comments are built into a conversation with the president of a conglomerate corporation. Explanation of how to use them is given at the end of Chapter 1.
As always, effort has been aimed at making the book increasingly relevant to its
users. We consider a text revision to be a “new product,” and thus an opportunity
for us to become even more customer-oriented. Academic colleagues have made
many thoughtful suggestions based on their experiences with previous editions
and have provided much of the driving force behind the changes you see in this
edition. We gratefully acknowledge all the reviewers who provided extensive comments and suggestions that were extremely helpful in this revision, as well as all the
instructors and students who contacted us to make suggestions and correct errors.
We are very excited about the changes to this new edition and sincerely hope
they fit your needs.
Online Resources
The instructor will find plenty of online support for this text at the companion
Web site, www.mhhe.com/crawford11e. Available on the Web site are an online
Instructor’s Manual, a set of PowerPoint slides, a test bank, and exercises and
cases that can be used to accompany the text materials. Some of these materials
are also available to the students where appropriate.
Dedication
This edition is dedicated to Merle Crawford (1924–2012), Professor Emeritus
(University of Michigan), sole author of the first five editions of this textbook, cofounder of the Product Development & Management Association, and influential
marketing scholar and consultant in new product development. In the field of
product development, the highest award conferred by the PDMA, in recognition
of a lifetime of achievements and contributions to the field of product development, is the Crawford Fellow. Merle Crawford was the namesake of this prestigious award, and also its first recipient. The naming of this award in his honor
speaks eloquently of the high regard and respect bestowed on Professor Crawford
by his colleagues at the PDMA. With this dedication I would also like to personally
express my thanks for the opportunity to be his writing partner on this textbook.
A.D.B.
Contents in Brief
PART ONE
PART FOUR
Overview and Opportunity
Identification/Selection 3
Development
319
13. Design 323
1. The Strategic Elements of Product
Development 5
14. Development Team
Management 351
2. The New Products Process 25
15. Product Use Testing
3. Opportunity Identification and
Selection: Strategic Planning for
New Products 60
PART FIVE
95
4. Creativity and the Product
Concept 97
5. Finding and Solving Customers’
Problems 130
6. Analytical Attribute Approaches:
Introduction and Perceptual
Mapping 154
7. Analytical Attribute Approaches:
Trade-Off Analysis and Qualitative
Techniques 171
PART THREE
Concept/Project Evaluation
191
8. The Concept Evaluation System 193
9. Concept Testing
Launch 403
16. Strategic Launch Planning
PART TWO
Concept Generation
381
214
406
17. Implementation of the Strategic
Plan 441
18. Market Testing
464
19. Launch Management
20. Public Policy Issues
492
515
APPENDIXES
A
Sources of Ideas Already
Generated 543
B
Other Techniques of Concept
Generation 549
C
The Marketing Plan
D
Guidelines for Evaluating a New
Products Program 565
INDEX
559
569
10. The Full Screen 243
11. Sales Forecasting and Financial
Analysis 262
12. Product Protocol
291
xiii
Contents
PART ONE
The Phases in the New Products Process
OVERVIEW AND OPPORTUNITY
IDENTIFICATION/SELECTION 3
Chapter 1
The Strategic Elements of Product
Development 5
Setting 5
The Importance of New Products 6
Globalization and New Product
Development 9
How Product Development
Is Different 11
What Is a New Product, and What Leads
to Success? 14
Does This Field of Activity Have a Unique
Vocabulary? 16
Does the Field of New Products Offer
Careers? 17
The Strategic Elements of Product
Development 18
The Basic New Products Process 19
The Other Strategic Elements 22
Product Development in Action 23
Summary 24
Applications 24
Chapter 2
The New Products Process
25
Setting 25
The Procter & Gamble Cosmetics Saga 25
The Product Innovation Charter (PIC) 26
The New Products Process 27
The New Product Portfolio 27
Supporting the Strategic Elements: Effective Team
Management 28
What Happened in That Saga? 28
xiv
29
Phase 1: Opportunity Identification and Selection
Phase 2: Concept Generation 31
Phase 3: Concept/Project Evaluation 31
Phase 4: Development 32
Phase 5: Launch 33
Evaluation Tasks Throughout the New
Products Process 34
Speeding the Product to Market 37
Risks and Guidelines in Speeding
to Market 40
What about New Services? 43
New-to-the-World Products 46
The Role of the Serial Innovator 48
Spiral Development and the Role
of Prototypes 50
Closing Thoughts about the New Products
Process 51
Summary 52
Applications 53
Case: Lego 53
Case: Tastykake Sensables 55
Case: The Levacor Heart Pump 57
Chapter 3
Opportunity Identification and
Selection: Strategic Planning
for New Products 60
Setting 60
A Product Strategy for a “Company within
a Company” 61
New Product Strategy Inputs and Identifying
Opportunities 61
Product Platform Planning 61
Opportunity Identification 66
Noncorporate Strategic Planning
Miscellaneous Sources 70
The Product Innovation Charter
Why Have a PIC?
72
68
70
30
Contents
The Sections of the PIC
74
Background Section of the PIC 74
The Arena (Area of Focus) Section of the PIC
Goals and Objectives Section of the PIC 77
Special Guidelines Section of the PIC 77
74
How to Prepare a Product Innovation
Charter 80
Product Portfolio Analysis: The New Product’s
Strategic Fit 82
Summary 87
Applications 87
Case: New Product Strategy at Kellogg 88
Case: The Honda Element 90
PART TWO
CONCEPT GENERATION
95
Chapter 4
Creativity and the Product
Concept 97
Setting 97
Preparation
97
The Product Innovation Charter 97
Finding the Right People 98
Management’s Role in Creativity 99
Activities to Encourage Creativity 101
Special Rewards 103
The Removal of Roadblocks 103
The Product Concept
104
The Designer Decaf Example 107
The Concept Statement 108
Two Basic Approaches 110
Important Sources of Ready-Made New
Product Ideas 111
User Toolkits 111
Crowdsourcing 114
Lead Users 115
Open Innovation 118
Summary 123
Applications 123
Case: Pillsbury Grands! Biscuit
Sandwiches 124
Case: P&G CarpetFlick 126
Case: Aquafresh White Trays 127
xv
Chapter 5
Finding and Solving Customers’
Problems 130
Setting 130
The Overall System of Internal Concept
Generation 130
Gathering the Problems 131
Internal Records 132
Direct Inputs from Technical and Marketing
Departments 132
Problem Analysis 133
Scenario Analysis 141
Solving the Problems
145
Group Creativity 145
Brainstorming 145
Electronic Brainstorming and Computer-Assisted
Creativity Techniques 146
Online Communities 147
Disciplines Panel 149
Concept Generation Techniques in Action 149
Summary 150
Applications 150
Case: Campbell’s IQ Meals 151
Case: Earning Organizational Respect 152
Chapter 6
Analytical Attribute Approaches:
