Innovation and New Product Strategy

INNOVATION AND NEW PRODUCT INNOVATION AND NEW PRODUCT STRATEGYSTRATEGY

Innovation as a Customer Driven ProcessNew Product PlanningIdea GenerationScreening, Evaluating, and Business

AnalysisProduct and Process DevelopmentMarketing Strategy and Market TestingCommercializationVariation in the Generic New Product

Planning Process

INNOVATION FEATUREINNOVATION FEATUREManaging Google’s Idea FactoryManaging Google’s Idea Factory

As director of consumer Web products Marissa Mayer is a champion of innovation. She favors new product launches that are early and often.

She joined Google in early 1999 as a programmer when the workforce totaled 20. By 2007 Google had 5,700 employees with expected sales of $16 billion.

How Google Innovates

The search leader has earned a reputation as one of the most innovative companies in the world of technology. A few of the ways Google hatches new ideas:

THE IDEAS LIST

Anyone at Google can post thoughts for new technologies of businesses on an ideas mailing list, available companywide for input and vetting. But beware: Newbies who suggest familiar or poorly thought-out ideas can face an intellectual pummeling.

OPEN OFFICE HOURS

Think back to your professors’ office hours in college. That’s pretty much what key managers, including Mayer, do two or three times a week, to discuss new ideas. One success born of this approach was Google’s personalized home page.

BIG BRAINSTORMS

As it has grown, Google has cut back on brainstorming sessions. Mayer still has them eight times a year, but limits hers to 100 engineers. Six concepts are pitched and discussed for 10 minutes each. The goal: to build on the initial idea with at least one complementary idea per minute.

ACQUIRE GOOD IDEAS

Although Google strongly prefers to develop technology in-house, it has also been willing to snap up small companies with interesting initiatives. In 2004 it bought Keyhole, including the technology that let Google offer sophisticated maps with satellite imagery.

FINDING CUSTOMER VALUE OPPORTUNITIESFINDING CUSTOMER VALUE OPPORTUNITIES

Customer value analysis

Objective is to identify needs for:

1. New products

2. Improvements to existing products

3. Improvements in production processes

4. Improvements in supporting services

CustomerExpectations

CustomerSatisfaction Gap

ActualProductPerformance

OPPORTUNITIES

(1) New Products(2) Improvements(3) New and Improved Processes

TRANSFORMATIONAL Break-through innovation Digital photographyNEW PRODUCT CATEGORY

Dell Printers Nike Apparel Golf clubsLINE EXTENSION New color/package/styleINCREMENTAL IMPROVEMENTS Software updates

The Evolution of the Creative CompanyThe Evolution of the Creative Company

STEP 1Technology and information become commoditized and globalized. Suddenly, the advantage of making things “faster, cheaper, better” diminishes, and profit margins decline.

STEP 2With commoditization, core advantages can be shipped abroad. Outsourcing to India, China, and Eastern Europe sends a growing share of manufacturing and even the Knowledge Economy overseas.

STEP 3Design Strategy begins to replace Six Sigma as a key organizing principle. Design plays a key role in product differentiation, decision-making, and understanding the consumer experience.

STEP 4Creative innovation becomes the key driver of growth. Companies master new design thinking and metrics and create products that address consumers’ unmet, and often unarticulated, desires.

STEP 5The successful Creative Corporation emerges, with new Innovation DNA. Winners build a fast-moving culture that routinely beats competitors because of a high success rate for innovation.

Characteristics of Successful InnovatorsCharacteristics of Successful Innovators

STRATEGIC INITIATIVES

Creating an Innovative Culture

Leveraging Capabilitie

s

Selecting the Right

Innovation Strategy

Developing and Implementing Effective New

Product Processes

Making Resource Commitments

Creating an Innovation Culture

Innovation Workshop for top executives to develop an innovation plan. Innovation Statement highlighting objectives and senior management’s role and responsibilities. Training programs for employees and managers. Communicate the priority of innovation. Speakers to expose employees to innovation authorities.

Source: Thomas D. Kuczmarski et al., “The Breakthrough Mindset,” Marketing Management, March/April 2003, 43.

The Innovation Strategy Spells Out Management’s Priorities for New Product Opportunities

1. Set specific New Product Objectives.2. Communicate the role of New Products throughout

the organization.3. Define the areas of strategic focus:

Product ScopeMarketsTechnologies

4. Include longer term discontinuous projects in the portfolio along with incremental projects.

CustomerNeeds

Analysis

CustomerNeeds

Analysis

BusinessAnalysisBusinessAnalysis

Screeningand

Evaluation

Screeningand

EvaluationIdeaGeneration

IdeaGeneration

MarketingStrategy

Development

MarketingStrategy

Development

ProductDevelopment

ProductDevelopment

TestingTesting

CommercializationCommercialization

NEW PRODUCT PLANNING PROCESS

Achieving Cross-Functional Interaction and Coordination

R & D

Operations Marketing

Finance

Coordination of new product activities by a high-level general manager

Inter-functional coordination by a team of new product planning representatives

Creation of a project task force responsible for new product planning

Designation of a new products manager to coordinate planning between departments

Formation of matrix structure for integration new product planning with business functions

Creation of a permanent design center

Responsibility for New Product Planning

Idea search: targeted or open-ended? How extensive and aggressive? What specific sources are best for generating a

regular flow of new product ideas? How can new ideas be obtained from customers? Where will responsibility for the new product

ideas search be placed? What are potential threats from alternative (or

disruptive) technologies?

