A Framework for Developing a Product Innovation and
Technology Strategy
Conrad Bartels Daal, Group 1, c.c.m.bartelsdaal@students.uu.nl
Dept. of Information and Computing Sciences,
Utrecht University
1.
Introduction
Companies are constantly striving for global competitiveness and market dominance (Cooper &
Edgett, 2010). A company’s financial performance, its ability to enter and gain competitive
advantages in new industries are linked to its ability to develop and market innovative products
(Dunk, 2011). The challenge for many companies is to create and to maintain a clear and wellcommunicated product innovation and technology strategy to ensure product development and
continued growth. Dunk (2011, p. 102) defines product innovation as “Product innovation refers
to the adoption of an internally generated or purchased product that is new to the adopting
organization”. The ability of a company to stay competitive can be related to its long-term
product innovation and technology strategy. As can be seen in the Corning Glass vs. Nortel
Networks example (Cooper & Edgett, 2010) both companies saw huge growth in the same
industry. After the market crashed a decade later only Corning was able to survive. Unlike Nortel
that had no clear strategy and made ‘ad-hoc’ style decisions, Corning was able to adopt and
innovate by defining and applying a consistent product innovation and technology strategy.
To help business improve their business performance and product innovation, Dr. Robert G.
Cooper and Scott Edgett created a framework for developing a product innovation and
technology strategy for businesses. The framework is based on observations and best practices
from their study of best performing businesses (Cooper et al, 2010). Dr. Robert G. Cooper is a
retired Professor and co-founder of the Product Development Institute and Stage-Gate Inc.
Cooper is an acknowledged global expert, with over 100 articles and got six books published in
the field of innovation management. Scott Edgett is CEO and co-founder of the Product
Development Institute and Stage-Gate Inc. He is a specialist with over 60 published articles and
six books in new product development and portfolio management.
The framework is a helpful tool for businesses looking for a starting point for developing their
own product innovation strategy. The framework is targeted for companies that rely on product
innovation in technology to stay competitive and create a sustainable business. It is used by
Business executives responsible for leading product innovation, Managers responsible for
implementing new product/new revenue generation systems, Cross-functional product innovation
development teams and senior executives responsible for R&D resource allocation.
The paper is divided as follows. In section 2 an example of the use of the framework is illustrated
based on a case of a software company. A literature perspective on product innovation and
technology is given in section 3. And in Section 4 the process deliverable diagram is presented
for the framework.
1.1.
Product Innovation and Technology Strategy Framework
The framework consists of five main activities as summarized in Figure 1. First, the goals for the
new product development are defined and are tied into the broader business goals. Important here
is to make sure that the new goals are clearly communicated to all stakeholders. The next step
defines the different strategic arenas (market, technology etc.) on which the business will focus its
new product efforts. Fundamental to the strategic thrust of the business’ product development
effort is to specify the ‘in bounds’ and ‘out of bounds’ of the strategic arenas for the product
innovation. The product-market matrix is used to define new arenas in which they can operate
profitably. Next the arenas are evaluated by a set of 6-8 questions, which senior managements
then uses to rate the various arenas under consideration based on two dimensions: Area of
attractiveness and business strength. The result is a strategic map that plots the different potential
arenas. With the strategic arenas selected, idea generation becomes more directed and productive.
Figure 1. Product innovation and technology strategy framework
After the strategic areas are identified a plan must be made on how to attack each strategic arena.
Understandings of the business’ core competencies coupled with knowledge of industry success
drivers are key factors in the selection of the appropriate attack strategy (Cooper et al. 2010). For
each new arena entry strategies are defined. The next step determines important development
decisions on spending, resource commitment and allocation. Development projects need to be
aligned with business strategy to ensure effective portfolio management. To achieve this, the
strategic bucket method is used. A bucket represents each project type or market geographic area.
Projects within buckets are ranked and funded in rank order until that bucket runs out of
resources. When the strategic-bucket method is followed over a longer term the result here fore is
an optimal portfolio of projects, one that mirrors the strategic priorities of the business. Finally
management makes tactical portfolio decisions on project prioritization and selection to insure
that resources are allocated to the right projects to achieve all product innovation business goals.
2.
