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McGraw-Hill/Irwin 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

23-2
CHAPTER THREE

OPPORTUNITY IDENTIFICATION
AND SELECTION:
STRATEGIC PLANNING FOR NEW
PRODUCTS
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The Strategic Elements

Chapters 1 and 2 introduced the New Products

Process
This chapter presents both the Product
Innovation Charter (PIC) and the New Product
Portfolio.
The PIC is a strategic plan for new products.
The portfolio ensures that products that meet
financial and strategic criteria are pursued.

3-3
43-4 The PIC: Why Does a Firm Need a New
Products Strategy?

To chart the new product teams direction

What technologies? What markets?
To set the teams goals and objectives
Why does it exist?
To tell the team how it will play the game
What are the rules? Constraints?
Any other key information to consider?

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The Company Within A Company

This describes a new products team as they do

everything a firm does develop a budget, do
financial analyses, assign tasks, and so on.
They need strategic direction on where they
must, and must not, go.
Product team managers ask, What sandbox
should I be playing in? before beginning to
think of specific products.

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Product Platform Planning
Many firms find that it is not efficient to develop a single product.
Platform - Product families that share similarities in design, development, or production process.
Toyota/Lexus: A new car platform spread out over several models.
Sony: Playstation platform launched 5 product variations.
Boeing: Passenger, Cargo, Short- and Long-haul planes made from same platform.
Black & Decker: Uses a single electric motor for dozens of consumer power tools.
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Opportunity
Horizon 1: improvements, variants, and cost
reduction of existing one.
Horizon 2: new territory of one or both of the
market and technology dimensions.
Horizon 3: New category of product/service
with great uncertainty.
83-8
Opportunity Identification Process
Establish a Product Innovation Charter
Generate opportunities
Screen opportunities
Develop promising opportunities
Select exceptional opportunities
Reflect on the result and process.
93-9 Opportunity Identification:
Greenfield Markets Figure 3.2

Find another location or venue: Once McDonalds had taken up the best
locations for traditional fast-food restaurants, it continued its U.S.
expansion by placing stores inside malls, in sports arenas, etc. Starbucks
Coffee complemented coffee-shop sales by selling its coffee beans, drinks
and ice creams in supermarkets.
Leverage your firms strengths in a new activity center: Nike has moved
into golf, Microsoft into the gaming industry.
Identify a fast-growing need, and adapt your products to that need:
Hewlett-Packard followed the need for total information solutions that
led it to develop computing and communications products for the World
Cup and other sporting events.
Find a new to you industry: P&G in pharmaceuticals, GE in broadcasting
(NBC), Disney in mainstream movies (MCAU, Star Wars, etc.),
Rubbermaid in gardening products either through alliance, acquisition, or
internal development.
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10 Opportunity Identification: Emerging
Societal Trends
Just-In-Time life
Sensing consumers
The transparent self
In search of enoughness
Virtual made real
Co-creation
Source: A. Hines, J. Calder, and D. Abraham, Six Catalysts Shaping the Future of
Product Development, Visions, 33(3), October 2009, pp. 20-23.

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11 Opportunities begin the Product Planning and
Product Development Processes

Opportunity Tournament

Exceptional Opportunities

Concept System-Level Detail Testing and Production

Planning Concept System-Level Detail Testing and Production
Planning Development Design Design Refinement Ramp-Up
Development Design Design Refinement Ramp-Up
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12

Pharmaceutical Drug
Development
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13
Hollywood Film Studios
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Opportunity Identification
 3-15
15
FroliCat Sway
Opportunity Funnel

1 1 1
mission PD process product
statement launch

3
explored
50 7
opportunities selected
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16
Automobile Concepts
 3-17
17

Source: Lunar Design

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Product Naming Tournament
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19 The Opportunity Funnel in Various
Industries
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Where do Opportunities come from?
 3-21
21 What is the Product Innovation Charter
(PIC)?
It is the new product teams strategy.
It is for Products (not processes).
It is for Innovation (think of the definition of new
product).
It is a Charter (a document specifying the conditions
under which a firm will operate).
Typically, it is a document prepared by senior
management designed to provide guidance to
the strategic business units (SBUs) on the role
of innovation.

