JOURNAL

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Chapter 2
The New Products Process

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The Procter & Gamble Cosmetics Saga

  • Senior management committed to new product development.
  • No clear Cosmetics product strategy
  • unfocused product initiatives
  • too many customer segments targeted
  • Cosmetics used strategic elements to make business unit profitable:
  • New products process
  • Product Innovation Charter (PIC)
  • Product portfolio

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In early 2000s, P&G bought Wella and Clairol for more than $10 billion, a boutique hair salon chain, and partnerships with perfume companies Valentino and Dolce & Gabbana under A.G. Lafley, CEO, building to almost $20 billion in revenue. Now they are divesting over 100 HBA brands including Wella, Clairol, CoverGirl merging them with Coty Inc. in a $13 billion deal on brands totalling about $6 billion sales/year.

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P&G Cosmetics PIC

  • Situation Assessment:
  • Underserved consumer market wanted quality facial products (e.g., cleansers, eye products)
  • Supply chain uncoordinated:
  • production and shipments unaligned with demand
  • market forecasts not driving shipping schedules.
  • PIC recommended a strategic focus only on facial products.

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Basically, P&G was out of its comfort zone, and did not know enough about the culture and brand equity of HBA products – out of their comfort zone!

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P&G Cosmetics & the New Products Process

  • P&G Cosmetics used a phase process similar to Chapter 1 with project teams.
  • Consumer research done early (the voice of the customer).
  • Tough evaluation steps carefully implemented as new products were compared to best practices and benchmarks.

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P&G Cosmetics & the New Product Portfolio

  • P&G Cosmetics systematically added new products to maximize buzz and excitement in the marketplace.
  • Management used “initiative rhythm” for product launches:
  • If several eye makeup products were on the market, they would not immediately launch another.

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P&G Cosmetics &
Effective Team Management

  • Senior Cosmetics executives and corporate management committed to success.
  • Initiative Success Managers hired to lead strategy development, manage evaluation meetings, train employees, etc.
  • Best team leaders rewarded based on performance.

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The Phases of the New Products Process

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Figure 2.1

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The Evaluation Tasks in the New Products Process

Figure 2.2

Phase 1. Opportunity Identification/

Selection

Phase 2. Concept Generation

Phase 3. Concept/Project Evaluation

Phase 4. Development

Phase 5. Launch

Direction;
Where should we look?

Initial Review:

Is the idea worth screening?

Full Screen:

Should we try to develop it?

Progress Reports:

Have we developed it?

Market Testing:

Should we market it?

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Phase 1: Opportunity Identification/Selection

  • Active and passive generation of new product opportunities as spinouts of ongoing business operations.
  • New product suggestions, changes in marketing plan, resource changes, and new needs/wants in the marketplace.
  • Research, evaluate, validate, and rank opportunities.
  • Give major opportunities a preliminary strategic statement.

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Activities that Feed Strategic Planning for New Products

  • Ongoing marketing planning (e.g., need to meet new aggressive competitor).
  • Ongoing corporate planning (e.g., senior management shifts technical resources from basic research to applied product development).
  • Special opportunity analysis (e.g., a firm has been overlooking a skill in manufacturing process engineering).

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Sources of Identified Opportunities

  • An underutilized resource (a manufacturing process, an operation, a strong franchise).
  • A new resource (discovery of a new material with many potential uses).
  • An external mandate (stagnant market combined with competitive threat).
  • An internal mandate (new products used to close long-term sales gap, senior management desires).

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Phase 2: Concept Generation

  • Select a high potential/urgency opportunity, and begin customer involvement.
  • Collect available new product concepts that fit the opportunity.
  • Generate new opportunities.

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Phase 3: Concept/Project Evaluation

  • Evaluate new product concepts (as they begin to come in) on technical, marketing, and financial criteria.
  • Rank them and select the best two or three.
  • Request project proposal authorization with product definition, team, budget, skeleton of development plan, and final PIC.

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Stages of Concept/Project Evaluation

  • Screening (pretechnical evaluation)
  • Concept testing
  • Full screen
  • Project evaluation (begin preparing product protocol)

The first stages of the new products process are sometimes

called the fuzzy front end because the product concept is

still fuzzy. By the end of the project, most of the fuzz should

be removed.

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Phase 4: Development (Technical Tasks)

  • Specify the full development process, and its deliverables.
  • Undertake to design prototypes, test and validate prototypes against protocol, design and validate production process for the best prototype.
  • Slowly scale up production as necessary for product and market testing.

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Phase 4: Development (Marketing Tasks)

  • Prepare strategy, tactics, and launch details for marketing plan.
  • Prepare proposed business plan and get approval for it.
  • Stipulate product augmentation (service, packaging, branding, etc.) and prepare for it.