Mobile Software Company Example
A software company build on the success of a personal finance management application launched
5 years ago is losing market share to new competitors. The new competitors are copying their
initial product and services and providing them on a mobile platform. Senior management has
recognized the los in revenues and customers and called for a new innovation plan to solve this
problem. To create a new product innovation a technology strategy senior management has
formed a team of managers, executives and developers to head up this initiative. This team will
use the framework for creating a product innovation and technology strategy to develop the
company’s new innovation strategy. This new strategy must make the software company
innovative market leader once again. The following example steps will illustrate the use of the
framework for creating a product innovation and technology strategy for a business.
2.1.
Define Goals and Objectives
The first step is to define the goals and objectives of the new product development. The example
shows that the software company had a successful product but is still loosing market share to new
competitors. The business strategy clearly is to become market leader again. An example of
business goal that fits into this strategy is to “Gain 40 % of the mobile market within 5 years”.
The product innovation objectives should fit into this business strategy. The management team
should ask questions like: How do new products and product innovation fit into the business’s
overall plan? Examples of product innovation goals and objectives that the management team can
set are:
1. Research and development of mobile versions of the personal finance management
application.
2. Sales generated of new products must be 20% of total sales in the first year
2.2.
Select Strategic Arenas
After defining the product innovation goals and objectives, the management team will define the
strategic arenas. These strategic arenas will define what is ‘in bound’ and ‘out of bound’ for
product innovation. A product-market matrix is used to identify new profitable opportunities for
the business. A template is shown in Appendix 1.Product-Market Matrix. The management team
will use the product-market matrix to defines possible strategic arenas on which to focus new
product development or R&D efforts. The product-matrix for this example can be seen in Table
1. The management team will evaluate these arenas and create a strategic map to define the
arenas where the business should focus its product development resources. A template is shown
in Appendix 2.Strategic Map.
Market/Product
Data synchronization
Cloud computing
Integration of services
Mobile users
Home users
Mobile and Home
Users
X
X
X
X
X
Table 1. Product-market matrix
X
X
2.3.
Develop Attack and Entry Strategies
With the strategic arenas defined, the management team will then define different attack plans for
each area. The company wants to be a market leader so its attack plan will be to be an Innovator
and first-to-market to ensure its market dominance. Furthermore, its entry strategy will be to
develop on the newest mobile technologies (e.g. tablets, pay-with-your phone, etc.).
2.4.
Strategic Portfolio Decisions
Important to the realization of new product innovations is the allocation of resources to these new
projects. One of the product innovation goals set in the first step (see section 2.1) was “To have
20% sales generated from new products by the first year”. To achieve this goal resources must be
strategically allocated to support the new product developments. A resource allocation of 40% to
new product developments, 20% to current development, 10% improvements & modifications of
current products will insure that the goal will be met. The creation of a strategic product roadmap
is a crucial step in strategic portfolio decision-making. A strategic roadmap is an effective way to
plot a series of major initiatives in the attack plan (Cooper & Edgett, 2010). The roadmap is an
effective way to communicate all major steps in the attack plan. It will be used to communicate
the strategy to senior management, who will give the go no/go decision. An example of a
strategic roadmap created by the management team can be seen in Figure 2.
Figure 2. Strategic Product roadmap
2.5.
Tactical Portfolio Decisions
The last step is project tactical portfolio decisions. This step is bases on project selection and
prioritization. Management has to allocate resources to projects in the portfolio based on
prioritization and go/no tactical decisions. The company’s available resources must be allocated
to the project with the highest priorities and overall success chances. The software company in
the example will allocate more resources to projects that aim at mobile development.
3.
Literature perspective
The framework for developing a product innovation and technology strategy is based on different
methods that once used in a specific order following a set of principles and guidelines, which will
produce good strategies for businesses. The root principles are derived from innovation
management. Verloop (2006, p. 6-8) defines innovation as “A supply chain process and the
essence of effective innovation management is to understand that the path from idea to market
goes through three distinct stages: generating and conceptualizing ideas, developing and
demonstrating the concepts, and investing to extract the value from the market place”. The
product innovation and technology strategy framework is developed for company-based
innovation and is based on the three stages of innovation.
The idea generation and crystallization stage is about generating ideas and developing them into a
concept that can be communicated and discussed. The first step in the framework adopts this idea
and specifies that the goals must tie into the broader business goals. The next step is the concept
development phase, which includes identifying the link with the market and customers’ needs and
the value to the stakeholders. The framework has also adopted this step where it defines the
different strategic arenas of focus. The Development and demonstration stage develops the
concept and assesses its feasibility in all aspects. The development plans have to be adjusted
regularly in view of new findings .The more radical the new idea is, the more difficult this is. The
framework has adopted this step in a more practical project view. Where it determines important
development decisions on spending, resource commitment and allocation that align with business
strategy. The Investment and preparing for launch stage involves creating the capabilities in the
company that are needed to launch the product or service into the market. This step is out of the
scope of the framework that only creates a strategy.
