Techniques and Checklists for New Products Here are some techniques and checklists that are useful for new products. Send suggestions for additions or corrections to Scott Armstrong. Action steps: Conclude your management presentations with an explicit and operational plan of action. In other words, outline the steps that should be taken to implement the stated objectives. To do this, it is important to keep in mind the “foot-in-the-door” technique by which one puts forth small steps with a time deadline in the near future; these steps should be ones that can be easily applied by the client. Brainstorming: A highly structured set of rules to enhance creativity. Groups without rules are not as creative as those with proper rules. The rules have one major guideline: to reduce evaluation. Favorable evaluations are even more detrimental than negative ones. To make it work, you need to appoint a facilitator and use a checklist. Groups seem to improve after using brainstorming a number of times. However, brainwriting (see below), is much more effective and it is less expensive. Brainwriting: In this technique, people work individually and anonymously to develop ideas. Then the ideas are combined. For example, take a time-out during a meeting (say eight minutes) and ask the group members to write down all their ideas to solve a particular problem. There is commercial software that can aid the summarizing stage for brainwriting. Compared to brainstorming, brainwriting is easier, less expensive, and more effective at generating useful ideas. Checklists: Checklists are one of the most valuable management techniques assuming that there is good evidence and especially if they use experimental evidence. The checklists must be comprehensive, operational, and understandable. They are more effective if done electronically than if on paper. They are of little value if done by memory. Conjoint analysis: A two-step procedure where you first prepare a set of alternative designs (using principles of experimental design so that the causal variables are not correlated with one another). Then ask customers how likely they would be to use each product offered. Conjoint programs are popular in business. Design your own experiments and analyze them using regression (all this can be done with a good spreadsheet program). Conjoint software programs are available, including student versions. Contingency plan: A specific plan on what to do given outcomes that might occur. Decomposition of judgment: One of the basic strategies of management science; Break a complex problem into pieces, solve each piece, then reassemble. Can be used for forecasting sales for new products and for decision-making (especially for group decision making). Delphi: An iterative anonymous survey of experts. Use this for evaluation of new product ideas and for sales forecasts given different possible designs for a product/service. Delphi provides substantial improvements over ratings by unstructured groups. Freeware provides instruction, evidence, and guidelines to help in the use of Delphi. Delphi is often used in firms and government agencies. That said, the vast majority of organizations are unaware of the Delphi method. Design for use: Design the product so that it will be easy for the customer to use. This step is often poorly done, as you may have noticed. Devil’s advocate: One person in the group is assigned the task of trying to tear down a proposal. Use this method only for a short period (e.g., ½ hour). If you adopt this role without getting permission of the group, you can become unpopular quickly. But here is the key point: The devil’s advocate method has been found to be detrimental as it bolsters the group’s current thinking. For an alternative approach to evaluating a proposal use the MAAD (see below). Ergonomics: The study of how people interact with machines and products (and services). Protocols are useful for learning how people use products (see protocols). Expectation surveys: Can be used to see if people expect they would buy a product. Experimentation: Remember this: Replicated experimentation of reasonable alternative hypotheses is the primary basis for knowledge. It is the gold standard. For example, to determine whether people would purchase a new product, develop realistic buying situations and present potential buyers with alternative choices. Expert opinion surveys: In contract to consumer surveys, expert surveys can be done with small samples (e.g., 5 to 20 experts works for most problems). In this case, one looks for experts who have diverse relevant information. There is no need to be concerned about finding a representative sample. See surveys and Delphi. Focus groups: Same procedure as nondirective interview only done on a group basis. A popular, expensive, and mis-used technique. Sometimes used early in project to generate ideas about a proposed product (e.g., about consumer reactions to the product). Potentially useful for obtaining ideas about products that are highly visible such that a buyer’s decision is based heavily on what others think. One cannot draw statistical inferences from focus groups. In general, non-directive interviewing with individuals (group depth interviews) are more effective. For more, see this focus groups article. Foot-in-the-door: Select a small operational step and set a time deadline. The foot-in-the-door technique is useful for gaining commitment, such as in presentations to get seed money or venture capital. (Also, use it yourself to experiment with new techniques or to get started on a project,) Formal planning: This involves four stages: (1) set objectives, (2) generate alternative strategies, (3) evaluate strategies, and (4) monitor results. New product introductions that do each step explicitly are more likely to