presentation winning at new products

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© Product Development Institute 2007Private and Confidential

34 Stone Church Road, Suite 111Ancaster, Ontario, Canada, L9K 1P4

P: 905-304-8797 F: 905-304-8799www.prod-dev.com www.stage-gate.com

Winning at New ProductsPathways to Pathways to

Profitable Product Profitable Product InnovationInnovation

ECO WORLD STYRIA – Graz, Austriawith: Dr. Robert G. CooperProduct Development Institute Inc.

& McMaster University, CanadaE-mail: [email protected]

Contact in Germany, Austria, Switzerland:five i`s innovation consulting gmbh

Dr. Angelika [email protected]

www.five-is-innovation.com

2© Product Development Institute 2007

Private and Confidentialwww.prod-dev.com www.stage-gate.com

Product Innovation: The Business Challenge this Decade

High positive impact1:New products currently represent about 30% of companies’ salesNew products on the market for 3 years or less

Companies expect to increase rate of product introductions by 21% over the next 5 years2

Almost half of CEOs rate innovation as “very critical” to their future business success3

Companies that are doing well today invariably have an enviable stable of new productsInnovativeness drives companies’ investment value4

Sources: 1. The PDMA Foundation's 2004 Comparative Performance Assessment Study (CPAS).2. Coopers & Lybrand survey3. Fast, Focused, Fertile: The Innovation Evolution, Cheskin and Fitch: Worldwide, 20034. Based on a study of Fortune Magazine “Most Admired Companies” survey

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Some Bad News Too!New Product Management Is In Trouble

44% of firms’ PD projects fail to meet profit objectives1

Only one in seven concepts is a winnerPerformance ratings1:

32% of businesses rate their NPD speed and efficiency “very poor”Only 27% rate their NPD profitability relative-to-spending as “high”28% of businesses don’t even measure their NPD performance results!

1. Source: APQC Benchmarking study

If you don’t know how well you’re doing versus these numbers, it’s time to put NPD metrics in place



Some Critical Performance Drivers That Make Businesses Profitable at NPD

Based on the NewProd Studies and APQC Benchmarking Studies of almost 2000 new product launches in 500+ firms*

*Studies conducted by Robert G. Cooper, Scott J. Edgett

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The Innovation Diamond

Product Innovation & Technology

Strategy for the Business

Idea-to-Launch System:

Stage-Gate®

Climate, culture, teams & leadership

Resources: Commitment & Portfolio

Management

And the Four Points of Performance

Stage-Gate® is a trademark of Product Development Institute Inc.

BusinessBusiness’’s new s new product product

performanceperformance



Elements of a Product Innovation Strategy

Percentage of Businesses

10% 20% 30% 40% 50% 60% 70% 80%

37.9%27.6%

19.2%Product roadmap in place

41.4%26.9%

15.4%Strategic buckets

69.0%64.8%

53.8%Strategic arenas defined

58.6%38.1%

23.1%Long term commitment

58.6%46.3%

30.8%Role in Business goals

51.7%38.1%

34.6%Clearly defined NPDgoals

Worst Performers

Average Business

Best Performers

Best performers articulate a product innovation strategy

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Another Critical Performance Driver




Stage-Gate®



Management






A Lean, Rapid & Productive Idea-to-Launch System

Many leading U.S., European & Japanese firms have implemented a world-class “idea-to-launch” processes or Stage-Gate® systems

73.7% of U.S. product developers have adopted Stage-Gate®

(source: APQC Best practices Study)The results are impressive:

Fewer errors & less recyclingShorter times to market (by about 30%)Better cross-functional communication & cooperationEarlier detection of failures & higher success ratesMore projects on time & on budgetBetter launch & higher customer satisfaction

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A World Class Idea-to-to-Launch NP SystemEvery best practice business has a NP Process1

Just a “given”“necessary for doing business”

1. Source: APQC Benchmarking study

New Product SuccessesInputs: Ideas Prioritization &

Execution



An Overview of the Stage-Gate® System

Discovery

Gate1

Stage 1

Idea Screen

Scoping

Gate2 Stage 2

Second Screen

BuildBusiness

Case

Gate3 Stage 3

Development

Go ToDevelopment

Gate4 Stage 4

Testing &Validation

Go ToTesting

Gate5 Stage 5

Go to Launch

Launch

Post-LaunchReview

Driving New Products to Market

Stage-Gate®: A five stage, five-gate roadmap along with Discovery and Post-Launch Review

About 30% of companies have an effective idea-to-launch process – the rest are deficient

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#1: Customer Focused

Developing and delivering new products that:

Are differentiatedSolve major customer problems And offer a compelling value propositionto the customer or user

is the number one key to success and profitabilityConceiving such unique, superior products is no easy taskBegins with a thorough understanding of the customers’ & users’ unmet and unarticulated needs thru in-the-field voice of customer workThe customer or user must be an integral part of the entire development process



Build a Customer Focus into the Process1st pay-off: A winning and profitable product

Unique superior productsDifferentiated, compelling value proposition

2nd pay-off: Reduces time, doesn’t add time!