Introduction and Perceptual
Mapping 154
Setting 154
Understanding Why Customers Buy a
Product 154
Products Are Groups of Attributes 154
Analyzing Product Attributes for Concept Generation
and Evaluation 156
Gap Analysis
156
Determinant Gap Maps 157
Perceptual Gap Maps Based on Attribute
Ratings (AR) 158
Perceptual Gap Maps Based on Overall Similarities
(OS) 164
Comments on Gap Analysis 167
Summary 168
Applications 168
Case: Comparing Smartphones (A)
169
xvi
Contents
Chapter 7
Analytical Attribute Approaches:
Trade-Off Analysis and Qualitative
Techniques 171
Setting 171
Trade-Off Analysis
171
Using Trade-Off Analysis to Generate Concepts 172
A Conjoint Analysis Application 173
Is Conjoint the Right Method? 177
Alternatives to Full-Profile Conjoint Analysis 178
Recent Modifications in Conjoint Analysis 179
Virtual Prototypes in Concept Testing 179
Qualitative Techniques
180
Dimensional Analysis 180
Checklists 182
Relationships Analysis 183
About the Dimensions Used in Relationships
Analysis 183
Two-Dimensional Matrix 183
Morphological or Multidimensional Matrix 184
Analogy 186
Summary 187
Applications 187
Case: Rubbermaid 188
193
The Evaluation System for the Basic New Products
Process 194
Product Line Considerations in Concept
Evaluation 197
The Cumulative Expenditures Curve 198
Everything Is Tentative 201
Potholes 202
Summary 209
Applications 210
Case: Chipotle Mexican Grill 210
Case: Concept Development Corporation
Chapter 9
Concept Testing
Setting 214
The Importance of Up-Front Evaluations
The Product Innovation Charter 215
Market Analysis 216
Initial Reaction 216
Concept Testing and Development 217
What Is a New Product Concept? 219
The Purposes of Concept Testing 219
Identifying Benefit Segments
Joint Space Maps 230
Preference Regression 232
228
228
Conjoint Analysis in Concept Testing 233
Market Research to Support Concept
Testing 235
Conclusions 238
Summary 238
Applications 239
Case: Domino’s 240
Case: Comparing Smartphones (B) 242
Chapter 10
The Full Screen
212
214
Analyzing Research Results
Setting 193
What’s Going On in the New Products
Process? 193
Planning the Evaluation System 201
205
Where Do We Get the Figures for the A-T-A-R
Model? 209
Further Uses of the A-T-A-R Model 209
Prepare the Concept Statement 221
Define the Respondent Group 225
Select the Response Situation 226
Prepare the Interviewing Sequence 227
Variations 228
CONCEPT/PROJECT
EVALUATION 191
The Risk/Payoff Matrix 199
The Decay Curve 200
The A-T-A-R Model
203
Considerations in Concept Testing
Research 221
PART THREE
Chapter 8
The Concept Evaluation System
The People Dimension
Surrogates 204
243
Setting 243
Purposes of the Full Screen
244
214
Contents
The Scoring Model
246
Introduction to Scoring Models 246
The Screening Procedure 247
Profile Sheet 252
A Screening Model Based on Project
NewProd 253
The Analytic Hierarchy Process 255
Special Aspects 258
Summary 258
Applications 259
Case: Logitech (A) 259
Chapter 11
Sales Forecasting and Financial
Analysis 262
Setting 262
Sales Forecasting for New Products 263
Forecasting Sales Using Traditional
Methods 264
Forecasting Sales Using Purchase
Intentions 266
Forecasting Sales Using the A-T-A-R
Model 267
Techniques for Forecasting Product
Diffusion 269
Observations on Forecasting Models 271
Problems with Sales Forecasting 272
Summary of the Problems
273
Actions by Managers to Handle These
Problems 274
Improve the New Product Process Currently in
Use 274
Use the Life Cycle Concept of Financial
Analysis 274
Reduce Dependence on Poor Forecasts 275
Return to the PIC 280
Summary 283
Applications 283
Case: Bay City Electronics
Chapter 12
Product Protocol
Setting 291
The Product Protocol
291
292
284
xvii
Purposes of the Protocol 294
Protocol’s Specific Contents 296
Target Market 298
Positioning 298
Product Attributes 299
Competitive Comparisons and Augmentation
Dimensions 301
Other Components of the Product Protocol 301
Protocol and the Voice of the Customer
Hearing the Voice of the Customer
302
302
Protocol and Quality Function Deployment
(QFD) 305
QFD and the House of Quality
Outcomes of QFD 309
305
Some Warnings about the Difficulty of the
Protocol Process 311
Summary 312
Applications 312
Case: Fisher & Paykel 313
Case: DuPont 315
Case: Logitech (B) 317
PART FOUR
DEVELOPMENT
319
Chapter 13
Design 323
Setting 323
What Is Design? 324
Design-Driven Innovation 324
The Role of Design in the New Products
Process 325
Contributions of Design to New Product Goals
Product Architecture
325
331
A Process for Product Architecture 331
Product Architecture and Product Platforms
Industrial Design and the Industrial
Designer 333
Prototype Development 334
Managing the Interfaces in the Design
Process 336
Improving the Interfaces in the Design
Process 339
Computer-Aided Design and Design for
Manufacturability 340
333
xviii
Contents
Continuous Improvement in Design 342
Summary 343
Applications 343
Case: The Mini 344
Case: Palm Pilot 345
Case: Gillette Mach3 and Fusion 348
Chapter 14
Development Team Management
Is Product Use Testing Really Necessary?
Are These Arguments Correct?
Knowledge Gained from Product Use
Testing 387
351
Setting 351
What Is a Team? 351
Structuring the Team 352
Another Look at Projectization
Building a Team
355
356
Establishing a Culture of Collaboration 356
The Team Assignment and Ownership 357
Selecting the Leader 358
Selecting the Team Members 359
Roles and Participants 360
Network Building 363
Training the Teams 363
Managing the Team
364
Cross-Functional Interface Management 364
Overcoming Barriers to Market Orientation 367
Ongoing Management of the Team 368
Team Compensation and Motivation 368
Closing the Team Down 370
Virtual Teams 370
Managing Globally Dispersed Teams
Summary 376
Applications 376
Case: Provo Craft 377
Case: Ford Fusion 378
Chapter 15
Product Use Testing
372
381
Setting 381
The Role of Marketing During
Development 382
Pre-Use Sense Reactions 387
Early Use Experiences 388
Alpha and Beta Tests 388
Gamma Testing 390
Diagnostic Information 391
Decisions in Product Use Testing
391
Who Should Be in the User Group? 391
How Should We Reach the User Group? 392
Should We Disclose Our Identity? 393
How Much Explanation Should We Provide? 393
How Much Control over Product Use Should
There Be? 393
How Should the Test Be Conducted? 394
Over What Time Period Should the Test
Be Conducted? 395
What Should Be the Source of the Product Being
Tested? 396
What Should Be the Form of the Product
Being Tested? 396
How Should We Record Respondents’
Reactions? 397
How Should We Interpret the Figures We Get? 398
Who Should Do the Product Use Test? 398
Special Problems
399
Don’t Change the Data Just Because They Came
Out Wrong 399
Be Alert to Strange Conditions 399
What If We Have to Go Ahead without Good
Use Testing? 399
Summary 399
Applications 400
Case: Product Use Testing for New
Consumer Nondurables 401
PART FIVE
Marketing Is Involved from the Beginning of the
Process 382
Marketing Ramp-Up, or the “I Think We’ve Got It”
Phase 383
Why Do Product Use Testing?
