PIM Notes - Summary Product innovation management PDF

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PIM NOTES

The imperative for Product Innovation – Why do companies do it? -

Vital to the survival and growth of all businesses.

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Companies that are doing well are likely to have a continuous supply of successful new products.

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CEOs continue to rate innovation capability as a critical driver for their future business success as they focus on increasing profitability and growth.

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BUT, developing and launching a steady stream of successful new products is not easy and many companies struggle to do it well or profitability.

Innovation challenges for Singapore? 1. What are the big future challenges facing product innovators over the next 5-10 years? 2. Globally vs Singapore? 3. Implications for product Innovation management?

Many Pressures Exist To Drive [Product] Innovation Importance. 

Supply exceeds demand

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Globalization

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Increasing price wars

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Shrinking profit margins

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Brands are becoming more similar

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Changing consumer needs

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Rapidly evolving technology

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Accelerated commoditization of products and services

PDMA Hot Topics and Issues 1. The value and importance of open innovation 2. Managing the front and back end of innovation 3. Integrating design thinking into the new product development process, and design effectiveness 4. Individual and firm-level incentives for innovation 5. New approaches for customer engagement in the development process

6. The importance of failure and how to manage it 7. Including sustainability in new product development 8. The role of crowdsourcing and crowdfunding in developing new products 9. Innovation and product development in a connected word

Types of New Products 

What types of new products are we talking about?

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What are the challenges associated with developing radical or really new products; e.g. virtual reality glasses?

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What are the challenges associated with developing incremental products; e.g. New fruit drink?

The Innovation Radar

Incremental Incremental is refinements, improvements, exploitation of existing technology used by the firm. Example 

New [related] category entry o Leveraging the brand in new but related categories e.g. snickers into icecream.

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Additions to existing product lines o Line extensions and flankers that flesh out the product line in current markets; e.g. up and go reduced sugar line.

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Improvements and revisions to existing products: o Current products made better; e.g. P&G’s continuing improvement to detergents; packaging changes the improve use etc.

Incremental can also include 

Repositioning (brand and product) o Brands that change their positioning and target market and hence need to refresh products o Products that are retargeted for a new use or application o Also includes retargeting to new users or new target markets Example o Volvo repositioned as innovative

o Dove repositioned to real people “It’s ok to be me.” “I’m beautiful as I am.” o Coco-Pops repositioned as an adult cereal.

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Cost reduction o 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 

E.g. Datsun Go (India, Nepal)

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Jetta – lower entry price to Volkswagen range.

Really new (to the firm) Products It is similar to ‘radical’ products but require less ‘learning’. It is very new and risky but less to than very radical products; e.g. Mercedes Ute. It can also change a market significantly.

Radical Vs Incremental Product Innovation

Few key issues 

Product Innovation and its management extends from the very minor adjustment to existing products (goods & services) through to development of radical new solutions existing and latent problems.

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Firms try to balance minor and major developments o Risk vs Reward o Capital investment vs payback and ROI o Discontinuous vs sustaining innovations o Being entrepreneurial – small vs large firms o Front end vs back end of innovation

o Process management vs eureka moments 

Many issues being dealt with by firms

Success factors 

What are the critical/key success factors at the organization or programme level?

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What are the critical/key success factors for a specific product – the product or project level?

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Are success factors different for the development of radical vs incremental new products?

2 levels of success factors 1. The central role of NPD in business strategy and often poor NPD performance results had led to a quest for the factors that drive performance and product innovation success a. Central to effective new product management b. Provides insights for managing new products e.g. are certain practices strongly linked to success? c. Clues to new product selection; e.g. what are the tell-tale signs of a winner? 2. Success factors can be: a. Product/Project level i. Product level – what makes a new product successful in the market ii. Project level – the things that make any individual new product project go well b. Program/Organisational level – the things that make the firm good at consistently producing successful new products.

Critical success factors at the Product/Project Level 1. A unique and superior product – differentiated, unique benefits, compelling value proposition, 2. Building in the voice of the customer – research, early customer engagement, clear personas, listening to their feedback 3. Doing the front end homework and font loading the project – due diligence, testing the concepts properly, assessing market need and size and profitability early.

4. Getting a sharp and early product definition – clearly outlining the specs of what is to be developed so costs are controlled, engineering etc know what is being made 5. Spiral development – build, test, feedback, revise, using Minimum Viable Products (MVP) to get feedback and test early and quickly 6. Well-conceived and properly executed product launch – clear product marketing plan, well designed and tested promotions, understanding customer touch points, doing it better than competition 7. Speed counts – fast development and launch BUT not at the expense of product quality and performance

Strategy Types 

What are the Booz & Co strategy types and how do they differ from each other?

