Innovation Management 2012
Stefan Wuyts
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Some basic terminology
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Strategic elements of product innovation
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The NPD process
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Radical innovation
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Siemens: “Innovation is our vital lifeblood”
Dow Chemical Company: “Innovation through R&D is
Chemistry’s lifeblood”
Nortel Networks: “Technology is the lifeblood of an
industry where innovation drives competition and
customer value”
P&G: “Innovation is our lifeblood”
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For the top performing firms, about 49% of company
sales and profits come from products that were
introduced in the last five years.
For other firms, this average is about 21%.
Lesson: firms that maintain their commitment to new
products are rewarded with sales and profits
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Percent of Products that Fail
90
90
80
70
60
50
40
30
20
10
0
40
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Sometimes Quoted in
Press
Research Reports
Sometimes Claimed
Although you may hear much higher percentages, careful
studies supported by research evidence suggest that about
40% of new products fail — somewhat higher for consumer
products, somewhat lower for business-to-business products.
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◦ New to the world
◦ New to the firm
◦ Product line extensions
◦ Revisions
◦ Repositionings
◦ Cost reductions
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Lipitor drug
Developed by Parke-Davis, approved
in 1996 for treatment of cholesterol.
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The New Products Process (chapters 1 and 2)
◦ Phased process that takes the new product idea through concept
development, evaluation, development, launch, and post-launch.
The Product Innovation Charter (Chapter 3)
◦ Strategy for new products that ensures new product development
in line with firm objectives and marketplace opportunities.
◦ Without strategic direction, the firm’s efforts are unfocused. The
PIC helps the team identify opportunities and focus efforts.
The Product Portfolio (Chapter 3)
◦ A way to assess which new products would be the best ones to
add to the existing line, given financial and strategic objectives.
◦ Avoids spreading scarce financial and human resources too thin.
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Starting point: senior management commitment to new
products.
P&G’s Cosmetics business unit had no clear product
strategy, unfocused product initiatives, too many
customer segments being targeted – in short, a lack of
focus.
P&G Cosmetics used the three strategic elements (PIC,
process, portfolio) to made the weak business unit
profitable.
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Situation Assessment:
◦ Underserved consumer market that wanted quality
facial products such as cleansers, eye products, etc.
◦ Supply chain was uncoordinated as production and
shipments were not tied to demand; market forecasts
were not driving shipping schedules.
PIC recommended a strategic focus on products for the
face – other opportunities would not be pursued.
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P&G Cosmetics used a phased process.
Project teams established early in process.
Consumer research done early and used in the process
(the voice of the customer).
Tough evaluation steps were carefully implemented as
new products were compared to best practices and
benchmarks.
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P&G Cosmetics systematically added new products such
that maximum buzz and excitement was created in the
marketplace.
If already several eye makeup products on the market,
they would not immediately launch another.
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Where do new product
opportunities come
from?
Phase 1: Opportunity Identification and Selection
How can we organize
F
ideation?F
Phase 2: Concept Generation
U
R
Z
O
Z
N
How should we decide
Y
T
E
N
D
which ideas to pursue?
Phase 3: Concept/Project Evaluation
Phase 4: Development
A. Technical tasks
B. Marketing tasks
Phase 5: Launch
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• Between the phases of the process are evaluation tasks,
where hard Go/No Go decisions are taken.
• There is pressure to accelerate time to market: crossing
the boundaries between phases.
• Fuzzy gates are commonly used: this is a “conditional Go”
so as not to slow down the process in analysis.
• Still, fuzzy gates must have teeth and shouldn’t be
hollow!
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Opportunity Identification/
Selection
Concept Generation
Concept/Project Evaluation
Development
Launch
Direction;
Where should we look?
Initial Review:
Is the idea worth screening?
Full Screen:
Should we try to develop it?
Progress Reports:
Have we developed it?
Market Testing:
Should we market it?
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◦ Garcia and Calantone (2002): discontinuity in both marketing
and technology.
◦ Gatignon et al. 2002: Radical innovations advance price/
performance frontier by much more than existing progress.
◦ Chandy and Tellis (1998): novel technology and addresses
customer needs in superior way.
Types of Product
Innovations
Newness of
Technology
Customer Need Fulfillment
Low
High
Low
Incremental
Innovation
Market
Breakthrough
High
Technological
Breakthrough
Radical
Innovation
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Based on a unique active ingredient (atorvastatin
calcium); only drug that lowers both LDL
cholesterol and triglycerides in patients with
elevated cholesterol.
The range includes an innovative firming shower
wash as a first step to improving the skin's elasticity;
the second step is a firming lotion which tightens the
skin's structure in just two weeks and the third step
is the intensive firming gel cream which reduces the
appearance of cellulite in three weeks.
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Incubation Stage:
◦ Involves customer & technical development
◦ Involves failure (but learn from it)
◦ Longer, more expensive: required for radical innovation
Discovery-Driven Planning: probe and learn
Example Levacor implantable heart pumps, problem with
young patients (magnetic levitation technology)
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Sony Digital Camera 1989
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