1. 1 9-1 Products of the Future Intelligent refrigerators will track food inventories, and will either provide a hard-copy shopping list or send an electronic list to a home-delivery service. Intelligent wallpaper will transform a wall to a television, a computer screen, works of art, etc. Robotic lawn mowers will tend the grass within any specified boundary. “Nanny-cams” hidden in teddy bears permit parents to watch their children at daycare; camera-surveillance systems will keep an eye on latchkey kids home alone. Holographic storage will be used to store and retrieve home videos. Lasers and decay-preventive gum and toothpastes will minimize the need for the dentist’s drill. Robots will dispense gasoline, and know your preferred grade. “Smart” heart pacemakers will be placed in the wrist. Source: Marian Salzman and Ira Matathia, “Lifestyles of the Next Millennium: 65 Forecasts,” The Futurist, July-August 1998.

2. 2 9-2 Not All New Products Are Planned Microwave ovens Aspartame (NutraSweet) ScotchGard fabric protector Teflon Penicillin X-rays Dynamite In each case, an accidental discovery -- but someone knew they had something when they saw it!

3. 3 9-3 What Is a New Product? New-to-the-World Products –Polaroid camera, in-line skates, Kevlar, word-processing software New Category Entries –Hewlett-Packard PCs, Hallmark gift items, Discover Card Additions to Product Lines –line extensions or flankers Product Improvements –frozen yogurt, Miller Lite, Windows 98, plain-paper fax Repositionings –Arm & Hammer baking soda

4. 4 9-4 What Is a Successful New Product? Although you may hear much higher percentages, careful studies supported by research evidence suggest that about 40% of new products fail -- somewhat higher for consumer products, somewhat lower for business-to-business products.

5. 5 9-5 The Conflicting Masters of New Products Management Three inputs to the new products process: the right quality product, at the right time, and at the right cost. These conflict with each other but may have synergies too. Issue: how to optimize these relationships in a new product situation. Quality TimeCost Value

6. 6 9-6 Breakthrough Innovations that Changed Our Lives Personal Computer Microwave Oven Photocopier Pocket Calculator Fax Machine Birth Control Pill Home VCR Communication satellite Bar coding Integrated Circuit Automatic Teller Answering Machine Velcro Fastener Touch-Tone Telephone Laser Surgery Apollo Lunar Spacecraft Computer Disk Drive Organ Transplanting Fiber-Optic Systems Disposable Diaper MS-DOS Magnetic Resonance Imaging This list was compiled in the early 1990s. Since then one would certainly have to add the Internet. Anything else you would add? Which would you delete?

7. 7 9-7 The Basic New Product Process Phase 1: Opportunity Identification/Selection Phase 2: Concept Generation Phase 3: Concept/Project Evaluation Phase 4: Development Phase 5: Launch

8. 8 9-8 Phase 1: Opportunity Identification/Selection Active and passive generation of new product opportunities as spinouts of the ongoing business operation. New product suggestions, changes in marketing plan, resource changes, and new needs/wants in the marketplace. Research, evaluate, validate, and rank them (as opportunities, not specific product concepts). Give major ones a preliminary strategic statement to guide further work on it.

9. 9 9-9 Activities that Feed Strategic Planning for New Products Ongoing marketing planning (e.g., need to meet new aggressive competitor) Ongoing corporate planning (e.g., senior management shifts technical resources from basic research to applied product development) Special opportunity analysis (e.g., a firm has been overlooking a skill in manufacturing process engineering)

10. 10 9-10 Sources of Identified Opportunities An underutilized resource (a manufacturing process, an operation, a strong franchise) A new resource (discovery of a new material with many potential uses) An external mandate (stagnant market combined with competitive threat) An internal mandate (new products used to close long-term sales gap, senior management desires)

11. 11 9-11 Phase 2: Concept Generation Select a high potential/urgency opportunity, and begin customer involvement. Collect available new product concepts that fit the opportunity and generate new ones as well.

12. 12 9-12 Phase 3: Concept/Project Evaluation Evaluate new product concepts (as they begin to come in) on technical, marketing, and financial criteria. Rank them and select the best two or three. Request project proposal authorization when have product definition, team, budget, skeleton of development plan, and final PIC.

13. 13 9-13 Stages of Concept/Project Evaluation Screening (pretechnical evaluation) Concept testing Full screen Project evaluation (begin preparing product protocol) The first stages of the new products process are sometimes called the fuzzy front end because the product concept is still fuzzy. By the end of the project, most of the fuzz should be removed.

14. 14 9-14 Phase 4: Development (Technical Tasks) Specify the full development process, and its deliverables. Undertake to design prototypes, test and validate prototypes against protocol, design and validate production process for the best prototype, slowly scale up production as necessary for product and market testing.