Sharpens product definitionGets the product specs rightConfirms product design early in the processMinimizes last minute changes and panics

A strong market orientation is critical to success and is missing in the majority of new product projects

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Competitive Product Advantage Gained Thru Customer Focus

86.2%

60.0%23.1%

Percent of Businesses Whose New Products Have Product Advantage vs. Competitive Products

Low Productivity Businesses

Average Business

High Productivity Business

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

58.6%

40.6%28.0%

Superior quality versus competitors

58.6%38.8%

15.4%Superior to competing products in meeting

customer needs

65.5%

44.1%19.2%

Better value for money for customer

62.1%34.3%

7.7%Offer customer new

& unique benefits

Main benefits areimportant to customer



Customer Focused Means

Must build in a customer-focused strategy – identifying and exploiting shifting competitive advantageKey Principles here:1. Necessary to understand customer value

• Focus on their unspoken, unarticulated and often hidden needs

• Must go beyond wants, requests and specifications2. Must be face to face – touching real customers

• The entire project team• At multiple customer sites

3. Must have constant customer interaction, testing & validation of the product as its evolves from concept thru to final product

Get customers and users involved throughout the entire process

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A Strong Customer Focus Means Vital Actions

Gate 1

Discovery: Ideas

GenerationStage 1: Scoping

Stage 2: Build Business

Case

Stage 3: Development Stage 4:

TestStage 5:

Full Launch-

Go to Dev Go to Test2nd Screen

Gate 2 Gate 3 Gate 4

Go toLaunch

Gate 5

ProcessAudit

PLR

Idea Screen

Ensuring that the customer / user is involved very early in the process

Executing a proficient launch –well planned, properly resourced

Market research – not just confirm-ation – but as an input to design

Broadening the base of customers –beyond the lead user

Rapid-prototype-and-tests during the Development phase – iterative

Well-planned customer tests & trials –use rigorous, agreed methodology



#2. Front-End LoadedTwo Key Issues here:

1. Doing the right up-front homework• What homework?• And how much homework is enough?

2. Getting fact-based product definitionWorking with fluid information• Changing customer requirements • Shifting market conditions

Which lead to fluid and flexible product definitions

Stage 1

Scoping

Gate2 Stage 2

Second Screen

BuildBusiness

Case

Gate3 Stage 3

Development

Go ToDevelopment

Gate1

Idea Screen

Discovery

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Front-End Homework is EssentialIt’s false economy to cut corners here!Key to both timeliness and success

57.1%

37.9%

32.1%

37.9%

29.2%

64.3%

55.2%

26.3%

16.5%

27.0%

18.3%

21.3%

43.7%

36.3%

23.1%

4.0%

15.4%

7.7%

12.0%

23.1%

34.6%

0% 10% 20% 30% 40% 50% 60% 70%

Business & financialanalysis

Value-to-customerassessment

Concept testing

Market research

Source-of-supplyassessment

Technical assessment

Prelim marketassessment

Percent of Businesses That Execute Well

Low Productivity Businesses

Average Business

High Productivity Business



Does more front-end homework mean longer times to market?

1. More time and money spent on the front-end greatly improves the odds of success – there is clear evidence for this!

2. More homework results in better & sharper product and project definition – this speeds up the Development phase (less recycling and wasted time)

3. Front-end homework done anticipates product problems and design changes – these product design changes are made early in the game (rather than as the product is going to market)

NO!

“Do it right the first time” – DIRTFooT

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And Build In a Product Definition StepBefore Development Begins

An all-party agreement between team members and senior managementIncludes:

Project scopeTarget market definitionProduct concept – whatthe product will be & doPositioning strategy,benefits to be delivered and

compelling value propositionProduct’s requirementsand high level specs

Establishes the goal-posts – what’s expected – so that Development can speed towards its goal

Product Definition- target market- concept- positioning & price- requirements, specs

Best performing businesses emphasize up-front homework leading to sharp, fact-based Product Definition



The Integrated Product Definition

ProductDefinition

Product Concept

Positioning (incl. price target)

Benefits to be Delivered

Features, Attributes,

Requirements

High Level Specs Project Scope

Target Market

Value Proposition

And what the product will not be!

