MKT 380: New Product Development - Test 1

Product Innovation Charter Contents

1. Background (what are we, why are we developing this strategy). 2. Focus (core competencies/strength, competitive advantage, value brought to target, capabilities). 3. Goals and objectives. 4. Guidelines (special guidelines - time and entry, innovativeness, costs, quality, competition, patentability). Reason why the project has been started, direction.

Problem Analysis (4)

1. Determine category of product. 2. Identify heavy users. 3. Find problems associated with product category. 4. Rank problems.

methods for generating concepts (2)

1. Gathering ready-made product concepts. 2. Using a managed process run by the new products team.

Drawbacks of Online Communities

1. Hard work. 2. Costly and time-consuming (must hire moderators and facilitators). 3. Takes time for the community to mature. 4. Hard to organize content so it is easily found. 5. Legal issues - member privacy, confidentiality, content ownership.

Accelerate Time To Market

1. Have a clear product innovation charter (PIC) 2. Have a third-generation new products process that permits overlapping phases. 3. Use a new product portfolio and careful project selection to allocate scarce resources. 4. Focus on quality: "get it right the first time." 5. Have an empowered cross-functional team.

Benefits of Open Innovation

1. Increased speed of research and innovation. 2. Cuts risks. 3. New innovation ideas. 4. Dominant innovation model; inventors, startups, or university labs are sought out.

Sources for needs and problems of customers

1. Internal records (routine contacts with customers. This is the most common source). 2. Technical and marketing departments (disadvantage: suggestions are usually perceptions of what the problem is). 3. Problem analysis. 4. Scenario analysis (anticipating future problems). 5. Experts 6. Published sources 7. CUSTOMER CONTACT

Drawbacks of crowdsourcing

1. Modest product improvements. 2. Typical user is less likely to come up with ideas that can easily be developed into real products. 3. Professionals and experienced users may have a more realistic view.

Strategic Elements of Product Development (3)

1. New Product Process 2. Product Innovation Charter 3. Product Portfolio

Categories of New Products (6)

1. New to the world. Example: iPod 10% 2. New to firm. Example: P&G shampoo or coffee. 20% 3. Additions to existing lines. Example: P&G Tide Liquid, Bud Light 26% 4. Improvements and revisions. Example: P&G improvements to Tide detergent. 26% 5. Repositioning. Example: Baking soda as an odor remover. 7% 6. Cost reductions. New product that provides similar service at a lower cost. 11%

Principles of Open Innovation

1. Not all smart people work for us. 2. Inbound and outbound. Obtain information from external partners, and monetize technology that is no longer consistent with strategy. 3. Not outsourcing! External sources are viewed as complementary to internal sources. 4. Selecting the best partners is critical, and mutual trust is important.

Types of Online Communities

1. Open 2. Lead user 3. Firm-organized 4. Private 5. Proprietary (thousands of members that statistically represent a target market).

New Product Process (5 phases)

1. Opportunity 2. Concept Generation 3. Concept Evaluation 4. Development 5. Launch

Product Portfolio Objectives

1. Strategic alignment (products reflect the PIC and align with strategy). 2. Assessing portfolio value (commercial value is maximized). 3. Project balance (products balance existing product lines). 4. Number of projects (avoid committing resources to too many projects as it could lead to underfunding).

Market Testing (4)

1. Strategy, tactics, and launch details for marketing plan. 2. Prepare and get approval for business plan. 3. Product augmentation - services, packaging, branding. 4. Decide if test marketing is necessary.

Categories of Opportunities (4)

1. Underutilized resources. 2. New resources. 3. External mandates (example: stagnant market, competitive threat that forces firm to look for new opportunities). 5. Internal mandates (example: new products used to close sales gaps, or to fill senior management desires).

Product Portfolio

A statement of how the new product is going to fit within the organization's other products. Used to avoid cannibalism and assess which products would be the best ones to add to the existing line, given financial and strategic objectives. Outlines how the new products are going to fit within the firm's portfolio of products. Ensures that products meet financial and strategic criteria. Example: P&G Cosmetics added new products such that maximum buzz was created in the marketplace. If there were already several eye makeup products on the portfolio, they would not immediately launch another. Management called this an "initiative rhythm" for product launch.

Strategic Alliance

A strategic partnership based on the rationale that, due to substantial cross-shareholding investments, each company acts in the financial interest of the other—while maintaining individual brand identities and independent corporate cultures. Example: Renault-Nissan. The goal of the Alliance is to increase economies of scale for both Renault and Nissan without forcing one company's identity to be consumed by the other's. The Alliance achieves economies of scale and speeds time to market by jointly developing engines, batteries, and other key components. It has resulted in joint global manufacturing and marketing (Brazil, Russia, India, China, Korea, Morocco).

