PRODUCT MANAGEMENT 2.
NEW-TO-THE-FIRM PRODUCTS – (new product lines) –
PRELIM REVIEWER
CHAPTER 1: THE STRATEGIC ELEMENTS OF PRODUCT DEVELOPMENT
New Products Management: (other term)
- product innovation management
- product planning
- research and development /
- marketing
RADICAL INNOVATION – is an innovation that displaces or makes
obsolete current products and/or creates totally new product
categories.
Gary Hamel described the creation of radical innovation as “the
most important business issue of our time”
Why Products FAIL:
– the firm doesn’t understand the customer
– underfunds the required research and development
– doesn’t do the required homework before beginning development
(ready-fire-aim approach)
– doesn’t pay enough attention to quality
– lacks senior management approach
– chases a moving target
Product development has become more challenging to increased
GLOBALIZATION.
Having a global innovation culture means that a firm is open to
global markets, mindful of differences in customer needs and
preferences, and respectful of different national cultural and
business environment.
Principle of Product Development: TEAMWORK
New Products Team:
personnel from marketing, R&D, engineering, manufacturing,
production, design and other functional areas as well.
This course of study calls for a strong creative contribution. It’s not
just about creating new product concept, the tough part is how best
to develop and market them.
 HEURISTIC – (shortcut) rules of thumb that firms have found
work for them.
 SIMPLE INTUITION – hunch, or gut feel
PROCESS INNOVATION – applies to functions, especially the
manufacturing of distribution process, and every new product
benefits from this type of innovation.
PRODUCT INNOVATION – applies to the total operation by which a
new product is created and marketed, and it includes innovation in
all of the functional processes.
Sometimes the new product process is accidental, or serendipitous.
CATEGORIES OF NEW PRODUCT:
1. NEW-TO-THE-WORLD PRODUCTS – (really new products) –
inventions that create a whole new product.
products that take a firm into a category new to it. Not new to
the world but new to the firm.
3. ADDITIONS TO NEW EXISTING PRODUCT LINES – these are
“flanker” brands, or line extensions, designed to flesh out the
product line as offered to the firm’s current market.
4. IMPROVEMENTS AND REVISIONS TO EXISTING PRODUCTS –
current products made better.
5. REPOSITIONING – products that are retargeted for a new use
or application. Also includes products retargeted to new users
or new target markets.
6. COST REDUCTIONS – new products that simply replace existing
products in the line, providing the customer similar
performance but at a lower cost. New design or production
that marketing.
2 reasons for a unique vocabulary:
 Expanding Field – taking on new tasks and performing them in
new ways.
 Melting Pot Field – bringing in the language of scientists,
lawyers, marketing people, accountants, production people,
corporate, and many more… they talk about the same event
but using different terms.
INVENTION – dimensions of uniqueness – the form, formulation,
function of something, usually patentable.
INNOVATION – invention is transformed into a commercial product
that can be sold profitably.
3 SPECIFIC JOBS IN THIS FIELD:
 FUNCTIONAL REPRESENTATIVE – sometimes full time, often
part time, representative on several teams or just one.
 PROJECT MANAGER/TEAM LEADER – leader of a team
representing the functions that will be required.
 NEW PRODUCTS PROCESS MANAGER – helps product
managers develop and use good new product processes.
STRATEGIC ELEMENTS (Robert Cooper) – provide a framework to
guide management through product development and help them
focus on what is most important.
1. NEW PRODUCT PROCESS – procedure that takes the new
product idea through concept evaluation, product
development, and a well-managed launch and postlaunch –
straightforward.
2. PRODUCT INNOVATION CHARTER – essentially a strategy for a
new products. It ensures the new product team develops
products that are in line with firm objectives and strategies and
that address market place opportunities.
3. PRODUCT PORTFOLIO MANAGEMENT – helps the firm assess
which new products would be the best additions to the existing
product line, given both financial and strategic objectives.
The Basic New Product Process – the goal is to manage down the
amount of risk and uncertainty as one passes from idea generation
to launch.
PHASE 1: Opportunity Identification and Selection
PHASE 2: Concept Generation
PHASE 3: Concept/Project Evaluation
PHASE 4: Development (technical and marketing tasks)
PHASE 5: Launch
It is the responsibility of a team leader to bring together the right
individuals with the right skill sets, and to encourage
communication.
Effective team leader knows how to deal with power conflicts as
well as technical complexity.
“ON DECISION” – project will move forward
FUZZY GATE – an evaluation task that includes conditional GO
decisions – speed up the process.
HOLLOW-GATE PROBLEM – teams actually make a full “GO”
decision, but fail to commit any resources to the project.
Breakthrough Products – technologically and creatively superior to
the existing product which is present in the market.
Incremental New Products – focused on improving an existing
product development efficiency, productivity and competitive
differentiation.
THIRD-GENERATION NEW PRODUCTS PROCESS – is the way most
firms interpret the process. (overlapping phases, fuzzy gates,
flexibility)
PRODUCT INNOVATION CHARTER (PIC)
– developed by senior management and provides guidance to all
