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Do a powerpoint and an outline (Word file) of your research topic (Crossing the Chasm) with a scope or research and some possible sources. Include any of the chapters from the text that might apply (chapter 16 in the text) . Start to populate the outline:

a)Title of Research

b)Purpose of the Research and why it interested you

c)History and /or evolution of the topic

d)Current state of the topic- how is it used today? What are its benefits? What are the underlying technologies?

e)What is the future of the topic? How could it improve? How could it be used in other applications?

f)Sources


For the power point do the slides and write the details in the notes section. (( make sure to use tools and concepts from the text))

the presentation should be 7 minutes

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New Products Management This page intentionally left blank New Products Management Eleventh Edition Merle Crawford University of Michigan—Emeritus Anthony Di Benedetto Temple University NEW PRODUCTS MANAGEMENT, ELEVENTH EDITION Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2011, 2008, and 2006. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOC/DOC 1 0 9 8 7 6 5 4 ISBN 978-0-07-802904-2 MHID 0-07-802904-x Senior Vice President, Products & Markets: Kurt L. Strand Vice President, General Manager, Products & Markets: Michael Ryan Vice President, Content Production & Technology Services: Kimberly Meriwether David Brand Manager: Sankha Basu Development Editor: Kelly Delso Marketing Manager: Donielle Xu Director, Content Production: Terri Schiesl Content Project Manager: Melissa M. Leick Buyer: Nichole Birkenholz Cover Designer: Studio Montage, St. Louis, MO Front Cover Image: Digital Tablet: Blend Images/Jetta Productions/Getty Images, Male Designer: Aping Vision/ STS/Getty Images, Businesswoman: Stockbyte/Getty Images, African Female Scientist: ERproductions Ltd/Blend Images LLC, Two Businesspeople: © Sam Edwards/age fotostock, Business Meeting: © Chris Ryan/age fotostock Back Cover Image: Author owned Typeface: 10/12 Palatino Compositor: MPS Limited Printer: R.R. Donnelley All credits appearing on page or at the end of the book are considered to be an extension of the copyright page. 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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CROSSING THE CHASM
RESEARCH PAPER.

DEFFINITION
• Chasm is the stunted growth a company experiences as
it tries to make a decision on how to reach and sell to
the early majority.
• Crossing the chasm is the process of making a product
,service or technology move from catering for the early
adopters to a larger market segment called the early
majority.
...


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