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What are the unique capabilities and cultures that shape the way each approaches product innovation?

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What should companies consider and do to improve their product innovation capabilities and culture?

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Looking to the future, how will capabilities and culture need to change?

Different strategy types have different goals and innovation capabilities. 

2014 Research by Booz & Co identified 3 types of companies with different innovation strategies o The Need Seekers (Apple) o The Market Readers (Samsung)

o The Technology Drivers (Microsoft)

A Need Seeker (think Apple) 

Actively and directly engages current and potential customers to better capture their unarticulated needs

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Shapes new product and services

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Strives to be the first to market with those new offerings

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Heavily reliant on direct customer observation rather than market research o Watching customers, seeing how they interact with the product or competitors products, and observing opportunities in the problems that they’re having

Apple didn’t invent the touch screen but has made more money by focusing on how people use it and being better than anyone else at delivering that experience.

A Market Reader (think Samsung) 

Monitors customers and competitors with equal care, but maintains a more cautious approach

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Focuses largely on creating value through incremental change and being “fast followers” of proven concepts o Attuned to what competitors are doing and bringing to market first – observes what seems to be gaining traction – very rapidly comes up with their own version o Not just reverse engineering but comes up with their own ‘innovated’ version rapidly to get their share.

Samsung creates compelling new versions of products, times them well, and adds to them – a difficult strategy to get right.

A Technology Driver (think Google) 

Follows the direction suggested by the company’s technological capabilities – more traditional tech push model

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Leverages its tech base and invests in R&D to drive both breakthrough innovation and incremental change

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Often seeks to solve customers’ unarticulated needs with new technology

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Google has many technologies and trials going and draws on those gaining traction

PIT – Product Innovation and Technology Strategy

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Why do we need a product innovation and technology strategy?

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How does it benefit firms and their product innovation decisions and choices?

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How do firms go about developing a product innovation technology strategy?

What about the future & how do we get there? -

Roadmaps

Road mapping can help determine which projects are important -

A product and technology roadmap is an effective way to plot a series of major initiatives in the attack plan

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Management maps out the major new product initiatives required in order to succeed in each strategic arena, and their timing o Lays out major development initiatives over time, often as far out as 5- 8 years o May specify the platform developments required for new products. o Provides a direction for R&D projects o Leads to a well-considered project portfolio

Example: Product-Technology roadmap

The Stage Gate Process 

Why is the Stage-gate NPD process so important to understand and what are the challenges in making it work well to develop great new product?

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How does it differ for the development of radical and non-radical product? E.g. robot vs new fruit snack product.

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How do you design and implement stage gate in an organization that doesn’t have one?

10 Implementation Tips for NPD Processes (How to implement stage-gate process) 1. Have a well-designed, credible process design 2. Give visible and meaningful leadership support 3. Be sure you have sufficient and appropriate support 4. Create defined roles and responsibilities 5. Have a strategic implementation approach 6. Be effective with your communication and marketing 7. Track your performance 8. Appoint an executive sponsor of the product innovation program 9. Understanding the impact on your company’s culture and systems 10. Seek effective change management

Challenges faced in making changes to NPD process

Process summary 

There are many versions of the NPD process – most tend to have the same fundamental stages

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Each firm must calibrate the process to their needs – depends on industry, markets, strategic position and stance, risk adverseness…

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Gates are critical and must be designed to fairly and appropriately assess ideas and projects

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Speed is of the essence today so care is needed to enable projects to meet market timing imperatives

Insights 

Why are customer insights so important and how do we find them?

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What is the value of conducting qualitative research such as ‘consumer ethnography’ to help in ideation?

What is a customer insight? 

A customer insight is a fresh and not-yet obvious understanding of customer beliefs, values, habits, desires, motives, emotions or needs that can become the basis for a competitive advantage.

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Customer insight represents a deep understand of customer needs and the drivers of customer behaviour at a level well beyond what customers are able to easily articulate themselves.

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“Unarticulated customer needs” – Needs unrecognized by customers that – when recognized and satisfied – leads to product and services that delights them. o The challenge is to “read between the lines” and “make non-obvious connections” i.e. Insight

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Engaging customers as partners in the innovation process is essential for creating breakthroughs

Briefly 

Mostly companies’ development portfolios suffer from a lack of blockbuster new products

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Generating breakthrough ideas is the first step, but it’s difficult to find the best idea sources.