functional areas involved in innovation.
– scope of activity for new product development.
– helping the product team identify what opportunities lie within the
boundaries.
– where they should focus their efforts.
CHAPTER 2: THE NEW PRODUCT PROCESS
The Product Innovation Charter (PIC)
It starts with an honest situation assessment and opportunity
identification. It is a systematic way for managers to develop a new
product strategy that considers the goals for their product
innovation efforts and how these efforts fit overall business
strategy. It involves identifying a strategic focus (which markets and
which technologies will be targeted).
The New Product Process (second strategic element)
The path the new product takes from idea to the time of launch and
beyond.
The New Product Portfolio
In addition to a well-functioning new products process, there are
needs also to be an assurance that the firm is developing the right
products with respect to its product portfolio.
THE PHASES OF THE NEW PRODUCTS PROCESS
PHASE 1: OPPORTUNITY IDENTIFICATION AND SELECTION
Successful completion of this phase yields strategic guidance to the
new products team, which guides idea generation and all remaining
phases in the new products process.
3 main streams of activity feed strategic planning for new products:
 Ongoing marketing planning
 Ongoing corporate planning
 Special opportunity analysis
From these activities, the opportunities identified can be sorted into
four categories:
 An underutilized resource
 A new resource
 An external mandate
 An internal mandate
New products people often must fill part of the gap between
current sales and that target. That assignment is called the
product innovation (and/or acquisition) gap.
The process of creatively recognizing such opportunities is called
opportunity identification.
Once an opportunity is approved, managers turn to various
techniques to guide new product people in exploiting it. This we will
call the product innovation charter (PIC).
PHASE 2: CONCEPT GENERATION
 Creating new product ideas is called product concepts.
 Identifying problems people or business have and suggesting
solutions to them – problem find-solve approach.
PHASE 3: CONCEPT/PROJECT EVALUATION
 Before development work can begin on new ideas, they need to
be evaluated, screened, sorted out – screening or pretechnical
evaluation.
 This would have to be followed by a concept test to see what
potential consumers thought about the proposed new
products.
 These views all come together in what is often called the full
screen. It uses a scoring model of some type and results in a
decision to either undertake development or quit.
 If the decision is to go ahead, the evaluation turns into project
evaluation, where we no longer evaluate the idea but rather
the plan we propose for capitalizing on that idea.
 Firms using Quality Function Development (a method of project
management and control) see this as the first list of customer
needs.
 A more common generic term is product description or
product definition.
 Product Protocol. Protocol means a kind of agreement.
 The first three phases (strategic planning, concept generation.
concept/project evaluation) comprise what is popularly called
the fuzzy front end (of the new product process).
PHASE 4: DEVELOPMENT
This is the phase during which the item acquires finite form – a
tangible good or a specific sequence of resources and activities that
will perform an intangible service.
 Resource Preparation
 The Major Body of Effort
 Comprehensive Business Analysis
PHASE 5: LAUNCH
The term launch, or commercialization, has described that time or
that decision when the firm decides to market a product (the Go in
Go/No Go).
 The critical step is the market test, a dress rehearsal for the
launch, and managers hope any problems discovered are
fixable between dress rehearsals and opening night.
 The announcement is often called launch.
THE EVOLUTION FROM CONCEPT TO NEW PRODUCT
Phase 1: Opportunity Identification
 Opportunity concept – a company skill or resource, or a
customer problem.
Phase 2: Concept Generation
 Idea concept – the first appearance of an idea.
 Stated concept – a form or a technology, plus a clear
statement of benefit.
Phase 3: Concept/Project Evaluation
 Tested Concept – it has passed an end-user concept test;
need is confirmed.
 Fully screened concept – it passes the test of fit with the
company’s situation.
 Protocol concept – a product definition that includes the
intended market user, the problem perceived, the
benefits, plus any mandatory features.
Phase 4: Development
 Prototype concept – a tentative physical product or
system procedure, including features and benefits.
 Batch concept – first full test-of-fit with manufacturing; it
can be made. Specifications are written stating exactly
what the product is to be, including features,
characteristics, and standards.
 Process concept – the full manufacturing process is
complete
 Pilot concept – a supply of the new product, produced in
quantity from a pilot production line, enough for field
testing with end users.
Phase 5: Launch
 Marketed concept – output of the scale-up process from
the pilot.
 Successful concept –it meets the goals set for it at the
start of the project.
SPPEDING THE PRODUCT TO MARKET
 Accelerated Product Development (APD) – speeding the
product to market.
 cycle time metric – the way management measures speed to
market
 First to mindshare – the one that the target market associates
with the product category and that is seen as the standard for
competitors to match.
Discovery-driven Planning – requires that managers make
assumption about the future in order to build their forecasts and
