Introduction

The strategic logic of the organization provides the rationale for product innovation. New-product strategies and programs are based on external and internal perspectives; the business environment, the market situation, customer needs, and competitive analysis make up the external perspective, while core capabilities, core technologies, development capabilities, organizational skills and knowledge, and strategic requirements constitute the internal perspective. The business environment, market requirements, and core capabilities are primary considerations in the formulation and implementation of market-related new-product strategies.

The basic philosophy for developing sustainable new products is to create value based on the expressed and latent needs of the customers and stakeholders. The new-product development (NPD) process has to focus on finding opportunities and creating new products to delight customers and enhance long-term capabilities and prosperity.

Product innovation is established within the strategic context of the organization and its enterprise. The enterprise is the integration and alignment of the organization with all of its external constituents under the leadership of strategic management. It provides the overarching framework for understanding the opportunities and challenges in the business environment and the organization's capabilities and resources in the business context.

Strategic management determines vision, mission, and direction. Strategic direction provides the overall objectives, strategies, and action plans. The aim of strategic logic is to integrate the management system, its processes, and interrelated activities so that all initiatives and development programs flow seamlessly across the organization.

Introduction

This chapter discusses and analyzes the pre-commercialization and launch of the new product. The Pre-commercialization Phase ensures that the required resources are available and that the commercialization game plan is ready to roll. The actual elements of the Pre-commercialization Phase vary from situation to situation; however, it generally involves finalizing the specific means to bring the product or service to the market. The major requirements typically include producing sufficient levels of the product so that it is available for distribution to the channels or directly to the customers, completing the marketing program elements, and committing the financial resources to the product delivery system and marketing communications plans. The Pre-commercialization Phase involves the transition from design and development, and validation, to the execution of the launch.

Not every new-product development (NPD) program needs an extensive Pre-commercialization Phase. In some cases the new product is ready for commercialization immediately after the Validation Phase. This is particularly true for services or software products that do not require significant production or inventory requirements. Similarly, it may not be required when the NPD program is rolled out in simple stages that minimize large commitments for inventory, marketing communications, or other longer-lead-time activities. Likewise, it is often not necessary if the introduction of the new product is being bootstrapped one stage at a time. However, the Pre-commercialization Phase is critical for large, complex programs with many elements that have to be timed perfectly at launch.

Commercialization of a new product varies considerably as well.

At the dawn of the twenty-first century, leading businesses are focusing on innovation as the means for achieving their strategic objectives and obtaining competitive advantages. Strategic management's priorities are shifting from focusing on the product delivery system and selling products to leading change through creativity and discovering new opportunities in the business environment. Conventional new-product development (NPD) approaches are evolving into powerful, comprehensive management processes and techniques that integrate opportunity, innovation, and the development process into highly capable and responsive constructs. For example, General Electric's (GE's) Chief Executive Officer (CEO) Jeffrey Immelt wants GE to focus more on innovation, and to become the leader in introducing new products and services.

The conceptual level involves the exploration of new-product ideas, the maturation of new-product concepts, the selection of appropriate opportunities for further development, and the determination of the overall game plan for the NPD program. The conceptual level as defined in Chapter 2 includes the activities and decisions necessary for laying the foundation for the successful design and development, and commercialization of a new product. The road has many pitfalls, problems, and challenges as organizations have to respond to the ever-changing landscape of demanding customers and concerned stakeholders. The NPD process has to be systematic, yet flexible enough to accommodate shifting requirements over time.

The conceptual level aims at managing Idea Generation, Concept Development and Selection, and Program Definition phases in an integrated fashion that is both comprehensive and expeditious.

Introduction

Overview

Product innovation is the overarching management framework for making incremental changes and improvements to products, services, and processes. It includes the conceptualization, design, development, validation, and commercialization of new products for customers and markets in concert with the prevailing conditions and trends. Product innovation involves the creative responses and solutions for meeting the needs and expectations of customers and market(s), the driving forces in the business environment, and the strategic requirements of the organization. Product innovation runs the gamut from improving existing products to discovering entirely new ways of satisfying customers and stakeholders. From an internal perspective, product innovation depends on the knowledge, experience, capabilities, resources, and the prevailing technologies of the organization. From an external perspective, product innovation focuses on customer and stakeholder needs, wants, and expectations. Customers desire excellent products and services with exceptional value, outstanding benefits, high quality, and assured reliability. Meeting such specifications is the exciting challenge of product innovation.

