Session 1 (GLS/JW)

Introduction To Product Innovation &

The Course

Week 1 (Friday)
MAST4001 & MASTG003
STUDENT HANDOUTS
To be distributed in class
 Welcome to
Product Innovation in
Organisations

Gillian Lacey-Solymar
[email protected]

Jane Walker
[email protected]
 Today’s Agenda

• Tell you who we are

• Give you an overview of the course

• Discuss assessments/assignments

• Introduce you to the key concepts of

NPD/ Innovation
 Who are we?
Gillian Lacey-Solymar Jane Walker
New Product Development Decision making in
organisations

• PPE Oxford • MBA City University

• MBA INSEAD • PGCE Greenwich
• McKinsey and Co • BT
• BBC • Coussins Associates
• UCL • UCL
 Aims and Objectives

• Aims - The purpose of the course is

to introduce the product innovation
process within organisations, and
identify key factors which influence
success.
• Objectives - By the end of this
course students will be able to
leverage the tools and techniques
to embark on a new product idea
and gain authorisation within the
organisation for its development.
 Course Outline
Session Date Title
1 6 Oct Intro to product innovation & the course
(GLS)
2 13 Oct Organisation capabilities (JW)
3 20 Oct Innovation & creativity (GLS)
4 27 Oct Influencing strategies – the rational
organisation (JW)
5 3 Nov NPD within the organisation (GLS)

READING WEEK – NO SESSIONS

6 17 Nov Influencing judgement (JW)
7 24 Nov Market research (GLS)
8 1 Dec Dealing with different agendas (JW)
9 8 Dec Marketing the idea (GLS)
10 15 Dec Dealing with closed minds (JW)
 Assessment

• Exam – 60%

• Assignments - 30%
– 15% Market research
– 15% Influencing decision-making

• Class participation – 10%

 Class participation : Rationale

• Practice for communication in the ‘real world’

- helps you to think on your feet
- builds skills in unthreatening
environment
• Enlivens lectures
• Permits learning from each other
• Common practice in business schools
 Class Participation – Views
From Previous Students
• ‘definitely a plus point…it makes you want to be
involved in class discussions’
• ‘interaction between your peers is as important
as with the lecturer’
• ‘helps things to sink in’
• ‘it’s the best way to learn…lose fear of
expressing yourself’
• ‘contribution to finding the answer made
learning much easier’
• ‘many people brought unusual responses –
good fun!’
• ‘good practice for the future’
 Class participation criteria

• Talking per se does not earn you

credit.

• The following do:

– insightful comments/questions
– well prepared cases
– building on others’ points
– constructive criticism of others’ points
 Coursework Guidelines

• How to submit
• Header sheet & declaration
• Assessment criteria
• Late submissions
• Referencing & bibliography
• Plagiarism
 Lecture 1
New Product Development &
Dynamics of Innovation
Introduction
 NPD: Aims of the Course

To Present:
- The challenges & practicalities of
innovation.
- The concept that inventions may be the
result of a single genius, but innovations
require the involvement of many.
- Ideas on directions your career may take.
- Opportunities to make presentations and
express views in a low risk
environment.
Introduction to NPD: Everything You Ever Wanted To
Know About NPD, But Were Afraid To Ask
Key Contention

INNOVATION IS
FASCINATING
BUT
TOUGH
Products/Innovations Which Have Changed Lives
Th Ra d
eW ar
clea r he
Nu el
b
Bom

iPod
(New) Products/Ideas Which Have Changed Lives
Hom Tha
eo path tche
y rism
n ity
stia
ri New Labour?
i sm Ch
es s ion a l
Exp r U ni v e r s
r a g e
suff
Educ
at Communism
ion
n a l n g
Fi e lle Gre
l o n i
t i on u v
No isi
n e !
ve ry mov en C
Solu Cu
Sl a eme
nt
- “This telephone’ has too many shortcomings
to be seriously considered as a means of
communication. The device is inherently of no
value to us”. Western Union Internal Memo,
1876.
In NPD There Are Always Many Critics...

-“The concept is interesting and well-formed but in

order to earn better than a ‘C’ the idea must be
feasible”.
-- “The wireless music box has no imaginable
commercial value. Who would pay for a message
sent to nobody in particular”.
-- “Who the hell wants to hear actors talk”.
In NPD There Are Always Many Critics...

