NEW PRODUCTS
MANAGEMENT
Merle Crawford
Anthony Di Benedetto
10th Edition
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 02
The New Products Process
2-2
The Procter & Gamble
Cosmetics Saga
• Starting point: senior management
commitment to new products.
• P&G’s Cosmetics business unit had no
clear product strategy, unfocused product
initiatives, and too many customer
segments being targeted – in short, a lack
of focus.
• P&G Cosmetics skillfully used all three
strategic elements and made the weak
business unit profitable.
2-3
P&G Cosmetics and the PIC
• Situation Assessment:
– Underserved consumer market that wanted
quality facial product such as cleansers, eye
products, etc.
– Supply chain was uncoordinated as
production and shipments were not tied to
demand; market forecasts were not driving
shipping schedules.
• PIC recommended a strategic focus on products
for the face – other opportunities would not be
pursued.
2-4
P&G Cosmetics and the New
Products Process
• P&G Cosmetics used a phased process like that
of Chapter 1.
• Project teams established early in process.
• Consumer research done early and used in the
process (the voice of the customer).
• Tough evaluation steps were carefully
implemented as new products were compared to
best practices and benchmarks.
2-5
P&G Cosmetics and the New
Product Portfolio
• P&G Cosmetics systematically added new
products such that maximum buzz and
excitement was created in the
marketplace.
• If already several eye makeup products on
the market, they would not immediately
launch another. Management called this
an “initiative rhythm” for product launch.
2-6
P&G Cosmetics and the Role of
Effective Team Management
• Senior Cosmetics executives were
committed to success as was corporate
level management.
• Initiative Success Managers were hired to
lead strategy development, manage
evaluation meetings, train employees, etc.
• The best team leaders were sought and
rewarded based on performance.
2-7
The Phases of the New Products
Process
2-8
The Evaluation Tasks in the New
Products Process
Opportunity Identification/
Selection
Direction;
Where should we look?
Concept Generation
Initial Review:
Is the idea worth screening?
Concept/Project Evaluation
Full Screen:
Should we try to develop it?
Development
Progress Reports:
Have we developed it?
Launch
Market Testing:
Should we market it?
2-9
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.
2-10
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)
2-11
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)
2-12
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.
2-13
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.
2-14
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.
2-15
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.
2-16
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.
2-17
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).
2-18
The Evolution from Concept to New
Product
Corresponding New Products Process Phases:
Opp. Identification  Concept Generation  Project Evaluation  Development  Launch
2-19
Methods for Accelerating Time
to Market
• Have a clear product innovation charter.
• Have a third-generation new products process
that permits overlapping phases.
• Use a new product portfolio and careful project
selection to allocate scarce resources.
• Focus on quality: “get it right the first time.”
• Have an empowered cross-functional team.
Source: Robert Cooper (1993).
2-20
Additional Techniques for
Accelerating Time to Market
Organization: not just an empowered team, but also
effective team leadership and focus on organizational
learning and knowledge transfer.
Intensify Resource Commitments: Integrate vendors and
resellers, get users involved and capture the Voice of the
Customer.
Design for Speed: use computer-aided design, rapid
prototyping, common components, get fast trial.
Rapid Manufacturing: standard processes, computer-aided
manufacturing, just-in-time delivery.
Rapid Marketing: Use rollouts, spend as needed to
generate awareness, offer trial purchasing.
2-21
What About New Services?
• Successful new services tend to come from firms that
use a systematic process much like the new products
process – the tools all fit.
• Iterations may be more frequent since they are less
expensive.
• Unique, superior service must be delivered, to achieve
success.
• Speed to market with services is important, especially in
enhancing reputation, image, and customer loyalty.
• Most important adjustments have to do with the
“customized” experience of each service customer.
• Therefore the human interaction between service
provider and customer is of highest importance.
• Consider how the customer evaluates the service: it may
be viewed as the sum of its parts.
2-22
New Service Examples
• Jet Blue: focused on friendliness, customized
experiences, easy communication by website,
stress on safety, gathers much customer
feedback.
• FedEx: customers are co-creators and provide
early input, ethnographic studies suggest
opportunities such as greater access, more
digital services, and service offerings such as
photocopying (hence the purchase of Kinko’s).
2-23
What About New-to-the-World
Products?
• The challenges are different, but the first phase remains
the same: opportunity identification and development of
a strategic statement.
• Clear connection required between the radical innovation
and the firm’s strategic vision.
• A firm may establish a transition management team to
move the R&D innovation project to business operating
status.
• The new products process is more explanatory: need to
bring in Voice of the Customer (VOC) early.
• Lead users may be critical here (see Chapter 5
discussion).
2-24
Managing Breakthrough
Innovation
• Incubation Stage
– Involves customer and market interaction as well as
technical development.
– Tolerate failure but learn from it (Google claims a
60% failure rate on innovative products).
– Longer and much more expensive than typical
business development, but required for breakthrough
opportunities.
• Discovery-Driven Planning
– Forecasts and plans evolve as more information
becomes available.
2-25
The Probe-and-Learn Process for
New-to-the-World Products
• Focused (limited-performance) prototypes
– Example: Iomega Zip Drive: over 50
prototypes were built to test out ideas with
customers.
• “Lickety-Stick” iterative process: nonlinear, more flexible process in which
dozens of prototypes may be tried
(“lickety”) before settling on one that
customers like (“stick”).
2-26