Innovation, new product development and why do new products fail?
Product innovation is the creation and subsequent introduction of a good or service that is either new, or improved on previous goods or services. Product innovation is defined as: the development of new products, changes in design of established products, or use of new materials or components in the manufacture of established products Thus product innovation can be divided into two categories of innovation: development of new products, and improvement of existing products. Systemmatic Innovation of Products includes:
Technology strategy Design thinking skills Customer needs analysis Systematic creativity methods Market and pricing strategy Design for environmental sustainability Design of services Capturing value from innovation Development process design Product and service leadership R&D organization and teams Managing complex technical projects The future of design process and culture The development and market introduction of a new, redesigned or substantially improved good or service.might include a new product’s invention; technical specification and quality improvements made to a product; or the inclusion of newcomponents, materials or desirable functions into an existing product. Meaning of New Product Development: Product development is a broad field of endeavor dealing with the design, creation, and marketing of new products.
Sometimes referred to as new product development (NPD), the discipline is focused on developing systematic methods for guiding all the processes involved in getting a new product to market. New product development (NPD) is the complete process ofbringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation,product design and detail engineering; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating and commercializing new product within the overall strategic process of product life cycle management used to maintain or grow their market share.
There are a number of organizations dedicated to supporting product development professionals, such as the Product Development and Management Association (PDMA) and the Product Development Institute (PDI). According to the PDMA, the organization’s mission is “to improve the effectiveness of people engaged in developing and managing new products – both new manufactured goods and new services. This mission includes facilitating the generation of new information, helping convert this information into knowledge which is in a usable format, and making this new knowledge broadly available to those who might benefit from it.
As we move into the 21st century, new challenges and opportunities are arising driven by global markets, global competition, the global dispersion of engineering talent, and the advent of new information and communication technologies such as electronic mail, the world-wide web, and increased electronic bandwidth. The new vision of product development is that of a highly disaggregated process with people and organizations spread throughout the world. In the late 1980s and early 1990s a marketing focus on product development stressed customer satisfaction.
Researchers in marketing believed that the key to success was a better understanding of the voice of the customer and a better ability to link that voice to the engineering decisions that are made in launching a product. Important research during that period included new ways to understand the voice of the customer (Griffin and Hauser 1993), new ways to develop optimal product profiles in the context of competition (Green and Krieger 1989a, 1991), more efficient preference measurements (Srinivasan 1988), and the ability to handle larger, more complex customer information (Wind, Green, Shifflet, and Scarbrough 1989).
At the same time the quality movement focused product development engineering on improved reliability through continuous improvement such as Kaizen methods (Imai 1986), statistical quality control (Deming 1986), modified experimental design (Taguchi 1987), and design for manufacturing (Boothroyd and Dewhurst 1Today, both industry and academia view successful product development as an integrated process that must overcome many tradeoffs994). Trade offs includes time to market, Production cost, Deliver customer benefits and Development costs.
All else equal, a product will be more profitable if it delivers customer benefits better, is faster to market, costs less to produce, and costs less to develop trade offs puts research on product development tools and methods into perspective. Research should be directed to assure that: (1) the firm is operating on the efficient frontier with respect to each of these strategic goals, and (2) the firm is making the best tradeoffs among these goals. Research must recognize that there are tradeoffs along the efficient frontier.
For example, if wefocus on just two of the many goals of product development, then the efficient frontier suggests that there are tradeoffs between customer satisfaction and platform reuse. A firm can becometoo committed to either. For example, the significant reuse of components in platforms, software, and designs may get the product to the market faster and reduce development costs1994), but the firm may sacrifice the ability to satisfy customer needs and may miss out on ways to reduce product costs.