IDEA GENERATION

METHODSOF

GENERATINGIDEAS

DirectSearch

LinkingMarketing

and Technology

FacilitatingLead UserAnalysis

CreativeMethods

National Policy

ExploratoryCustomerStudies

Alliances/Acquisition/Licensing

TechnologicalInnovation

An Innovation Champion in Action at GE

Beth Comstock calls herself “a little bit of the crazy, wacky one” at corporate

headquarters. And it’s an apt description when you realize she works at

General Electric Co. Comstock, 44, is charged with transforming GE’s culture,

famously devoted to process, engineering, and financial controls, to one that’s

more agile and creative. Chairman and CEO Jeffrey R. Immelt tapped the

former communications chief to become GE’s first-ever chief marketing officer

almost three years ago. The job came with a critical twist: the goal of driving

innovation through the company’s 300,000 plus ranks.

“Creativity is still a word we’re wrestling with,” Comstock concedes. “It seems

a bit undisciplined, a bit chaotic for a place like GE.” More comfortable

territory is the term “imaginative problem-solving” – encouraging people to

think “what if” – yet always with the aim of driving growth. One of Comstock’s

first moves was to bring in anthropologists to audit GE’s culture. They came

back with praise for GE’s famous work ethic but noted that employees wanted

more “wow” – more discoveries from the company founded by Thomas Edison.

Comstock has a role whose importance is spreading

throughout Big Business – that of innovation champion.

She began by studying the best practices at companies

such as Procter & Gamble, FedEx, and 3M. She brought in

a raft of creativity consultants, futurists, and design gurus

to lead sessions with different operations. Their names

were jolting for GE types: Play, a Richmond (VA.) group

that helps execs think differently, and Jump, based in San

Mateo, CA., which researches how people use things. GE

is expanding its army of designers to bring businesses

closer to customers. And Comstock is staging “dreaming

sessions” where Immelt, senior execs, and customers

debate future market trends. Comstock concedes some

managers view the workshops as a waste of time. “We

have a long way to go,” she says. But for GE, there’s no

turning back.

IDEA GENERATION

SCREENING(fit/feasibility)

CONCEPT EVALUATION

BUSINESS ANALYSIS

SCREENING, EVALUATING, AND BUSINESS ANALYSIS

Business AnalysisBusiness Analysis

Revenue Forecasts

Preliminary Marketing Plan

Cost Estimation

Profit Projections

Other Considerations

NEWPRODUCTCONCEPT

PRODUCTDEVELOPMENT

AND USETESTING

MARKETINGSTRATEGY

DEVELOPMENT

MARKETTESTING

LAUNCH

PRODUCT AND PROCESS DEVELOPMENT

Development of the new product includes:◦Product design◦Packaging design◦Decisions to make or purchase product

componentsProduct Development Process:◦Product Specifications◦Industrial Design◦Prototype◦Use Tests◦Process Development

Collaborative Development

Product and Process DevelopmentProduct and Process Development

PURPOSE OFUSE TESTS

Does it have therequired attributes?

Verifyclaims

Ideas forimprovements

Identify usesituations

MARKETING STRATEGY AND MARKET TESTINGMARKETING STRATEGY AND MARKET TESTING

Marketing Strategy Decisions

◦Market Targeting

◦Positioning Strategy Market Testing Options

◦Simulated Test Marketing

◦Scanner – Based Test Marketing

◦Conventional Test Marketing

◦Testing Industrial Products

◦Selecting Test Sites

◦Length of the Test

◦External Influences

Less artificial than simulated testing

Costs less than full-scale market test

Test is controlled by using IRI’s 2300 panel members in each test city

Cable TV enables use of controlled ad testing

Tests take about 12 months

Scanner-based Test Marketing

COMMERCIALIZATIONCOMMERCIALIZATION

The Marketing Plan

◦Complete marketing strategy

◦Responsibilities for execution

◦Cross – functional approach

Monitoring and Control

◦Real – time tracking

◦Role of the Internet

◦ Include product performance metrics with performance targets

Market Target(s)

Marketing Program(s)

Objectives

Marketing Strategy

Technology Push Processes

Platform Products

Process – Intensive Products

Customized Products

VARIATIONS IN THE GENERIC NEW PRODUCT PLANNING