innovation & new product strategy
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STRATEGIC MARKETING & PLANNING
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New products opportunities offer superior value to customers andcould range from totally newproducts, to only improvements inexisting products.
What are new products? What dothey offer?
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Customer needs is an importantdeterminant of value opportunities
identified through the process of customer value analysis.
The intention is to find GAPSbetween value expected & valuedelivered .
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CustomerExpectations
Customer
SatisfactionGapActualProduct
Performance(ValueDelivered)
OPPORTUNITIES
(1) New Products(2) Improved products(3) New, ImprovedProcesses(4) Improved supporting
services.
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Customer value analysis finds gapsbetween expectations & satisfaction|
Constant & objective assessment of organizational capabilities is required.Organizations normally havecapabilities for product lineextensions & incremental innovations.
A step-change requires radicalaction!
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Three types:1. Transformational innovation :
radically new, resulting in significantvalue creation e.g. ATMs, iPad;
2. Substantial Innovation: significantlynew, creating important value for customers e.g. CNN CitizenJournalism, Diet Coke;
3. Incremental innovation : improvedperformance or greater perceivedvalue e.g. new fragrance, salted
peanuts.
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Customers are often NOT a good guideto creation of totally new products.In such circumstances managementmust form a vision & be willing to takerisks.Corning Inc. developed opticalfiber technology & succeeded.Apple has severalinnovations to its credit thatfall under transformationalinnovation.
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Study between competing US &Japanese companies revealed that bothtransformational & incremental
improvements can be practiced bycompanies with success.
BUT, radical innovations have the
potential to disrupt existing(sustaining) technologies but that isoften the intention the company has!
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As business evolved IBM ended upcreating three SBUs to match theneeds of each customer type. SBUswas not the innovation, but a new way
of working was: Horizon one business : for traditional,
mature lines e.g. main-frames; Horizon two business : for current
growth businesses; Horizon three business : for many
young businesses.
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Not all new products technology
are breakthroughs! Idea of Post-it Notes came from aresearcher at 3M who put slips of paper to mark songs in his hymnbook but theykept falling. Until he used a failedadhesive.Initial samples sent to office-supply
vendors were rejected not stickyenough! Samples sent to Fortune 500 companies
executive assistants wanted MOREof it!
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1. Developing an innovative culture:HOW?
Open communications across alllevels;
Setting specific New ProductObjectives;
Communicating the role of NewProducts across the organization;
Defining areas of strategic focus(Product, Scope, Markets,Technologies);
Including long-term discontinuousprojects & incremental projects in
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2. Developing an effective planningprocesses
a) Systematic planning , coordination,
decision-making, activities, & functionsrequired;Generating a stream of new productideas;Implementing procedures andmethods for evaluation.
Contd .
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Contd
2. Developing an effective planningprocesses
b) Involving different business
functions: better coordination &integration; c) Setting challenging time frames to
create healthy competition;d) Managing resources linked to delivery
of results;e) Developing products & services in
tandem.
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3. Assigning responsibility for NewProduct Planning?
Coordination at a high level in thehierarchy;
Creating a separate project taskforce for New Product Planning (NPP);
Making NPP team responsible for inter-functional coordination; Sometimescreating a permanent
design center.
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1. Sources of Ideas : Process starts with a
checklist of questions clarifying what isrequired : Should the search be targeted or open-
ended ? How extensive? How aggressive? What sources can be tapped? How? Should ideas come from customers -
How? Should alternative (or disruptive)
technologies be considered? Who manages the idea-search?
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METHODSOFGENERATING
IDEAS
Direct/ IndirectSearch
IncentivizingEmployees
IncentivizingValue-ChainMembers
ApplyingCreativeMethods
Customer ResearchStudies
Alliances/ Acquisition/
Licensing
ReviewingTechnologicalInnovations
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Microsoft Corp : Microsoft Research, hasa separate division , with a budget, topursue new technologies and generateideas;
Sonera Corp : leading wireless carrier inFinland, distributes cameras inhouseholds across Europe, askingpeople to send activity photos. Those are
studied for ideas!Some companies rely on existingcustomers to generate new productideas.
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Beth Comstock at GE corporateheadquarters called herself a little bit ofthe crazy, wacky one - an apt description
for a woman like her who works at GeneralElectric Co.
Comstock, 44, was charged withtransforming GEs culture famouslydevoted to process, engineering, &financial controls - to one thats more
agile and creative.
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Chairman & CEO Jeff Immelt tapped theformer communications chief to becomeGEs first -ever CMO.
The job came with a critical twist: goal ofdriving innovation through the companys300,000 plus ranks.
Creativity is still a word were wrestlingwith, Comstock conceded. It seems a bitindisciplined, a bit chaotic, for a place likeGE.