Product innovation is challenging because of the complexities of the business environment, the changing needs of customers and markets, the effects of competition, and the difficulties associated with understanding the present and forecasting the future. However, the complexities of product innovation are simplified in most organizations because there are common pathways to define and describe the processes and methods used for developing new products, and the organization has an information system to support the required analysis and decision making.

Introduction

This chapter discusses the conversion of the conceptual level into an operational reality during the Design and Development Phase of the new-product development (NPD) process. It bridges the chasm between intended functions, features, and benefits from the market perspective with the physical and psychological aspects of the new-product architecture. Product design is the process of defining and creating the product attributes necessary for meeting customer and stakeholder expectations. Design and development include the full package of the requirements to commercialize the new product, including technical design, marketing, production, and financial implications.

The Design and Development Phase translates customer needs and the intentions of the concept into design specifications and technical instruments to create a producible and marketable product. It involves the concurrent development of the product architecture with marketing, production, and financial functional programs. The Design and Development Phase includes the following essential elements and learning objectives:

• Positioning the new product in the light of market realities and building flexibility into the process.

• Reaffirming the proper product attributes and understanding the functions and benefits from the perspective of customer and stakeholder needs and wants.

• Ascertaining the critical driving forces pertaining to customers, stakeholders, supply networks, related industries, the infrastructure, and competitors.

• Building an effective and integrated design process that leads to successful commercialization.

• Choosing the right marketing programs for the introduction of the product.

• Selecting the best means for producing and delivering the product to the market.

• Managing the financial implications to ensure that the product is and remains viable.

The Design and Development Phase, therefore, includes designing the product, selecting the marketing programs, determining the production and delivery methods, and understanding the financial implications.

Introduction

The primary result of the Idea Generation Phase is an “approved” list of acceptable candidates indicating their fit into the organization's criteria and their potential to succeed in the business environment. Idea generation produces ideas that usually lack full definition. This seeming weakness is actually one of the strengths of the new-product development (NPD) process. It is simple and cost-effective to produce a myriad of ideas during the Idea Generation Phase. The scope is limited and the critical objective is to select potential candidates for further analyses and development. In most cases, it is easy for an organization to discern which ideas should move forward.

The Concept Development and Selection Phase expands the rudimentary perspectives of the Idea Generation Phase into comprehensive new-product candidates based on sufficient analyses that the product, market, marketing, production, and financial dimensions can be defined and articulated. The primary objectives are to assess the potential of each of the candidates and to determine which ones should be developed into new products. Concept development and selection involves the transformation of new-product ideas into fully articulated concepts that can be ranked, screened, and selected for succeeding phases. It converts the basic elements of the new-product ideas into a comprehensive understanding of the business opportunities based on an assessment of the internal and external dimensions.

The selection activities include the screening of the concepts using selected metrics, and evaluating the implications on the internal and external dimensions of enterprise-management model (EMM).

Introduction

Best-practice benchmarking is today taken to describe a process whereby organizations pursue enhanced performance by learning from the successful practices of others. Comparisons may be made with other parts of the same organization, with competitors, or with organizations operating in different spheres whose business processes are nevertheless deemed to be in some way relevant. By implication at least, the lessons learned are implemented and the cycle continues anew.

The purpose of this chapter is to shed some light on the rather broad range of activities that are often subsumed under the umbrella term of benchmarking. The authors’ original interest in the topic stems from a conviction that benchmarking offers rather more than the mere establishment of performance “league tables.” Although we fully accept the value of these as a means of ascertaining comparative performance levels, and hence directing attention towards areas or processes which are seen, in relative terms, to be under-performing, our conviction remains that true benchmarking entails rather more. Specifically, the network of contacts generated by the activity represents a treasure-trove of good (if not necessarily best) practice, much of which could be adopted by the organization in some shape or form. It has been argued that benchmarking can only be about catching up; if good practice were to be copied slavishly then this would undoubtedly be the case, but a more general receptivity to good ideas, and the willingness to try them out in some new context, is arguably a major ingredient for innovation (see, e. g., Drucker, 1985; Peters, 1989; Zairi, 1996a).

Introduction

Assessing marketing performance is an increasingly important task for managers and other corporate stakeholders. First, many firms are looking to provide fresh growth in profit through increasing sales after years of downsizing (Sheth and Sisodia, 1995). Second, multi-disciplinary perspectives on performance measurement, such as the balanced scorecard (Kaplan and Norton, 1992) are increasing the attention given to non-financial measures of performance in general, raising the issue of which marketing measures, if any, should be included in such schemes. Third, investors and analysts are increasingly asking for information on the marketing performance of firms (Haigh, 1998; Mavrinac and Siesfeld, 1997).