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Spiral DevelopmentHandles the dynamic information process with fluid, changing informationGets the product right

By Contrast: the Rigid, Linear ProcessFront-end work or homework is doneThe product specs are determined, the product definition is fixedDevelopment proceeds – the product is developedThen tested… but…

#3: Spiral Development

Stage1- 2

Front-End Homework

Gate3 Stage 3

Development

Go ToDevelopment

Gate4 Stage 4

Testing &Validation

Go ToTesting

Gate5

Go to Launch

Product Product Definition Fixed Definition Fixed

HereHere



Fluid or Unreliable Information

The product definition was not quite right in the first place

Or market and customer requirements changed

Or a new competitive product was introduced

Or new technical possibilities become available

A Rigid, Linear Process does not work

Not adaptive

Does not responding to changing and fluid information

What to do?

But Things Change!

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They use a series of iterative steps or “loops”Build-test-feedback-and-revise

They define what information is fixed and reliableAnd define what design elements of the product are fixedversus variable (fluid)They develop a first very early version of the product

• A virtual prototypeThey test it with the customer, seeking fast feedbackWhich they then use to produce the next and more complete version, a crude model or rapid prototype… and so on

Use tools:Virtual prototypesRapid prototypesLaptop & video projector

Smart Teams Practice Spiral Development

Get something in front of people!

People don’t know what they’re looking for until they see it.



Spiral Development: A Series of “Build-Test-Feedback-Revise” Iterations

The Customer or User

Gate2 Stage 2

BuildBusiness

Case

VoC User Needs &

Wants Study

Full Prop Concept

Test

Gate3 Stage 3: Development

Rapid-Proto &

Test

1st-Proto & Test

Next Proto &

Test

Gate4 Stage 4

Testing &Validation

Field Trial,

Beta Test

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Sample Spirals in Stage 2 - Business Case

VoC User Needs-and-Wants Study

Face to face interviewsBy entire project teamWith users and customersIdentity needs, problems, issues, requirementsMove beyond wants and specs!

Gate2 Stage 2

Build Business Case

Gate3

Stage 3: Development

Full Proposition Concept TestA simulated “sell”Pre-Development!With a “virtual prototype” or “protocept”And brochures, collaterals, spec sheetAnd PPT selling presentationGauge: interest, liking, preference and purchase intent



Sample Spirals in Stage 3 - Development

Rapid-Prototype & TestAgain a test of proposed productEarly in Development StageUsing a rapid prototype, crude prototype, or model

• 3 dimensional and physicalAgain with selling materialsGauge purchase intent

Gate3 Stage 3: Development Gate

4TestingStage 4

1st and Next Prototype TestMuch the sameBut versions of product much closer to the “final product”Always gauging purchase intent

A series of rapid build-test-feedback-and-revise spirals

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These loops or spirals enable teams to quickly confirm elements of the products’ design

Separate facts from speculationEstablish interest, liking & purchase interest

And respond quickly to changing customer requirementsMoving rapidly to a finalized productThese “loops” or “spirals” are built in from Scoping right thru the Development Stage & into Testing

Spiral Development: An Effective Way Handle Unstable and Fluid Information

May take a bit more work in the short term…But saves a lot of rework, recycle and going ‘back to beginning’

A key way to improve NPD Productivity



#4: An Effective Launch PlanNot only must the new product meet customer needs & wantsIt must be marketed – sold! – effectivelyA lack of an effective launch kills many new products

Percent of Businesses That Execute Well

0% 10% 20% 30% 40% 50% 60% 70% 80%

65.5%35.6%

24.0%Market launch

66.7%57.1%

35.0%Production start-up

51.9%28.4%

16.0%Pre-launch businessanalysis

41.7%26.7%

9.5%Test market or trial sell

70.4%51.5%

24.0%Customer tests of product

Worst Performers

Average Business

Best Performers

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Components of a Launch Plan

Product Strategy• Product positioning• Benefits & features• Value proposition• Quality standards• Models & range• Packaging• Branding• Warranties & guaranties• Servicing

Pricing Strategy•Positioning Strategy•Pricing strategy & policy•Costs:

DevelopmentMarket launchProduction & supplySellingOther

•Target margins & price•Discounts, deals•E-pricing•Method of payment, terms & conditions