Product Configurators

A type of user toolkit. Computer aided manufacturing system to produce a custom product.

Innovation

An invention is transformed into a marketable product or service. Types are disruptive, sustaining, and commercial.

Gap Analysis

Analyzing product attributes to find an unserved gap.

Online Community

Any group that interacts using online social networking or a similar medium. Example: Del Monte identified biggest concerns of pet owners (doggie daycare, travel with dogs, pet entertainment), identified a new customer segment ("Dogs Are People, Too"), created invitation-only private online community to encourage customer innovation, called "I Love My Dog" (300-500 consumers). The community generated and refined ideas for new breakfast product for dogs, i.e., Snausages Breakfast Bites, launched in half the normal time.

Attribute Ratings (AR) Perceptual Map

Attribute rating by customers. Set of attributes → gather customer perception → Likert scale → use factor analysis to reduce a large number of attributes to a small number of underlying factors, which can then form the axes of the perceptual map. Benefit: uses customer perceptions, so gaps are more likely influence potential users. Weakness: phantom attributes (non-identifiable attributes); difficulty scoring attributes.

New Product Development (NPD) Process

Begins with a strategy. Many company departments are involved. Marketing becomes involved early. The process is over when the new product is successful, so feedback/corrections occur.

Benefits and Weaknesses of Perceptual Mapping

Benefits: 1. Understand market segments. 2. Understand customer perception of the brand. 3. Evaluate performance of marketing campaigns and marketing mix changes. 4. Compare customer perceptions to positioning goals. 5. Check clarity of positioning. 6. Track success of new product positioning. 7. Monitor competition. 8. Identify gaps in the market. 9. Monitor changes in consumer preference. Weaknesses: 1. Oversimplified to 2 attributes. 2. More beneficial for low-involvement decisions. 3. More relevant for individual brands; less helpful for corporate images. 4. Expensive data. 5. Differences between consumer perception of benefits and reality.

Spiral Development

Build-test-feedback-revise proces where customer is an active part of the development process. Produce successive prototypes. Useful for new-to-the-world products. Early non-working (focused) prototype made of wood or foam tested with customers. Customer feedback obtained on what needs to be changed. Based on the feedback, the next prototype is prepared and the cycle continues. Note: early prototypes may precede customer specifications! The new products phases may be done out of order.

Perceptual Mapping

Compare products based on consumer perceptions with the purpose of identifying the brand image that consumers have and their reactions to brands, products, and services. Helps businesses identify potential new products during product development. Types: determinant, attribute rating, overall similarities.

concept generation ideal sequence

Customer need → firm develops technology → produces form.

New Product Concept

Customers desire products that have better features, performance and quality than the products that are already on the market.

Phase 1: Opportunity Identification

Direction - where should we look? Opportunity concept - underutilized skill, resource, or a problem. Steps: 1. Generate new opportunities. 2. Sort opportunities.

Lead Users

Firms or individuals at the front end of a trend. How are they used in the innovation process? New product ideas, best understanding problems and may already be developing solutions. ASK FOR outcomes (what they would like the product to do). Don't ask for improvements. Be informed by the customer. Example: X-Games athletes for new high-performance snowboards. They provide design requirements and are also early adopters and good at stimulating word-of-mouth.

Extending Studies

Form of scenario analysis, also called extrapolation. Take a present trend and extend it into the future. Example: Global Warming → High Seas → needs ??

Wild Card Studies

Form of scenario analysis. Consider the effect of future high-impact, low-probability events. Example: Human Cloning

Leap Studies

Form of scenario analysis. Make a bold prediction of a future scenario. Example: all cars will be driverless.

Concept

Form or technology with a clear need/benefit statement. A technology permits us to developed a form that provides a benefit. NOT an idea, but an idea that has taken form. Requirements (3): form, technology, and benefit/need. Example: Gillette Trac II Razor Example: Toilet Brush Idea: Develop a new and improved toilet brush. Concept: A toilet brush that contains detergent, refillable, and easy for the customer to attach to the handle. Product: Lysol Ready Brush Toilet Cleansing System

Phase 3: Concept Evaluation

Goal: rank concepts and eliminate bad ones. Tested concept. Fully screened concept. Protocol concept - a product definition that includes the intended market user, the problem perceived, the benefits the product should have, plus mandatory features. Steps (go/no go for each stage): 1. Screening (pre-technical evaluation). 2. Concept testing with customers (focus groups, interviews, etc). 3. Full-screen (gatekeeper). 4. Project evaluation (prepare protocol, explain benefit). Request project proposal authorization (once you have the product definition, team, budget, skeleton of development plan, and final PIC).

