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Chapter Ten

Managing

Innovation and

New Industrial

Product

Development

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Some newproducts followplanned,deliberateprocesses, whilecircuitous andchaotic processestypifies others.

Why? Researchsuggests thatstrategic activitywithin larger

organizations fallsinto two broadcategories:induced andautonomousstrategic behavior.

Table 12.1 7th ed

Patterns of Strategic Behavior

Induced Vs. Autonomous Strategic Behavior: Selected

Characteristics of Marketing Strategy Formulation Process

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Senior management at 3M

Company will not commit

to a project unless a

Product Champion

emerges and will not

abandon the effort unless

the champion gets tired.

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Four Types: Development Projects

Derivative projects center on incremental product enhancements,

incremental process improvements, or incremental changes on both

dimensions.

Platform projects create design and components shared by set of

products.

Breakthrough projects establish new core products and new core

processes that differ fundamentally from previous generation of

process and product.

Research and development creates knowledge of new materials and

technologies that eventually leads to commercial developmentmore

like pure science.

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Product Families

Products that share common platform but have different

specific features and enhancements required for different

consumer sets.

Strategists argue that firms should move away fromplanning emphases that center on single products.

The move toward product family perspective requires

close inter-functional working relationships, long-term

technology strategy view, and multiple-year resourcecommitment.

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The Disruptive Innovation Model

Performance

Time

DisruptiveInnovations

Performance That CustomersCan Utilize or Absorb

Range ofPerformance

That CustomersCan Utilize

Source: Clayton M. Christensen and Michael E. Raynor, The Innovators Solution: Creating and Sustaining Successful Growth (Boston:Harvard Business School Press, 2003), p. 33.

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Three Approaches to Creating New-Growth Businesses

Dimensions

Targeted perform-ance of productor service

Targeted customersor market application

Effect on requiredbusiness model

(processes andcost structure)

SustainingInnovations

Performance improvementin attributes most valued byindustrys mostdemanding customers.

These improvements maybe incremental or break-through.

The most attractive (i.e.,profitable) customers inmainstream markets whowill pay for improvedperformance.

Improves or maintainsprofit margins by exploiting

existing processes and coststructure and making betteruse of current competitiveadvantages.

Low-EndDisruptions

Performance goodenough along traditionalmetrics of performanceat low end ofmainstream market.

Overserved customers inlow end of mainstreammarket.

Uses new operating orfinancial approach or both

different combination oflower gross profit marginsand higher asset utilizationcan earn attractivereturns at discountprices required to winbusiness at low end ofmarket.

New-MarketDisruptions

Lower performance intraditional attributes,but improved performancein new attributestypicallysimplicity and convenience.

Targets nonconsumption:customers who historicallylacked money or skillto buy and use product.

Business model must makemoney at lower price per

unit sold, and at unit pro-duction volumes that willinitially be small. Grossmargin dollars per unit soldwill be significantly lower.

Source: Clayton M. Christensen and Michael E. Raynor, The Innovators Solution: Creating and Sustaining Successful Growth (Boston: Harvard BusinessSchool Press, 2003), p. 51.

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Innovation Winners:High-Technology Characteristics

1. Limited Structure

Creating successful products to meet changing customer needs requiresflexibility but successful product innovators combine this flexibility with a

few rules that are never broken.

2. Real Time Communication and Improvisation

Improvisation involves design and execution of actions that converge with

each other in time.

3. Experimentation: Probing into the Future

Successful product portfolios creators did not invest in any one version of

future but instead used variety of low-cost probes to create options for

future.

4. Time Pacing

Product innovators carefully manage transitions between current and future

projects, while less successful innovators let each project unfold according

to its own schedule.

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Although definitions of failure somewhat elusive,

research suggests that 40 percent of industrial products

fail to meet objectives.

Major Drivers of

Firms New

ProductPerformance

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New Product Development Process

Successful companies employ high-quality new product development

processgive careful attention to execution of activities and decision

points. Benchmarking characteristics:

Firms emphasize upfront market and technical assessments.

Processes feature complete descriptions of product concepts,product benefits, positioning, and target markets.

Process include tough project go/killdecision points and kill

option was actually used.

New product process are flexible.

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Three main ingredients:

1. Top management committed resources necessary to

meet firms objectives for total product effort in firm.

2. R&D budgets were adequate and aligned with stated newproduct objectives.

3. Necessary personnel were relieved from other duties and

assigned specifically to new product effort.

Resource Commitments

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New Product Strategy

Set aggressive new product performance goal as

basic corporate goal and communicate to allemployees.

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Lead user projects are conducted by cross-functional teams that include four to

six managers from marketing and technical departments; one member serves

as project leader. Team members typically spend 12 to 15 hours per week on

projects.

Lead

User

Method

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Quality Function Deployment

First QFD task: identify customer needs.

QFD strength: comes from translating customer

needs into product design attributes.

QFD provides important framework for bringing

critical information on customer needs togetherwith appropriate engineering data.

Quality function deployment, or QFD, is a method used to identifycritical customer attributes and to establish a specific link between

customer attributes and product design attributes.

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Four Strategic FactorsFor New Product Success

Product advantage refers

to customer perceptions of

product superiority with

respect to quality, cost-

performance ratio, orfunction relative to

competitors products.

Marketing synergy

represents the degree of fit

between project needs and

the firms resources and

marketing skills.

Technical synergy comes

from the fit between project

needs and the firms R&D

resources and

competencies.

International orientation--

new products designed and

developed to meet foreign

requirements, and targeted

at world or nearest-neighbor

export markets.