384
384
385
LAUNCH
403
Chapter 16
Strategic Launch Planning
Setting
406
406
Contents
The Strategic Givens 407
Revisiting the Strategic Goals 408
Strategic Platform Decisions 409
Launch Tactics
Alliances 450
A-T-A-R Requirements
451
Awareness 451
Stocking and Availability
Trial 454
Repeat Purchase 457
413
Alternative Ways to Segment a Market
Targeting May Also Use Diffusion of
Innovation 418
Product Positioning 420
Creating Unique Value for the
Chosen Target 422
Branding and Brand Management
414
424
435
The Role of Packaging 435
The Packaging Decision 435
Summary 436
Applications 437
Case: Wii 437
Case: Iridium 439
Case: Comparing Smartphones (C)
461
Setting 464
The Market Testing Decision
Methods of Market Testing
471
473
Controlled Sale Methods
Setting 441
The Launch Cycle 441
Prelaunch and Preannouncement 441
Announcement, Beachhead, and Early
Growth 444
445
470
Pseudo Sale 470
Controlled Sale 470
Full Sale 471
Speculative Sale 472
Simulated Test Market
440
464
When Is the Decision Made? 465
Is This an Easy Decision to Make? 465
Market Tests Must Have Teeth 466
The Factors for Deciding Whether to Market Test 468
Pseudo Sale Methods
Chapter 17
Implementation of the Strategic
Plan 441
Lean Launch and Launch Timing
Summary 458
Applications 458
CASE: Hulu 459
Case: Dodge Nitro
452
Chapter Eighteen
Market Testing 464
Trademarks and Registration 424
What Is a Good Brand Name? 426
Managing Brand Equity 428
Brand Equity and Branding Strategies 432
Global Branding and Positioning: Standardize
or Adapt? 433
Global Brand Leadership 434
Packaging
447
The Communications Plan 447
The Copy Strategy Statement 449
Personal Selling 449
Type of Demand Sought 409
Permanence 410
Aggressiveness 411
Competitive Advantage 411
Product Line Replacement 411
Competitive Relationship 413
Scope of Market Entry 413
Image 413
The Target Market Decision
xix
Informal Selling 476
Direct Marketing 477
Minimarkets 477
Scanner Market Testing
Full Sale Methods
476
479
480
Test Marketing 480
The Rollout 484
Wrap-Up on Market Testing
Methodologies 488
Summary 488
Applications 489
Case: PepsiCo—Pepsi-Kona and
Pepsi One 489
xx
Contents
CHAPTER 19
Launch Management
492
Setting 492
What We Mean by Launch Management
The Launch Management System 493
492
Step One: Spot Potential Problems 494
Step Two: Select the Control Events 498
Step Three: Develop Contingency Plans 499
Step Four: Design the Tracking System 500
Effective Innovation Metrics 504
A Sample Launch Management Plan 506
Launch Management and Knowledge
Creation 506
Product Failure 509
Summary 511
Applications
512
Case: Levitra 512
CHAPTER 20
Public Policy Issues
Strategy and Policy 534
Control Systems 534
Product Testing 534
Marketing and Market Testing 534
Customer Education and External Affairs
515
Phase I: Stirring 516
Phase II: Trial Support 517
Phase III: The Political Arena 517
Phase IV: Regulatory Adjustment 518
Appendix A Sources of Ideas Already
Generated
Business Attitudes toward Product Issues
Current Problem Areas 518
Product Liability 519
Typology of Injury Sources 519
The Four Legal Bases for Product Liability
Other Legislation 523
Planning for the Product Recall
Prior to the Recall 524
During the Recall 524
After the Recall 524
535
Summary 535
Applications 536
Case: Clorox Green Works 536
Case: Hybrid or Hydrogen Vehicles
at General Motors? 539
Case: Product (RED) 541
515
Setting 515
Bigger Picture: A Cycle of Concerns
Attempts at Standardization and
Clarification 525
Environmental Needs 525
Product Piracy 528
Worthy Products 529
Morality 530
Designing Products for Emerging
Markets 530
Personal Ethics 532
The Underlying Residual Issues 533
What Are New Products Managers Doing
about All This? 534
518
543
Appendix B Other Techniques of Concept
Generation
549
Appendix C The Marketing Plan 559
521
Appendix D Guidelines for Evaluating a
New Products Program
524
Index
569
565
New Products
Management
2
Part One
Overview and Opportunity Identification/Selection
FIGURE I.1
Opportunity Identification and Selection
Inputs from ongoing
marketing planning
Special opportunity
audits
Inputs from ongoing
corporate planning
Audit of relevant markets
Audit of resources
Sort Suggestions for Product Innovation Activity
Exploit underutilized
resources
Exploit new resources
Respond to external
mandate
Respond to internal
mandate
Technical
Financial
Product
Market
Discoveries
Acquisitions
Diversified markets
Quality studies
Customer needs
Competitive threat
Regulation
Owners
Top management plans
Unit management plans
Gaps
Evaluate the resource and define it carefully
Study the mandate,
validate the threat
Study the mandate,
validate role for
product innovation
Cull to a Pool of Validated New Product Opportunities
Reject those that conflict with ongoing product innovation strategy
Reject those clearly not economically or technically viable
Give Each Opportunity a Product Innovation Charter (PIC)
Fits a PIC already in place
Requires a new PIC
To Figure II.1
(Concept Generation)
P A R T
O N E
Overview and Opportunity
Identification/Selection
This book is divided into parts. They are (1) Overview and Opportunity Identification and Selection, (2) Concept Generation, (3) Concept/Project Evaluation,
(4) Development, and (5) Launch. They follow the general flow of the new products process, which we will present in Chapter 1, Figure 1.5. We will see later,
however, that the phases are not sequential, compartmentalized steps. They are
quite fluid and overlap each other.
At the beginning of each part is a short Part Introduction (noted with a Roman
numeral) and a figure (see Figure I.1). The introduction describes briefly what
aspects of the new products process will be covered in the upcoming chapters.
The figure provides detailed information about what goes on at that phase in the
new products process, and shows what phases come immediately before and after.
Figure I.1, for example, details the opportunity identification and selection process,
ending with the product innovation charter, a key topic of Chapter 3. Hence, the five
part figures (Figures I.1, II.1, III.1, IV.1, and V.1) actually make up one long, detailed
new products process, the essence of which is presented briefly in Figure 1.5.
Before getting to opportunity identification and selection, we begin Part I
with two introductory chapters. The first introduces the three strategic elements
of product development: the new products process, the product innovation charter,
and the product portfolio. It presents the first of these, the new products process,
in relatively simplified form, as a kind of introduction to the rest of the book.
Chapter 1 also attempts to answer the questions most often asked about such a
course and helps to define some of the concepts we will be returning to throughout the text (such as, what exactly is a new product, how many new products
really do succeed, and how do firms achieve globalization in product development). Chapter 2 goes much deeper into the new products process. Chapter 2
also introduces the key concepts of radical innovation, new service development,
and speed to market, and how each of these may have an impact on the new
products process as presented in the chapter.
4
Part One
Overview and Opportunity Identification/Selection
Chapter 3 completes the introductory part of the book, as it presents the second and third strategic elements. First, opportunity identification and selection
are presented, which deal with the strategic planning lying at the very base of
new products work that guides a new products team, just as corporate or SBU
strategy guides the unit as a whole. Figure I.1 provides a flow model that describes the process of opportunity identification. Chapter 3 then discusses the
product innovation charter (PIC). This can be thought of as a statement of strategy that will guide the new product development team: the arena in which they
will operate, their goals and objectives, and other considerations. The last part of
Chapter 3 discusses the product portfolio. Innovative ideas that can be converted
into high-potential new product opportunities can come from many sources; but
however the new product idea is arrived at, its fit with the firm’s product innovation strategies needs to be assessed. This is a portfolio issue: When assessing
any potential new product, the firm needs to consider its technical viability (can
we make it?) and its market viability (will customers buy it?). Most firms will
have many other criteria, both financial and strategic, that they consider at this
important step.
As seen in Figure I.1, once the PIC has been determined, the next step is to
generate product concepts. This will be taken up in Part II of this book.
C H A P T E R
O N E
The Strategic Elements
of Product Development
Setting
Mention new products and people think about technology—iPods, iPhones,
YouTube, virtual realities, fiber optics, and the like. But most new products are
far simpler—low-carb colas, new movies, new singing stars, fast foods, and new
flavors of frozen yogurt. New products run the gamut from the cutting edge of
technology to the latest version of the ballpoint pen. New products can be tangible
goods or services. New products can be destined for the consumer market, the
business-to-business market, or both.
You have chosen to study how new products are developed and managed, so it
would be nice to say they come from an orderly process, managed by experienced
persons well versed in product innovation. Some do, but some don’t. Years ago,
Art Fry became famous for an idea that became Post-it notes, when his hymnal
page-marking slips kept falling out. He had a rough time persuading others at 3M
that the idea was worth marketing, even though it soon became the second largest
volume supply item in the office supply industry! Or consider James Dyson, an
industrial designer by training who was dissatisfied with the performance of commercially available vacuum cleaners and set out to create a better one. After five
years and about 5,000 prototypes, he created the Dual Cyclone bagless vacuum
cleaner. Over the next eight years, he was unable to interest vacuum cleaner manufacturers or venture capitalists in the new product, frequently hearing that since
he was a designer, he couldn’t possibly know anything about manufacturing or
marketing! In 1985 and on the verge of bankruptcy, Dyson found an interested
Japanese investor, and by 1993 he had set up Dyson Appliances in the United
Kingdom (his home country). Since that time, Dyson Appliances has sold over
$2 billion worth of vacuums worldwide.1
So you may be confused by the uncertainty you meet in this book. If so, welcome to the land of creative exploration. The activity we study in this book is sometimes called product innovation management; some call it product planning,
and some (from a very biased perspective) call it research & development (R&D) or
1
Anonymous, “Dyson Fills a Vacuum,” @ Issue, 8(1), 2003.
6
Part One
Overview and Opportunity Identification/Selection
marketing. In this book, we use the most descriptive term we have—new products
management—and we adopt the viewpoint of the marketing manager; that is, we
are primarily concerned about the specific role for marketing in the overall task.
