New Product Management (2)

Chapter 2: The New Products Process

The Highlighter Saga – an ongoing operation faced a problem, the problem was studied, and the solution was checked against ongoing new product strategy, and then approved for action. It is typical that the new products process does not usually begin with a new idea (it is folklore that someone wakes up in the middle of the night with a great insight). It usually begins with what amounts to strategy - the mature market & the competitive activity which are threats. The development also does not take place in the research lab and marketing does not start when the product is finished – it often starts before ideation, and the process ends when the new product is successful (after some in-flight correction).

The Basic New Product Process (State-gate process): Opportunity identification & selection (E: direction – where should we look?), concept generation (E: Initial review – is the idea worth screening?), concept/ project evaluation (E: Full screen – should we try to develop it?), development (technical/ marketing tasks), and launch. “Gate” refers to evaluation tasks between the stages or phases which the hard GO/ No-Go decisions need to be asked. Firms using this process have reported improvements in product teamwork, less rework, greater success, earlier identification of failures, improved launch, and up to 30% shorter cycle times. Per each phase, there are the evaluation task different kinds of question need to be asked - concepts that pass this stage move on to development & begin incurring significant costs. They are best answered through progress reports.

In reality the activities in the Basic New Product process are not sequential, but overlapping. There is also much pressure to accelerate time to market for new products, and this overlapping of phases is an important tool in speeding new products to market. Product development today is a multifunctional program, where all functions work together on a cross-functional team.

Phase 1: Opportunity identification & selection

It is strategic in nature & is the most difficult to describe/ define. There are 3 main streams of activity feed strategic planning for new products.

i) Ongoing marketing planning (the annual marketing plan for a line extension to meet encroachment of a new competitor selling primarily on price).

ii) Ongoing corporate planning (management adopts a strategy that says either own a market or get out of it. This will require new product activity in all desirable markets where the firm holds a minor position).

iii) Special opportunity analysis – 1 or more persons are assigned to take an inventory of the firm’s resources (a firm called for an audit of its manufacturing operation and it turned out that a process engineering had been overlooked which skill could serve as the base for a new products program.

From the above activities, the opportunities identified could be sought into 4 categories:

i) An underutilized resource

ii) A new resource (discovery of new resource)

iii) An external mandate (the stagnant market combined with a competitive threat)

iv) An internal mandate (long range planning of sale target & the new products must fill part of the gap between current sales & that target – product innovation gap)

Opportunity identification is the process of creatively recognizing such opportunities (analyze to confirm that a sales potential does exist). Some opportunities may not fit with company skills, too risky, does not go with the firm’s self image, some require more $ than the firm has.

Phase 2: Concept generation

Product concepts are the new product ideas created by new products people. The most fruitful ideation involves identifying problems people/ businesses have & suggesting solutions. The 1st ideation step is to study those people, and find what problems they have.

Phase 3: Concept/ project evaluation

Before development work can begin on new ideas – they need to be evaluated, screened, and sorted out. It is called screening or pre-technical evaluation. Technical people may propose a solution to the competitive problem, and there is a concept test to see what potential Customers thought about it. If the decision is to go ahead, the evaluation turns into project evaluation where we no longer evaluate the idea but the plan we propose for capitalizing on that idea. This involves preparing a statement of what is wanted from the new product, called product protocol – it is important that there be agreement between the various groups before extensive technical work get under way.

The lack of good info complicates all pre-technical evaluation. The 1st three phases is called the fuzzy front end – the product concept is fuzzy but by the end of the project, most fuzz will have been removed.

Phase 4: Development

In this phase, the item acquires finite form – a tangible good or a specific sequence of resources & activities that will perform in an intangible service. It is the stage which the marketing plan is sketched & gradually fleshed out. Business practice pieces:

i) Resource preparation: for product improvement/ line extensions it is often fine. But for new-to-the-world products, then the team may need special training, new reward systems, revisions in the firm’s usual project review system, and special permission. Without adequate preparation of the ball field, a firm does not get much of the home advantage.

ii) The major body of effort: the actual development of the item/ service itself, the marketing plan, and a business/ financial plan that final approval requires. Marketing decisions are completely interlaced with technical ones and involve package design, brand name selection, and marketing budgets. Along the way, concept evaluation continues; we evaluate the concept well enough to permit development work. Prototypes are evaluate to be sure that the technology being developed meets the needs & desires of the Customers in a way that creates value for them, while at the same time being profitable.

iii) Comprehensive business analysis: the financial analysis is still not firm, but it is good to assure the management that this project will be worthwhile.

Phase 5: Launch

Launch (commercialization or often – the announcement) is the time/ that decision where the firm decides to market a product (the Go/ No go). This decision is more attitude than anything else. A firm can always pull out, even during a test market. The last few wks or months just before & after announcing the new product is really a launch phase. Market test is the 1st time the marketing program and the product are active together (like dress rehearsal which managers hope any problems discovered are fixable between dress rehearsal & opening night – if they aren’t then the opening has to be delayed). There is also launch management – the plan of tracking after the launch.

