New Products & ServicesKari WetzelBUS 501April 12, 2012

New Product Success Rate• Research has explored the

uncertainty related with the development & sale of new products.

• Think about these organizations:▫ RCA’s VideoDisc Player

Lost $500 million▫ Time Inc.’s TV-Cable

Week Lost $47 million

▫ Pfizer invested in an anti-aging drug Lost $70 in the

development

• Developing & producing products that fail is a part of business in all industries. ▫ Ex: Food Companies

• Organizations take ricks because product innovation allows them to stay current.

New Product Success Rate

• A survey by the Product Development and Management Association (PDMA) helps to determine what is successful.

100 ideas

33 Developed Projects

28 Pass All Testing

24 Fully Commercialized

14 Successful in Marketplace

Reasons for New Product Success• Why are some products

more successful than others?▫ Success can be related to

collaboration between technical & marketing departments

▫ Successful new products seem to be technologically sound & tailored to the customer needs.

• Project SAPPHO examined 17 pairs of new product innovation, with 1 success & 1 failure in each pair. 1. Successful innovating

companies had a much better understanding of customer needs & paid much more attention to marketing.

2. Successful innovating companies made more effective use of outside technology & outside advice, even though they did more work in-house.

3. Top Management support in the successful innovating companies was from people who were more senior & had great authority.

Horizontal Coordination Model

To achieve new product

innovation, it involves 3

components- departmental specialization,

boundary spanning, and

horizontal coordination.

Horizontal Coordination Model

•Specialization▫All members needs to be competent at their

tasks.•Boundary Spanning

▫Each department involved with the new product has linkage with relevant sectors in the external environment.

•Horizontal Coordination▫This means that technical, marketing, and

production share ideas & information

Horizontal Coordination Model• Famous innovation failures usually violate the

horizontal linkage model.▫New Coke, Kellogg’s Breakfast Mates, Susan B.

Anthony Dollar.• Many successful companies are including

customers, strategic partners, suppliers, and other outsiders in the development of a new product.

• Open Innovation▫Extending the search for and commercialization of

new products beyond the boundaries of the organization and even beyond the boundaries of the industry.

Horizontal Coordination Model• Threadless

▫ Produces dozens of new T-shirt designs a month and has never produced a flop.

▫ They let potential customers tell them which shirts to make.

▫ Hold design competitions online where they can be voted on to be made into real shirts.

▫ The customers are essentially the company.

▫ They employ NO proeffsional designers, NO marketing department, NO advertising staff, and NO distribution to retailers.

Achieving Competitive Advantage: The Need for Speed•90% of executives say speed & agility

have become major concerns for the companies in recent years.

•The rapid development of new products & services is becoming a major strategic weapon in the global marketplace.

•To stay competitive, companies are learning to turn ideas into new products & services incredibly fast.

Achieving Competitive Advantage: The Need for Speed• Time-based Competition

▫ Delivering products & services faster than competitors, giving companies a competitive edge. Zara (Clothing Retailer)

Gets new clothing in 2 times a week. Russell Stover

3 months for new low-carb candies instead of 12 months, like normal.

▫ Fast Cycle Teams A way to support highly important projects & deliver

products & services faster. Multifunctional, and sometimes multinational. Works under stringent timelines and is given a good amount

of company resources & empowerment in order to complete the project.

Achieving Competitive Advantage: The Need for Speed•International Issues

▫Can be an issue when designing a product that competes on a global scale & when marketing those products.

▫Quaker Oats, Häagen Dazs, Levi’s Trying to improve horizontal communication

& collaboration across geographical regions.