The Importance of New Products
New products are big business. Over a hundred billion dollars are spent yearly on
the technical development phase alone. Untold thousands of new products are
marketed every year, perhaps millions if we call each new Web site a new product.
Hundreds of thousands of people make their living producing and marketing new
products. Many managers realize that radical innovation is critical to future growth
and even the survival of the firm. Here, we are defining radical innovation as innovation that displaces or makes obsolete current products and/or creates totally
new product categories.2 The Industrial Research Institute identified “accelerating innovation” and “business growth through innovation” as the top challenges
faced by technology leaders, and well-known business writer Gary Hamel has
described the creation of radical innovation as “the most important business issue
of our time.”3
The reason firms invest this much in new products is that they hold the answer
to most firms’ biggest problems. Competitors do the most damage when (1) there is
so little product differentiation that price-cutting takes everyone’s margins away
or (2) when they have a desirable new item that we don’t. The fact is: A successful
new product does more good for a firm than anything else. The very reason for a firm’s
existence is the value its operations provide to others, and for which they pay. And
in a competitive world this means that what we offer—be it a physical good or a
service—must be better than what someone else offers, at least part of the time.
This is true in all organizations, including hospitals, churches, colleges, and even
political parties. Look at the winners in those arenas and ask yourself which ones
are popular and growing.
Another reason for studying about new products is that the new products process
is exceedingly difficult. Hundreds of individuals are involved in the creation of a single product, but all are from separate departments (sales, engineering, manufacturing, and so on) where they may have their own agendas. When a product flops
miserably, it often generates huge publicity, much to the chagrin of the producers:
think of New Coke, Premier smokeless cigarettes, the movies Gigli and Catwoman,
or countless others. Perhaps, as a result, we think failure rates are higher than they
really are. New products do fail, of course, but at around a 40 percent rate, not
2
M. Rice, R. Liefer, and G. O’Connor, “Assessing Transition Readiness for Radical Innovations,”
Research-Technology Management, 45(6), 2002, pp. 50–56; and Gina O’Connor, Joanne Hyland,
and Mark P. Rice, “Bringing Radical and Other Innovations Successfully to Market: Bridging the
Transition from R&D to Operations,” in The PDMA Toolbook 2 for New Product Development,
ed. P. Belliveau, A. Griffin, and S. M. Somermeyer (Hoboken, NJ: Wiley, 2004), pp. 33–70.
3
Industrial Research Institute 2001/2002 Annual Reports, Washington, DC, Industrial Research
Institute; and Gary Hamel, “Innovation Now! (It’s the Only Way to Win Today),” Fast Company,
December 2002, pp. 114–124.
Chapter One
The Strategic Elements of Product Development
7
the 90 percent rate you often hear, and this percentage holds for both goods and
services. The best product-developing firms can improve their odds further: They
require only about four ideas to generate one winning product, as compared to
over nine ideas for other firms. This is probably because the best firms are better at
screening out bad ideas earlier.4 And after many years of research, we know many
of the most important reasons why products fail. The firm doesn’t understand
the customer, or underfunds the required research and development, or doesn’t
do the required homework before beginning development (sometimes called the
ready—fire—aim approach), or doesn’t pay enough attention to quality, or lacks senior management support, or chases a moving target (we will see moving-target
issues such as unstable specifications and scope creep in Chapter 3).5
The goal at most firms is not necessarily to reduce failure rates to zero. Having
too low a failure rate might mean that the firm is playing it too safe with close-tohome innovations, while missing out on the (risky) breakthroughs. The definition
of “too low” probably depends on the industry and on how inherently risky product development is. The goal here is to minimize the dollar losses on the failures
(don’t bankrupt the company!) and to learn from them. Regardless of the actual
failure rate you encounter, the amount at stake and the risk of failure are high in
new product development.
Success rates have remained remarkably consistent over the years. The Comparative Performance Assessment Study (CPAS) is periodically conducted by
the Product Development & Management Association (PDMA), most recently in
2012.6 In these studies, for every 100 ideas, a little under 70 make it through the
initial screen; fewer than 50 pass concept evaluation and testing and are moved to
the development phase; a little more than 30 make it through development; about
30 make it through testing; about 25 of them are commercialized; and about 15 are
considered to be successes (about 60 percent of those that were commercialized).
Interestingly, the percent success rate does not vary too much from one category
to the next. The percent success rate ranges from 51 percent (frequently purchased
consumer goods) to 65 percent (health care). If one splits the CPAS sample into
two groups, the “Best” (the top-performing 25 percent of firms) and the “Rest,” a
slightly different pattern emerges: In 2012, the Best firms attained a success rate of
4
Marjorie Adams, Competitive Performance Assessment (CPAS) Study Results, PDMA Foundation, 2004; and Stephen K. Markham and Hyunjung Lee, “Product Development and Management Association’s 2012 Comparative Performance Assessment Study,” Journal of Product
Innovation Management, 30(3), 2013, pp. 408–429. Success rate has held steady at around
60 percent of products marketed since the 1995 CPAS study; the 2012 study suggests the
success rates are slightly lower in Europe and Asia.
5
Robert Cooper, Winning at New Products: Accelerating the Process from Idea to Launch, 3rd
ed. (New York: Perseus Books, 2001).
6
2003 CPAS results are found in Doug Boike and Marjorie Adams, “PDMA Foundation CPAS
Study Reveals New Trends—While the ‘Best-Rest’ Gap in NPD Widens,” Visions, 28(3), July
2004, pp. 26–29; and Gloria Barczak, Abbie Griffin, and Kenneth B. Kahn, “Perspective: Trends
and Drivers of Success in NPD Practices: Results of the 2003 PDMA Best Practices Study,”
Journal of Product Innovation Management, 26(1), January 2009, pp. 3–23. The 2012 results are
summarized in Markham and Lee (2012), op. cit.
8
Part One
Overview and Opportunity Identification/Selection
FIGURE 1.1
The Best
Firms Achieve
Superior NPD
Results
Percent Successes
Percent of Sales from New Products
Percent of Profits from New Products
Number of Ideas Per Successful
New Product
The Best
(top 25% of firms)
The Rest
(bottom 75% of firms)
82.2
47.9
48.5
4.5
52.9
25.4
25.0
11.4
Source: Adapted from Stephen K. Markham and Hyunjung Lee, “Product Development and Management Association’s
2012 Comparative Performance Assessment Study,” Journal of Product Innovation Management, 30(3), 2013, pp. 408–429.
over 80 percent, while the Rest’s success rate was much lower at about 50 percent.
The Best, therefore, have greater success with new product development!7
Figure 1.1 shows that the Best firms not only have a higher percentage rate of
successes, but also derive almost twice as many sales and profits from new products (defined as five years old or younger) than do the Rest. Best firms are also
more efficient in developing successful products: they require about 4.5 ideas to
generate one success, while the Rest require almost three times as many ideas per
success. In addition, the development cost per successful project for Best firms is
roughly half the cost per successful project for the Rest.8
The 2012 CPAS study also reveals that the Best companies at product development manage their new products process differently than do the Rest. In sum,
the Best companies are better at implementing many of the new products process
concepts and principles that we discuss in upcoming chapters of this book. Relative to the Rest, the Best:
• Are more likely to use market research tools like creativity sessions (which
we explore in Chapter 5), trade-off analyses (Chapter 7), concept tests (Chapter 9), voice of the customer (Chapter 12), alpha and beta testing (Chapter 15),
and test markets (Chapter 18).
• Are more likely to have global market and operations strategies (Chapters 3
and 14).
• Rely more on portfolio analysis for product selection (Chapter 3).
• Tend to use social media and online communities more for information gathering (Chapter 5).
• Employ formal processes for selecting which concepts to develop (Chapter 10).
• Are more effective in using team support tools and team incentives (Chapter 14).9
7
The “Best” are defined in the CPAS study as those firms that are in the top 25 percent in their
industry and above the mean in both program success and sales and profit success from new
product development.
8
Stephen K. Markham and Hyunjung Lee, op. cit.
9
Stephen K. Markham and Hyunjung Lee, op. cit.
Chapter One
The Strategic Elements of Product Development
9
In sum, the concepts of new products management as presented throughout
this book are used extensively, and well, by the top innovating companies, who
achieve superior results from their new products!
