Innovation Management Chapter 9 PDF

4/20/2024 Innovation Management Chapter 9 New Product Development Arsalan Safari Associate Professor Outlines New Product Development (NPD) Sequence of Events During NPD NPD Four Stages Model Customer Roles in NPD A new product has different interpretations Educating Customers for New Product Produc...

4/20/2024 Innovation Management Chapter 9 New Product Development Arsalan Safari Associate Professor Outlines New Product Development (NPD) Sequence of Events During NPD NPD Four Stages Model Customer Roles in NPD A new product has different interpretations Educating Customers for New Product Product Failure Adopting Sustainable NPD (S-NPD) Strategy 1 4/20/2024 Introduction New product development (NPD) is a part of the innovation process, where innovative idea becomes real and tangible New products must generate profits to cover the initial cost NPD requires significant market research to introduce the right product to customers Some products good fail after lunching to market From Idea Generation to Entrepreneurship FINAL SOLUTION (Startup Phase) ANALYSIS/ RESEARCH 2 4/20/2024 From Idea Generation to Entrepreneurship Business Approach Generating/selecting an Idea This part is covered in innovation management section (i.e., needs assessment, concept development, detailed design,..) Developing successful business ideas Including completing feasibility Analysis and business plan Moving from an idea to a startup Implementing business plan; building the management team; obtaining seed funds, commercialization (sales & distribution)… FINANCIAL FEASIBILITY …. Expanding the firm’s activity; commercial maturity; market expansion & consolidation … If Yes for All ORGANIZATION FEASIBILITY  Purpose      Managing and growing the firm Objectives INDUSTRY/MARKET FEASSIBILTIY  Management Description of end state  Resource Early identifiedsufficiency risks and issues PRODUCT/SERVICE assumptions Industry attractiveness  …. Major and constraints FEASIBILITY  Old or new/growing rate  Product/service details  … Interdependent projects  … Life  cycle Product/service desirability  … Target market attractiveness  Manufacurability/durability/safety/…  … Detailed Business Plan - For implementation - For investors - For owners/partners  Fatal flaws  Product/service demand  Potential customers’ feedback Business development plan of an innovation can be started after Concept Development phase discussed earlier. Idea Generation (Opportunities) 3 4/20/2024 Sequence of Events During NPD linear NPD model Cost / Profit During NPD When sales start, we begin to cover the initial cost. The more we sale, the quicker we cover the development costs. Profit Cost Zero profit 4 4/20/2024 NPD Concepts Business opportunity: A possible idea that may be transformed into a revenue-generating product. Product concept: A physical form or a technology plus a clear description of benefit (features). Screening: A series of evaluations, including technical, commercial and business assessments of the concept. Prototype: A tentative version of a product including features and benefits. Ideas generation: identifying the business opportunities for new products. Idea screening and selection: choosing the best product concept that satisfy certain criteria (technical, commercial, financial, resources…) Product development: translating the selected idea into a physical product or a new feature. Product introduction: testing and launching the new product to markets. Customer Involvement is Important NPD Four Stages Model The process cycle is repeated to improve the product over time 5 4/20/2024 An activity-stage model Source: Adapted from Crawford, C.M. (1997) New Products Management, 5th edn. Concurrent engineering (example of tech-based products) 3. Technical development 1. Strategic planning marketing marketing production production engineering engineering 4. Commercialisation marketing production engineering marketing production engineering 2. Concept generation 6 4/20/2024 Product Life Cycle The demand for each product will decrease after sometime; unless it was replaced by a newer version “more attractive”, or more features are added to support it (by innovation). This is why NPD is a critical process for firms to stay in market. Customer Roles in NPD Since the new product are for markets/customers, they should be included in every stage to ensure that the product reflects their needs. Customer role NPD Stage Key issues Customers as resource for many ideas Ideas generation - Finding the right customer groups to collect reliable information. - Finding ways to motivate them to participate. - Tools to capture customer knowledge - Differential role of existing (current) and potential (future) customers Customer as co-creator Idea screening and selection - Ranking the ideas based on their importance to customers. - Choosing the best concept that creates more values 7 4/20/2024 Customer Roles in NPD Customer role NPD Stage Key issues Customer as co-creator Product development - Involving customers in a wide range of development tasks, to define the final product design. - Building a prototype - Defining the appropriate