Concept/Project Innovation Flashcards
Concept/Project Evaluation:
The Evaluation System:
Criteria for Early Stage Screening Assessment:
- Uniqueness: Is the idea original? Is it easily copied by competitors?
- Need fulfilment: Does it meet a customer need?
- Feasibility: Can we develop and launch it?
- Impact: How will our firm be affected?
- Scalability: Can we become more efficient in production?
- Strategic fit: Does it match with corporate strategy and culture?
Sample Idea Screening Techniques:
Unilever requires that a brief be written for each new idea under consideration, including:
- Customer need
- Technical specifications
- “Idea solution” (benchmarks and standards)
- “Must-haves” (minimum requirements)
- “Killers” (what might cause it to fail)
- What is already known
- Budget and timeline
Cumulative Expenditures Curve:
Risk/Payoff Matrix at Each Evaluation:
- Cells AA and BB are “correct” decisions
- Cells BA and AB are errors, but they have different cost and probability dimensions
- Usually, BA (the “go” error) is much more costly but don’t forget opportunity costs!
- Consider how “new-to-the-world” the product is as that has an impact on the risk level
Planning the Evaluation Systems: Four Concepts:
- Rolling Evaluation (tentative nature of new products process)
- Potholes
- People
- Surrogates
Rolling Evaluation (“Everything is Tentative”):
- Project is assessed continuously (rather than a single Go/No Go decision)
- Needs continuous financial analysis
- But not enough data early on for complex financial analyses
- Run risk of killing off too many good ideas early
- Marketing begins early in the process
Key: new product participants avoid ”good/bad” mindsets, avoid premature closure
Potholes:
Know what the really damaging problems are for your firm and focus on them when evaluating concepts.
Examples:
- Campbell Soup focuses on manufacturing cost and taste
- Drug companies focus on FDA approval
- Software developers may focus on customer unwillingness to learn how to use complex software
People:
- Proposal may be hard to stop once there is buy-in on the concept
- Need tough demanding hurdles, especially late in new products process
- Personal risk associated with new product development
- Need system that protects developers and offers reassurance (if warranted)
Surrogate Questions:
A-T-A-R Formula:
Profits = Units Sold x Profit Per Unit
Units Sold = Number of buying units
× % aware of product
× % who would try product if they can get it
× % to whom product is available
× repeat measure (what is the average number of units bought per person per year, including repeats)
The A-T-A-R Model: Definitions:
- Buying Unit: Potential target market
- Aware: Has heard about the new product with some characteristic that differentiates it
- Trial: Willing to try new product
- Available: Find new product in the store
- Repeat: The product is bought at least once more, or (for durables) recommended to others
Points to Note About A-T-A-R Model:
- Each factor is subject to estimation
- Estimates improve with each step in the development phase
-
Inadequate profit forecast can be improved by changing factors and doing a what-if analysis
- If profit forecast is inadequate, look at each factor and see which can be improved, and at what cost
- In our example, could retail margins be increased to increase distribution? Could more advertising spending lead to more awareness?
- Consider qualitative issues as well (advertising theme or execution)
Many Ideas Are Eliminated Before Concept Testing:
- PIC eliminates most new product ideas even before they are developed into concepts
- Ideas of the following types are excluded:
- Ideas requiring technologies the firm does not have
- Ideas to be sold to customers about whom the firm has no close knowledge
- Ideas that offer too much (or too little) innovativeness
- Ideas wrong on other dimensions: not low cost, too close to certain competitors, etc
PIC Components:
Market Analysis and Initial Reaction:
-
Market analysis: in-depth study of the market area that the PIC has selected for focus.
- Conducted immediately after PIC approval
-
Initial reaction: preliminary, inexpensive assessment of concepts, which may be flowing very quickly at this point
- Avoid “bazooka effect” (quickly blasting out concepts without forethought)
- Respect the “fragility of ideas”—have more than a single person involved
- Use more than pure intuition—keep records and stay objective
Suggested Questions for the Initial Reaction:
Market Worth: what is the attractiveness of the new product to the targeted customer population?
Firm Worth: Is the new product project viewed positively by management? Does this new product project enhance the firm’s competencies?
Competitive Insulation: Can the product’s advantage be maintained against competitive retaliation?
Concept Testing Cautions and Concerns:
- If the prime benefit is a personal sense (aroma, taste)
- If the concept involves new art and entertainment
- If the concept embodies a new technology that users cannot visualize
- If concept testing is mishandled by management, then blamed for product failure
- If customers simply do not know what problems they have:
- Consider: how useful would be the concept test results for the Ferris wheel? The first microwave? Diet fast food burgers?
What Is a Product Concept Statement?
A statement about anticipated product features (form or technology) that will yield selected benefits relative to other products or problem solutions already available
- Example: “A new electric razor whose screen is so thin it can cut closer than any other electric razor on the market”
- Recall the importance of getting responses to product concepts and not simply ideas (Chapter 4)
Purposes of Concept Testing:
- To identify very poor concepts so that they can be eliminated.
- To estimate (at least crudely) the sales or trial rate the product would enjoy (buying intentions, early projection of market share).
- To help develop the idea (e.g. make tradeoffs among attributes).
Procedure for a Concept Test:
- Prepare concept statement
- Clarify specific purposes
- Decide format(s)
- Select commercialization
- Determine price(s)
- Select respondent type(s)
- Select response situation
- Define the interview
- Conduct trial interviews
- Interview, tabulate, analyze
Some Key Issues in Concept Testing:
- Concept statement: narrative, drawing, model?
- Respondent group: Lead users? Large users?
- Response situation: Where? How?
- Interviewing sequence: Is the concept understandable? Believable? Important? Interesting? Realistic? Would it work? What problems do they see? Would they buy?
- Test procedure, change and implement, study findings.
Concept Test: Verbal Description Examples:
“Here is a tasty, sparkling beverage that quenches thirst, refreshes, and makes the mouth tingle with a delightful flavor blend of orange, mint, and lime”.
“It helps adults (and kids too) control weight by reducing the craving for sweets and between-meal snacks. And, best of all, it contains absolutely no calories”.
“Comes in 12-ounce cans or bottles and costs 60 cents each”.