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Phase 5: Launch

  • Commercialize the plans and prototypes from development phase.
  • Begin distribution and sale of the new product (maybe on a limited basis).
  • Manage launch program to achieve the goals and objectives set in the PIC (as modified in the final business plan).

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The Evolution from Concept to New Product

Figure 2.3

Corresponding New Products Process Phases:

Opp. Identification  Concept Generation  Project Evaluation  Development  Launch

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Methods for Accelerating Time to Market

  • Have a clear PIC (Product Innovation Charter).
  • Have a third-generation new products process that permits overlapping phases.
  • Use a new product portfolio and careful project selection to allocate scarce resources.
  • Focus on quality: “get it right the first time.”
  • Have an empowered cross-functional team.

Source: Robert Cooper (1993).

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Additional Techniques for Accelerating Time to Market

  • Organization: not just an empowered team, but effective team leadership - focus on organizational learning and knowledge transfer.
  • Intensify Resource Commitments: Integrate vendors and resellers, get users involved, and capture the Voice of the Customer.
  • Design for Speed: use computer-aided design, rapid prototyping, common components, get fast trial.
  • Rapid Manufacturing: standard processes, computer-aided manufacturing, just-in-time delivery.
  • Rapid Marketing: Use rollouts, spend as needed to generate awareness, offer trial purchasing.

Figure 2.4

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What About New Services?

  • Successful new services tend to come from firms that use a systematic process much like the new products process – the tools all fit.
  • Iterations may be more frequent since they are less expensive.
  • Unique, superior service must be delivered, to achieve success.
  • Speed to market with services is important, especially in enhancing reputation, image, and customer loyalty.
  • Most important adjustments have to do with the “customized” experience of each service customer.
  • The human interaction between service provider and customer is of highest importance.
  • The customer evaluates the service as the sum of its parts.

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Another note about service is that it has no category, and is part of perfect competition. People do not compare just hotels to one another, for example. They may compare their hotel service experience to Zing cell phone customer service, Nordstrom’s, or a Disney World experience.

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New Service Examples

  • Jet Blue: focused on friendliness, customized experiences, easy communication by website, stress on safety, gathers much customer feedback.
  • FedEx: customers are co-creators and provide early input, ethnographic studies suggest opportunities such as greater access, more digital services, and service offerings such as photocopying (hence the purchase of Kinko’s).

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Interestingly, Southwest Airlines mostly owns humor as a defining competitive edge, and helps mitigate negative service experiences. SWA even has notebooks on successful humor routines for new cabin attendants to use. Customers can recount their favorite SWA humor routines, and it helps build loyalty.

FedEx not only owns the best overnight delivery promise reputation, but also TLC handling of packages. For example, many sensitive electronics companies (e.g., Dell, Apple) use FedEx instead of UPS because UPS is infamous for packages having to survive a 5-foot drop test. Beware of how your operations and logistics could contribute to negative brand image, and lost business!

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What About New-to-the-World Products?

  • The challenges are different, but the first phase remains the same: opportunity identification and development of a strategic statement.
  • Clear connection required between the radical innovation and the firm’s strategic vision.
  • A firm may establish a transition management team to move the R&D innovation project to business operating status.
  • The new products process is more explanatory: need to bring in Voice of the Customer (VOC) early.
  • Lead users may be critical here (see Chapter 5 discussion).

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Two basic types of new-to-the-world products:

  • Non-STEP innovations – potentially disruptive innovations that do not significantly alter SOCIAL, TECHNOLOGICAL, ECONOMIC, OR POLITICAL/Regulatory aspects – e.g., potable water treatment systems. These could be blue ocean ideas or not.
  • STEP innovations – that forever change some or all aspects of STEP – e.g., the humble plow that sped up settlement evolution, disrupting the nomadic hunt and gather societies. This is the rare 1% of all innovations. Next up? Room temperature nuclear fusion, which essentially disrupt all other forms of commercial energy in the world.

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Managing Breakthrough Innovation

  • Incubation Stage
  • Involves customer and market interaction as well as technical development.
  • Tolerate failure but learn from it (Google claims a 60% failure rate on innovative products).
  • Longer and much more expensive than typical business development, but required for breakthrough opportunities.
  • Discovery-Driven Planning
  • Forecasts and plans evolve as more information becomes available.

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The Probe-and-Learn Process for New-to-the-World Products

  • Focused (limited-performance) prototypes
  • Example: Iomega Zip Drive: over 50 prototypes were built to test out ideas with customers.
  • “Lickety-Stick” iterative process: non-linear, more flexible process in which dozens of prototypes may be tried (“lickety”) before settling on one that customers like (“stick”).

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