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 3-22
22 The Contents of a Product Innovation
Charter Figure 3.4

Background

Key ideas from the situation analysis; special forces such as managerial dicta; reasons for
preparing a new PIC at this time.

Focus

At least one clear technology dimension and one clear market dimension. They match and
have good potential.

Goals-Objectives

What the project will accomplish, either short-term as objectives or longer-term as goals.
Evaluation measurements.

Guidelines

Any "rules of the road," requirements imposed by the situation or by upper management.
Innovativeness, order of market entry, time/quality/cost, miscellaneous.
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23
Do Many Firms Have a PIC?
Most do, according to research, even if they dont call it by that
name.
Surveys show:
75% of firms have a formal new product policy of some type (a partial
PIC).
29% have a formal, written complete PIC.
80% of firms have formalized at least a few of the phases in the new
products process.
86% of the Best firms have a PIC and only 69% of the Rest.
According to an independent study:
The more detailed and specific the PIC, the higher are the firms
innovation rates.
The more specific the corporate mission and senior management
direction is spelled out in the PIC, the better is the performance of the
firms new products.

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24
An Illustrative PIC for the Apple iPad
Focus: Technology strengths include Apples operating system, hardware,
applications, and services, product design and development skills.
Marketing requirements include products on the cutting edge that
offer seamless integration and high performance, yet are intuitive,
simple, and fun to use.
Goals: Revolutionary new products should also be platforms for future
products, due to the cost of really new product development. New
products should occupy the leadership position in the market.
Special Guidelines: Apple aims to be the best, not necessarily the first, in
new product categories.
The Result: Apples first tablet computer, a revolutionary new product
seen by many at the time as the next big thing. No one tablet
computer had established a dominant position yet, so Apple could be
the standard bearer with the iPad. The plan for the future was to add
capabilities and applications to future iPads.

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Purposes of PIC

Focus and integrate team effort

Permit delegation
Establish the size and range of the sandbox

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Risks of Poor PIC Development

Scope creep: Product definition keeps changing: who

is the customer? Is it a standalone product or a
platform?
Unstable product specifications: Required
performance level keeps changing.
Both of these risks are elusive targets (moving
goalposts) that occur because the sandbox was never
defined, or vaguely defined.

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PIC Steps: Background, Focus, and Goals

Background: Why did we develop this

strategy?
Focus, or Area: technology and market drivers
that (1) fit and (2) have good potential.
Goals and Objectives: profit, growth, market
status

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PIC Special Guidelines
Degree of Innovativeness
First-to-market
Adaptive product
Imitation (emulation)
Timing
First
Quick second
Slow
Late
Miscellaneous
Avoidance of competition with certain firms
Recognition of weaknesses
Patentability
Product Integrity
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Tips for PIC Development

Note where you are starting -- what decisions have already

been made?
Watch for any and all opportunities.
Confirm interesting opportunities.
Keep balance between focus and freedom -- wildcatting can
pay off too.
Speed usually assumed a well-established, close-to-home PIC.
PICs less useful in cases where personal tastes rule (art, games,
foods) or where the biggest task is developing a new
technology (wait till you have it).
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More Tips

Poor implementation will still ruin a good PIC (e.g., Bic

perfume in lighter fluid package).
Watch for PIC conflicts -- e.g., a flood the market line
extension strategy may hurt real innovation. Some charters
dictate separate organizations.
Once in place, live by it. Use at all stages -- organization,
concept generation, concept evaluation, technical, and, yes,
marketing!
Change it only when necessary, or when you get information
you have been waiting for.
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Dimensions for Assessing Strategic Fit

Strategic goals (defending current base of products versus extending

the base).
Project types (fundamental research, process improvements, or
maintenance projects).
Short-term versus long-term projects.
High-risk versus low-risk projects.
Market familiarity (existing markets, extensions of current ones, or
totally new ones).
Technology familiarity (existing platforms, extensions of current ones,
or totally new ones).
Ease of development.
Geographical markets (North America, Europe, Asia).