succeed. Formal planning improves performance only when the group is small enough to reach commitment. It does not work, for example, for nations or for very large organizations, although it works for small units within large organizations. See Systems Approach, Marketing Planning, Planning Process Checklist, and New Product Proposal Outline. Gallery writing: Individuals in a group meeting contribute their ideas simultaneously by posting them so all can see. Intentions surveys: Ask people whether they intend to purchase your product. In some cases this can provide a useful way to forecast. Judgmental bootstrapping: The development of a model of an expert by inferring the experts’ rules. This is analogous to conjoint analysis except that a small number of experts is used, rather than a large number of potential customers. The expert is presented with a set of situations, say 20, and is asked to make predictions (or decisions) for each. Regression analysis is then used to infer the rules. Judgmental bootstrapping can be used to forecast sales for products having alternative designs and alternative marketing mixes. Few consulting firms offer this approach, and few organizations use it (professional sports teams being the big exception). For more, see this paper on judgmental bootstrapping. 2 MAAD: Multiple Anonymous Authentic Dissent. Each person on a project provides anonymous reasons why venture would not be worthwhile. The ideas are then summarized and provided to all those in the venture team. Each person brainwrites solutions to resolve each problem and these are summarized. Marketing Concept: Product design (as well as the rest of the marketing mix) should start with the customer and it should look at the customers’ needs first at the highest conceptual level. In practice, this is typically an expensive and difficult approach. Marketing planning checklist: This checklist first assesses the marketing objectives as well as the current and future status of the environment (both internal and external). The next step is to find opportunities/problems that exist within the market and to translate these into action steps involving the marketing mix. After a marketing program is designed, it is then carried out and monitored. The monitoring process brings us back to square one where we reevaluate the objectives, environmental status, and implementation of the plan, and then judge the effectiveness of the marketing plan. This framework enables one to keep abreast of the changing needs of the consumer and in the environment. For more, see Marketing Planning. Net present value (NPV): New products often require early expenditures in hopes of later returns. Thus, you should determine a cost-of-capital (given the level of risk which is high for new products) and apply this to the profit stream (or to the cash flow stream). In addition to an expected NPV, you should also estimate the confidence intervals to reflect the risk involved in the venture. Objective setting: The calls for relevant, explicit, measurable, and ambitious objectives, for specified time periods. Parallel processing: Remember this: groups cannot analyze problems—but they think they can. Analyses should be done by individuals. Then compare the results from 2 or more independent analyses. Parallel processing helps to guard against mistakes (two separate analysts are unlikely to make the same mistakes). Portfolio matrix: Portfolio matrices are used to aid in determining the proper set of products that the firm should have. The BCG or Boston Consulting Group Matrix is one of a number of such aids. It classifies products into four categories using market share and the growth in the market. Prediction interval: A measure of confidence about a given forecast. For example: “This method predicts sales in year 1 to be 800,000 units. There is only a 5% chance outside the range from 400,000 to 1,600,000 units. Problem-storming: People individually brainwrite ways to describe a problem. Then the problem statements are summarized. Brainwriting is then used to sole each of the problem statements. This is important because the way one states a problem has a strong effect on the solutions that are considered. Product liability: What legal risks are posed when you sell a product? This area has changed greatly in the U.S. given that courts currently tend to ignore contract law and rely on tort law. This, along with class-action suits, has created enormous product liability exposure for many products. Large firms are especially at risk as are domestic firms. Product life cycle: The marketing plan will differ depending on what stage the product is in: Introduction, growth, maturity, or decline. Different techniques are applicable depending upon the stage for the product under consideration. 3 Product/market opportunity matrix: A guide to searching for new business opportunities according to changes in new versus old products, and new versus old markets. Firms can looks for new product opportunities in each of the four categories. Protocols for design: An examination of people as they use a product. People are asked to talk as they use a product. Especially important for new products. This provides ideas for product design, instruction booklets, and warnings. Quasi-contracts: Contracts written with insurance against ill effects from use of a product or service. Based on the idea that people believe in contracts even if the courts do not- and that people do not like risk. Scenarios: Written stories that describe the future. They should be written like a short story with details showing how one step leads to another. To gain interest, the stories are written in the past tense. Typically one uses a benchmark scenario (trends continue) or an ideal scenario (start with the ideal and work