targets, recognizing that these assumptions may be quite wrong.
Reverse Income Statement – which starts form the bottom and
works backward to required levels of revenues and costs.
SPIRAL DEVELOPMENT AND THE ROLE OF PROTOTYPES
 Spiral development – If the final form of the product is truly
unknown, it may make sense for the firm to try several
prototypes in rapid succession, showing them to customers,
getting feedback, trying another prototype, then continuing in
this manner until an acceptable form is identified.
 Focused prototype – an early, nonworking version of the
product.
 Probe-and-learn – through interaction with customers,
designers are inspired to probe, experiment, and improvise,
and as a result, may come up with a successful new-to-the-
world product.
 Lickety-stick – The developing team develops prototypes from
dozens of different new product ideas (“likety”), eventually
settling on a prototype that customers like (“stick”).
CHAPTER 4: CREATIVITY AND THE CONCEPT
FINDING THE RIGHT PEOPLE
 A common stereotype is that creative persons are eccentric
 Creativity can be measured using the standard MBTI (Myers-
Briggs Type Indicator) Creativity Index. This index is based on
the MBTI personality measurement instrument, used to access
individuals on 4 personality scales (intuitive-sensory,
perceiving-judging extraverted-introverted and thinking-feeling)
 Creative types tend to be more intuitive, perceiving,
extraverted and thinking than other individuals
GENIUS THINKING STRATEGIES
 Geniuses find many different ways to look at problem
 Geniuses make their thoughts visible
 Geniuses produce
 Geniuses make novel combinations
 Geniuses force relationships
 Geniuses think in opposites
 Geniuses think metaphorically
 Geniuses prepare themselves for chance
MANAGEMENT'S ROLE IN CREATIVITY
 Management has a role in getting the best out of its "ideas
people"
 Creative people can benefit from training
ACTIVITIES TO ENCOURAGE CREATIVITY
 "We do expect mistakes as a normal part of running a business
but we expect our mistakes to have originality"
 Creative firms often use a computerized database or "idea
bank", to store and document ideas from earlier, unused new
product projects for reuse later.
SPECIAL REWARDS
 Creative people are usually unimpressed by group rewards.
They believe group contributions are never equal.
 Creative do like personal accolades.
 Many firm have annual dinners to recognize employees' who
obtained patients during the year
THE REMOVAL OF ROADBLOCKS
 Some organization set up roadblocks that stop new product
concept creativity.
 Some organization use a technique called itemized response
 To encourage creativity, some firms deliberately encourage
conflict by putting certain employees (ex. Creative person and a
practical type) together on the same team (called creative
abrasion)
BARRIERS TO FIRM CREATIVITY
 Cross-functional diversity – diverse team; wide variety of
perspectives and more creative stimulations
 Allegiance to functional areas – team members need to have a
sense of belonging and to feel they have a stake in the team's
success.
 Social cohesion – if the interpersonal ties between team
members are too strong, candid debate might be replaced by
friendly agreement.
 The role of top management – should encourage the team to
be adventurous and try newer idea.
THE PRODUCT CONCEPT
 Form: physical thing created (or service). It is the sequence of
steps by which the service will be created.
 Technology: source by which the form was attained. Define in
product innovation as the power to do work.
 Need/Benefits: the product has value only as it provides some
benefits to the customer that the customer sees a need or
desire for it.
THE CONCEPT STATEMENT
 Product concept statement – technical people and intended
customers must tell us the concept is worthy of development.
 Concept – is a verbal and/or prototype expression that tells
what is going to be changed and how the customer stands to
gain.
TWO BASIC APPROACHES
 ready-made
 tailored (do-it-yourself)
2. CROWDSOURCING
 Many firms have recently gone online to obtain product
ideas from their customers efficiently: this kind of open
idea solicitation is known as crowdsourcing.
3. LEAD USERS
 They are at the front edge of the trend, have the best
understanding of the problems faced and expect to gain
significantly from solutions to those problems.
 2 characteristics of lead users: high expected benefits and
being "ahead of the trend"
OPEN INNOVATION
 One of the most exciting new developments in new product
development is the adoption by many firms of an open
innovation model.
 The process a company employs to externally search for
research innovation, new technologies and products
 Henry Chesbrough -- 1st advocate of open innovation, who
viewed it as a new paradigm for innovation in which firm makes
strategic commitment to use the knowledge in the external
environment to improve innovation performance
 One of the complicated issues a firm must manage in an open
innovation policy is intellectual property protection.
ADVANTAGES AND RISKS OF OPEN INNOVATION
 Importing new ideas multiplies innovation building blocks
 Exporting ideas raises cash
 Exporting signals the true worth of an innovation
 Exporting clarifies core business
 Risk:
the deal is not structured in a way that captures the financial
value of your innovation
 Proprietary secrets can be lost to a partner, even inadvertently
 Theft of technology, or poaching of top researchers is a
concern
CHAPTER 6: ANALYTICAL ATTRIBUTE APPROACHES: INTRODUCTION
AND PERCEPTUAL MAPPING
UNDERSTANDING WHY CUSTOMERS BUY A PRODUCT

