1. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Course Schedule Wednesday 3/28 – Realizing the Opportunity I Monday 4/2 – Building an innovative product organization Wednesday 4/4 – Product development case study Monday 4/9 - Managing a product innovation portfolio Wednesday 4/11 - Innovation for social good I –Doing well by doing good with product innovation –Aravind eye clinic case study Monday 4/16 - Final project workshop Wednesday 4/18 - Innovation for social good II - Case study Monday 4/23 - Innovation for social good III Wednesday 4/25 - Final project presentations

2. Carnegie Mellon Qatar ©2011 - 2012 Robert T. Monroe Course 70-446 Conceptualizing The Opportunity III: Gate 3: The Big Go/No-Go Decision Realizing The Opportunity I: Mechanics of a Product Launch Robert Monroe Innovative Product Development March 28, 2012

3. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 By The End Of Class Today, You Should: Understand of the types of questions that the product innovation team needs to be able to answer to gain approval to move from product concept to product realization Understand the steps and decisions required to bring an innovative new product from the development stage to a new product launch Understand the concept of a business model and be able to explain the key decisions that define the selection of a business model for a new product or service offering

4. Carnegie Mellon Qatar ©2011 - 2012 Robert T. Monroe Course 70-446 A Quick StageGate Review

5. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gates: Go/No-Go Decision Points Gates are key decision points in the process –Always a cross-functional group of gatekeepers –Gates should force a decision to be effective Possible outcomes from a gate meeting: –Go: move ahead to the next stage, commit appropriate resources –No-Go: the project does not meet the criteria required to move forward. Stop the project and reallocate project resources. –Recycle: the project shows promise but has not yet met the criteria for moving to the next stage. Continue work in the current stage, return with additional information. Resources are allocated as needed to get requested information Decision Criteria Deliverables From Previous Stage Decision, Resources Allocated, Outputs Source: [CE09] page 10.

6. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 The Modified Stage Gate / Cagan-Vogel Process Source: [CV02] Chapter 5 and [CE09] Launch * Realize Conceptualize UnderstandIdentify Discovery Stage Scoping Stage 1 Business Case Stage 2 Development Stage 3 Stages 4 & 5

7. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Managing Risk With Incremental Resource Allocations Level of risk and uncertainty Time (Phases) Resources allocated

8. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Not All Gates Are Created Equal! Level of risk and uncertainty Resources allocated Gate 1Gate 2Gate 3Gate 4Gate 5

9. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3: The Big Go/No-Go Decision Gate 3: Approve product development investment? Gate 3: Approve product development investment? The pitch: We should invest to develop this product and bring it to market Move forward – or – More analysis needed – or – Halt work

10. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Questions: Gate 3: Approve product development investment? Gate 3: Approve product development investment? What does the product innovation team need to include in their proposal to the Gate 3 New Product Review Board? What decision are they asking the board to make?

11. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3: The Big Go/No-Go Decision Gate 3: Approve Product Development Investment Gate 3: Approve Product Development Investment Review Inputs: Product concept Customer analysis Detailed scenarios Market analysis Technical analysis Competitive analysis Development plan Production plan Financial analysis Resource request First draft of go-to-market plan Decisions: Product approval Resources allocated Downstream processes initiated Milestones set

12. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Sample Structure Of A Gate 3 Meeting Detailed proposal sent to gatekeepers prior to meeting Presentation of product proposal by innovation team –Led by a ‘champion’ of the product –This is part sales pitch, part demonstration, and part presentation of analysis Gatekeepers ask questions, discuss amongst themselves and the team the implications of moving forward with the project A decision is usually reached at the meeting, though details may be refined following the meeting based on feedback and discussion at the meeting

13. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3 Review: Product Concept, Customer Analysis Overview of product concept –Prototypes / storyboards / visuals / models / etc. –Technical specs –Differentiation from current alternatives Target customer analysis –Use cases, value opportunities, high-value product attributes –Demographics of target customers –Detailed scenarios Show pain points with current solutions Identification of key stakeholders for the product or service Explain which you are targeting

14. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3 Review: Technical Feasability Do we have, or can we readily develop, the technical capabilities to deliver the product or service proposed? –Engineering (computer, mechanical, electrical, chemical, etc.) –Production (can we make it to specs / tolerances proposed) –Durability / maintainability –After-sales service and support –Others?

15. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3 Review: Market Analysis Who will our customers be for this? What is the size of the opportunity? –Money, number of customers, other? Will this take business from us (cannibalizing), from our competitors, or will we be growing a new market? Where are our customers on the tech adoption curve? How much are you planning to charge? Who will pay (what is your business model)? How will we sell and deliver the product / service? What is the launch plan and timeline? When can we start selling it?

16. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3 Review: Financial Analysis Looking for pro-forma analysis of: Expenses (present to n-quarters or years ahead) Sales (units, money, rate of ramping) Break even point Sensitivity analysis highlighting key assumptions and risks Profit potential Risks and mitigation plans Resources required What else?

17. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3 Review: Strategic and Competitive Analysis Strategic analysis: –Is this new product or service well aligned with our capabilities? –Does it move the business in the direction we want to go? –Will we be able to create a defensible advantage with this offering? How will our competitors react to our new product? –Why are we the right organization to offer this product or service? Competitive analysis: –What products/services are people already using for this Job To Be Done? –Do our competitors already offer similar products? What are they? What are they charging? Are these profitable businesses for our competitors? Will they be for us? –Will this new product offering be sufficiently better than the current options to overcome switching costs, concerns, reluctance to change, etc.?

18. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3 Review: Development Plan and Resource Request What we require to deliver the new product –Who, what, when, how much, for how long, etc. Development timeline with milestones Identified risks and contingency plans

19. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Gate 3 Review: Production Plan Can we make this? Will we make it ourselves our outsource it? –More accurately, what will we make, what will we outsource? Can our current supply chain provide what we need to deliver the product / service? Do we (and our suppliers) have the capacity to produce what we need, when we need it? What do we need to do to set up our supply chain, when do we need to do it? –How soon will specs be ready to deliver to suppliers?

20. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Question: Who should be on your new product review board (your gatekeepers) for gate 3? How should you go about selecting the proper people to participate in the gate meetings?

21. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Phase 4 Overview: Product Development Phase 4 Gate 3 Gate 4 Phase 3 outputs: Product prototypes Detailed product concept (but not detailed specs) Resources allocated Development plan Market analysis Phase 4 activities: Detailed design Develop the product Design production plan / suppliers Initial product testing Allocate and marshal significant resources Production prototyping Continued market research / refinment Create go-to-market plan Phase 4 outputs: Working product Product / supplier system set up Product ready for final testing Go to market plan

22. Carnegie Mellon Qatar ©2011 - 2012 Robert T. Monroe Course 70-446 Realizing The Opportunity: Mechanics of a Product Launch

23. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Mapping Stage Gate to Cagan/Vogel Process Source: [CV02] Chapter 5 and [CE09] Launch * Realize Conceptualize UnderstandIdentify Discovery Stage Scoping Stage 1 Business Case Stage 2 Development Stage 3 Stages 4 & 5 Today’s Discussion

24. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Going To Market: Key Decisions and Tasks Determine Business model –Who pays whom? –For what? –When, and how frequently? Pricing: what should you charge? Set up sales and distribution channels Introduction and ramp-up strategy –Advertising and promotions –Complementary products and services Customer service and support Warranty work and return management

25. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Determine Your Business Model Three key questions: –Who pays whom? (define your revenue streams) –For what? (product? services? both?) –When, and how frequently? (up-front? series of payments? commision or contingency?) Sometimes your business model is defined for you –Product/service innovation in a mature market Sometimes a new business model is the innovation –Often the case with a significant rethinking of a JTBD –Often the case with a disruptive technological advance

26. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Business Model Analysis: OXO Goodgrips Peeler Who pays whom? –Define revenue streams For what? –Product? services? both? When, and how frequently? –up-front? series of payments? commision or contingency? Established or disruptive business model?

27. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Business Model Analysis: Local Restaurant Who pays whom? –Define revenue streams For what? –Product? services? both? When, and how frequently? –up-front? series of payments? commision or contingency? Established or disruptive business model?

28. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Business Model Analysis: Chain Restaurant Who pays whom? –Define revenue streams For what? –Product? services? both? When, and how frequently? –up-front? series of payments? commision or contingency? Established or disruptive business model?

29. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Business Model Analysis: Property Construction Who pays whom? –Define revenue streams For what? –Product? services? both? When, and how frequently? –up-front? series of payments? commision or contingency? Established or disruptive business model?

30. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Business Model Analysis: E-Mail Who pays whom? –Define revenue streams For what? –Product? services? both? When, and how frequently? –up-front? series of payments? commision or contingency? Established or disruptive business model?

31. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Business Model Analysis: Mobile Phones Who pays whom? –Define revenue streams For what? –Product? services? both? When, and how frequently? –up-front? series of payments? commision or contingency? Established or disruptive business model?

32. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Pricing Decisions What should you charge? What should your pricing strategy signal? To Whom? –Low price / mass market –Midmarket –High price / high value Maximize short-term profits or long-term market share? –Maximum market skimming (start high, lower price over time) –Aggressive initial pricing, seeking rapid adoption (penetration pricing strategy) Can be effective when economies of scale are important Can be effective when owning the standard is the key goal Bundling, discounting, packaging with existing products

33. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Reaching Your Customers What will your sales and distribution channels be? –Direct to customers at the retail level? –Retail and wholesale channels? –Wholesale distribution only (intermediaries handle distribution) –OEM? Introduction and ramp-up strategy –Big-bang roll-out? –Soft opening roll-out? –Extended beta testing? –Partnerships and complementary product / service support? –Advertising and promotions?

34. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Keeping Your Customers What types of customer service and support are needed? –Online self-help (websites, manuals, videos, etc.) –Paid consultants? –24/7 phone and web chat support? –Repair and maintenance services? Warranty work and return management –What happens when something goes wrong with a delivered product or service? –How will you handle warranties and returns? –Outsource this or do it in-house? –What information will you capture as part of this process? –… and how will you use that information to improve?

35. Carnegie Mellon Qatar ©2011 - 2012 Robert T. Monroe Course 70-446 Wrap Up

36. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 Reminder: Final Project! Use the process, tools, and techniques we cover in this course to develop an innovative new product or service concept to bring to market. –Phases 1-3 in detail, ‘lightweight’ phase 4 Group project, 3 people in each group Choose your own topic/area Written proposal due at noon on April 30 Proposal (roughtly, Gate 3) presentation on last day of class –~20 minutes per group for your presentation, plus 10 minutes for Q&A Upcoming deadlines: –You need to send me an e-mail with the names of your team members and a draft of your product opportunity by Friday, March 30 –Each team needs to set up a 20-30 minute meeting with me next week to discuss your project idea and your plan for completing it by the due date

37. Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446 References [CE09] Robert G. Cooper and Scott Edgett, Successful Product Innovation, Product Development Institute, 2009, ISBN: 978-1-4392-4918-5. [CV02] Jonathan Cagan and Craig M. Vogel, Creating Breakthrough Products, Prentice Hall, 2002, ISBN: 0-13-969694-6. [KL01] Tom Kelly with Jonathan Littman, The Art of Innovation, Doubleday, 2001 ISBN: 0-385-49984-1. [SSD09] David Silverstein, Philip Samuel, Neil DeCarlo, The Innovator’s Toolkit, John Wiley and Sons, 2009, ISBN: 978-0-470-34535-1.