backwards). Scenarios are misleading when it comes to forecasting, but they are highly effective in gaining commitment to future courses of action. Especially useful when large changes are contemplated (see How to Gain Acceptance for Change). Second Solution: Assume that a group’s preferred solution is not feasible. Develop a new solution. Now compare the new solution with the old and decide which is best. Segmentation: Describe the key market segments that you are serving (using expert panels or using procedures such as survey research). Then develop products (and a supporting marketing plan) for each segment. Simulated interaction: A realistic acting out of the relationships involved in a situation. This technique asks subjects to reach a decision by going through the same type of interactions as might occur in the real situation (e.g., in meetings or by exchanging messages). It has been found to be especially useful for situations involving conflicts among groups. See paper by Green (2002). Stakeholder analysis: The success of a firm depends upon the cooperative efforts of various groups that make contribution (e.g., stockholders, employees, creditors, customers, suppliers). When proposing a new product, consider the opinions from each group and what would be a satisfactory reward for each group. Structured analogies: Experts are asked to think of situations similar to a current situation. The decisions made in those analogous situations are summarized and used to forecast for the current situation. See Green and Armstrong working paper. Sunk cost: Consider only those things that vary with the decision. Whether you should proceed with a new product venture should depend only on the NPV at the time that you are making a decision about the product. But recognize that this is not how most managers perceive things. You must consider how to implement a decision that will strike most people as irrational because you are ignoring sunk costs. On the positive side, you can use this to your advantage (see foot-in-the-door, above). Survey research: Useful for assessing customer needs and also to assess expert opinion about how customers will react to an ad. Extensive research has led to effective procedures and the best summary of these is in Don Dillman’s Mail and Internet Surveys. It is easy to look at a survey and tell whether the creators have used the research in designing it. For more, see surveys. 4 SWOT (Strengths, Weaknesses, Opportunities, and Threats): Do not use SWOT. There is no evidence that it works. To the contrary, it has detrimental side effects. Synectics: “Prepare a list of situations, analogous to when a similar problem had been solved.” Might any of those solution be applicable to your problem? Use these analogous along with along with the use of brainwriting to consider the design and implementation ideas. Systems approach: Look first at objectives, then at alternative strategies. In each case, start at the highest conceptual level, then make the objectives and strategies more operational. It sounds easy, but the systems approach requires time and discipline. It enables people to go outside of current solutions and to produce rational yet often surprising solutions. I sometimes get calls from former students telling me how they used this procedure to come up with unusual and effective solutions that differed greatly from the existing thinking in their company. For details, see this paper-- Systems Approach. Time line: The process of allocating one’s time in accordance with the tasks they must accomplish. This method allows one to break down their jobs in meaningful, do-able parts. One of the essential components of a time budget is slack calendar time. With the inclusion of slack time, one can deal with the inevitable setbacks without upsetting their schedules. Using a PERT (Program Evaluation and Review Technique) chart is one way of creating a time budget. Also related is CPM, the Critical Path Method. Do the time line, show relationships, and estimate times. Ensure that the total time is reasonable and that you have “slack” hours. Then figure what path is determining the time to completion. You might then consider changes to this critical path to shorten the time or to introduce slack. (See Planning Process Checklist). Unique Selling Proposition (USP): What is the primary benefit that the product/service provides to the consumer that is not already perceived to be provided? Venture teams: An organizational design to introduce the innovative spirit into large companies. It was pioneered long ago by companies such as 3M and DuPont. A firm provides seed money to individuals in the firm to support the development of a new product. At the same time, the team is freed of day-to-day operational demands (otherwise short-term deadlines dominate how people spend their time). If the project is promising, the team members have the opportunity to implement this venture. If the venture is successful, the team has the opportunity of managing this new business. Virtual group: A group in which members work on a common problem, yet they do not meet face-toface. They interact primarily by email and websites. Delphi is a form of a virtual group that allows for some interaction. Virtual groups avoid many of the problems of groups, such as “group-think.” They use information more effectively and they save time. In face-to-face groups, influence depends on such irrelevant things as how much people talk (people who talk more do not necessarily know more) and gender (males talk much more than females). In virtual groups, influence depends more on performance. Finally, because of the need to write, virtual groups leave a paper trail that aids in communication. For support, see “How to Make Better Forecasts and Decisions.” Revised March 13, 2014 5