The Concept Life Cycle

The new product process essentially turns as opportunity into a profit flow. Both beginning & end is not product. It is an evolving concept that at the end becomes a product if it is successful.

Phase 1:

opportunity concept – a company skill/ resource, or a customer problem

Phase 2:

Idea concept – 1st appearance of an idea

Stated concept – a form/ a technology, plus a clear statement of benefit

Phase 3:

Tested concept – it has passed an end-user concept test; need is confirmed.

Fully screened concept – passes the test of fit with the company’s situation

Protocol concept – a product definition that includes the intended market user, the problem perceived, the benefits, plus any mandatory feature.

Phase 4:

Prototype concept – a tentative physical product/ system procedure (including features & benefits)

Batch concept – 1st full test-of-fit with manufacturing; it can be made (features, characteristiCustomers, & standards).

Process concept – the full manufacturing process is complete

Pilot concept – a supply of the new product, produced in quantity from a pilot production line, enough for field testing with end users.

Phase 5:

Marketed concept – output of the scale-up process from pilot (either a market test/ full scale launch).

Successful concept – new product meets the goal of the project

Speeding the product to market

One of today’s most discussed management goals in product development is accelerated product development (APD), or speeding the product to market. When we let the development process lag, we lose the competitive race. The firm that gets to market 1st has a major short-term advantage, which may sustain for years if its follow-up development practices are sharp. Marketing people are now getting involved much earlier in the new products process. Cycle time metric is the way management measures speed to market (time to market). Marketing can strive to accelerate premarket speed (pre-testing the marketing plan more quickly) and post-announcement speed (getting the sales rep into the field more quickly). There is also the value of mindshare (rather than being 1st to market) – the firm that the target market associates with the product category & that is seen as the standard for competitors to match.

Techniques to shorten cycle times include: the use of cross-functional teams (individuals from marketing, R&D, production, and etc.), parallel or concurrent processing (strategic overlapping of stages – in car making), reducing product complexity (appropriate prototype management), investing more human & capital resources, and turning to a more participative leadership style (top management – how to get through the process faster without sacrificing quality).

Risk & guidelines in speeding to market – cost that are not evident can be disastrous, attempt to cut critical step to get cycle time down (when facing high turbulent environment, product development should be kept as flexible as possible). Product that is brought out too soon may still has bugs (in situations where there are high opportunity costs & low development risks – it’d be better to speed up cycle time, but when there are low opportunity cost & high development risks (Boeing) – it is more appropriate to get the product 100% right.

New services: Services & goods are often arrayed on a scale of pure service (counseling), primarily service & partly a good (insurance), primarily a good & partly service (automobile), and pure good (candy bar). Successful new services found tended to come from firms that used a systematic, comprehensive new service development process with clearly defined stages & regular evaluations & reviews (identical to the new products process). Iterations are less expensive in the development of services and most development runs fast to prototype as there is less cost. There is no inventory of services since they are produced at the point of consumption. In service business, we inventory service capability (McDonalds sell parking convenience as a service, but it was actually created when the parking lot was built – even consultant know to drive the right type of car, use the right business case, wear the right clothing – all have an impact on how well the intangible service recommendations will be accepted & used – such supportive goods are part of the new product creation tasks). New services tend to be successful if they were delivered by trained expert personnel, if they were new & fit well to the market needs, or if the service experience to the customer was improved – a unique superior service. It often fail when they are quick & dirty line additions with little Customer value, or me-too services with no new benefits. Speed in service leads to enhance reputations, images, & increased Customer loyalty.

New-to-the-world products

The fundamental market-related question is whether the market will ultimately value the offering. It is usually difficult for potential Customers to provide useful info about likely acceptance (or perceived value) since they have nothing to which they can compare to, they may not even be able to visualize its potential (99% of technological breakthroughs, people had not been asking for it). These items often require major commitments in form resources & technology, and years of R&D. To be able to make the difficult link between breakthrough technology & market need, firms need to adept at market visioning (“what could be”). With a new-to-the-world product, it is especially important that the voice of the customer (VOC) be brought in as early as possible (at concept generation to provide input to both marketer & R&D). Early Customers involvement with these products is sometimes accomplished by using focused prototypes – early, limited performance versions that Customers can try out & comment on. Through interaction with Customers, designers are inspired to probe, experiment, and improvise, and come up with a successful new product (probe-and-learn). In lickety-stick, the developing team develops prototypes from dozens of different product ideas (lickety), eventually settling on a prototype that Customers like (stick)

Senior management can support R&D in several ways: recognizing & building the firm’s core technical competencies & capabilities, by encouraging knowledge flow throughout the firm, by developing effective, streamlined work processes, by clearly linking basic & applied research, and by assuring an exciting work environment.