•Credit & financing

Promotion Decisions• Claims & testimonials• Push versus pull• End user advertising• Trade advertising• Web page & e-marketing• Demonstrations• Sales aids (collateral materials)• Premiums & coupons• Samples & displays• Publicity & PR

Marketing Mix: Components of

Launch Plan

Distribution Decisions• Use current sales force• Specialty sales force• Distribution channels• Manufacturer’s reps• Dealers• Distributors, jobbers• E-channels

• Margins paid, discounts• Training & support

• Joint advertising & promotion

• Incentives• Inventories, transportation &

warehousing• Payment & terms



The Design of the Marketing Plan Is Done as Part of the New Product Process

Not at the end!

Rule: The marketing plan begins at the first few steps of the new product processStart earlyGet the entire Project Team working on the Marketing PlanMust overlay the marketing planning process on top of the new product process

A solid launch plan, backed by the right resources, and properly executed, is fundamental to success

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Overlaying the Marketing Planning on the NPP

First cut at...marketing objectivessize-up (analysis) of the markettarget market definitiondefining product concept & strategyassessing market & sales potential

Define precisely...target market & positioning strategyproduct requirementsproduct benefits & featurestarget priceexpected sales & revenues

First cut at...preliminary market launch plan

Idea or Discovery•Idea generation•Initial Screening (Gate 1)

Stage 1. Scoping•Preliminary market, technical & financial assessment

Stage 2. Business Case•VoC – user needs & wants studies•Competitive & market analyses•Concept tests with users•Detailed technical assessment•Detailed financial analysis

NP Stage-Gate Process Corresponding Marketing Planning Tasks



Overlaying the Process (continued)

Initial customer feedback:rapid prototype-and-test

Develop detailed market launch plan:

advertising & promotionpricing, discounts, marginssalesforce & distributioncustomer service & support

Test the Marketing Plan:product tests with customers (to validate product & confirm purchase intent)test market or trial sellrevise product & support elements of marketing mixfinalize product & marketing plan

Implement Marketing PlanMeasure, Control, & Adjust Plan

Stage 3. Development•Product development•Iterations with customers•Develop test, marketing & production plans

Stage 4. Test & Validation•Full customer tests•Test market•Trial production

Stage 5. Full Production & Market Launch•Implement production and marketing plans

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Another Critical Performance Driver




Stage-Gate®



Management






Deployment & Strategic Portfolio Management: Fundamental to Successful NPD

How should you invest your R&D or Development funds and people? What is your investment portfolio?Portfolio Management:

Is about resource allocationWhich Development projects should the business resource from among many opportunities (Go/Kill)?The relative prioritization of these (e.g., accelerated development; Go vs. Hold for now)

PM is how you put into practice your Business Strategy

Strategy becomes real when you start spending money!

Tech

nolo

gy Im

pact

to B

usin

ess

HIGH

LOW

Likelihood of CommercializationWithin Next 5 Years

LOW HIGH

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Every development project is an investmentMust be carefully scrutinized & focused thru an effective portfolio management systemFocus is achieved with a funneling approach:

Start with many solid new product conceptsSuccessively remove the weak ones via a series of gates & portfolio reviews

The result is fewer projects, but higher value projects

Focus – A Funneling Approach For Effective Portfolio Management

Must learn to “drown some puppies”



Focus Resources on the Hi-Value Projects1. Many new product projects should be killed!

Simply low value-to-the-company projects2. But resources are too scarce to waste on the wrong projects

– a need for better focus3. Project evaluations in most firms are weak or non-existent

No process or procedure for killing projects – no “Kill mechanism”No criteria for Go / KillWrong people at the gatePoor, missing or inconsistent data on projects

4. Must develop more rigor in project selection – move to Portfolio Management

Use scorecards to rate & rank projectsUse the Productivity Index too!

Portfolio Management helps effectively allocate resources

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The Diamond works… so work the Diamond!




Stage-Gate®



Management

The The four points four points of performanceof performancein the in the Innovation Innovation DiamondDiamond drive drive your NPD resultsyour NPD results





References – Books:

1. Product Leadership: Pathways to Profitable Innovation (Perseus Books, Reading, Mass) by RG Cooper… hardcover 2005. Aimed at the senior executive. Provides an in-depth look at developing a product innovation and technology strategy, implementing portfolio management, making the idea-to-launch process work, and creating the right climate & culture for innovation.