Phase 2: Concept Generation

Initial review. Is the idea worth screening? Idea concept. Stated concept. Steps: 1. Select high potential opportunities. 2. Involve customers. 3. Collect new product concepts that fit the opportunity.

Methodologies used to contact customers (4)

Interviews, observation of product in use, focus group, role playing.

Attributes

Make up the basic idea; features (what it consists of), function (what it does), and benefits (how does it help the customer). A future product must involve one or more of these three. Theoretic sequence: the feature permits a function which provides a benefit.

Once you have identified an opportunity, how do you prepare the firm for ideation?

Managers need the right people in the correct environment and get them ready for the ideation process. Creative persons need to know the concept that is being searched for.

Phase 5: Launch

Market testing. Should the product be marketed? Marketed concept. Successful concept. Steps: 1. Commercialize plans and prototypes from development phase. 2. Distribution and sales. 3. Make sure that launch achieves goals set in PIC.

Direct Customer Contact

Most productive method for understanding consumer problems.

Brainstorming

One person presents a thought, another person reacts to it, another person reacts to the reaction, and so on. Use of human synergy (interaction and teamwork). Rules: 1. No criticism. 2. Freewheeling. The wilder the better. 3. Nothing should slow the session down. 4. Combination and improvement of ideas.

Crowdsourcing

Open idea solicitation from customers. How is it used in innovation? Creative source, innovation drive, improve products, increase customer satisfaction. Example: Dell's Idea Storm: encouraged customers to submit ideas for new products and improvements to existing products online. Over 10,000 ideas were obtained from sources around the world. Apple used crowdsourcing in generating ideas for the iPad. Apple monitored reviews and blogs and also obtained Voice of the Customer data to understand the needs of potential users. Threadless invites contributors for T-shirt designs, encourages users to vote for favorite designs, and produces and sells the favorites. Frito Lay's flavor competition.

Prototype Design (3)

Part of the development phase of the new product process. Steps: 1. Test prototypes 2. Validate against protocol. 2. Design and validate production for prototype. 3. Scale production for product and market testing.

Overall Similarities Perceptual Mapping

Perceptual map that does not require customers to rate choices on individual attributes. Runs on perceptions of similarities between pairs of brands. Uses Multidimensional Scaling (MDS). Example: Coke -- Pepsi --------- Dr. Pepper

New Product Process Evaluation

Phase 1: Opportunity Identification. Direction. Where should we look? Opportunity concept - underutilized skill, resource, or a problem. Phase 2: Concept Generation. Initial Review. Is the idea worth screening? Idea concept. Stated concept. Phase 3: Concept Evaluation. Full Screen. Should we develop this? Tested concept. Fully screened concept. Protocol concept. Phase 4: Development. Progress Reports. Have we developed it? Prototype concept. Batch concept. Process concept. Phase 5: Launch. Market testing. Should we market this? Marketed concept. Successful concept.

Perception

Process by which a person interprets their surroundings.

Open Innovation

Process used by a firm to search externally for research, innovation, technologies, and products. Risks: loss of proprietary secrets, theft of technology. Example: P&G's "Connect and Develop" program requires that no fewer than 50 percent of new initiatives have to include at least one external partner. Avoids the "not invented here" syndrome. To execute Connect and Develop, P&G assigned a team to find external partners, build brand equity, access new technologies, and create new product categories. SunHealth Solutions (a P&G partner) developed the UV sensing technology used in Huggies swimpants. Mr. Clean scrubbing brush uses technology originally used as insulation in the auto industry. Magic Eraser cleaning pad was sourced from a German chemicals company, and first noticed by P&G in use in Japan. Example: Kraft Foods sought open innovation partners for its planned Tassimo Beverage System. While they had the food knowhow, suppliers, and distribution channel, they needed assistance in the development and manufacture of the coffee maker. They assessed different home appliance manufacturers for manufacturing and R&D capabilities and competence in the appliance product category, and also for brand value compatibility, cultural fit, and compatibility of business strategies. In particular, they sought a manufacturer that shared Kraft's attitudes toward quality, convenience, and responsibility. Ultimately, they selected the Bosch and Siemens Home Appliance Group.

Product Platform

Product families that share similarities in design, development, or production process. Cost and time efficient, increased personalization. Examples: Boeing: passenger, cargo, short- and long-haul planes made from same platform. P&G: Liquid Ariel for European market, Liquid Tide for North America, and Liquid Cheer for Japanese market. Black & Decker: uses a single electric motor for dozens of consumer power tools.