The second key principle of the framework is technology strategy. The framework does not only
develop a product innovation strategy but also positions and exploits this product in the
development of technology over time. The core of a company is not the product that it has or the
markets it serves, rather what is knows and what it can do (David, 1998). Technology strategy
centers on this knowledge and abilities. The framework applies this strategy by developing
policies, plans and procedures for acquiring knowledge and ability. The goal is to manage that
knowledge and ability within the company to exploit them for profit.
Import to product innovation is technology and product road mapping. Kostoff & Schaller (2001,
p. 132) define a roadmap as: “A roadmap is an extended look at the future of a chosen field of
inquiry composed from the collective knowledge and imagination of the brightest drivers of
change in that field”. Roadmaps are used to communicate visions, attract resources from business,
stimulate investigations and monitor and plan progresses. Roadmaps can take various forms but
they all try to answer three simple questions: (1) where are we going, (2) where are we now, and
(3) how can we get there? (Phaal, Farrukh, & Probert, 2005).
The success of production innovation goes beyond the strategy used by the business. Dougherty
& Hardy (1996, p. 1146) conclude from their research that “Product innovation, when it did occur
successfully, was powered by the operational and middle levels of the organizational hierarchies
and based largely on the particular networks, connections, and experiences of lower-level
managers”. Tidd (2001, p. 180) states, “The complexity and uncertainty of the environment
affects the degree, type organization and management of innovation”. As we can see in the
literature, the factors for a company’s success are a good product innovation strategy and a
dedicated and consistent management team to execute and maintain this strategy. Research done
by (Li & Atuahene-Gima, 2001) supports this view. The research was done on product innovation
strategies and new technology venture performances in China concluded that the relatively low
amount of variance in performance found suggests that other factors affecting new technology
venture performance in China are influencing the performance. The research further explains the
key factor of a good management team by suggesting that a possible area of research would be
the impact of founder or top management team characteristics.
Different management visions and business strategies will lead to different innovation goals as
can be seen in de research by (Roper, 1997). Research was done on product innovation strategies
of German, U.K and Irish companies. The companies had similar product innovation objectives
but the innovation strategies significantly varied. Management in Germany had a more riskreeducation/cost-sharing networking strategy that lead to emphasis on mutual or collaborative
ventures. Further R&D was more formally organized in German companies than in the U.K. and
Ireland. This again suggests a more managed or planned approach to product innovation by
German companies compared to the less formal, more market responsive pattern of U.K. and
Ireland.
4.
Process Deliverable Diagram
A problem companies can face when implementing projects is choosing the right development
method to use. Van de Weerd & Brinkkemper (2008, p.38) conclude that “No IS development
method exists that is best in all situations. Therefore, to improve the effectiveness of a method, it
should be engineered to the situation at hand, by taking into account the uniqueness of a project”.
The Process-deliverable diagram is used in analyzing, storing, selecting, and assembling method
fragments (Van de Weerd & Brinkkemper, 2008). A PDD is a twofold diagram, reflecting the
main activities (based on a UML activity diagram) on the left side and the main deliverables
(based on a UML class diagram) on the right side (Van de Weerd & Brinkkemper, 2008).
The Process-Deliverable Diagram (PDD) depicted in Figure 5 shows the main activities, subactivities and different concepts used in the framework for developing a product innovation and
technology Strategy. The steps in the framework are high-level genera; management steps. Hence
there no specific roles are set for the different activities. As stated in the introduction the method
is most likely used by Business executives responsible for leading product innovation, Managers
responsible for implementing new product/new revenue generation systems, Cross-functional
product innovation development teams and senior executives responsible for R&D resource
allocation. The Activities are further explained in the Activity Table (Table 2) in section 4.1. The
Concepts are further explained in the Concept Table (Table 3) in section 4.2.
Figure 2. Product Innovation and Technology Framework Process Deliverable Diagram
Figure 3. Strategic Bucket Method Process Deliverable Diagram
4.1.
Activity table
In the following the table the activities are explained that are used in the PDD for the framework
for developing a product innovation a technology strategy.
