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The Managementof New Product

Development, and

Entrepreneurship

The Managementof New Product

Development, and

Entrepreneurship

1919

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Innovation, Technological Change and

Competition

Innovation, Technological Change and

CompetitionTechnology refers to the skills, knowledge,experience, body of scientific knowledge,tools, computers, machines used in the design

and production of goods and services.Quantum technologicalchange: fundamentalshift in technology that results in innovation.

The Internet and genetic engineering are examples.

Incrementaltechnologicalchange: refinements of

current technology over time.

Most firms seek incremental product innovations which

allows constant, but small, improvements.

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Effect of Technological ChangeEffect of Technological Change

Many products undergo constant change and

improvement.

Electronic products provide a great example.

This change can be a threat to firms that are slow to

improve but provides benefits to firms that adjust.

Technological change is both a threat and an

opportunity.

Smith Corona typewriter company missed out on word

processing and is now out of business.

Microsoft was quick to embrace graphic user interface

programs and now is dominant in the software business.

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Product Life CyclesProduct Life Cycles

Refers to demand changes for a product over time.

Embryonic stage:product is not widely accepted and

has minimal demand.

Growth stage: many consumers seek out the product

and buy it for the first time.

Mature stage: demand peaks since most buyers already

have the product and only buy replacements.

Decline stage: demand falls off perhaps since the

product is obsolete.

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Product Life CyclesProduct Life Cycles

Embryonic

Stage

Growth

Stage

Mature

Stage

Decline

Stage

Time

Demand

Figure 19.1

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Relationship Between Technological

Change and Life Cycle Duration

Relationship Between Technological

Change and Life Cycle Duration

Length of Product Life Cycles

Rate of Technological

Change

Figure 19.2

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Rate of Technological ChangeRate of Technological Change

The rateofchange determines the length of the product

life cycle demand curve.

The computer industry, life cycle is about 18 months; in

the steel industry, it is many years.

Fads andfashions also impact the life cycle duration.

Style changes alter the demand for goods.

Usually, goods subject to fads and fashion changeswill experience shorter life cycles.

In general, life cycles are getting shorter, forcing

managers to be more responsive to customers.

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The Four Goals of New ProductDevelopment

The Four Goals of New ProductDevelopment

Reduce Product

Cycle Time

Maximize Fit with

Customer needs

Maximize

Manufacturability

Maximize

Product Quality

New ProductNew Product

DevelopmentDevelopment

GoalsGoals

Figure 19.3

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The Four Goals of New Product

Development

The Four Goals of New Product

Development1) Reduce Product Cycle Time: reduce time needed to

develop a product from conception to market

introduction.

Early to market products can command premium pricesand will have a longer life cycle.

Can add new features before competitors

2) Maximize fit with Customer Needs: most products

fail because they were not designed to fit customerneeds.

Ensure customers want the product features before adding

them to the product.

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The Four Goals of New Product

Development

The Four Goals of New Product

Development3) Maximize Product Quality:be sure new products

are of superior quality.

Poor quality in a new product can doom its acceptance

even if quality is fixed later on. Quality problems usually result from rushing product to

market.

4) Maximize Manufacturability: the efficiency with

which the product is built impacts its time to market. Ease of production can shorten development time.

Efficient production can also avoid production

problems and improve quality.

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Stage-Gate Development FunnelP

rinciples

Stage-Gate Development FunnelP

rinciples Principle 1: Use aStage-Gate DevelopmentFunnel;

managers often try to fund too many projects at once.

Stage 1 considers all new ideas. Those that are feasible

and meet the strategic goals of the firm go through Gate

1.

Stage 2 focuses on the product development plan and

then evaluated at Gate 2. Only the best continue.

Stage 3 issues a contract bookand focuses on

responsibilities, budgets, resources, etc. This is the

symbolic launch of the formal development.

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Stage-Gate Development FunnelStage-Gate Development Funnel

Ship

Stage 3Stage 2Stage 1

Ideas

Gate 1 Gate 2

Figure 19.4

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Cross Functional Teams PrinciplesCross Functional Teams Principles

Principle 2: Cross functionalteams seem to be a crucial

part of effective product development.

Core members of the team are the 3 to 6 people

primarily responsible for the development effort.

Must ensure there is coordination and communications

between team members.

Often are located physically together

Successful teams will develop a clear sense of their

objectives and share a common mission.

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Members of a Cross-Functional NewP

roduct Development Team

Members of a Cross-Functional NewP

roduct Development Team

TeamTeam

LeaderLeader

CoreCoreMembersMembers

PeripheralPeripheral

MembersMembers

Figure 19.5

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Concurrent Engineering PrinciplesConcurrent Engineering Principles

Principle 3: ConcurrentEngineering: Traditional

approach follows a sequential flow between steps.

This results in long development times and poor quality

when managers do not communicate betweendepartments.

Development managers may design the product without

talking with manufacturing, resulting in problems.

By working concurrently, design and production issuesare considered together.

Production concerns are addressed while the product is

designed and can still be changed.

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Sequential v. Parallel DevelopmentProcesses

Sequential v. Parallel DevelopmentProcesses

Figure 19.6

OpportunityOpportunity

IdentificationIdentification

ConceptConcept

DevelopmentDevelopment

ProductProductDesignDesign

ProcessProcess

DesignDesign

CommercialCommercial

ProductionProduction

OpportunityOpportunity

IdentificationIdentification

ConceptConcept

DevelopmentDevelopment

ProductProduct

DesignDesign

ProcessProcess

DesignDesign

CommercialCommercial

ProductionProduction

A Sequential Process

A Partly Parallel Process

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Bring in Customers & SuppliersBring in Customers & Suppliers

A key reason the products fail is that they do not meet

the needs of the customers.

Customerideas andneeds should be included in thedesign process.

Solicit customer input from many sources.

Suppliers are alsocriticalto the success of a product.

Embrace them during concurrent engineering.

Seek their ideas and input early in the process.

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Product Development ProblemsProduct Development Problems

Successful product development is a critical component

of a successful firm.

While most managers know this, it can be difficult to

actually carry out good development strategies.

Many managers have difficulty in releasing control of

their part of the process and allowing groups to take

part.

Conflict management skills can address this.

Product development often requires a break in the

traditional organizational culture to be highly successful.

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EntrepreneurshipEntrepreneurship

Entrepreneurs are people that notice

opportunities and take the initiative to

mobilize resources to make new goods and

services. Many entrepreneurs work for themselves and start new

firms.

Intrapreneurs: work in large companies and contribute

to innovation in the firm.

Intrapreneurs that become frustrated with the lack of

opportunity at some large firms often leave and form

their own business called a new venture.

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Entrepreneurship and New VenturesEntrepreneurship and New Ventures

Characteristics of entrepreneurs--most share these

common traits:

Open to experience: they are original thinkers and take

risks.

Internal locus of control: they take responsibility for

their own actions.

High self-esteem: they feel competent and capable.

High need for achievement: they set high goals and

enjoy working toward them.

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IntrapreneurshipIntrapreneurship

A learningorganization encourages employees to act as

intrapreneurs. To help, form:

Product Champions:person that takes ownership of a

product from concept to market.Skunkworks: group of intrapreneurs kept separate from

the rest of the firm.

Allows workers total flexibility and innovation.

New Venture Division: allows a division to act as itsown smaller company.

Rewards for Innovation: link innovation by workers to

valued rewards.