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8/3/2019 IM 9e pp CH10
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Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMedia Presentations 1
Chapter Ten
Managing
Innovation and
New Industrial
Product
Development
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Some newproducts followplanned,deliberateprocesses, whilecircuitous andchaotic processestypifies others.
Why? Researchsuggests thatstrategic activitywithin larger
organizations fallsinto two broadcategories:induced andautonomousstrategic behavior.
Table 12.1 7th ed
Patterns of Strategic Behavior
Induced Vs. Autonomous Strategic Behavior: Selected
Characteristics of Marketing Strategy Formulation Process
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Senior management at 3M
Company will not commit
to a project unless a
Product Champion
emerges and will not
abandon the effort unless
the champion gets tired.
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Four Types: Development Projects
Derivative projects center on incremental product enhancements,
incremental process improvements, or incremental changes on both
dimensions.
Platform projects create design and components shared by set of
products.
Breakthrough projects establish new core products and new core
processes that differ fundamentally from previous generation of
process and product.
Research and development creates knowledge of new materials and
technologies that eventually leads to commercial developmentmore
like pure science.
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Product Families
Products that share common platform but have different
specific features and enhancements required for different
consumer sets.
Strategists argue that firms should move away fromplanning emphases that center on single products.
The move toward product family perspective requires
close inter-functional working relationships, long-term
technology strategy view, and multiple-year resourcecommitment.
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The Disruptive Innovation Model
Performance
Time
DisruptiveInnovations
Performance That CustomersCan Utilize or Absorb
Range ofPerformance
That CustomersCan Utilize
Source: Clayton M. Christensen and Michael E. Raynor, The Innovators Solution: Creating and Sustaining Successful Growth (Boston:Harvard Business School Press, 2003), p. 33.
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Three Approaches to Creating New-Growth Businesses
Dimensions
Targeted perform-ance of productor service
Targeted customersor market application
Effect on requiredbusiness model
(processes andcost structure)
SustainingInnovations
Performance improvementin attributes most valued byindustrys mostdemanding customers.
These improvements maybe incremental or break-through.
The most attractive (i.e.,profitable) customers inmainstream markets whowill pay for improvedperformance.
Improves or maintainsprofit margins by exploiting
existing processes and coststructure and making betteruse of current competitiveadvantages.
Low-EndDisruptions
Performance goodenough along traditionalmetrics of performanceat low end ofmainstream market.
Overserved customers inlow end of mainstreammarket.
Uses new operating orfinancial approach or both
different combination oflower gross profit marginsand higher asset utilizationcan earn attractivereturns at discountprices required to winbusiness at low end ofmarket.
New-MarketDisruptions
Lower performance intraditional attributes,but improved performancein new attributestypicallysimplicity and convenience.
Targets nonconsumption:customers who historicallylacked money or skillto buy and use product.
Business model must makemoney at lower price per
unit sold, and at unit pro-duction volumes that willinitially be small. Grossmargin dollars per unit soldwill be significantly lower.
Source: Clayton M. Christensen and Michael E. Raynor, The Innovators Solution: Creating and Sustaining Successful Growth (Boston: Harvard BusinessSchool Press, 2003), p. 51.
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Innovation Winners:High-Technology Characteristics
1. Limited Structure
Creating successful products to meet changing customer needs requiresflexibility but successful product innovators combine this flexibility with a
few rules that are never broken.
2. Real Time Communication and Improvisation
Improvisation involves design and execution of actions that converge with
each other in time.
3. Experimentation: Probing into the Future
Successful product portfolios creators did not invest in any one version of
future but instead used variety of low-cost probes to create options for
future.
4. Time Pacing
Product innovators carefully manage transitions between current and future
projects, while less successful innovators let each project unfold according
to its own schedule.
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Although definitions of failure somewhat elusive,
research suggests that 40 percent of industrial products
fail to meet objectives.
Major Drivers of
Firms New
ProductPerformance
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New Product Development Process
Successful companies employ high-quality new product development
processgive careful attention to execution of activities and decision
points. Benchmarking characteristics:
Firms emphasize upfront market and technical assessments.
Processes feature complete descriptions of product concepts,product benefits, positioning, and target markets.
Process include tough project go/killdecision points and kill
option was actually used.
New product process are flexible.
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Three main ingredients:
1. Top management committed resources necessary to
meet firms objectives for total product effort in firm.
2. R&D budgets were adequate and aligned with stated newproduct objectives.
3. Necessary personnel were relieved from other duties and
assigned specifically to new product effort.
Resource Commitments
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New Product Strategy
Set aggressive new product performance goal as
basic corporate goal and communicate to allemployees.
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Lead user projects are conducted by cross-functional teams that include four to
six managers from marketing and technical departments; one member serves
as project leader. Team members typically spend 12 to 15 hours per week on
projects.
Lead
User
Method
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Quality Function Deployment
First QFD task: identify customer needs.
QFD strength: comes from translating customer
needs into product design attributes.
QFD provides important framework for bringing
critical information on customer needs togetherwith appropriate engineering data.
Quality function deployment, or QFD, is a method used to identifycritical customer attributes and to establish a specific link between
customer attributes and product design attributes.
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Four Strategic FactorsFor New Product Success
Product advantage refers
to customer perceptions of
product superiority with
respect to quality, cost-
performance ratio, orfunction relative to
competitors products.
Marketing synergy
represents the degree of fit
between project needs and
the firms resources and
marketing skills.
Technical synergy comes
from the fit between project
needs and the firms R&D
resources and
competencies.
International orientation--
new products designed and
developed to meet foreign
requirements, and targeted
at world or nearest-neighbor
export markets.