Introduction

This chapter discusses product/market considerations, product architecture, and product design. The concepts, methods, and techniques described and assessed provide a foundation for the approaches used to link the product/market conceptual aspects with the elements of product design and development. The discussions focus on the product/market and the technical basis for selecting, analyzing, and implementing product- and market-related techniques.

Given that the techniques for market analysis were covered in Chapter 2 and that Chapters 4 and 5 provided a general overview of the conceptual aspects of the new-product development (NPD) process, this chapter examines how product/market planning and design strategies are essential parts of the NPD process; the aim is to achieve product quality and performance and to minimize potential defects and burdens.

The key to creating outstanding new products is to understand the opportunities and challenges of the business environment, the dynamics of the markets and the external dimensions, and the consequences of the decisions made during the NPD process. Integrating product/market strategies with the selection of the appropriate technological- and product-innovation methodologies provides a linkage between the technical and market-related requirements, and the marketing, production, and financial elements. Design techniques focus on analyzing the product requirements and selecting the best market-based design approaches.

Appropriate design strategies satisfy the social, economic, technical, and functional objectives of the product/market design, and meet the requirements of the design philosophies and the program priorities and realities.

Introduction

Validation is an integral part of the new-product development (NPD) process. It is embedded within the NPD process and serves as a mechanism to verify that the decisions are appropriate and in line with objectives and expectations. The reviews at the end of each phase and the Validation Phase itself are the main methods for improving the probability that positive outcomes will be achieved.

During the Validation Phase, decisions made during design and development are evaluated and tested to ensure that the new product meets customer and stakeholder expectations. The validation process includes examining the most significant elements of the NPD program, proving that the product meets specifications, and reducing defects and burdens.

The reduction of uncertainties during the Validation Phase provides management and practitioners with the confidence that critical success factors have been duly considered and that barriers to implementation have been mitigated. The Validation Phase focuses on major risk-reduction methods that require time, effort, and money to complete. Such methods are usually necessary for obtaining management's commitment to fund the Pre-commercialization Phase and Launch. The Validation Phase provides evidence that the potential of the new product is worth the investment and that there are no undue concerns about spending the money to launch the product. This is particularly appropriate where most of the investment is incurred just before commercialization, or if there are significant strategic, market, technical, or financial risks and uncertainties. For example, non-durable consumer products require a significant expenditure in advertising during the Pre-commercialization Phase.

Introduction

Exploring new-product opportunities involves the generation, development, and evaluation of ideas for new products. The fundamental steps include understanding the needs for new products, discovering existing and potential sources of ideas, describing internal and external requirements, and assessing the opportunities. The steps include reflecting on goals and priorities, examining guidelines, resolving problems and conflicts, evaluating ideas, and selecting candidates for further development.

Idea generation represents the genesis of the new-product development (NPD) process. While new-product development is a continuum in many organizations with ideas constantly flowing from individuals, teams, and business units, the Idea Generation Phase is the formal starting point of the NPD process where the ideas are identified, assessed, evaluated, ranked, and screened. New-product ideas are obtained from every facet of the business environment and the organization.

The exploration of new-product opportunities requires an extensive study of external business conditions and trends including understanding market needs and wants, and stakeholder expectations. It also requires a thorough assessment of the internal strengths and weaknesses with respect to the existing product portfolio and capabilities. Occasionally, luck plays a role as well; ideas simply become apparent or occasionally mistakes in the laboratory turn into opportunities. 3M's Post-it Notes are an example of a product line that evolved from the failure to develop a super adhesive. The semi-sticky substance that resulted from the experiments became the perfect material for making detachable notes.

Introduction

This chapter adds insights on how leading organizations are improving their processes and techniques for developing high-quality, superior-performance, and low-cost products having superior reliability and durability. The demands are not only on the products, but also on the processes and the people involved. Effective companies have to create and launch new products with outstanding attributes and in record times. They have to create a positive climate for being the best and achieving superior outcomes.

Product innovation has evolved dramatically over the latter part of the twentieth century. Leading corporations have integrated product development into their organizational constructs and have progressed from the linear flow of project-management thinking to a more-dynamic and interactive process-management framework, attempting to maximize synchronization of the activities and speed to market. On a global basis, most large companies are using some form of integrated product development (IPD) and are incorporating contributions of their customers, stakeholders, supply networks, strategic partnerships, related industries, and stakeholders into the new-product development (NPD) process.

Product innovation in the twenty-first century continues to evolve as new methods and techniques become available. Nevertheless, the near-term challenges include how to maintain continuous improvement and to discover even better ways of leading and managing product innovation. Leading companies are exploring the means to develop products virtually and to improve further the effectiveness of their NPD programs.

Innovation involves changes and improvements to technologies, products, processes, and services that result in positive contributions for customers and other constituents of business organizations. An innovation is a creative new solution to the prevailing conditions and trends, and fulfills the expressed and latent needs and wants of customers and stakeholders.

Innovation management involves the means, mechanisms, and methods for leading change through developing new technologies, products, and processes. It includes changes in business models and organizational structure. Innovation management is imperative for improving product portfolios, enhancing and developing new products, and achieving customer and stakeholder satisfaction in the fast-paced world of globalization, technological change, and pressures from the business environment.

Innovation is pivotal for sustaining the prosperity of most organizations. If cash flow is the life-blood of a business enterprise, then innovation is the prescription for reinvigorating the organization to compete more successfully in a demanding world.

Product innovation concentrates on improving the strategic position and product-delivery capabilities of the organization through creativity and leadership. Product innovation includes several essential aspects.

1. Examining the needs for new products, processes, and services.

2. Determining the proper direction and fit for new products.

3. Establishing the appropriate game plan of the entire management system for developing and commercializing new products.

4. Selecting new-product opportunities for investment.

5. Enhancing the organizational capabilities to create successful new products.

6. Creating the new product and executing the new-product development (NPD) program.

Product innovation is a dynamic construct requiring managerial and organizational leadership and skills; it is a far-reaching term.

Introduction

Managing new-product development (NPD) includes developing a model or framework, creating an effective NPD process, understanding the organizational implications, and determining and using the methods and techniques for analysis and decision making. Part III provides a schematic presentation and discussion of the essential mechanisms for analyzing the decisions and solutions required for maintaining the flow of the NPD process. The various methods and techniques are divided into the fundamental categories used for developing new products from an internal perspective. The areas include: product/market considerations, marketing strategies and programs, production strategies and programs, and financial applications and implications.

The methods and techniques discussed in Chapters 7 to 10 are typically the more-sophisticated approaches used during the later phases of the NPD process. However, some of the methods and techniques may be applied during the conceptual level as well. As discussed earlier, the applications depend on the type of new product and the complexities involved in the program. The more complex the NPD program, the more likely it is that sophisticated methods will be used during the earlier phases of the NPD process.

These chapters are intended to provide a broad understanding of the methods and techniques so that practitioners understand the fundamentals of their discipline as well as those of their colleagues. It is imperative that the specialists in each of the main disciplines have a working knowledge of the approaches used to make decisions.

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).