2. Lean, Rapid & Profitable New Product Development, Cooper & Edgett. Outlines the seven principles to maximize your NPD productivity, 2005. www.stage-gate.com

3. New! Creating Breakthrough New Product Ideas: Feeding the Innovation Funnel, 2007, www.stage-gate.com

4. An Investigation into Best Practices in Product Innovation:What Distinguishes the Top Performers, March 2003. Reports the results of the latest and definitive benchmarking study, done thru APQC, Houston.

5. Winning at New Products: Accelerating the Process from Idea to Launch, 3rd edition, 2001, by RG Cooper (Perseus Books, Reading, Mass), paperback, 425 pages. The classic best seller – 3rd edition. Provides an overview of the critical success factors in product development, and outlines the Stage-Gate® process

6. Portfolio Management for New Products, 2nd edition, 2002 (new!) by Cooper, Edgett & Kleinschmidt, (Perseus Books, Reading, Mass) hardcover. Provides a look at the best portfolio methods, results achieved, and their use in industry.

7. Product Development for the Service Sector, by Cooper & Edgett (Perseus Books, Reading, Mass) 1999. Success factors and Stage-Gate® for service industries

Order on line for next day shipments: www.prod-dev.com

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Articles (in chronological order):1. R.G. Cooper, “Product Innovation and Technology Strategy” in “Succeeding in Technological Innovation” series: Research-

Technology Management, 43, 1, Jan-Feb. 2000, pp 28-44.2. R.G. Cooper, “Doing it right -winning with new products, “Ivey Business Journal, July-August 2000, 4, pp 54-60.3. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “New problems, new solutions: making portfolio management more effective”,

Research-Technology Management, 2000, 43,2, pp 18-33.4. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “Optimizing the Stage-Gate® Process: What Best Practice Companies Are

Doing – Part I”, Research-Technology Management 45, 5, Sept-Oct 2002, pp 21-27.5. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “Optimizing the Stage-Gate® Process: What Best Practice Companies Are

Doing – Part II”, Research-Technology Management 45, 6, Nov-Dec 2002. 6. R.G. Cooper, “Stage-Gate new product development processes: a game plan from idea to launch”, in: The Portable MBA in

Project Management, ed. By E. Verzuh, Hoboken, N.J.: John Wiley & Sons, 2003, pp 309-3467. R.G. Cooper and S.J. Edgett, “Overcoming the crunch in resources for new product development,” Research-Technology

Management, 46, 3, May-June 2003, pp 48-58.8. R.G. Cooper, “Maximizing the value of your new product portfolio: Methods, metrics and scorecards, Current Issues in

Technology Management, published by Stevens Alliance for Technology Management, Vol. 7, Issue 1, Winter 2003, p 1.9. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “Benchmarking best NPD practices – I: Culture, climate, teams and senior

management roles”, Research-Technology Management, Vol. 47, No. 1, Nov/Dec 2003, pp 31-43.10. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “Benchmarking best NPD practices – II: Strategy, resource allocation and

portfolio management”, Research-Technology Management, vol. 47, no. 3, May/June 2004, pp 50-59.11. R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, “Benchmarking best NPD practices – III: The NPD Process & Decisive Idea-to-

Launch Practices”, Research-Technology Management, vol. 47, no. 6, Nov-Dec 2004.12. R.G. Cooper, Chapter 1 ""New Products: What Separates the Winners from the Losers" The PDMA Handbook of New Product

Development, 2nd Edition New York, NY John Wiley & Sons (2004).13. R.G. Cooper, Winning at New Products: Pathways to Profitable Innovation, Microsoft whitepaper, www.microsoft.com, 2005. 14. R.G. Cooper, “Your NPD portfolio may be harmful to your business’s health”, PDMA Visions, XXIX, 2, April 2005, 22-26 15. R.G. Cooper, & M. Mills, “Succeeding at new products the P&G way: A key element is using the “Innovation Diamond”,

PDMA Visions, XXIX, 4, October 2005, 9-13.16. R.G. Cooper & S.J. Edgett, “Ten ways to make better portfolio and project selection decisions”, PDMA Visions Magazine,

XXX, 3, June 2006, p 11-15.17. R.G. Cooper, “Formula for success”, Marketing Management Magazine (American Marketing Association), March-April 2006,

p 21-24. 18. R.G. Cooper & S.J. Edgett, “Maximizing productivity in product innovation,” forthcoming in Research Technology

Management, Fall, 2007.Also, see selected articles on line (no charge) at www.stage-gate.com

presentation winning at new products

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