Similarly, quality function deployment (QFD) may be an effective means to deliver customer benefits by improving communication and coordinating the efforts of multiple players in the NPD process, but some applications are too cumbersome reducing time-to-market and increasing development cost. 8 Steps for New Product Development Every entrepreneur knows that productivity is one of the key ingredients for successful product development. One of the two key processes in Robert’s Rules of Innovation is the
A formalized, NPD process – also referred to and best practice: the Stage Gate® Process – is a must, from simple to sophisticated. The New Product Development process is often referred to as The Stage-Gate innovation process , developed by Dr. Robert G. Cooper as a result of comprehensive research on reasons why products succeed and why they fail. When teams collaborate in developing new innovations, having the following eight ingredients mixed into your team’s new product developmental repertoire will ensure that it’s overall marketability will happen relatively quick, and accurately – making everyone productive across the board. Step 1: Generating Utilizing basic internal and external SWOT analyses, as well as current marketing trends, one can distance themselves from the competition by generating ideologies which take affordability, ROI, and widespread distribution costs into account. Lean, mean and scalable are the key points to keep in mind.
During the NPD process, keep the system nimble and use flexible discretion over which activities are executed. You may want to develop multiple versions of your road map scaled to suit different types and risk levels of projects. Step 2: Screening The Idea Wichita, possessing more aviation industry than most other states, is seeing many new innovations stop with Step 2 – screening. Do you go/no go? Set specific criteria for ideas that should be continued or dropped. Stick to the agreed upon criteria so poor projects can be sent back to the idea-hopper early on.
Because product development costs are being cut in areas like Wichita, “prescreening product ideas,” means taking your Top 3 competitors’ new innovations into account, how much market share they’re chomping up, what benefits end consumers could expect etc. An interesting industry fact: Aviation industrialists will often compare growth with metals markets; therefore, when Boeing is idle, never assume that all airplanes are grounded, per se. Step 3: Testing The Concept As Gaurav Akrani has said, “Concept testing is done after idea screening.
And it is important to note, it is different from test marketing. Aside from patent research, design due diligence, and other legalities involved with new product development; knowing where the marketing messages will work best is often the biggest part of testing the concept. Does the consumer understand, need, or want the product or service? Step 4: Business Analytics During the New Product Development process, build a system of metrics to monitor progress. Include input metrics, such as average time in each stage, as well as output metrics that measure the value of launched products, percentage of new product sales and other figures that provide valuable feedback. It is important for an organization to be in agreement for these criteria and metrics. Even if an idea doesn’t turn into product, keep it in the hopper because it can prove to be a valuable asset for future products and a basis for learning and growth. Step 5: Beta / Marketability Tests Arranging private tests groups, launching beta versions, and then forming test panels after the product or products have been tested will provide you with valuable information allowing last minute improvements and tweaks.
Not to mention helping to generate a small amount of buzz. WordPress is becoming synonymous with beta testing, and it’s effective; Thousands of programmers contribute code, millions test it, and finally even more download the completed end-product. Step 6: Technicalities + Product Development Provided the technical aspects can be perfected without alterations to post-beta products, heading towards a smooth step 7 is imminent. According to Akrani, in this step, “The production department will make plans to produce the product. The marketing department will make plans to distribute the product.
The finance department will provide the finance for introducing the new product”. As an example; In manufacturing, the process before sending technical specs to machinery involves printing MSDS sheets , a requirement for retaining an ISO 9001 certification (the organizational structure, procedures, processes and resources needed to implement quality management . ) In internet jargon, honing the technicalities after beta testing involves final database preparations, estimation of server resources, and planning automated logistics.
Be sure to have your technicalities in line when moving forward. Step 7: Commercialize At this stage, your new product developments have gone mainstream, consumers are purchasing your good or service, and technical support is consistently monitoring progress. Keeping your distribution pipelines loaded with products is an integral part of this process too, as one prefers not to give physical (or perpetual) shelf space to competition. Refreshing advertisements during this stage will keep your product’s name firmly supplanted into the minds of those in the contemplation stages of purchase.