15. 15 9-15 Phase 4: Development (Marketing Tasks) Prepare strategy, tactics, and launch details for marketing plan, prepare proposed business plan and get approval for it, stipulate product augmentation (service, packaging, branding, etc.) and prepare for it.

16. 16 9-16 Phase 5: Launch Commercialize the plans and prototypes from development phase, begin distribution and sale of the new product (maybe on a limited basis) and manage the launch program to achieve the goals and objectives set in the PIC (as modified in the final business plan).

17. 17 9-17 The Impact of Simultaneous Operations on the Product Development Process

18. 18 9-18 The Life Cycle of a Concept

19. 19 9-19 Rate of Use of NPD Steps among PDMA Members Concept searching90% Concept screening76% Concept testing80% Business analysis89% Product development (technical)99% Use testing/market testing87%

20. 20 9-20 Why Does a Firm Need a New Products Strategy? To chart the group’s/team’s direction –What technologies?/what markets? To set the group’s goals and objectives –Why does it exist? To tell the group how it will play the game –What are the rules?/constraints? –Any other key information to consider?

21. 21 9-21 Product Platform Planning Many firms find that it is not efficient to develop a single product. Platform: product families that share similarities in design, development, or production process. Car industry: $3 billion price tag on a new car platform is spread out over several models. Sony: four platforms for Walkman launched 160 product variations. Boeing: passenger, cargo, short- and long-haul planes made from same platform. Black & Decker: uses a single electric motor for dozens of consumer power tools.

22. 22 9-22 What is the Product Innovation Charter (PIC)? It is the new product team’s strategy. It is for Products (not processes). It is for Innovation (think of the definition of new product). It is a Charter (a document specifying the conditions under which a firm will operate).

23. 23 9-23 The Contents of a Product Innovation Charter

24. 24 9-24 A Sample PIC for a Chemical Product Focus: The XYZ Company is committed to a program of innovation in specialty chemicals, as used in the automobile and other metal finishing businesses, to the extent that we will become the market share leader in that market and will achieve at least 35 percent ROI from that program on a three-year payout basis. We seek recognition as the most technically competent company in metal finishing. Goals-Objectives: These goals will be achieved by building on our current R&D skills and by embellishing them as necessary so as to produce new items that are demonstrably superior technically, in- house, and have only emergency reliance on outside sources. The company is willing to invest funds, as necessary, to achieve these technical breakthroughs. Guidelines: Care will be taken to establish patent-protected positions in these new developments and to increase the safety of customer and company personnel.

25. 25 9-25 PIC Special Guidelines Degree of Innovativeness –First-to-market –Adaptive product –Imitation (emulation) Timing –First –Quick second –Slow –Late Miscellaneous –Avoidance of competition with certain firms –Recognition of weaknesses –Patentability –Product Integrity

26. 26 9-26 Tips for PIC Development Note where you are starting -- what decisions have already been made? Watch for any and all opportunities. Confirm interesting opportunities. Keep balance between focus and freedom -- wildcatting can pay off too. Speed usually assumed a well-established, close-to-home PIC. PICs less useful in cases where personal tastes rule (art, games, foods) or where the biggest task is developing a new technology (wait till you have it).

27. 27 9-27 More Tips Poor implementation will still ruin a good PIC (e.g., Bic perfume in lighter fluid package). Watch for PIC conflicts -- e.g., a “flood the market” line extension strategy may hurt real innovation. Some charters dictate separate organizations. Once in place, live by it. Use at all stages -- organization, concept generation, concept evaluation, technical, and, yes, marketing! Change it only when necessary, or when you get information you have been waiting for.

28. 28 9-28 Dimensions for Assessing Strategic Fit Strategic goals (defending current base of products versus extending the base). Project types (fundamental research, process improvements, or maintenance projects). Short-term versus long-term projects. High-risk versus low-risk projects. Market familiarity (existing markets, extensions of current ones, or totally new ones). Technology familiarity (existing platforms, extensions of current ones, or totally new ones). Ease of development. Geographical markets (North America, Europe, Asia).