- “The concept is interesting and well-formed but in order to

earn better than a ‘C’ the idea must be feasible”. A Yale
university management professor in response to Fred Smith’s
paper proposing overnight delivery service.
- “The wireless music box has no imaginable commercial
value. Who would pay for a message sent to nobody in
particular”. David Sarnoff’s associates in response to his
urgings for investment in the radio in the 1920s.
- “Who the hell wants to hear actors talk”. H.M. Warner, Warner
Brothers, 1927.
 ....Even for Fantastic Ideas
- “Drillfor oil? You mean drill into the ground
to try and find oil? You're crazy”.
- “I think there is a world market for maybe 5
computers”.
- “Everything that can be invented, has been
invented”.
 ....Even for Fantastic Ideas
- “Drill for oil? You mean drill into the ground to try and find oil?
You're crazy”. Drillers whom Edwin L. Drake tried to enlist to his
project to drill for oil, 1859.

- “I think there is a world market for maybe 5 computers”.

Thomas Watson, Chairman of IBM, 1943.

- “Everything that can be invented, has been invented”. Charles

H Duell, Commissioner, US Office of Patents, 1899.
Failure Rate of New Products by Industry

40%

18% 20%

Services Industrial Products Consumer Products

Source: Hopkins & Bailey
Failure of New Products by Product Types
50%

30%
25%

Product Line New brands New Products

Extensions introduced to introduced to new
categories categories
where the
company already
had a product
 Prominent NPD Failures
Product Company Fin. Loss Sector

Edsel Ford >$100m Automotive

Rotary Engine GM >$100m Automotive
Conform Du Pont $100s m Leather substitute
Happy Face Gillette $ millions Cleansing Cream
Alto P.C. Xerox $ millions Computing
Premium RJR Nabisco $250m+ Cigarettes
Polarvision Polaroid $100m+ Instant “Movies”
New Coke Coca Cola $ millions Soft Drinks
Darsani Coca Cola $ millions Purified water
 DotCom Casualties: Examples

• boo.com • clickmango.com
• garden.com • boxman.com
• quepasa.com • CDNow.com
• foodoo.com • urbanfetch.com
• govworks.com • bagsoftime.com
• ibelieve.com • urwired.com
• pets.com • thestreet.co.uk
 But new product development
remains crucial
Universal business mantra: Innovate or die

Example 1

“We expect new product vitality or the percent of

company sales from products launched within the
last 3 years, to double from its current level to
over 30%.”
Mark D Ketchum, President and CEO Rubbermaid,
April 2006
…and most CEOs remain obsessed with
NPD/Innovation
• “My priority will be to recreate the excitement and spirit of
innovation that has evolved into the Sony brand over the
past 6 decades.
Sir Howard Stringer, Chairman and CEO, Sony June 2005“In
fiscal year 2005

• “The Disney team reinforced its position as an industry

leader in quality, creativity and innovation, while generating
double-digit earnings growth for our shareholders.”
Robert A. Iger, President and CEO, Disney, Dec 2005

• “Due to the highly volatile and competitive nature of the PC

and consumer electronics industries… the Company must
continually introduce new products and technologies..”
Apple Annual Report, March 2005

• “We've strengthened our innovation team considerably this

year…This year we improved or introduced around 3,000
food products”
Justin King, CEO Sainsbury’s 2006 Annual Report
 Example 2: Anheuser-Busch Market
Share Increase
30.3% 41.9% 45.7% Many others now
including
• Bud Light
13.8 • A-B Natural Light
New 7.4
0 • Busch Light
Products
5.0
2.5 6.0 • Bud Dry
4 others 4.6
Michelob 4.2
1.8 • Michelob Light

Budweiser 21.5 27.0 24.1

1981 1988 1992

 What is NPD?

• NPD= New product development is the

research, development, conceptualisation,
manufacture, marketing and launch of goods
or services or processes not previously
available on the market.
• NPD ≠ Narcissistic personality disorder (“An
overly grandiose state of mind that deviates
markedly from the expectation of the
individual's culture, is pervasive and
inflexible … and leads to distress or
impairment.”)
 What is NPD?

New Product Development

Can be entirely new A good or service Conceptualisation,

product or simply a which a customer research, design,
refinement of an (end consumer or manufacture,
existing product. (e.g. intermediary) is marketing and launch
“new improved” willing to pay for (or
washing powder) a process that
reduces cost)
 Innovation vs Invention
Dictionary Definitions
Innovation Invention

Definition 1 Definition 1
• The act of introducing • A new device, method, or
something new. process developed from study
• Something newly introduced. and experimentation: the
phonograph, an invention
attributed to Thomas Edison.
• A discovery; a finding. The act
of introducing something new.