Globalization and New Product Development
Like all aspects of modern business, product development has become more challenging due to increased globalization. To a greater extent than ever before, firms
are seeing new product development as a global process in order to take advantage of worldwide opportunities and increase their efficiency and effectiveness of
innovation. According to a 2007 study by consultants Booz & Company, the top
global firms in terms of R&D spending deployed about 55 percent of their R&D
spending in foreign countries. Among the 80 top U.S. R&D firms, $80.1 billion out
of $146 billion was spent overseas, and similar percentages were found for top
European and Japanese R&D firms.10 The Booz & Company study also showed
that the firms with higher percentages of R&D spending deployed elsewhere did
better than average on many important performance measures, such as return on
investment and total shareholder return.
This study found that firms have multiple reasons for increasing their global
R&D efforts. In many foreign countries, R&D engineers are lower paid than in the
United States, Western Europe, or Japan—but the salary gap is narrowing, especially for the most skilled engineers and scientists. Now, many firms look overseas
not just to access a cheaper labor force, but to access the talent residing in these
markets and the ideas generated by these skilled personnel. Huge markets such as
India and China are obvious sources of talented engineers, and there is some evidence of specialization: India boasts strengths in automotive engineering, China
in electronics.
Another reason for increased global R&D is the increasing globalization of the
innovating firms themselves. For example, as automakers seek to penetrate new
markets such as China or India, it makes sense to conduct more of their design
work in or near these markets than back in the home office located in Michigan
or Bavaria. In addition, firms are under increased pressure to reduce product development times, or may be competing in increasingly turbulent market environments. These factors lead firms to leverage all the global resources they have at
their disposal for product development.11
Many multinational firms seek to leverage their product development skills
across their subsidiaries and gain competitive advantage by setting up global new
10
For a summary of the Booz & Company findings, see Barry Jaruzelski and Kevin Dehoff, “‘Beyond
Borders: The Global Innovation 1000’ Study Reveals a Global Shift in R&D Spending,” Visions, 33(3),
October 2009, pp. 27–30.
11
Elko J. Kleinschmidt, Ulrike de Brentani, and Sören Salomo, “Performance of Global New
Product Development Programs: A Resource-Based View,” Journal of Product Innovation
Management, 24(5), September 2007, pp. 419–441; see summary in K. Sivakumar, “Global
Product Development,” in Jagdish N. Sheth and Naresh K. Malhotra, Wiley International
Encyclopedia of Marketing, Volume 5, Product Innovation and Management (West Sussex, UK:
John Wiley, 2011), pp. 68–74.
10
Part One
Overview and Opportunity Identification/Selection
product teams.12 A large firm may have R&D skills in its German subsidiary, its
manufacturing in Asia, and its suppliers somewhere else again. A firm’s global
presence, however, is no guarantee that it will automatically know how to efficiently manage its global operations. Effectively coordinating and marshaling the
efforts across multiple countries to develop and to launch successful new products
is a major challenge. There are many decisions to make that impact global product
development effectiveness: how much autonomy should the subsidiaries have,
how should they be rewarded, what work conditions should be imposed such that
teamwork within and between subsidiaries is encouraged, and so forth. There is
also the possibility of outsourcing some of the required new product capabilities,
for example, through strategic alliances with global partners. Similarly, the global
network of suppliers and distributors needs to be managed and coordinated so as
to improve global product development as well as global launch. Selecting the best
organizational structure for the global product team is more difficult than if only
one culture is involved, as differences among team individuals as well as linguistic
barriers and national culture differences must be taken into account. At the time of
launch, even more decisions arise: Should a product be positioned the same way
throughout the world, or should positioning, branding, or packaging decisions
be localized? Many firms react to these challenges with well-defined, formal processes, while others leave the new products process relatively unstructured and
adaptable to product or environmental considerations.
The best research available on this topic finds that firms with a global innovation
culture have the most effective global new product programs.13 Having a global
innovation culture means that a firm is open to global markets, mindful of differences in customer needs and preferences, and respectful of different national
cultural and business environments. Firms with such a corporate culture are able
to recognize the specialized skills, resources, and ideas they possess in different
subsidiaries around the world. In fact, at these firms, all operations and strategies
(not just new product development) are defined in terms of the realities of the
international market. A firm with a global innovation culture is better at integrating its global knowledge, can better manage the R&D tasks associated with the
new products process, and has an advantage in implementing global launches.14
All of these factors contribute to improved global new product performance.
Throughout this book, you will see examples of firms that practice innovation on
a global basis, which includes managing virtual and highly diverse global product
12
Good references are: Roger J. Calantone and David A. Griffith, “From the Special Issue
Editors: Challenges and Opportunities in the Field of Global Product Launch,” Journal of Product
Innovation Management, 24(5), September 2007, pp. 414–418; and Ram Mudambi, Susan
Mudambi, and Pietro Navarra, “Global Innovation in MNCs: The Effects of Subsidiary SelfDetermination and Teamwork,” Journal of Product Innovation Management, 24(5), September
2007, pp. 442–455.
13
Elko J. Kleinschmidt, Ulrike de Brentani, and Sören Salomo, op. cit.
14
Roger J. Calantone, S. T. Cavusgil, J. B. Schmidt, and G.-C. Shin, “Internationalization and the
Dynamics of Product Adaptation: An Empirical Investigation,” Journal of Product Innovation
Management, 22(2), March 2004, pp. 185–198.
Chapter One
The Strategic Elements of Product Development
11
FIGURE 1.2 Product Development as a Global Process
Procter & Gamble: According to the P&G Web site, P&G products are developed as global R&D projects. P&G has
22 research centers in 13 countries from which they can draw expertise. As a good example of a global product,
consider the Swiffer mop. P&G made use of its research centers in the United States and France to conduct market
research and testing in support of this new product.
Apple: In the development of the iPod, Apple worked with about ten different firms and independent contractors
throughout the world, and did product design and customer requirement definition in both the United States and
Japan.
Ikea: The Swedish furniture retailer knows that its target market (middle-class strivers) crosses international and
intercontinental lines, so it operates globally in a streamlined fashion. It identifies an unmet customer need (say a
certain style of table at a given price point), commissions in-house and outsourced designers to compete for the
best design, then its manufacturing partners worldwide compete for the rights to manufacture it. Excellent global
logistics complete the value delivery to customers.
Bungie Studios: This boutique software company, now owned by Microsoft, developed the MS Halo gaming
software series in the United States, but product-tested it in Europe and Asia. Like Ikea customers in the prior
example, gamers are much alike the world over.
Source: Loida Rosario, “Borderless Innovation™: The Impact of Globalization on NPD Planning in Three Industries,” Visions, June 2006.
development teams—no easy task! Figure 1.2 provides several samples of firms
that take the global aspect of product development very seriously.
Global new product teams are a way of life now for many firms, and we will see
more about the challenges facing such teams in Chapter 14. There, we will focus
on the issues facing the global new product development team, and how firms
overcome these hurdles to take advantage of product knowledge residing in many
corners of the world. We touch on some of the issues regarding global positioning
and branding decisions in Chapter 16.
How Product Development Is Different
It is likely that this course is located in your university’s business school, within
the marketing department. Or it might be part of your engineering training, or
part of a specialized program in technology innovation management. In any case,
this is a good time to note an underlying principle of product development: It’s
all about teamwork. The new products team ideally is cross-functional, comprising
personnel from marketing, R&D, engineering, manufacturing, production, design,
and other functional areas as well. Unlike other courses you may be taking, we
spend much time in this text on how you interact with people from other fields of study:
discussing how team members work together, how they can improve communication, what they need to achieve when working together, and so on. So, whatever
your background, and whatever course of study you are pursuing, remember that
in product development you will spend a lot of your time coordinating and working closely with people from other functional areas. Above all else, product development is a joint effort.
12
Part One
Overview and Opportunity Identification/Selection
All members of a new products team make an important contribution to product development, so we must be aware of, and try to avoid, narrow functional
viewpoints. Marketers have to learn to work with scientists, engineers, lawyers,
production managers, and so on. We may come from marketing, and we will often
return there when the project is finished, but, for now, we are all new products
people, working with all functions, being biased to no one. A marketing type may
not appreciate the thoroughness of a research scientist. And that scientist may not
appreciate the marketer’s enthusiasm, which sometimes leads to what the scientist
thinks are rash and unwarranted conclusions. Now is a good time to begin thinking like a general manager.