Post Launch Review and Perfect Pricing Review the NPD process efficiency and look for continues improvements. Most new products are introduced with introductory pricing, in which final prices are nailed down after consumers have ‘gotten in’. In this final stage, you’ll gauge overall value relevant to COGS (cost of goods sold), making sure internal costs aren’t overshadowing new product profits. You continuously differentiate consumer needs as your products age, forecast profits and improve delivery process whether physical, or digital, products are being perpetuated.
Remember: The Process Is Loose The entire new product development process is an ever evolving testing platform where errors will be made, designs will get trashed, and loss could be recorded. Having your entire team working in tight synchronicity will ensure the successful launch of goods or services, even if reinventing your own wheel. Productivity during product development can be achieved if, and only if, goals are clearly defined along the way and each process has contingencies clearly outlined on paper. Why do new products fail?
Marketers know that they’ve got to keep a steady stream of new products and/or services flowing—if for no other reason than to keep up with the competition. As circumstances, needs, wants, and trends change, no one wants to get left behind. At the same time though, marketers also know that innovation these days is pretty risky business. Neglect market research Inaccurate market research Poor marketing after launch Poor distribution Product performance below expectation(poor product quality) Product too complex Unforeseen events Market not ready for the product
Inadequate support for the product Lack of USP Target market too small In Winning at New Products, author Robert Cooper estimates that about half of all resources allocated to “product development and commercialization” in the U. S. goes to products that a firm cancels or produce an inadequate financial return. In packaged goods, for instance, IRI calculated that less than a quarter of the new products introduced in 2008 broke the $7. 5 million in sales mark their first year of availability and less than one-half of 1% earned more than $100 million in sales.
Though estimates of new product and service failure rates vary widely by company, category, industry, and reporting agency, the best-case-scenario chances of introducing a successful new product or service don’t get much better than 50-50. About 10%-20% of new products and services succeed, which means they remain in the market generating profits for the company three years after introduction. Here’s our top 10 list of reasons new products and services fail: Marketers assess the marketing climate inadequately. The wrong group was targeted.
A weak positioning strategy was used. A less-than-optimal “configuration” of attributes and benefits was selected. A questionable pricing strategy was implemented. The ad campaign generated an insufficient level of awareness. Cannibalization depressed corporate profits. Over-optimism about the marketing plan led to a unrealistic forecast. Poor implementation of the marketing plan in the real world. New product development is critical to the firm’s long term survival for several reasons: First, new product development recognizes that all products have life cycles.
Eventually, all products enter a decline phase with respect to sales and profitability. At some point, these products must be removed from the market. New products must exist to take their place if the firm wishes to maintain existing levels of sales and profits. New products can provide firms with a competitive advantage in the market. Firms that continually try to improve existing products and or develop new products stay a step ahead of their competitors. This advantage can translate into greater sales and higher profitability. New products also can enhance the firm’s image in the market.
Consumers are attracted to things that are new. Firms that continually strive to introduce new products will likely be at the forefront of attention and have their names continuously in the media. This media exposure certainly cannot hurt the firm’s image and reputation as an innovator. Finally, new products may help the firm reduce risk by diversification. Company’s with large portfolios of products often are more stable than firms with smaller portfolios. Types of Product Failures There are two common interpretations of what is meant by a ‘new product failure.
Each interpretation has implications for which product failure rates are more believable. The Absolute Failure The first type of failure is referred to as “the absolute” failure. This failure is one that does not generate sufficient revenue to allow the firm to break even on its new product investment. The Relative Failure The less severe “relative” product failure generates sufficient product revenues to break even. However, profit objectives are not achieved. In other words, this product makes money — it just does not make as much money as management hoped.
The instances of relative product failures probably are substantially higher than the numbers of absolute failures. I suspect that the higher failure rates that have been reported in the literature refer to relative product failures. The number of absolute product failures probably is substantially less. The Causes of New Product Failure An important question is why do new products fail? What are the causes of failure? Several factors contribute to the high failure rates for new products in today’s highly competitive marketplace Lack of Relative Advantage
The first, and probably most important reason for failure, is simply that the new product does nothing really new or unique for the consumer. This essentially means that the new product possess little relative or differential advantage over existing products already on the market. Inadequate Planning Many products fail because the manufacturer did not do enough “homework. ” This is to say that the new product planning process was somehow flawed. Generally, this means that the market opportunity analysis (or MOA) was not conducted or missed some important information.
