The Strategic Elements of Product Development Chapter 1The Importance of New Products By manufacturing new products, a firm can meet seasonal requirements of CT elt eR SLi oa LOL REI satisfied due to matching products in each of the seasons, and company can get reasonable business. Creativity and innovation is an efficient way to attain TCM Oo© 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.IN estroy Tae) ae ‘ X (fam . ffs fl =In business and technology terms, radical innovation happens when a new entry completely disrupts a business or industry. Many point to the rise of Netflix, first as a mail-order movie service and later as a provider of streaming video, as a radical innovation that put the retail- based movie rental model -- and industry giant Blockbuster -- out of business.Aceording to Harvard TT eg Tana “RadicaLinnovationfocusesion long-term impact and may involve displacing rater tal products, altering the relationship between customers and suppliers, and folg Fb di gF eee sodti) (14) Mam lore the CVF -fo) ifWhy study New Product? Research captures customer preferences, allows your organization to understand the end-user experience, and prioritizes the “wants” and “needs” of a target audience.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\ (a :Globalization Globalization is the process by which people and goods move easily across borders. Principally, it's an economic concept — the integration of markets, trade and investments with few barriers to slow the flow of products and services between nations.Globalization * 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 effi ciency and effectiveness of innovation.. . Top firms deploy over 50% of their R&D spending in foreign countries. Global product teams allow firms to leverage their new product skills across their subsidiaries. Design, R&D, and manufacturing may occur in different subsidiaries around the world. Difficulties in Globalization: Coordinating the efforts across multiple countries to launch a successful new product. Having a global innovation culture — being aware of differences in business and cultural environments and being open to global markets — is important to success.Global New Product Teams * Many multinational firms seek to leverage their product development skills across their subsidiaries and gain competitive advantage by setting up global new product teams. * A product development team is a group of people who oversee the process of a new product design. Each member of the team collaborates with the others to create and implement a strategy. They also work independently to contribute to the overall goal, which is to take the product to marketFIGURE 12 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 22research centers in 13 countries from which they can draw expertise. As @ good example of a global product, ‘consider the Swiffer mop. P&G made use ofits research centers in the United States and France to conduct market ‘esearch and testing in support ofthis new product. ‘Apple: In the development ofthe 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 strvers) crosses international and intercontinental ines, soit operates globally in a streamlined fashion. Itidentifies an unmet customer need (say a ‘certain style of table ata given price point), commissions in-house and outsourced designers to compete for the ‘best design, then its manufacturing partners worldwide compete forthe 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: Lida Ronan, “Bonderles innovation”: The impact of Glohlization on NPD Panning in Three Industries,” Vow, June 206,=> Cultural Innovations A cultural invention is any innovation developed by people. Cultural inventions include sets of behaviour adopted by groups of people. They are perpetuated by being passed on to others within the group or outside it. They are also passed on to future groups and generations.= Global Innovation Culture The global innovation culture values represent an integration of organizational strengths from leading multinational firms. All of these organizations are active in recruiting global talent and promoting culturally diverse teams. Having a global innovation culture means that a fi rm is open to global markets, mindful of differences in customer needs and preferences, and respectful of different national cultural and business environments.Product development, also called mew _ product management, is a series of steps that includes the conceptualization, design, development and marketing of newly created or newly rebranded goods or services.¥ A product development team is a group of people who oversee the process of a new product design. Each member of the team collaborates with the others to create and implement a strategy. They also work independently to contribute to the overall goal, which is to take the product to market.= What Is a New Product? - Categories © New-to-the-world (really-new) products (10% of new products): Inventions that create a whole new market. Ex.: Polaroid camera, Sony Walkman, Palm Pilot, Rollerblade skates, P&G Febreze and Dryel. * New-to-the-firm products(20%): Products that take a firm into a category new to it. Ex.: P&G brand shampoo or coffee, Hallmark gift items, AT&T Universal credit card, Canon laser printer. * Additions to existing product lines (26%): Line extensions and flankers that flesh out the product line in current markets. Ex.: Tide Liquid, Bud Light, Apple’s iMac, HP LaserJet 7P. © Improvements and revisions to existing products (26%): Current products made better. Ex.: P&G’s continuing improvements to Tide detergent and Ivory soap.= What Is a New Product? - Categories © Repositioning (7%): Products that are retargeted for a new use or application. Also includes retargeting to new users or new target markets. Ex.: Arm & Hammer baking soda sold as a refrigerator deodorant; aspirin repositioned as a safeguard against heart attacks;Marlboro retargeted as a man’s cigarette. * Cost reductions (11%): New products that provide the customer similar performance but at a lower cost. May be more of a “new product” in terms of design or production.==The Strategic Elements of Product Development 1.A new products process, 2.A product innovation charter, and 3.A well-managed product portfolio.The New Product Process © The new product 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 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 fi rm objectives and strategies and that address marketplace opportunities.=> Product Portfolio Management Product portfolio management helps the firm assess which new products would be the best additions to the existing product line, given both fi nancial and strategic objectives.Phase 1: Opportunity Identification and Selection Phase 2: Concept Period Phase 3: Concept/Project Evaluation Phase 4: Development (Includes both technical and Marketing tasks) Phase 5: Launch