product features (size, design, taste) Customer as user Product Introduction - Verifying product features - Testing product performance - Building customer service centers What Kind of Customers Needed for NPD Customers involvement in the NPD process is critical, as they provide valuable information and ideas. However, I need to be careful in selecting these customers, to get reliable and useful information. Lead users are the best source of information for NPD: The first to buy products (loyal and passionate to improvement) Generate creative ideas to improve the product (new one) Contribute to identification of future opportunities (vision) Welling to participate in evaluating emerging concepts Can be used to develop and test new product features 8 4/20/2024 Examples of a Bad Products A new product has different interpretations The concept of new product varies across different industries. For example, in the detergent case, the following are considered a new products: 1- A minor change leads to a new product. For example, improve the strength of detergent 2- Adjusting the package leads to a new product 3- Introducing a new design leads to a new product 3- Introducing a new smell can produce a new product 9 4/20/2024 A new product has different interpretations Introducing the same product with a new size (change packaging), with the same features (taste)  Common in the food industry. A new product has different interpretations Introducing a new version of the product by adding new features. For phone industry, it usually happens annually. 10 4/20/2024 A new product has different interpretations Introducing a totally new product by creating new design. Require significant recourses and time to come to market Educating Customers for New Product Sometimes new products are initially rejected by customers, but later on they become successful (after realizing their benefits). Examples: Fax machines 1960s: Initially rejected by consumers who could not see any application for it. Microcomputers 1960s: Initially consumers could not predict all the potential uses for microcomputers. Dyson bagless vacuum cleaner 1990: Consumers did not want to see dirt collected in a transparent container. Later on, became very successful (seeing the amount of dirt!). Chryslers Cruiser 1990s: This product was not rejected, but expected to be good for a small market. Later on, it was widely accepted in the industry. 11 4/20/2024 Educating Customers for New Product It is important to introduce totally new products to market,  Creating a competitive position (controlling price) However, even if a product is developed with the help of some customers, others may not accept it (due to its complete novality). Therefore, firms should launch a robust marketing campaign to educate the mass market about the detailed value of the new product. Example: When I-pod was introduced, they gave a detailed explanation to its benefits: saving 500 songs, ability to change songs, no need to carry many CD/ cassette, save the songs that you like, easy to carry, it comes with different colors…. NPD Across Different Industries The level of technical activities is more intense in some industries, which experience more complicated processes. (Engineering) (Business) Fast Moving Consumer Goods (beverages, healthcare, household and personal care) 12 4/20/2024 Product Failure This can happen when customers refuse to buy it, because it is not attractive or reflect their needs, or not aware of its value. This is why it is very important to integrate them in each stage of NPD, and educate them Finding the right communication channel with customers is important to define their needs accurately. Sometimes, the new technology might be amazing, but it should be reformatted to fit customers needs. Product Failure 13 4/20/2024 Reasons for New Product Failure Adopting Sustainable NPD (S-NPD) Strategy Sustainability is becoming a component of business practices (Chpt. 5) S-NPD involves introducing a new product that considers sustainability criteria at each stage,  Focusing on minimizing negative impacts on society and environment. Example: 1- Reduce energy consumption 2- Reduce material consumption 3- Adopt recycling programs 4- … 14 4/20/2024 Adopting Sustainable NPD (S-NPD) Strategy Advantages: Reduce operation costs (energy and water costs) Attract new customers and increase sales (green products) Tax incentives (adopting Sust. strategy) Reduce negative impact on society and environment (enhancing public image) Boost workforce morale and innovations (caring for community) Example VW 3M 3M has over 60,000 products  saved $ billion by adopting S-NPD Volkswagen (VW) 2015 fraud in air pollution sensor  lost over $ 35 billion 15 4/20/2024 Summary NPD offers organic growth for firms. NPD has to go through multiple stages.  Necessitate effective project management The marketing and R&D interaction is a critical dimension of NPD. Customers can have pivotal roles in NPD, and educating them is crucial. A new product has various dimensions that can be changed. Adopting a sustainable NPD (S-NPD) strategy is crucial in minimizing the risk of new product failure. 16