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Comstock found a more comfortableterritory using the term imaginativeproblem-solving , encouraging people tothink WHAT IF? yet always with the aimof driving growth.One of Comstocks first moves: bring inanthropologists to audit GEs culture who found that GEs famous work ethic wasgreat, but employees wanted morewow more discoveries from the
company founded by Thomas Edison.
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Comstock assumed a role, whoseimportance is spreading throughout BigBusiness she became a self-styledINNOVATION CHAMPION.
She studied the best practices at companies such as Procter & Gamble,FedEx, and 3M . She brought in creativityconsultants, futurists, and design gurus tolead sessions with different operations .
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The consulting firms had names that joltedthe GE types:
A) Play , a Richmond (VA.) group thathelped execs think different , &
B) Jump, based in San Mateo, CA., which
researched how people used things .THE RESULT??
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GE hired more designers to bringbusinesses closer to customers .
Comstock staged dreaming sessions where Immelt, senior execs, andcustomers debate future market trends.Comstock concededs some managersviewed the workshops as a waste of
time. We have a long way to go. But for GE, theres no turning back. Source: Bruce Hussbaum , How to Build Creative
Companies ,BusinessWeek, August, 2005, 77.
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Screening: Removing unpromising ideas,
reducing risk of rejecting good ideas:Tight screening may eliminate good
ideas as well; Eliminating ideas at other stages of
product development process;
Analyzing impact on business &deciding for or against the idea; Determine strategic fit with company
&/or SBU objective.
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Contd Determine strategic fit with company
&/or SBU objective on TWO factors :
Compatibility with organizationalmission & objectives: matchescapabilities & resources;
Commercially feasibility : marketattractiveness, technical feasibility, social/ environmental concerns met.
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Concept Evaluation:
Take ideas through stages: what clearsfirst stage , must go in for detailedevaluation;
Research , decided upon, beforebeginning product development &committing resources;
Testing concepts agreed:Acceptable or unacceptable,Favorable or unfavorable.
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Business analysis: Analyzing commercial performance ; Refining tools based on feedback.
Process:A) Revenue Forecasting: Issue : Influence of newness of product,
market-size & competition quality of
projection ; Ease in established markets: successnorms already exist.
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Business analysis:B. Developing preliminary MarketingPlan: Deciding on key elements: market
target, positioning, marketing mix.C. Cost estimation: Preparing initial cost estimates - likely
to be revised as project progresses.
D. Profit projections: Exercises like breakeven analysis to
estimate likelihood/ timing of projectprofitability.
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NEW PRODUCTCONCEPT
PRODUCTDEVELOPMENT& USE TESTING
MARKETINGSTRATEGY
DEVELOPMENT
MARKETTESTING
LAUNCH
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Development of new product: Product design Packaging design What to make & what to buy?
Product Development Process: Product Specifications/ Industrial Design Prototype Use Tests Process DevelopmentCollaborative Development : e.g. HP Faxdeveloped in collaboration with Matsushita of Japan.
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ProductConcept
R&DPrototype
ProductionPrototype
Product
TargetPositioningPricePromotion
DistributionService
Plan
Concepttest
Productuse test
Marketingcomponents test: Ad
copy,pricing etc.
Markettest
Final productfor national
launchFinal plan for
national launch
Product Marketing plan
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Monitoring & ControlReal-time trackingRole of InternetMatch product performance metrics
with performance targets.
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How Is Intel Changing?We still are driving our core [microprocessor]business as hard as ever, and its still doingpretty well. But weve supplemented it with newgrowth initiatives , which are very exciting andvery different for us. That acquiring companies ,
equating people , and putting a new image on top of the big, powerful chip monster that eatsthe world.
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Whether its networking for cellular communications, solar appliances, or server farms, theres a lot more buzz and energy ,which is causing the company to change theway it behaves.Its not just a big machine continuing to hold on.
We have a bunch of smaller businessesstarting up, which are forced to compete,scratch, and claw for market share.
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Why such a massive overhaul of business?The PC was at the center of computing duringthe 90s, but if you look at the next decade, theInternet is clearly it. The PC is still veryimportant in the Internet era. But if you want to
be involved in this new era, you have to lookfor new growth opportunities. Thats exactlywhat youre trying to do.
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Standard new product planning works inmost cases but other factorsincreasingly influence the process:
1. Technology Push : where newtechnology becomes the force behindnew products & the process driver;
2. Optimizing Platform Products : whenan existing platform is used for newproduct development;
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3. Using Existing Process: when anexisting capability is used e.g. Pepsiintroducing Sierra Mist;
4. Creating Customized Products : largescale busnesses e.g. Aircraftmanufacture;
5. Proactive cannibalization : where acompany deliberately edges out oldproduct to maintain competitiveadvantage & higher profits. E.g. Gillette.
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CustomerNeeds
Analysis
Business
Analysis
Screeningand
EvaluationIdea
Generation
MarketingStrategy
Development
ProductDevelopment
Testing
Commercialization
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