CHAPTER 8

Innovation and New Product

Strategy
The Innovation Mandate

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 FINDING CUSTOMER VALUE OPPORTUNITIES
Customer value analysis
Objective is to identify needs for:

1. New products
2. Improvements to existing
products
3. Improvements in production
processes
4. Improvements in supporting
services
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 Customer
Expectations
Customer
Satisfaction Gap
OPPORTUNITIES
Actual
(1) New Products
Product (2) Improvements
Performance (3) New and Improved
Processes

8-3
TRANSFORMATIONAL
Break-through innovation
Digital photography
NEW PRODUCT CATEGORY

Dell Printers

Nike Apparel
Golf clubs
LINE EXTENSION
New color/package/style
INCREMENTAL IMPROVEMENTS
Software updates
8-4
 Characteristics of Successful Innovators
Creating an
Innovative Culture

Leveraging STRATEGIC Selecting the

Capabilities Right
INITIATIVES Innovation
Strategy

Making Resource Developing and

Commitments Implementing Effective
New Product Processes

8-5
 Creating an Innovation Culture

 Innovation Workshop for top executives to

develop an innovation plan.
 Innovation Statement highlighting objectives
and senior management’s role and responsibilities.
 Training programs for employees and
managers.
 Communicate the priority of innovation.
 Speakers to expose employees to innovation
authorities.

Source: Thomas D. Kuczmarski et al., “The Breakthrough Mindset,” Marketing Management, March/April 2003, 43.

8-6
 The Innovation Strategy Spells Out Management’s Priorities for
New Product Opportunities
1. Set specific New Product Objectives.
2. Communicate the role of New Products
throughout the organization.
3. Define the areas of strategic focus:
Product Scope
Markets
Technologies
4. Include longer term discontinuous projects
in the portfolio along with incremental
projects.

Source: Robert Cooper, “Benchmarking New Product Performance,” European Management Journal, Feb. 1998, 1-7.
8-7
 NEW PRODUCT PLANNING PROCESS
Customer
Needs
Analysis
Screening
Business
Idea and
Analysis
Generation Evaluation

Marketing Product
Strategy Development
Development

Testing

Commercialization
8-8
 Responsibility for New Product Planning
* Coordination of new product activities by a high-level
general manager
* Inter-functional coordination by a team of new
product planning representatives
* Creation of a project task force responsible for new
product planning
* Designation of a new products manager to
coordinate planning between departments
* Formation of matrix structure for integration new
product planning with business functions
* Creation of a permanent design center

8-9
 IDEA GENERATION
* Idea search: targeted or open-ended?
* How extensive and aggressive?
* What specific sources are best for generating a
regular flow of new product ideas?
* How can new ideas be obtained from
customers?
* Where will responsibility for the new product
ideas search be placed?
* What are potential threats from alternative (or
disruptive) technologies?
8-10
 Direct
Alliances/ Search
Technological
Acquisition/
Innovation
Licensing
METHODS
National OF Exploratory
Policy GENERATING Customer
IDEAS Studies

Creative Facilitating
Methods Lead User
Linking
Analysis
Marketing
and Technology

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SCREENING, EVALUATING, AND BUSINESS ANALYSIS

IDEA GENERATION

SCREENING
(fit/feasibility)

CONCEPT EVALUATION

BUSINESS ANALYSIS
8-12
 Business Analysis
* Revenue Forecasts

* Preliminary Marketing Plan

* Cost Estimation

* Profit Projections

* Other Considerations
8-13
 PRODUCT AND PROCESS DEVELOPMENT

NEW
PRODUCT
CONCEPT

PRODUCT MARKETING
DEVELOPMENT STRATEGY
AND USE DEVELOPMENT
TESTING
MARKET
TESTING

LAUNCH
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 Product and Process Development
* Development of the new product includes:
* Product design
* Packaging design
* Decisions to make or purchase product components
* Product Development Process:
* Product Specifications
* Industrial Design
* Prototype
* Use Tests
* Process Development
* Collaborative Development

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 Does it have the
required attributes?

Verify PURPOSE OF Ideas for

claims USE TESTS improvements

Identify use
situations

8-16
 MARKETING STRATEGY AND MARKET TESTING
 Marketing Strategy Decisions
* Market Targeting
* Positioning Strategy
 Market Testing Options
* Simulated Test Marketing
* Scanner – Based Test Marketing
* Conventional Test Marketing
* Testing Industrial Products
* Selecting Test Sites
* Length of the Test
* External Influences
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 Scanner-based Test Marketing
Less artificial than simulated testing

Costs less than full-scale market test

Test is controlled by using IRI’s 2300 panel

members in each test city

Cable TV enables use of controlled ad testing

Tests take about 12 months

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 COMMERCIALIZATION
The Marketing Plan
* Complete marketing strategy
* Responsibilities for execution
* Cross – functional approach
Monitoring and Control
* Real – time tracking
* Role of the Internet
* Include product performance metrics with performance
targets
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 Marketing Strategy

Market Target(s)

Marketing
Objectives
Program(s)

8-20
VARIATIONS IN THE GENERIC NEW PRODUCT PLANNING

* Technology Push Processes

* Platform Products
* Process – Intensive Products
* Customized Products

8-21