Activity
Define
Goals and
Objectives
Select
strategic
Arenas
Sub-Activity
Define product
innovation goals
Define product
innovation objectives
Define product
innovation role in
total business strategy
Identify possible
strategic arenas of
new opportunity and
profit
Select evaluation
dimensions
Develop evaluation
dimensions criteria
list
Evaluate identified
strategic arenas
Develop
Attack and
Identify business core
competencies
Description
Define (S.M.A.R.T) production innovation goals. The
goals defined must tie into the business goals.
Define (S.M.A.R.T) production innovation objectives. The
objectives must support the product innovation goals. A
popular used objective is the percentage of the business’s
annual sales generated from new products (Cooper &
Edgett, 2010).
Define the role that the product innovation will play in
helping the business achieve its objectives (Cooper &
Edgett, 2010).
Define new but adjacent areas were there is possibility to
operate profitably. Map these areas in a product-market
matrix (see PRODUCT-MARKET MATRIX).
Select evaluation dimensions for strategic map (see
STRATEGIC MAP). Two dimensions are usually selected
for this evaluation: Area Attractiveness and Business
strength (Cooper & Edgett, 2010).
Develop a dimensions criteria list (see DIMENSION
CRITERIA LIST) consisting of a set of assessment
questions (see ASSESMENT QUESTION) to evaluate and
rate all strategic arenas under consideration.
Evaluate and rate the strategic arenas under consideration
using the assessment question from the dimension list for
each selected dimension. Map the results in a strategic
map (see STRATEGIC MAP).
Perform a company analysis to identify business core
competencies (see BUSINESS CORE COMPENTENCE)
Entry
Strategies
Allocate
and
Commit
Resources
Identify industry
success drivers
Define attack strategy
for each strategic
arena
Define entry strategy
for each strategic
arena
Gather data on
current portfolio
Perform Strategic
Bucket Method
Develop strategic
product roadmap
Optimize
Product
Portfolio
Perform
Strategic
Bucket
Method
Project selection and
Prioritization
Divide resources into
buckets
Categorize Projects
by bucket
Rank projects in
bucket
Perform an industry analysis to identify industry success
drivers (see INDUSTRY SUCCESS DRIVER).
For each strategic arena define an attack strategy (see
ATTACK STRATEGY) in consideration of the key
factors of business core competencies (see BUSINESS
CORE COMPENTENCE) and industry success drivers
(INDUSTRY SUCCESS DRIVER).
For each strategic arena define an entry strategy (see
ENTRY STRATEGY).
Gather data and create a current portfolio chart of current
split in projects, resources and expected sales by project of
the current portfolio.
The strategic-buckets method splits resources into
different buckets to ensure that resource allocations mirror
strategic priorities (Cooper & Edgett, 2010). See Activity
Perform Strategic Bucket Method.
Map out major new product initiatives required in order to
succeed in each strategic arena, and their timing in a
strategic product roadmap (see STRATEGIC PRODUCT
ROADMAP).
Projects are prioritized and selected on a tactical level for
development.
Identify project types. For example “new products” and “improvements and modifications”. Secondly divide
current resources by project type into different buckets
(see BUCKET). For each bucket categorize the projects in the bucket.
For each bucket rank the projects by priority and reorder
the project list of the bucket.
Table 2. Activity Table with the description of the sub-activities in the PDD
4.2.
Concept table
In the following the table the concepts are explained that are used in the PDD for the framework
for developing a product innovation a technology strategy.
Concept
Description
PRODUCT
INNOVATION AND
TECHNOLOGY
STRATEGY
Cooper & Edgett (2010) define product innovation and technology
strategy as “Product innovation strategy should specify the goals and
objectives of the business’s total product innovation effort and
indicate the role that product innovation will play in helping the
business achieve its objectives”
A goal set for a new product innovation effort that ties into the
business goals. Goals are broad and give general intentions (Cooper
& Edgett, 2010).
An objective for supporting new product innovation goals set for a
new production effort. Objectives are narrow, concrete, and precise
PRODUCT
INNOVATION GOAL
PRODUCT
INNOVATION
OBJECTIVE
PRODUCT
INNOVATION ROLE
PRODUCT-MARKET
MATRIX
MARKET
PRODUCT
STRATEGIC ARENA
DIMENSIONS
CRITERIA LIST
ASSESMENT
QUESTION
STRATEGIC MAP
EVALUATION
DIMENSION
STRATEGIC ARENA
FOCUS LIST
BUSINESS CORE
COMPETENCE
INDUSTRY SUCCESS
DRIVER
ATTACK STRATEGY
ENTRY STRATEGY
CURRENT
PORTFOLIO CHART
STRATEGIC BUCKET
METHOD
BUCKET
STRATEGIC
PRODUCT ROADMAP
(Cooper & Edgett, 2010).