PRODUCTS ARE GROUPS OF ATTRIBUTES

IMPORTANCE SOURCES OF READY-MADE NEW PRODUCT IDEAS  Attributes are of 3 types: features (what the product consists
1. USER TOOLKITS of), functions (what the product does and how it works) and
 a method that formally turns the innovation task over to benefits (how the product provides satisfaction to the user)
some extent, to other users themselves.
 Product configuration – these configurators allow the user A. Product attributes are of 3 types:
to mix and match different components and see what
retail price would be. FEATURES BENEFITS FUNCTIONS
 Mass customization – the user is a "segment of one"  Dimensions
 Source
ingredients  Uses are how
Two examples of toolkits for User Innovation  Savings (time products work.
 Services
 International Flavors and fragrances – created an  Structures and effort) They are
internet-based user toolkit that provides a huge database  Esthetic  Sensory unlimited in
of flavor profiles as well as design rules used in combining characteristics equipment variety, but are
or modifying these  Manufacturing  Nonmaterial not used nearly
 3M Telecom Enclosure Division – provides its customer process well-being as often as
with a computer-aided design (CAD) program that allows  Performance  Economic gains benefits and
them to design their own telecom enclosure.  Trademarks and many more features
 Components
 Materials
B. Analytical attribute approaches use different attributes
 Dimensional analysis uses features
 Checklists use all attributes
 Trade-off analysis also uses determinant attributes
 Several methods in Appendix A use functions and benefits

ANALYZING PRODUCT ATTRIBUTES FOR CONCEPT GENERATION

AND EVALUATION

Analytical attribute technique allow us to create new product

concepts by changing one or more of its current attribute or by
adding attribute.

ANALYSIS
 Gap analysis – statistical technique with immense power under
certain circumstances.
 Maps of the market – used to determine how various products
are perceived by how they are positioned on the market map.
 Gap map – a map that shows gaps.
 Gaps maps are made in 3 ways:
(1) managerial expertise and judgment is used to plot products
on a map and make a determinant gap map,
(2) a manager uses customer attribute ratings to get data from
users for an AR perceptual gap map, and
(3) a manager uses overall similarities to get data from users
for an OS perceptual gap map.

DETERMINANT GAP MAP

 Attributes that both differentiated and are important are called
determinant attributes
 Purpose of this method is to find a spot on the map where the
gap offers potential as a new item, one that people might find
different and interesting.

PERCEPTUAL GAP MAPS BASED ON ATTRIBUTE RATINGS (AR)

 Attribute ratings (AR) perceptual gap mapping asks market
participants (buyers and users of the product) to tell what
attributes they believe products have.
 Factor analysis – statistical technique used to reduce the large
number of attributes to a small number of underlying
dimensions (called factor) then serve as the axes of the
perceptual map.
 Cluster analysis can be used to group individual respondents
together into benefit segment based on their preferences.

PERCEPTUAL GAP MAPS BASED ON OVERALL SIMILARITIES (OS)

 OS techniques do not require customers to rate choices on
individual attributes. Rather, these techniques run on
perceptions of overall similarities between pairs of brands.
 Multidimentional scaling (MDS) computer program used to
develop a perceptual map from the similarities data .

TELLA-IN&DAWANG