Phase 4: Development

Progress Report. Have we developed the product? Prototype concept. Batch concept - product specifications, first product test. Process concept - manufacturing process. Pilot concept - a supply of the new product is produced to field test with users. Steps: 1. Determine development and deliverables. 2. Design prototype. 3. Market test (strategize, launch details, prepare business plan, product augmentation).

Full Screen

Scoring model to determine whether you should develop a product or not. A process by which the new product concepts that passed initial screen are thoroughly evaluated on product advantage, market competitiveness, marketing synergy, and technical synergy.

User Toolkit

Set of design tools that customers can use to customize a product. How are they used in innovation? Customers build the product they want. Example: International Flavors and Fragrances. Internet-based toolkit that provides a database of flavor profiles and rules on how to combine them. Customer can specify flavor mixes that are immediately made into samples; customer can then make adjustments until the desired flavor is obtained. Example: NikeiD

Determinant Gap Map

Set of differentiating and important (determinant) attributes. Purpose of this method is to find where a gap offers a potential new item. Weakness: the map is driven by managerial judgment (customer perceptions may differ).

Scenario Analysis

Solving future "what if" problems. 1. Create scenario. 2. Study for problems and needs. 3. Evaluate problems and solve important ones. Forms: extending studies, leap studies, and wild card studies.

Factor Analysis

Statistical procedure used to identify clusters of related factor. Used in AR perceptual mapping. Example: when you take a multiple-choice test, a factor analysis can be done to see what types of questions you did best on and worst on (maybe you did best on factual types of questions but really poorly on conceptual types of questions).

Multidimensional Scaling

Technique that creates a map displaying relative positions of objects, given only a table of the distances between them (rating how similar they are) on a scale from 1 to 10, with 1 meaning they are identical, and 10 meaning they are as different as possible.

Creativity

Techniques for stimulating __________ used by management: 1. Idea bank of unused ideas. 2. Competitive teams. 3. Encourage interaction. 4. Recognize individuality, tolerate mistakes, be supportive under stress. Barriers: 1. Cross-functional diversity. 2. Allegiance to functional areas. 3. Social cohesion. 4. Role of top management.

Product Innovation Charter

The sandbox. A strategy for new products that ensures the team develops products in line with firm objectives and marketplace opportunities. Developed by senior management and provides guidance to the strategic business units (SBUs) on innovation. Measurable and time-framed marketing objectives. Example: P&G revitalized its cosmetics segment by doing situation analysis and focusing on facial products. Example: Apple iPad. 1. Focus - technology. 2. Goals - revolutionary new products should also be platforms for future products. 3. Special guidelines - be the best. Risks of poor PIC development/vaguely defined sandbox: scope creep (product definition keeps changing), unstable product specifications.

Sustaining Innovation

Type of innovation where extensions or improvements are added to existing products. Meets consumer needs by filling gaps, eliminating consumer trade-offs, or providing new benefits. Example: P&G Pampers Caterpillar-Flex, which improved the fit and comfort of baby diapers, and Crest Pro-Health Rinse, the Crest brand's entry into the mouth-rinse category adjacent to toothpastes.

Disruptive Innovation

Type of innovation where new categories, segments, or sources of consumer consumption are created. Meet consumer needs that nobody else has met. New to the world. Takes root in simple applications at the bottom of a market and then relentlessly moves up, eventually displacing established competitors. Example: desktop and laptop computers

Commercial Innovation

Type of innovation. No new product or package change. The opposite of bringing new products to new markets. A fast, market-oriented approach of creating growth potential in existing markets. Example: P&G Gillette Champions and Pampers Unicef programs, marketing efforts that give consumers new reasons to be interested in and loyal to a P&G brand.

Product Portfolio Strategic Criteria (8)

Used in the Product Portfolio to evaluate new product fit with the firm's business strategy. 1. Strategy 2. Project type 3. Short-term versus long-term. 4. High-risk versus low-risk 5. Market familiarity. 6. Technology familiarity. 7. Ease of development. 8. Geographical markets.

Core Competencies (4)

Used to define company focus. 1. Technological strength. 2. Product experience (business focus). 3. Customer franchise (customer focus). 4. End-use experience (end use focus).

When does a new product come into being?

When the product is successful in the marketplace.

Artificial Intelligence

Will impact both consumer and business lives in the near future. Examples: 1. Newsfeed: Facebook is using AI and machine learning to enhance user experience. 2. Digital assistant: will help connect, organize, and automate nearly every area of life. 3. Autonomous vehicles: self-driving cars. 4. Smarter customer service: predicting customer issues 5. Modern marketing: better business-to-customer relationships 6. Next-gen human resources: more personalization