Topic 5B Managing Innovation & Growth

Question 1

Why New Product Development is Important

Answer 1

• BCG survey: global innovators generated a 12% premium in past 3 years over non-innovating competitors, and 2% over the past 10 years (a period with several recessions!!)
• Conference board Study: 72% of CEOs said innovation was a top strategic priority; only 55% were satisfied with their financial returns from innovation
• In many industries >50% of sales comes from products introduced in the last 5 years (e.g., electronics, autos, telecommunications)
• >95% of new products fail to achieve an economic return

Question 2

Impediments to NPD Success (7)

Answer 2

• Risk averse corporate culture
• lengthy development time
• difficulty selecting the right ideas
• uncertainty of outcomes
• rapidly changing technologies
• changing customer needs
• aggressive global competitors

Question 3

Development Strategies

Answer 3

• Maximize Fit with Customer Requirements
• Minimize Cycle Time
• Control Development Costs

Question 4

Maximize Fit with Customer Requirements–GOAL

Answer 4

Superior Value proposition

Question 5

Maximize Fit with Customer Requirements— CHALLENGES

Answer 5

• Identifying most important features
• Balancing Benefits/Costs
• Designing to conflicting segments

Question 6

Maximize Fit with Customer Requirements— METHODS

Answer 6

• Involving Customers/Suppliers
• Beta testing/ Lead Users
• Crowdsourcing

Question 7

Maximize Fit with Customer Requirements— Tools

Answer 7

• Conjoint Analysis
• QFD
• FMEA

Question 8

Maximize Fit with Customer Requirements

Why do companies fail to do this?

Answer 8

•Must offer more compelling features, greater quality, more attractive pricing, better value than competing products

•Why do companies fail to do this?
–no clear sense of what customers value most so overinvest in wrong features;
–overestimate customer willingness to pay for features so stuff product with unwanted features, too expensive;
–Cannot resolve heterogeneity in customer demands so compromise too much, not attractive to anyone

•Customer driven vs. technology driven design

Question 9

Minimize Cycle Time—Goal

Answer 9

Reduce development cycle time

Question 10

Minimize Cycle Time— Challenges

Answer 10

• Achieving first to market advantages
• Gaining the efficiencies from faster cycle times
• Avoiding obsolescence
• Controlled speed vs rush

Question 11

Minimize Cycle Time—methods

Answer 11

• Partly parallel development process
• Project champions

Question 12

Minimize Cycle Time—Tools

Answer 12

DFM

CAD/CAM

Question 13

Sequential versus Partly Parallel
Development Processes

Answer 13

Before mid-1990s, most US companies used sequential NPD process

Partly parallel process shortens overall development time, and enables closer coordination between stages.

Question 14

Control Development Costs—Goal

Answer 14

High ROIC

Question 15

Control Development Costs– Challenges

Answer 15

• Speed/Cost Risk Optimization
• Benefit/Cost Optimization
• Prioritization

Question 16

Control Development Costs–Method

Answer 16

• Stage-Gate Process
• Cycle Time Reduction Methods

Question 17

Control Development Costs—Tools

Answer 17

• Portfolio Analysis
• Measurement Systems
• DFM, CAD/CAM, FMEA, Lean
• 3-D Prototyping
• Postmortem Analysis

Question 18

Stage-Gate Process for Product Development(specific Gate and Stage in PPT)

Answer 18

•Each Stage includes:
–Deliverables
–Criteria
–Outputs
•
•Each Gate Decision:
–Go,
–Kill,
–Hold, or
–Recycle

Question 19

Stage-Gate Process

Answer 19

Question 20

Principles of Stage-Gate processes

Answer 20

•Strong senior management commitment (gate-keepers)
•Business innovation strategy exists, has been converted into objectives
•Project management system thru-out
•Emphasizes market assessments
•Emphasizes pre-development assessment: (early stages found to be most wanting)
–Is this a good business?
–Who are the customers?
–Do we have the technological capability?

•Predevelopment; what exactly is the product concept, and can we do it at the right cost?
•Pre-established criteria: forces discussion of important issues
•Clear plan - lays out what to do by when, by whom, and what are the objectives for the leaders and the teams
•Parallel processing? (some say this is a limitation of this approach)

Question 21

NPD (new product development) strategy options

Answer 21

• Fisrt to market
• fast follower
• niche
• reactive

Question 22

NPD Timing Strategies—First Mover Strategy

Answer 22

Innovation culture, able to create and then dominate

the market against fast followers

E*xamples: *

• –Amazon with the e-book, J&J with medical devices*
• Examples of failures:*
• –Apple with the Lisa and Newton*

Question 23

NPD Timing Strategies—Fast Follower Strategy

Answer 23

Firm must be very good with innovation and have strong R&D, and be good at figuring out why the first mover failed to exploit the market so they can leapfrog fast and grab the market

Examples:

–Apple with mp3 players and later cell phones,
–Nokia with a smart phone,
–Google over Yahoo, Microsoft in search technology,

Question 24

NPD Timing Stratgies – Niche Strategy

Answer 24

Focus on specific niche market, requires a close connection to customers on what they want as far as product differentiation

Examples:

–Laurastar, a Swiss with high end irons “world’s smartest iron”,
–SolarCity, a US firm that focus on clean energy

Question 25

NPD Timing strategies—Reactive Strategy

Answer 25

Firms that are followers and have a focus on operations, have a wait and see approach and look for low rish opportunities, will copy proven inovation

• Example:*
• –Ryanair copied the no frills service model of Southwest Airlines.*