Innovation Strategy Management Lecture 9

Programme Part 1 – The basis of Innovation Part 1 – The basis of Innovation Part 2 – Innovation and New Product Development Part 2 – Innovation and New Product Development Part 3 – Innovation and Technology development Part 3 – Innovation and Technology development Part 4 – Innovation and Intellectual Property Part 4 – Innovation and Intellectual Property Part 5 – EU Green paper of Innovation Part 5 – EU Green paper of Innovation Part 6 – Innovation policies in different countries Part 6 – Innovation policies in different countries

Part 2 Innovation and New Product Development

Lecture 9: New Product development (NPD) Innovation management and NPD Innovation management and NPD NPD strategy NPD strategy What is a new product? What is a new product? Overview of NPD theories Overview of NPD theories Models of new product development Models of new product development

New Product Development NPD Innovation management and NPD Innovation management and NPD Production management Production management Marketing Marketing Economics Economics Design and Engineering Design and Engineering

Innovation management Development of the necessary Conditions for innovation to occur NPD activities: Concept development Development of prototypes Design specifications Engineering Screening Production Business analysis Test marketing, etc. A conceptual framework linking innovation management and NPD

New products and prosperity Examples: Microsoft, Compaq Examples: Microsoft, Compaq Life cycles of products are becoming shorter! Life cycles of products are becoming shorter!

A variety of perspectives from which to analyse the development of new products

Considerations when development a NPD strategy On-going corporate On-going corporate On-going market planning On-going market planning On-going technology management On-going technology management Opportunity analysis Opportunity analysis

Key inputs into new product strategy

NPD as a strategy for growth Market penetration Market penetration Market development Market development Product development Product development Diversification (opportunity analysis) Diversification (opportunity analysis)

Ansoff Matrix CurrentproductsNewproducts Currentmarkets 1 Market penetrationstrategy 3 Product developmentstrategy NewMarkets 2 Market developmentstrategy 4 Diversification strategy

A range of product development opportunities What is a new product? What is a new product? Defining a new product Defining a new product Classification of new product Classification of new product New to the world products New to the world products New product lines (in firm) New product lines (in firm) Additions to existing lines Additions to existing lines Improvements and revisions to existing products Improvements and revisions to existing products Cost reductions Cost reductions Repositionings Repositionings (new applications for existing products)(new applications for existing products)

A product is multidimensional

Different examples of newness 1. Changing the performance capabilities of the product (for example, a new improved washing detergent) 2. Changing the application advice for the product (for example, the use of the Persil ball in washing machines) 3. Changing the after-sales service for the product (for example, frequency of service for a motor car) 4. Changing the promoted image of the product (for example, the use of green-image refill packs) 5. Changing the availability of the product (for example, the use of chocolate-vending machines) 6. Changing the price of the product (for example, the newspaper industry has experienced severe price wars)

A new product has different interpretations of new New product A New product A A snack manufacturer introduces a new, larger pack size for its best-selling savoury snack. Consumer research for the company revealed that a family-size pack would generate additional sales without cannibalising existing sales of the standard-size pack. A snack manufacturer introduces a new, larger pack size for its best-selling savoury snack. Consumer research for the company revealed that a family-size pack would generate additional sales without cannibalising existing sales of the standard-size pack.

A new product has different interpretations of new New product B New product B An electronics company introduces a new miniature compact disc player. The company has further developed its existing compact disc product and is now able to offer a much lighter and smaller version. An electronics company introduces a new miniature compact disc player. The company has further developed its existing compact disc product and is now able to offer a much lighter and smaller version.

A new product has different interpretations of new New product C New product C A pharmaceutical company introduces a new prescription drug for ulcer treatment. Following eight years of laboratory research and three years of clinical trials, the company has recently received approval from the governments medical authorities to launch its new ulcer drug. A pharmaceutical company introduces a new prescription drug for ulcer treatment. Following eight years of laboratory research and three years of clinical trials, the company has recently received approval from the governments medical authorities to launch its new ulcer drug.

New product development as an industry innovation cycle SMEs is developing their own new products. SMEs is developing their own new products. The result is determined efforts to reduce costs in order to improve profits. The result is determined efforts to reduce costs in order to improve profits.

NPD theories Linear model Linear model Cash flows and NPD Cash flows and NPD

Commonly presented linear NPD model Idea generation Idea screening Concept testing Business analysis Product development Test marketing Commercialization Monitoring and evaluation

Cash flows and NPD

The three main streams of research within the NPD literature

Models of NPD: Departmental-stage models Departmental-stage models Activity-stage models and concurrent engineering Activity-stage models and concurrent engineering Cross-functional models (teams) Cross-functional models (teams) Decision-stage models Decision-stage models Conversion-process models Conversion-process models Response models Response models Network models Network models

Over the wall model

Mike Smiths secret weapon: the salutary tale of How not to design a swing, or perils of poor coordination

An activity-stage model

A network of NPD