For example, Anheuser Busch’s Dewey Stevens Wine Cooler failed due to poor planning. In the mid 1980’s, Anheuser Busch, the world’s leading beer manufacturer, launched Dewey Stevens Wine Cooler with a poorly conceived and implemented promotion program that never targeted the right audience for the product. In its promotional material, Dewey Stevens alternately tried to appeal to woman, calorie counter consumers, and more sophisticated upscale consumers. The varied positioning of Dewey Stevens created substantial confusion in the market concerning Dewey Stevens’ image.
A second example is provided by the test market of Eli Cutter cigarettes discussed in an earlier topic. Eli Cutter probably would have failed if it had been commercialized due to its poorly conceived positioning strategy. The brand was positioned directly against Marlboro, the leading brand in the market with a strong customer following. Better attention to marketing research and new product planning would have prevented taking Eli Cutter to test market. Poor Execution of Introduction Poorly executed marketing programs, no matter how well they are conceived, also can result in product failure.
Poor execution entails an improperly conceived and poorly implemented marketing mix. The product may have been promoted incorrectly, priced either too high or too low, or distributed in inappropriate outlets. This is primarily a marketing failure. Technical Problems During Introduction Technical problems can also plague new product introductions leading to their failure. These problems are problems with the basic functionality of the product that were not uncovered during earlier functional testing and/or test marketing. Poor Timing of Introduction
Poor timing of introduction can lead to failure. Introducing products during economic down-turns or at about the same time as competitors are introducing similar products can severely limit sales. Procter and Gamble introduced Encaprin in the mid 1980’s as an extra strength pain reliever. At introduction, Encaprin faced very intense competition both from Advil and Nuprin, which also were recently introduced as arthritis pain relievers. Advil and Nuprin together had in excess of a hundred million dollars in advertising budgets.
The net effect was that Encaprin could not break out of the promotional noise generated by these two brands Conclusion Modern innovation management requires integrated structures. Social community network structures can promote innovation management in the sense of open innovation. Only by cooperation it will be able to develop suitable innovations for the customer in future. Otherwise one will run the risk developing innovations not wanted by the customers. Next to once, it is particularly necessary to do everything for a systematic innovation management which refer among others to responsibilities, know-how and concepts.
In the end, this examination shall give libraries and information providers the possibility of using the identified and described improvement potentials for their own innovation management. In the consequence changes of the organization principles possibly require also courageous decisions by e. g. conventional structures being put and broken open within a furnishing but and customer also between supplier in question. Increasing competition intensity and a high dynamics of information scientific services force service providers to develop solutions and services for the customer to build up a positive image to the customer.
The collection of qualitative data gives a profound insight into the practice of innovation management in information science institutions. It were primarily enterprises such studies focused on. Libraries and (public) information service providers weren’t subject of such survey till now. It is the aim also to draw conclusions in this sector from the results for trainings and further education as well as to generate possible offers to promote the innovation management further. Since this study is part of an on-going research and it is not fully completed, conclusions should be taken with care.
Nevertheless, some concluding points deserve attention. NPD integrates different perspectives of new product development process, considering the nature of the elements as the basis for its elaboration. Finally, even as a preliminary study, the conceptual model here proposed seems to contribute to the understanding of the dynamics of the product development process, given theseparation of the operational dimension of the other five that constitute the structure of the development project.
This gives a clear notion that, although the methods and techniques that compose each dimension are very well understoodRigorous processes and a more effective platform for managing an open development environment can reduce the costs of new-product-development and increase the chances of delivering products. A more effective delivery platform can meet today’s need to reduce costs while also positioning a company for market dominance and high performance in long run.