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Voice-of-customer methods give the best idea. While open innovation yields disappointing results.

Ethnography provides perhaps the greatest insights into users’ unmet and unarticulated needs, applications and problems.

Ethnography (uncovering needs) 

Ethnography is o “a descriptive, qualitative market research methodology for studying the customer in relation to his or her environment o Researchers spend time in the field observing customers and their environment to acquire a deep understanding of customers’ lifestyles or culture as a basis for better understanding their needs and problems”

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The term “ethnography” involves the description and study of human cultures, societies and interactions. o Understand other ways of life from the “native’s” point of view e.g. the consumer or end user. o Examine “traces” that people leave as they go about their everyday lives.

o Takes place in natural surroundings o Is open to change and refinement throughout the process as new learning shapes future observation

Three Main Ethnographic Approaches 1. What people SAY 2. What people DO 3. What people USE

Designing Products 

Why is design thinking an important process in new product development?

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How does design help create value in new products?

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How do we integrate design and design thinking into our NPD efforts?

What is design? 

“The synthesis of technology and human needs into manufacturable products (goods and services).”

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In practice, design can mean many many things – from styling to ergonomics, to setting up final product specification

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One thing it is not : “prettying up” a product that is about to manufactured! o Design is planned in order to add real utilitarian and hedonic value for consumers 

Utilitarian – Useful or practical (Satisfy customer)

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Hedonic – Pleasant sensations (Delight customer)

Design Thinking Process Empathy – heart of design 

Without understanding what others see, feel and experience, design is a pointless task.

The ability to combine empathy for the context of a problem, creativity in the generation of insights and solutions, and rationality to analyze and fit solutions to the context.

How does design help create value in new products? Two approaches to driving value through design

How to integrate design and design thinking into NPD efforts?

VOAS = Value Opportunity analyses

Business Case 

How do we build and prove the business case for new products?

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What is the critical information we need to build a business case for a new product?

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How do we gather information to build a case across the NPD process leading to launch?

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How do we forecast the sales of potential new products and what is so difficult in doing so?

Definition: What is a business case? 

A living document that defines the product and provides the rationale for developing it.

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A management tool that supports planning and decision-making for an investment by positioning the investment decision in the context of business objectives.

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“…a proposal (sales and cost estimates / payback period / profits) that provides an analysis of all the costs, benefits and risk associated with the proposed investment and offers reasonable alternatives

How to build and prove the business case for new products?

Business case evaluation acid test question: Real? Win? Worth it? 

Is the market real? o What is the potential of the target market? o What will the product life cycle be?

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Is the product real? o Can it be manufactured (delivered)? o What will it cost to produce?

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Can our company be competitive? o Does it fit our core competences (present or future)? o Is our advantage sustainable?

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Can the product be competitive? o What are its determinant attributes (price, quality…)? o What market share will it achieve?

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Will it make money? o What is the ROI, NPV, etc.? o When will it break even?

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Are there other benefits? o Will we gain experience or build relationships? o Will we gain other strategic advantages?

What is forecasting? What are some of the issues in forecasting new product uptake/sales, etc

Approaches to forecasting 

Assumption-Based Modeling o A technique that attempts to model the behaviour of the relevant market environment by breaking the market down into % of likely actors o ATAR/ATR

Market drivers – Awareness, Trial, Availability, Repeat purchase (ATAR) By assuming values for these drivers, forecasts are generated (commonly used to forecast consumer packaged goods)

Sales potential estimation 

To translate “purchase intent” into sales potential we need to: o Develop the “norms” carefully for a specific market and for specific launch practices – similar product histories o Examples 

Consumer Package Goods might “normally” have: 

80-90% chances that the “definites” will buy

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33% chance for the “probably wills”

Points to note about A-T-A-R model 

Awareness is forecast based on year-one advertising and media plan (including print, radio, internet, etc.)

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Samples of the new product are placed in homes for consumers to use under normal conditions for a period of days or weeks (i.e. an in-home usage product test). o The results of the product test are used to predict the repeat purchase curve and the purchase cycle. o Then the model combines the trial predictions and the repeat purchase curve into a forecast of first-year retail depletions.

o Useful for predicting “repeat goods” in FMCG, less so for infrequent luxury items; e.g. sofa 

Each factor is subject to estimation o Estimates improve with each step in the development phase and we need to ensure such estimations are strengthened

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Inadequate profit forecast can be improved by changing factors o Look at each factor and see which can be improved, and at what cost; e.g. boosting awareness (advertising) or distribution availab...