This course of study calls for a strong creative contribution. Not only do we create new product concepts; in many firms, that’s easy. The tough part is how best to
develop and market them—devising a concept-testing method that works, screening
a totally new idea the firm has never faced, figuring out how to integrate engineers
into a trade show booth effectively, how to position a product that creates its own
new category, how to produce it on present equipment, how to name it in a way
that communicates and is not confusing, and so on. No answers are found in the
back of this book. We never will know whether any one decision was right, just
whether the total package of decisions worked out.
Being creative means we travel on unmarked roads. Most of our decisions are
made on grossly inadequate facts. Not that we don’t know what facts we need or
how to get good estimates of them—we usually do. But there’s never enough time
or money. Worst of all, what seems to be a fact in January may not be a fact come June,
when we actually introduce the new item. As a result, we often do things that make
others nervous. For example, we use heuristics—rules of thumb that firms have
found work for them: “On items such as this, about 30 percent of the people who
hear of a new brand, try it,” or “When the product engineer from R&D disagrees
with the process engineer from manufacturing, it’s better to go with manufacturing.” Heuristics sometimes leave us holding an empty bag; but without them,
projects just won’t move forward fast enough. Another technique is to use simple
intuition: hunch, or gut feel. This explains why most managers want new products
people to have spent time in ongoing operations before moving on to new products work.
This suggests another key difference between this course and many of your
others. This course is about the activities of people working under intense pressure,
making tough decisions under impossible conditions. Consider a now-classic example: a group of about 15 people sent by IBM from Armonk to Boca Raton during the dawn of the personal computer era, 1980. They were given one year to
create and market a new product, which eventually became known as the IBM
PC. Literally billions of dollars were at stake—the difference between becoming a
major player in a new market or missing the boat completely. Virtually every day,
someone on that team had to make a decision that could close the show. When
studying how strategy guides teams throughout a project, or how firms telescope
their market testing into simultaneous regional rollouts, remember that pressure.
You may also be taking a course that deals with innovation in manufacturing
or operations, and you may wonder how process innovation differs from product
Chapter One
The Strategic Elements of Product Development
13
FIGURE 1.3 Not All New Products Are Planned
A Raytheon engineer working on experimental radar noticed that a chocolate bar in his shirt pocket melted. He then
“cooked” some popcorn. The firm developed the first commercial microwave oven.
A chemist at G. D. Searle licked his finger to turn a page of a book and got a sweet taste. Remembering that he had
spilled some experimental fluid, he checked it out and produced aspartame (NutraSweet).
A 3M researcher dropped a beaker of industrial compound and later noticed that where her sneakers had been
splashed, they stayed clean. ScotchGard fabric protector resulted.
A DuPont chemist was bothered by an experimental refrigerant that didn’t dissolve in conventional solvents or react
to extreme temperatures. So the firm took the time to identify what later became Teflon.
Another scientist couldn’t get plastic to mix evenly when cast into automobile parts. Disgusted, he threw a steel wool
scouring pad into one batch as he quit for the night. Later, he noticed that the steel fibers conducted the heat out of
the liquid quickly, letting it cool more evenly and stay mixed better. Bendix made many things from the new material,
including brake linings.
Others? Gore-Tex, dynamite, puffed wheat, Dextro-Maltose, LSD, penicillin, Dramamine, X rays, pulsars, and many
more. In each case, a prepared mind.
Sources: DuPont and Bendix cases, The Innovators (New York: Dow Jones, 1968); Raytheon, Searle, and 3M cases, Kenneth Labrich, “The Innovators,”
Fortune, June 6, 1988, p. 56.
innovation. The term process innovation usually applies to functions, especially the
manufacturing or distribution process, and every new product benefits from this
type of innovation. The term product innovation applies to the total operation by
which a new product is created and marketed, and it includes innovation in all of
the functional processes.
The last difference worth noting here is in application. Sometimes the new product process is accidental, or serendipitous (see Figure 1.3). But remember the old
adage that chance favors the prepared mind. At least two dozen scientists had
observed mold killing their bacteria colonies before Alexander Fleming pursued
the phenomenon into the discovery of penicillin. More recently, Pfizer researchers
noticed that several of the men in a test study of a new angina medication reported
that it was ineffective at treating their angina, but it did have an unexpected alternative effect on the body. Soon, Pfizer was marketing Viagra, one of their top
products in recent years and showing enough market growth potential to have
attracted several competitors.15 So, we must practice. You cannot learn how to develop a new product concept by reading about attribute analysis or gap analysis.
You must do them. The same goes for product use testing, positioning, contingency
planning, and many more. There are opportunities at the end of every chapter to
think about the chapter’s material in a market setting.
15
Jenny Darroch and Morgan P. Miles, “Sources of Innovation,” in V. K. Narayanan and Gina C.
O’Connor (eds.), Encyclopedia of Technology & Innovation Management (Chichester, UK: John
Wiley, 2010), Chapter 14.
14
Part One
Overview and Opportunity Identification/Selection
What Is a New Product, and What Leads to Success?
The term new product can mean different things to different people. Figure 1.4
shows that new products can include new-to-the-world (sometimes called really
new) products, as well as minor repositionings and cost reductions. The list in
Figure 1.4 may include things you would exclude. For example, can we have a
new item just by repositioning an old one (telling customers it is something else)?
Arm & Hammer did, several times, by coming up with a new refrigerator deodorant, a new carpet freshener, a new drain deodorant, and more, all in the same package of baking soda, even with the same brand name. These may be considered just
new uses, but the firm still went through a process of discovery and development.
And a new use (particularly in industrial firms) may occur in a completely separate division. DuPont, for example, uses basic fibers in many different ways, from
technical to consumer. Financial firms use their common databases for different
markets. Similarly, brand names have long been used as platforms for launching
line extensions. The Dove soap name, for example, has been extended to almost
two dozen box soaps and almost as many liquid body washes.16
FIGURE 1.4 What Is a New Product?
New products can be categorized in terms of how new they really are to the world, or to the firm. One common set of
categories is as follows:
1. New-to-the-world products, or really new products. These products are inventions that create a whole new
market. Examples: Polaroid camera, the iPod and iPad, Hewlett-Packard’s laser printer, Rollerblade brand inline
skates, P&G’s Febreze and Dryel.
2. New-to-the-firm products, or new product lines. Products that take a firm into a category new to it. The products are not new to the world, but are new to the firm. Examples: P&G’s first shampoo or coffee, Hallmark gift
items, AT&T’s Universal credit card, Canon’s laser printer.
3. Additions to existing product lines. These are “flanker” brands, or line extensions, designed to flesh out the
product line as offered to the firm’s current markets. Examples: P&G’s Tide Liquid detergent, Bud Light, Special K
line extensions (drinks, snack bars, and crystals).
4. Improvements and revisions to existing products. Current products made better. Examples: P&G’s Ivory Soap
and Tide powder laundry detergent have been revised numerous times throughout their history; countless other
examples.
5. Repositionings. Products that are retargeted for a new use or application. Example: Arm & Hammer baking soda
repositioned as a drain or refrigerator deodorant; aspirin repositioned as a safeguard against heart attacks. Also
includes products retargeted to new users or new target markets; Marlboro cigarettes were repositioned from a
woman’s cigarette to a man’s cigarette years ago.
6. Cost reductions. New products that simply replace existing products in the line, providing the customer similar performance but at a lower cost. May be more of a “new product” in terms of design or production than marketing.
Sources: The categorization scheme was originally presented in Booz, Allen & Hamilton Inc., New Product Management for the 1980s (New York: Booz,
Allen & Hamilton Inc., 1982) and is now standard in new product development. Some of the examples are from Robert G. Cooper, Winning at New
Products: Accelerating the Process from Idea to Launch, 3rd ed. (Cambridge, MA: Perseus Publications, 2001).
16
Deborah L. Vence, “Just a Variation on a Theme,” Marketing News, February 2007, pp.18–20.