The role a new production effort will play in helping achieving
business objectives (Cooper & Edgett, 2010).
A product–market matrix is a matrix where each cell in the matrix
represents a potential strategic arena that offers a number of new
product opportunities (Cooper & Edgett, 2010).
A market is the process in which the prices of goods and services are
established. (Marshall, 1890)
A product is a thing produced by labor or the result of an act or a
process. (Marshall, 1890)
A Strategic Arena is specification of where your business will focus
its new product efforts. Examples of strategic arenas are markets,
industry sectors, applications, product types, or technologies (Cooper
& Edgett, 2010).
A list of criteria is the form of assessment questions (see
ASSESMENT QUESTION) for an evaluation dimension. Used to
evaluate possible values for strategic arenas on the dimension
A question to assess a strategic arena under consideration.
The strategic map plots potential arenas on two dimensions. Arenas in the
upper left quadrant—the “good bets”—are those designated as the
most promising (Cooper & Edgett, 2010).
A dimension for evaluation of strategic arenas. Common evaluation
dimensions uses are Area Attractiveness and Business Strength
(Cooper & Edgett, 2010).
List of “good bet” strategic arenas that the company should focus on
(Cooper & Edgett, 2010).
Competence is often understood as a series of processes or activities a
potential, or qualification, to perform activities, i.e. ‘‘having the
ability, power, authority, skill, knowledge, etc., to do what is needed
(Leonard-Barton, 1992)
Cooper & Edgett (2010, p.39) define industry success drivers as
“What it takes to”succeed in the industry, sector, or arena”.
Cooper & Edgett (2010, p.39) define an attack strategy as “Attack
strategies usually specify the globality of the innovation effort, as
well, defining whether innovation will be guided by a series of
domestic or regional initiatives, take a more global approach, or a
combination of both”.
An entry strategy is a planned method for delivering goods or
services to a specific targeted market (Cooper & Edgett, 2010).
A chart that displays current split in projects, resources and expected
sales by project of the current portfolio (Cooper & Edgett, 2010).
A strategic bucket map is a map that displays different strategic
buckets. The strategic bucket map helps management define where
the development dollars should go, by project type, by market, by
geography, or by product area (Cooper & Edgett, 2010).
A bucket is a representation of project type or market or geographic
area (Cooper & Edgett, 2010).
A strategic roadmap is an effective way to plot a series of major
initiatives in the attack plan. The roadmap lays out major
DEVELOPMENT
INITIATIVE
TIME
PROJECT PORTFOLIO
PROJECT
development initiatives over time, often as far out as five to eight
years (Cooper & Edgett, 2010).
A development initiative is a future desired project or modification
for a product.
A measure of time with a value for a specific period
A project portfolio is the business’s collection of new and current
projects to be developed.
A project is collaborative enterprise, frequently involving research or
design that is carefully planned to achieve a particular product
innovation aim.
Table 3. Concept Table with the description of the concepts used in the PDD
5.
Conclusion
Production innovation is a key factor in a business’s long-term success as illustrated in the
example of Corning Glass vs. Nortel Networks. A clear product innovation backed by a visionary
and committed senior management helped Corning to adapt and succeed.
The framework for developing a product innovation and technology strategy can help businesses
lay down a solid groundwork for developing such a strategy. The framework starts with defining
the business’s goals and objectives and culminates with resource deployment decisions using
strategic buckets and strategic roadmaps to put the strategy into practice. To insure successful
results by implementing this framework, businesses must allocate enough time and commit to the
hard work involved.
References
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Appendix
1.Product-Market Matrix
Market/Product [Product 1] [Product 2] [Product 3] [Product 4] [Product 5]
[Market 1]
[Market 2]
[Market 3]
[Market 4]
2.Strategic Map
Strategic Arena
[Name]
Business Strength
[Low (0) to High (10)]
Area Attractiveness
[Poor (0) to Excellent (10)]
Strategic Arena 10 Area Attractiveness 9 8 7 6 5 4 3 2 1 0 0 1 2 3 4 5 6 7 8 Business Strength Plot the strategic arenas on two dimensions, business strength and arena attractiveness.
9 10