29. 29 9-29 Genius Thinking Strategies Geniuses find many different ways to look at a problem. Einstein, for example, and da Vinci, were well known for looking at their problems from many different perspectives. Geniuses make their thoughts visible. Da Vinci’s famous sketches, and Galileo’s diagrams of the planets, allowed them to display information visibly rather than relying strictly on mathematical analysis. Geniuses produce. Thomas Edison had a quota of one invention every ten days. Mozart was among the most prolific composers over his short life. Geniuses make novel combinations. Einstein found the relationship between energy, mass, and the speed of light (the equation E=mc²). Geniuses force relationships. They can make connections where others cannot. Kekule dreamed of a snake biting its tail, immediately suggesting to him that the shape of the molecule he was studying (benzene) was circular. Geniuses think in opposites. This will often suggest a new point of view. Physicist Neils Bohr conceived of light as being both a wave and a particle. Geniuses think metaphorically. Bell thought of a membrane moving steel, and its similarity to the construction of the ear; this led to the development of the telephone earpiece. Geniuses prepare themselves for chance. Fleming was not the first to see mold forming on a culture, but was the first to investigate the mold, which eventually led to the discovery of penicillin. Source: Michael Michalko, “Thinking Like a Genius,” The Futurist, May 1998, pp. 21-25.

30. 30 9-30 “Killer Phrases:” Roadblocks to Creativity It simply won’t work. Are you sure of that? You can’t be serious. It’s against our policy. Let’s shelve it for the time being. That won’t work in our market. Let’s think about that some more. I agree, but… We’ve done it the other way for some time. Where are you going to get the money for that? We just can’t do that. Who thought of that? It’s probably too big for us. I believe we tried that once before.

31. 31 9-31 Historic Roadblocks to Creativity “I think there is a world market for maybe five computers.” Thomas Watson, Chair, IBM, 1943. “Computers in the future may weigh no more than 1.5 tons.” Popular Mechanics, 1949. “I can assure you that data processing is a fad that won’t last out the year.” Business books editor, Prentice-Hall, 1957. “So we went to Atari and said,...’We’ll give it to you. We just want to do it. Pay our salary, we’ll come work for you.’ And they said no. So then we went to HP, and they said ‘We don’t need you, you haven’t got through college yet.’” Steve Jobs, co-founder, Apple Computers. “640K of RAM ought to be enough for anybody.” Bill Gates, Microsoft, 1981.

32. 32 9-32 Historic Roadblocks to Creativity “Who the hell wants to hear actors talk?” H.M. Warner, Warner Bros., 1927. “Stocks have reached what look to be a permanently high plateau.” I. Fisher, Prof. of Economics, Yale, 1929. “We don’t like their sound, and guitar music is on the way out.” Dick Rowe, Decca Records executive, rejecting the Beatles’ demo tape, 1962. “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication [and] is inherently of no value to us.” Western Union, 1876. “Heavier-than’air flying machines are impossible.” Lord Kelvin, President, Royal Society, 1895. “Everything that can be invented has been invented.” C. H. Duell, Commissioner, U.S. Office of Patents, 1899.

33. 33 9-33 Required Inputs to the Creation Process Form (the physical thing created, or, for a service, the set of steps by which the service will be created) Technology (the source by which the form is to be attained) Benefit/Need (benefit to the customer for which the customer sees a need or desire) Technology permits us to develop a form that provides the benefit.

34. 34 9-34 What is a Product Concept? A product concept is a verbal or prototype statement of what is going to be changed and how the customer stands to gain or lose. Rule: You need at least two of the three inputs to have a feasible new product concept, and all three to have a new product.

35. 35 9-35 New Product Concepts and the New Product NeedForm Technology New Product “C”= Concepts C C C

36. 36 9-36 The Soft Bubble Gum Example Benefit: “Consumers want a bubble gum that doesn’t take five minutes to soften up.” Form: “We should make a softer, more flexible bubble gum.” Technology: “There’s a new chemical mixing process that prevents drying out of food and keeps it moist.”

37. 37 9-37 What a Concept Is and Is Not “Learning needs of computer users can be met by using online systems to let them see training videos on the leading software packages.” (good concept; need and technology clear) “A new way to solve the in-home training/educational needs of PC users.” (need only; actually more like a wish) “Let’s develop a new line of instructional videos.” (technology only, lacking market need and form)

38. 38 9-38 Methods for Generating Product Concepts Two Broad Categories of Methods: Gathering Ready-Made Product Concepts Using a Managed Process Run by the New Products Team

39. 39 9-39 Best Sources of Ready-Made New Product Concepts New Products Employees –Technical: R&D, engineering, design –Marketing and manufacturing End Users –Lead Users Resellers, Suppliers, Vendors Competitors The Invention Industry (investors, etc.) Miscellaneous (continued)

40. 40 9-40 Best Sources of Ready-Made New Product Concepts (continued) Miscellaneous Categories –Consultants –Advertising agencies –Marketing research firms –Retired product specialists –Industrial designers –Other manufacturers –Universities –Research laboratories –Governments –Printed sources –International –Internet