Chapter One
The Strategic Elements of Product Development
15
All the categories in Figure 1.4 are considered new products, but it is plain to see
that the risks and uncertainties differ, and the categories need to be managed differently. Generally, if a product is new to the world or new to the firm (the first two categories), the risks and uncertainties faced by the firm are higher, as are the associated
costs of development and launch. It cost Gillette far more, for example, to launch its
newest shaving system (the Fusion) than to do upgrades to the earlier Mach 3 system (such as developing the women’s version, named Venus, which used the same
blade technology). A greater commitment of human and financial resources is often
required to bring the most innovative new products to market successfully.
Note also that not all the new product categories in Figure 1.4 are necessarily
innovations. Line extensions, like the Dove soap bars mentioned above, or new
flavors of Oreo cookies, may have resulted from the company’s desire to increase
display space and shelf space. As Bob Golden of Technomic, a food industry
consultancy, notes, “Many of these companies [that launch line extensions] are
cannibalizing existing brands in order to stimulate the [product] category.” Line
extension shouldn’t be confused with “true” innovation—and management must
recognize that true innovation that provides enhanced value to customers is where
their long-term competitive advantage may lie.17
New-to-the-world products revolutionize existing product categories or define
wholly new ones. They are the most likely to require consumer learning and/ or
incorporate a very new technology. Desktop computers with word processing software defined a new product category that made electric and manual typewriters
virtually obsolete, and consumer learning was required by those who type for a
living. Hewlett-Packard LaserJet printers did much the same thing in the printer
category. The launch of CDs required major differences at the retail level in terms
of store layout and distribution of related components (such as CD players). Other
familiar examples, such as hybrid cars, the iPod, and even the Swatch watch, illustrate the use of new technologies in new-to-the-world products. Manufacturers
had to overcome perceived risks, perceived incompatibility with prior experience,
or other barriers to customer adoption (more on this subject in Chapter 16).
Of course, launching new-to-the-world products means risk—and the encouragement to take on the risk must permeate the whole firm and must start at the
highest levels of management. At highly innovative firms like Intel and Gillette
(the latter now a division of Procter & Gamble), top management may even abandon the use of quarterly earnings estimates in order to keep the business units
focused on innovation and other long-term strategic goals.18
The new product line category in Figure 1.4 raises the issue of the imitation product, a strictly “me-too.” If a firm introduces a brand of light beer that is new to them
but is identical to those already on the market, is it a new product? Yes, it is new to the
firm, and it requires the new products process. Canon was not the first laser printer
manufacturer, Coca-Cola was not the first orange-juice bottler, and P&G was not
17
Deborah L. Vence, op. cit.; the Bob Golden quote is from Karen Heller, “It’s in the Snack Aisle,
But Is It Food?” Philadelphia Inquirier, March 14, 2007, pp. E1, E4.
18
Thomas D. Kuczmarski, “What Is Innovation? And Why Aren’t Companies Doing More of It?”
Journal of Consumer Marketing, 20(6), 2003, pp. 536–541.
16
Part One
Overview and Opportunity Identification/Selection
the first competitor in the coffee business. These were new products to these firms,
however, managerially speaking, and they are managed as such by the companies.
Figure 1.4 shows that many new products can be considered additions to existing product lines or improvements and revisions to existing products. Many of
these line extensions round out or add to existing product lines extremely well:
Tide Liquid detergent, Bud Light, Special K snack bars or shakes. Nevertheless,
studies suggest that the most innovative new product categories account for
many more product successes. In one study, the two most innovative categories
accounted for about 30 percent of new product launches, but about 60 percent
of the most successful products. (Percentages, of course, will vary by industry:
High-tech industries will produce proportionately more highly innovative new
products.) In fact, a U shape between innovativeness and success was found: The
most innovative new product categories and the least innovative categories (the
repositionings and cost reductions) outperformed the middle categories in terms
of meeting financial criteria, returns on investment, and resulting market shares!19
This is because new products in the “middle ground” are not new enough to really
excite new customers, yet different enough from existing products that there are
fewer synergies. The results suggest that many firms need to reconsider the importance and potential contribution of innovative new products when making project
selection decisions. In Chapter 3 we shall look at building a strategic portfolio of
products that strives for balance among the innovation categories.
We have already seen that, even among the best firms, there are some product
failures, and this entire book is devoted to developing new successful products,
so there can be no easy answer to the question “What leads to new product success?” Nevertheless, several studies over the years on this question have yielded a
consistent answer: The number one reason for success is a unique superior product.
Additionally, common causes of failure include “no need for the product” and
“there was a need but the new product did not meet that need.” In other words,
it was not unique and superior.20 It did not offer the user sufficient value added
relative to the costs of purchasing and use. Value added is a key concept to keep in
mind as you travel the new product highway.
Does This Field of Activity Have a Unique Vocabulary?
Yes, it does, for two reasons. One, it is an expanding field, taking on new tasks
and performing them in new ways. Second, it is a melting pot field, bringing in
the language of scientists, lawyers, marketing people, accountants, production
19
Elko J. Kleinschmidt and Robert G. Cooper, “The Impact of Product Innovativeness on Performance,” Journal of Product Innovation Management, 8(4), December 1991, pp. 240–251; see
also Abbie Griffin, Drivers of NPD Success: The 1997 PDMA Report (Chicago: Product Development & Management Association, 1997).
20
Discussions of product success and failure can be found in R. G. Cooper, “New Products:
What Separates the Winners from the Losers?” in M. D. Rosenau, A. Griffin, G. Castellion,
and N. Anscheutz (eds.), The PDMA Handbook of New Product Development (New York: John
Wiley, 1996), pp. 3–18; and R.G. Cooper, “The Impact of Product Innovativeness on Performance,” Journal of Product Innovation Management, 16(2), April 1999, pp. 115–133.
Chapter One
The Strategic Elements of Product Development
17
people, corporate strategists, and many more. Because many of these people
talk about the same event but using different terms, communication problems
abound.
For example, there is sometimes confusion over the terms invention and
innovation. To managers invention refers to the dimension of uniqueness—the
form, formulation, function of something. It is usually patentable. Innovation
refers to the overall process whereby an invention is transformed into a commercial product that can be sold profitably. The invention may take but a few moments.
We have far more inventions than we do innovations. Similarly, the average person might think that a product idea, a product concept, a product prototype, and
maybe even a product are all about the same thing. As you will see in the pages of
this book, we have specific, distinct definitions for each of these terms, and they
are not interchangeable.
The problem becomes much worse from a global perspective. Take, for example,
the term design. In North American new product work, design means essentially
industrial design or engineering (premanufacturing) design; in Europe, however,
design means the entire technical creation function from initial specs to the shipping dock. To some design people, the term means the entire product innovation
function.
When in doubt, a complete glossary of new product terms is published online
by the Product Development & Management Association (www.pdma.org; follow
the link to the glossary).
Does the Field of New Products Offer Careers?
It does, though not many are entry positions for people right out of college. Generally, top managers want new products people to know the industry involved (for
the customer understanding mentioned earlier) and the firm’s various operations
(that multidimensional, orchestration task also mentioned). So, most new products managers get assigned to new products work from a position in a functional
department. For example, a scientist finds working with marketing and manufacturing people interesting, a market researcher specializes in benefit segmentation,
or a salesperson earns a reputation for good new product concepts. Each of these
people is a candidate for full-time work on new products.
The specific jobs in this field are three. First is functional representative on a
team, sometimes full time, more often part time. An example is a marketing researcher or a production planner. These people may be representatives on several
teams or just one. The second job is project manager or team leader. This role is
leader of a team of people representing the functions that will be required. The
third position is new products process manager, responsible for helping project
managers develop and use good new product processes.
Some of the career tips we hear are:
1. Be multifunctional, not functionally parochial. Have experience in more than
one function (marketing, manufacturing, and so on).
18
Part One
Overview and Opportunity Identification/Selection
2. Be a risk taker, willing to do whatever is necessary to bring a product to market, including facing the wrath of coworkers.
3. Think like a general manager. Scientists and sales managers can lead new
products teams, but they must cease being scientists and sales managers.
4. Be a combination of optimist and realist, aggressor and team player, leader
and follower.
5. Develop your creative skills, both for new product concepts and for new
ways of doing things.
6. Be comfortable in chaos and confusion. Learn to work with depressives,
euphorics, and those with no emotion at all.
Fortunately, such managers do exist—and in increasing numbers. We hope you
become one of them.