Definition 2 Definition 2
• a new device or process • A new device or process
created by study and created by study and
experimentation [syn: experimentation [syn:
invention innovation

Definition1: The American Heritage® Dictionary of the English Language, Fourth Edition
Definition 2: WordNet ® 1997 Princeton University
 Innovation vs Invention –
possible definition

Innovation is the process of making an

invention a usable (possibly commercial)
reality

An innovation is an invention
made real
 Innovation vs Invention

Innovation is not a single action but a total

process of interrelated sub-processes. It is
not just the conception of a new idea, nor the
invention of a new device, nor the
development of a new market. The process is
all these things acting in an integrated
fashion.

Paul Trott
Innovation Management and New Product
Development
 How is it Done?

Market facts
& ideas Phase II Phase III
Phase I Launch/
Business Launch Rollout
Technical Concept
Proposition Preparation
Generation
facts & Development
ideas

Activities • Gather ideas • Build total • Organise • Launch marketing

proposition logistics campaign
• Conduct
demand • Determine, • Prepare • Distribute product
research test, refine marketing
• Monitor progress
components campaign
• Develop
(packaging,
project briefs • Brief
name, etc)
salesforce
 What is a “New” Product?

Me-Too New to
Yes
Product World
New to
Company
Product Repositioning
No
Improvement

No Yes

New to Market
 What is its Aim?
Immediate Aim
To develop products that:
- Customers want to buy
- Manufacturing can produce Ultimate Aim
at reasonable cost
- Fit the company’s image and To maximise
strategy benefits (e.g. profit
Complementary Aim size, reputation) for
To: the organisation
- Raise the company image which develops the
product
- Bring together functions
which do not usually mix
- Learn new ways of working
- Test out leaders of the
future
 When is NPD Vital?

Economy

Supplier
Structure
Technology
Shortening
product life-
Material Customer
cycles and
costs Rapidly
Changing
Demands
need for new
Environment
products to
Distribution
New maintain
Channels competitors
cashflow
Government Maverick
Regulations
 Product Life Cycle

Introductory Growth Maturity

Decline Stage
Stage Stage Stage

Total
Market
Sales

Time
Shortening Product Life Cycle

Introductory Growth Maturity

Decline Stage
Stage Stage Stage

Total
Market
Old PLC
Sales

Time

Introductory Growth Maturity

DeclineStage
Stage Stage Stage

Total
New PLC
Market
Sales

Time

Example: Sony used to enjoy 3 year lead on

competitors. Now companies like
Panasonic/Matsushita can copy within 6 months
 Who Does NPD and What Do They Do?
R&D Senior Management Manufacturing
• Investigate emerging • Evaluate fit with • Ensure the product
technologies re: new corporate strategy can be manufactured
products at economic cost
• Hold the purse strings
•Design new products • Establish production
line

NPD

Marketing Legal Finance

•Discover what the • Apply for product • Evaluate financial

customer wants/needs patent impact of NPD on
cashflow of business
•Design marketing mix • Check product liability
• Conduct NPV
calculations
Who Does It and What Do They Do? - Textbook View

R&D Engineering

Marketing Production

Finance
 Which Qualities are Needed to Excel at
NPD?
Personal Institutional

Curious, probing mind Clearly defined goals and parameters

“Out of the box” thinking Encouragement of experimentation
Tolerance of failure
Team - personality Support of team culture
Multifunctional not sequential teams
Tolerance of ambiguity Backing of top management but “hands
off” approach
Ability to cope with pressure Built in instability
Eagerness to learn Institutionalising “lessons learned”
 Why Should I Care About NPD?

It hones your innovative skills/instincts.

Anything new that looks to the future tends to be
more dynamic and fun than anything static
It’s your chance to make a difference (maybe?)
“If it’s good for the organisation, it’s good for
me” (a.k.a. youthful enthusiasm)
It’s likely to be good for your career to be
associated with a new product success (a.k.a.
hard nosed determination)
 NPD Questions: Rudimentary Answers
What is NPD? - ‘New' doesn't necessarily mean earth-shattering
- Product doesn’t necessarily mean “product”
(service, process, etc)
Why should an - At first sight it looks terrifying
organisation do it? - But it is critical for profits and long term survival
(let alone all the complementary benefits)

When is it vital? - When the environment is changing rapidly

- That means that product life cycles are shortening,
and existing products become obsolete rapidly
Who does it and - Multiple departments within an organisation
what do they do? - Interactivity is the key
What qualities do you - Probing mind and team personality
need to excel? - Organisation with creative culture

Why should I care - Benefits in terms of job satisfaction and advancement