Unfortunately, assessing marketing performance is also very difficult to do. Unlike purely internal measures of performance, such as defects per million, marketing performance depends on external, largely uncontrollable actors, such as customers and competitors. Further, it acts as a mediator between these external actors and various internal corporate processes, such as accounting, manufacturing, research and development, and finance. Bonoma and Clark (1988, p. 2) observe that these factors make “marketing's outputs lagged, multivocal, and subject to so many influences that establishing causes-and-effect linkages is difficult.”

This contribution is intended to introduce the reader to the long history of measuring the performance of marketing, reviewing representative samples of each research tradition. I begin with a discussion of the marketing productivity paradigm, which dominated much of the first 40 years of work in this area, and move on to illustrate expanded conceptions of marketing outputs and inputs, particularly in the distinction between marketing activities and assets.

Introduction

One ostensible objective of research on performance measurement is to determine the characteristics of measurement systems that lead to high performance. To this end, descriptive theories of performance measurement hypothesize relationships between work contexts, the design of measurement systems, the aptitudes and behavior of workers, and the outcomes that result from the work. Normative theories specify principles of design for measurement systems intended to produce desirable outcomes.

Normative theories do not usually specifically assert that high performance results only from performance measurement systems constructed in accord with theory. But high performance achieved via means other than performance measurement should surely operate in a way that is consistent with the mechanisms inherent in these performance measurement theories. Furthermore, some theories in use, such as the one summarized by the widely accepted aphorism “What you can't measure, you can't manage,” seem to imply that a performance measurement system designed according to certain basic principles is a prerequisite for high performance.

This contribution is simple in its layout and objectives. First, we identify a minimal set of principles for designing performance measurement systems that can be extracted from theories in a wide variety of academic disciplines and applied settings. We arrive at three principles that we believe would seem unobjectionable to most performance measurement proponents. Second, we present four vignettes that describe actual events from the airline industry in which the principles of performance measurement seem to be deliberately subverted in order to produce high performance. It is important to emphasize here that these are not merely examples of high performance arrived at via a different means than performance measurement.

Introduction

Recent years have witnessed a renewed emphasis on delivering superior-quality products and services to customers. As cost cutting and downsizing produce diminishing returns, the corporate spotlight has returned to marketing to encourage growth in businesses. Effective marketing can be defined as success in winning and retaining customer preference and thereby achieving the firm's long-term goals. Putting customers at the heart of every business activity is claimed to be key to sustained competitiveness (Kotler, 1997).

Marketing has to be broadly defined as being both the whole company's activities designed to satisfy customers and achieve its own objectives thereby (“pan-company marketing”) and the activities of the functional marketing department (see Webster, 1992). Marketers believe that the marketing paradigm is best for business compared to alternative orientations, such as those towards production or shareholders. But how well is that perception pursued?

Improving product and service quality and satisfying evolving customer needs and expectations requires on-going tracking and responsiveness to changing marketplace needs. Successful marketing requires monitoring of the effectiveness of marketing activities. Allocating resources to marketing, based on past effectiveness and the benchmarked experience of others, can significantly enhance performance. Better measurement leads to better marketing. What gets measured gets attention, particularly when rewards are tied to those measures (Eccles, 1991). The firm's orientation and objectives, how they measure progress towards those objectives, and the impact of measurement on performance are all likely to influence performance.

This study explores how marketing effectiveness is measured. We report how UK firms, in a variety of business sectors, assess marketing performance and whether measurement practice is related to firm characteristics (e. g., size, sector).

Introduction

This chapter reports on the loosely coupled performance measurement practices of a high-performing restaurant chain. Over a period of four years we observed a series of initiatives aimed at “tightening up” the performance measurement systems of the case company. Yet none of these initiatives resolved the desire for what the finance director towards the end of the research period called “unambiguous performance information.” Head office managers of all grades continued to demand performance measurement systems that allowed more comprehensive and detailed control over the operational decisions of restaurant managers. Whilst it was easy to see in principle how such systems could have been implemented, successive working parties did not impose them. This was not for lack of market competition, and it did not result in lower performance. Indeed, managers felt competitive pressures intensified during the research period and still managed to both increase market share and profitability of the case company. What we were faced with was a high-performing company in a competitive industry that espoused to rectify the flaws of its performance measurement system, yet did not. We think that this case holds a lesson for those who are interested in performance measurement system implementation, because it combines high performance with a handling of performance measurement issues that would seem to violate an implicit cornerstone of much of the performance measurement literature. We hypothesize that managers’ “failure” to address the obvious shortcomings of their performance measurement systems may have been related to the management style that enabled the company to perform so remarkably well.