new product management

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Chapter 2
The New Products Process

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The Procter & Gamble Cosmetics Saga

  • Starting point: senior management commitment to new products.
  • P&G’s Cosmetics business unit had no clear product strategy, unfocused product initiatives, and too many customer segments being targeted – in short, a lack of focus.
  • P&G Cosmetics skillfully used all three strategic elements and made the weak business unit profitable.

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P&G Cosmetics and the PIC

  • Situation Assessment:
  • Underserved consumer market that wanted quality facial product such as cleansers, eye products, etc.
  • Supply chain was uncoordinated as production and shipments were not tied to demand; market forecasts were not driving shipping schedules.
  • PIC recommended a strategic focus on products for the face – other opportunities would not be pursued.

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P&G Cosmetics and the New Products Process

  • P&G Cosmetics used a phased process like that of Chapter 1.
  • Project teams established early in process.
  • Consumer research done early and used in the process (the voice of the customer).
  • Tough evaluation steps were carefully implemented as new products were compared to best practices and benchmarks.

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P&G Cosmetics and the New Product Portfolio

  • P&G Cosmetics systematically added new products such that maximum buzz and excitement was created in the marketplace.
  • If already several eye makeup products on the market, they would not immediately launch another. Management called this an “initiative rhythm” for product launch.

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P&G Cosmetics and the Role of Effective Team Management

  • Senior Cosmetics executives were committed to success as was corporate level management.
  • Initiative Success Managers were hired to lead strategy development, manage evaluation meetings, train employees, etc.
  • The best team leaders were sought and rewarded based on performance.

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The Phases of the New Products Process

Phase 1: Opportunity Identification/Selection

Phase 2: Concept Generation

Phase 3: Concept/Project Evaluation

Phase 4: Development

Phase 5: Launch

Figure 2.1

The Evaluation Tasks in the New Products Process

Figure 2.2

Opportunity Identification/

Selection

Concept Generation

Concept/Project Evaluation

Development

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 the ongoing business operation. New product suggestions, changes in marketing plan, resource changes, and new needs/wants in the marketplace. Research, evaluate, validate, and rank them (as opportunities, not specific product concepts). Give major ones a preliminary strategic statement to guide further work on it.

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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 and generate new ones as well.

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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 when have 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) and manage the 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 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 also effective team leadership and 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.
  • Therefore the human interaction between service provider and customer is of highest importance.
  • Consider how the customer evaluates the service: it may be viewed as the sum of its parts.

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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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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 exploratory: need to bring in Voice of the Customer (VOC) early.
  • Lead users may be critical here (see Chapter 5 discussion).

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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 Role of the Serial Innovator

  • Mid-level, technical employees who think and work differently and follow their own new products process.
  • Critical to firms being able to launch radical innovations successfully and repeatedly over a long period of time (Apple, P&G, Intel).
  • Challenge: Identify, manage, and properly reward the serial innovator (they are rare!).

What Does the Serial Innovator Contribute?

  • Can bridge the gap between technology and market, in iterative fashion.
  • Begin by understanding customer problem then discover technical solutions to those problems.
  • Oscillate between customer need and technology solution.
  • Can also bring in market information (e.g., is the market demand large enough?).

The Serial Innovator “Process”

  • Not really a process! (no steps or fixed order).
  • Activities include:
  • Finding a problem important to customers.
  • Check potential market size and revenue stream.
  • Understand the problem: technology solutions, competition, customer requirements.
  • Determine if the problem is interesting to customers (willing to pay) and to the firm (fit with product strategy).
  • Invent solution to problem and check customer acceptance with a prototype.
  • Get the product into development and gain market acceptance for it.

Recognizing Serial Innovators: Innate Characteristics

  • Systems thinking (can connect disjointed information).
  • High creativity (though not exceedingly high).
  • Curiosity in several areas of interest.
  • A knack for intuition based on expertise.
  • A sincere desire to solve customer problems.

Source: Griffin, Price and Vojak, Serial Innovators: How Individuals Create and Deliver Breakthrough Innovations.

Spiral Development and the Role of Prototypes

  • Spiral development implies many iterations between firm and customer. Useful for new-to-the-world products.
  • “Build-test-feedback-revise” process:
  • Early non-working (focused) prototype (e.g., cell phone made of wood or foam)
  • Tested with customers
  • Customer feedback obtained on what needs to be changed
  • Based on the feedback, the next prototype is prepared and the cycle continues
  • Note: early prototypes may precede customer specifications! The new products phases may be done out of order.

Spiral Development in Action

  • Focused (limited-performance) prototypes
  • Example: Iomega Zip Drive: over 50 prototypes were built to test out ideas with customers.
  • Other terms encountered:
  • “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”).
  • Also known as “probe-and-learn” process.

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