Ways of obtaining New Products.

Consumer tastes, technology, and competition

changes rapidly so companies must develop a steady stream of new products and
services. How? Through:
1. Acquisition by buying a whole company, a patent, or a license to produce
someone elses
2. New-product development in the companys own R&D department.
New product means original products, product improvement, product
modification, and new brands that the firm develops through its own R & D
efforts.
Many studies tell us that innovation can be very risky. New products continue
to fail at a disturbing rate. Listen to these findings:
- One source estimates that new consumer packaged goods fail at a rate of
80%
- Another study suggested that only 40% of new consumer food, beverage,
beauty, and health care products to hit the market annually will be around
five years later.
- Failure rates for new industrial products may be as high as 30%
- New-product failures to be as high as 95%
Reasons why new product fail
1. Although an idea may be good, the market size may have been
overestimated.
2. The actual product was not designed as well as it should be.
3. Incorrectly positioned in the market.
4. The price is too high.
5. Poorly advertised.
Major stages in new-product development
1. Idea generation the systematic search for new-product ideas. The idea
may come from internal and external sources such as customers,
competitors, distributors and suppliers, and etc. Internal idea sources may
come through formal R & D. Hitachis Henjinkai composed of 1,200 engineers
with PhDs fraternize at technical conferences, swap ideas, ad informally
advise Hitachis board on important technological development.
External idea sources may come from consumers by means of a survey.
Asking them about the negative and positive experience they have in using
the products and what input or suggestion they can share to improve the
products.
Competitors ads and other communications can be watched to get clues
about their new products. Buying their product and take them apart to see
how they work.
Idea management system is the systematic gathering of new ideas to a
central point where they can be collected, reviewed, and evaluated. To set up
the system the company can do any or all of the following:
a) Appoint a respected senior person to be the companys idea manager.

b) Create a cross-functional idea management committee to meet regularly

and evaluate proposed new product and service ideas.
c) Set up a toll-free number or website for anyone who wants to send a new
idea to the idea manager.
d) Encourage all company stakeholders to send their ideas to the idea
manager.
e) Set up formal recognition programs to reward those who contribute the
best new ideas.
Favorable outcomes of Idea manager Approach
a) It helps create an innovation-oriented company culture.
b) It will yield a larger number of ideas where good ones exist.
2. Idea screening reducing the number of ideas gathered by spotting good
ones and dropping the poor ones. How? Companies must have a welldesigned systems for rating and screening new-product ideas that focus on:
- The description of the products, the target market, and competition
- Some rough estimates of market size, product price, development time
and costs, manufacturing costs, and rate of return
- Then, the idea committee must evaluates an attractive idea against a set
of general criteria such the companys philosophy, mission, and vision.