The Strategic Elements of Product Development
We cover a lot of product development material in this book, from opportunity
identification right through to launch and postlaunch. Underlying all of this are
three strategic elements, which will be a major focus in this book. These strategic
elements provide a framework to guide management through product development and help them focus on what is most important. Top product development
consultants, like Robert Cooper of the Product Development Institute, recommend
a framework of this type to firms of all sizes to help guide product development.21
A key point here is that all three of the strategic elements must be in place, and each
is coordinated with, and supports, all the others. The three elements are a new
products process, a product innovation charter, and a well-managed product
portfolio.
The new products process is the procedure that takes the new product idea
through concept evaluation, product development, launch, and postlaunch.
This procedure is usually depicted as a phased process with evaluative steps
between the phases, but as you will see in upcoming chapters, it is rarely so
straightforward. The product innovation charter is essentially a strategy for new
products. It ensures that the new product team develops products that are in
line with firm objectives and strategies and that address marketplace opportunities. Product portfolio management helps the firm assess which new products
would be the best additions to the existing product line, given both financial and
strategic objectives. In this chapter, we introduce the first strategic element, the
new products process, as it serves as a framework for everything that follows in
this book, and explore it more deeply in Chapter 2. In Chapter 3, we discuss the
last two strategic elements, the product innovation charter and product portfolio
management.
21
Roger J. Calantone, S. T. Cavusgil, J. B. Schmidt, and G.-C. Shin, “Internationalization and the
Dynamics of Product Adaptation: An Empirical Investigation,” Journal of Product Innovation
Management, 22(2), March 2004, pp. 185–198.
Chapter One
The Strategic Elements of Product Development
19
The Basic New Products Process
Figure 1.5 shows a simple new products process described in terms of phases and
tasks. Research has shown that about 70 percent of firms use some kind of formal,
cross-functional, phased new products process, and about 47 percent use clearly
defined evaluation criteria after each phase. At least 40 percent of firms assign a
process manager whose job it is to manage the phased new products process.22 The
phased new products process is certainly well established among firms involved
in new product development.
The idea behind the new products process is that the phases represent activities
that are conducted by the new product team; between the phases are evaluation
tasks, or decision points.23 It is at these points that the hard Go/No Go decisions
need to be made (that is, whether the project looks promising enough to go on
to the next phase). Throughout this book, we will be looking at the kinds of tests
(from concept tests, to product use tests, to market tests) that are used to gather
information for project evaluation.
The goal of a new products process is to manage down the amount of risk
and uncertainty as one passes from idea generation to launch. There are periodic
FIGURE 1.5
The Basic
New Products
Process
Phase 1: Opportunity Identification and Selection
Phase 2: Concept Generation
Phase 3: Concept/Project Evaluation
Phase 4: Development
(includes both technical and marketing tasks)
Phase 5: Launch
22
Markham and Lee (2012), op. cit.; Robert G. Cooper, Scott G. Edgett, and Elko J. Kleinschmidt,
Improving New Product Development Performance and Practices: Benchmarking Study
(Houston, TX: American Productivity and Quality Center, 2002); Marjorie Adams (2004), op. cit.,
and Kenneth B. Kahn, Gloria Barczak, and Roberta Moss (2002), op. cit.
23
Robert G. Cooper, Winning at New Products: Accelerating the Process from Idea to Launch,
3rd ed. (Cambridge, MA: Perseus Publishing, 2001).
20
Part One
Overview and Opportunity Identification/Selection
evaluations all the way through the process. A firm may have access to hundreds
of ideas; weaker ones are immediately eliminated, and the better ones are refined
into concepts. Later in the process, only the best concepts are approved and moved
forward to the development phase. The product is continuously refined during the
development phase and could still be halted before the launch phase if preliminary
product use test results are not positive. By the time the product is launched, it
has a much higher likelihood of succeeding (recall the roughly 60 percent success
rate across many product categories cited earlier). Managing down the amount of
uncertainty is important, because each additional phase means greater financial investment (possibly much greater), not to mention greater commitment of human
resources. Firms using a new products process have reported improvements in
product teamwork, less rework, greater success rates with new products, earlier
identification of failures, improved launch, and up to 30 percent shorter cycle
times.24 This is not to say, however, that all firms implement the process well. Other
studies show that many firms that claim to have a new products process either designed it or implemented it poorly; thus, there is much room for improvement.25
One should note that the neat, linear sequencing of phases shown in Figure 1.5
is just not typical. The reality is that the activities are not sequential, but overlapping. It is not implied that one phase must be completed before work can begin on
the next one, like a pass-the-baton relay race. In fact, overlapping is encouraged.
There is much pressure for firms to accelerate time to market for new products,
and a certain amount of phase overlapping is an important tool in speeding new
products to market. To do this right, of course, requires that the product team
members from different functional areas (marketing, R&D, manufacturing, design, engineering) communicate very effectively.26 Product development is truly
multifunctional, where all functions (and, increasingly, the customer as well)
work together on a cross-functional team to accomplish the required tasks. The
whole of Chapter 14 investigates the organization and management of these crossfunctional teams in depth. But even though we discuss teams later in the text,
keep in mind that the team must become involved as early as possible in the new
products process. It is the responsibility of the team leader to bring together the
right individuals with the right skill sets, and to encourage communication within
the team, between the team and top management, and between the team and communities of customers. The effective team leader knows how to deal with power
conflicts as well as technical complexity.27
24
Robert G. Cooper, “New Products: What Separates the Winners From the Losers and What
Drives Success,” in K. B. Kahn, S. E. Kay, R. J. Slotegraaf, and S. Uban (Eds.), The PDMA
Handbook of New Product Development (Hoboken, NJ: Wiley, 2013), Ch. 1, pp. 3–34.
25
Robert G. Cooper, Scott J. Edgett, and Elko J. Kleinschmidt, Best Practices in Product
Innovation: What Distinguishes the Top Performers, Product Development Institute, 2003; Robert
G. Cooper, “Perspective: The Stage-Gate® Idea-to-Launch Process—Update, What’s New, and
NexGen Systems,” Journal of Product Innovation Management, 25(3), May 2008, pp. 213–232.
26
Preston G. Smith and D. G. Reinertsen, Developing Products in Half the Time (New York: Van
Nostrand Reinhold, 1991).
27
Hans J. Thamhain, “Managing Product Development Project Teams,” in Kenneth B. Kahn,
George Castellion, and Abbie Griffin (eds.), The PDMA Handbook of New Product Development
(New York: John Wiley & Sons, 2005), pp. 127–143.
Chapter One
The Strategic Elements of Product Development
21
Another way that firms have been able to avoid delays and speed up time to
market is to streamline the evaluation tasks. At Johnson & Johnson, the preparation for an evaluation task might have included preparing a 30- to 90-page review
document. This was cut to a standardized presentation, with a one-page summary
and a handful of slides—enough to inform senior management about the risks and
commitments being decided upon. It was reported that weeks of preparation time
were saved with the new format.28
Furthermore, we should clear up something about the evalulation tasks that
occur after every phase in the new products process. Figure 1.5 implies that each
phase is always followed by a Go/No Go decision. While this is often the case, it
might be an oversimplification. If some key information is still missing or unavailable, a third option is possible, which we can call an “On decision.” This means
that the project will move forward (a conditional “Go,” if you will), but the missing information must be gathered and the project could still be halted at a later
phase. An evaluation task that includes conditional Go decisions is sometimes
called a fuzzy gate. For example, a new packaged food product might do reasonably well at a concept test, but management might feel they don’t really have a
read on the market until some product use testing (letting the customer actually
taste the product) is conducted. An On decision would mean that the product is
approved to move to development, but the product use test must yield positive
results, otherwise the project would be halted at that point. Fuzzy gates, therefore,
speed up the process because time is not wasted in obtaining complete information before the decision is made. They are relatively common; in the CPAS study,
about 50 percent of projects move forward with some conditional decisions along
the way. Nevertheless, the team must indeed make a firm decision once the necessary information is obtained; in other words, fuzzy gates still have teeth. A related
problem occurs when teams actually make a full “Go” decision, but fail to commit
any resources to the project. This is known as a hollow-gate problem and results
in too many projects underway and, inevitably, cost overruns and launch delays.
Similarly, a poor project may never be critically evaluated because it is the CEO’s
pet project, or beca...
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