ASSIGNMENT # 01

INNOVATION MANAGEMENT
*SUMMARY OF CREATING NEW PRODUCTS &
SERVICES*

Submitted to:
Ms. Mobina Farasat
Submitted by:
Faiza Israr 08

BBA 6th Semester

Department of Management Sciences

Lahore College For Women University

 CREATING NEW PRODUCTS AND SERVICES

Processes for new product development:

There are many requirements of the development of successful products, like the need to
have an appropriate organization to support innovation, an explicit process to manage
development and application of set of tools and techniques. They also need to choose
between different kinds of teams and team structures. This development process is basically a
gradual process of reducing uncertainty through a series of stages. This involves a fine
balancing between whether to continue with project or discard it. For such decisions, there
must be a structured development system, with clear decision points and agreed rules which
indicate whether to take go/no-go decision. There are numerous models like Cooper’s
“stage-gate” process or “development funnel” model for new product development. The
former one is a structured process in which project passes through different decision “gates”
while the later one takes into account the reduction in uncertainty as the process progresses
and also assumes resource constraints. There are many other models but they are simple,
linear and unidirectional. One of the simplified forms is a four-stage model which include
concept generation, project assessment and selection, product development and product
commercialization.
Factors influencing new product success are product advantage, market knowledge, clear
product definition, risk assessment, project organization, project resources, proficiency of
execution and top management support. There are five key practices that help in the
successful development of blockbuster products, these are commitment of senior
management, clear and stable vision, improvisation, information exchange and collaboration
under pressure.

Influence of Technology and Markets on Commercialization:

Both the market and technological context have an impact on the development of a new
product and service. There are no standard factors which contribute to the success of a new
product, rather they depend upon market and technological characteristics. In the
development of new products or services, there is a limited use of many of the standard
marketing tools. In order to apply these standard marketing techniques, we have to
understand the maturity of technologies and markets. For this, there is a two by two matrix of
technological and market maturity. Each quadrant requires different techniques for
development and commercialization. For differentiated products, existing technologies are
used to produce complementary products. Architectural products develop new markets with
existing technologies. Technological products are the new products made from new
technologies but are sold in already established markets. In case of complex products, both
technology and market co-evolve. Growth rate of market provides a good estimate of market
maturity.

PIMS & QFD matrix:

In case of differentiated products, major point of differentiation is relative quality of products
which impacts the profitability of company. Profit impact of market strategy (PIMS) data
shows that product or process innovation improves relative quality, reduces costs thereby
improving the value and reputation of brand and both of them help in driving growth in
market share. Quality function deployment (QFD) is a method of translating customer
requirements into development needs so that engineers can understand potential user’s
requirements. Steps for the construction of QFD matrix involves identification of customer
requirements, rank them, translate these requirements into measurable characteristics,
establish relation between customer requirement and product technical characteristics and
estimate the strength of relationship and choose appropriate units of measurement and
determine target values. To show the relationship between customer requirements and
technical specification they use different symbols and also assign weights to indicate the
strength of the relationship.

Segmentation for architectural products:

Architectural products require identification of group of customers with almost similar
purchasing behavior so that they can be treated in a similar way. Analyze customers’ buying
behavior and variables influencing these behaviors and identify unmet customer needs.
There are two approaches dealing with segmenting consumer markets, one approach says
consumers are rational and make purchasing decision by comparing product utility with their
requirement and the other approach argues that buying decision follows a sequence of
changing attitude to a product. Whereas in practice there should be a balance between these
two approaches. Level of risk defines the involvement of customer in purchasing decision.
Segmenting business market can be done on the basis of common buying factor or
purchasing processes and it should have clear operational implications such as differences in
preferences, pricing, distribution or sales strategy. Customer segmentation can be done by
identifying all relevant parties and by determining main influences on each. For identifying
new business markets, there is a three-stage segmentation process which include
segmentation on the basis of functionality of technology, behavioral segmentation and then
combine them to identify potential customers. Also analyze competitor products and
customers and try to foresee emerging customer requirements. Moreover, you can also extend
product in a number of ways like enhanced products, “up-market” extension, “down-market”
extension or hybrid product.
There are two types of architectural innovation. It can be either sustaining which improves
existing technology for existing customers or markets or it can be disruptive which provides a
different set of functions to appeal different segment of market.
Main issue is to identify the need to change the architecture itself. There should be a precise
balance between the frequency of radical change of product platform and incremental
innovation within these platforms.

Segmentation for high-technology products:

As there is a distinction between product and technology so we must identify why a potential
customer might look for an alternative to the existing solution. For identifying potential
applications and target customers, there are two stages, these are technical and behavioral
segmentation. The former one is done to identify range of specific potential uses while later
one is carried out to find three or four groups of customers with similar situations and
behavior. After conducting these segmentations combine them to define specific groups of
target markets and customers so that they can be evaluated commercially. Buying behavior of
high-technology products is affected by supplier related switching costs, buyer’s perception
of differences in technology and rate of change of technology.

Complex products implementation:

Complex product commercialization process has some characteristics that are common to
consumer and business markets. Complex products nature can be either as bundled system or
as subsystems or components depending upon how open the standards are for interfaces
between various components. The link between developers and users will vary throughout
the development and adoption process. Development, adoption and interfacing are three
processes that need to be managed as each of them demand different linkages. Developers
need to realize that development and adoption resources help in the commercialization of
complex products so they should manage information and resources flow and direction at
different stages of process. Range of different applications for an innovation and number of
potential users of each application are two dimensions that determine relationship between
developers and users.
Lead users play vital role in development and adoption of complex products. They share
some characteristics like they recognize their requirements early, expect high level of
benefits, develop their own innovations and applications and they are perceived to be
pioneering and innovative. Adoption process of such products is lengthy because of high
level of risk involved. Risk can be either performance related or psychological. Buying
criteria of organizational purchases is different from general purchase criteria of a normal
buyer and it can be affected by political and legal environment, organizational structures and
tasks and by personal roles and responsibilities.

Service innovation:
In today’s world service sector is growing much more than manufacturing sector that has
already become highly automated. Some good practices of manufacturing sector can be
adopted but they must adapt to different contexts. Service sector is very diverse and offers a
wide range of different operations from low skilled personal services to higher skilled
personal services to mass consumer services. Tangibility, perception of performance and
quality, simultaneity, storage, customer contact and location are some of the key points that
differentiate service operations from manufacturing.
High innovators typically focus more on R&D, technology change, invest in fixed assets,
bring new concepts in less than a year and compete in open markets. They avoid
overcomplicating their customer base and focus in the procurement and service delivery
process. As persuading customers to buy new services is a difficult task so they operate with
a policy of parity pricing.
There are four different types of service organization for innovation. These are client project
oriented, mechanistic customization, hybrid knowledge sharing and integrated innovative
organization. All these four types of configurations offer different advantages. Client project
oriented reduces time to market and improves service delivery, mechanistic customization
reduces cost by setting standards and by the involvement of suppliers and customers. Hybrid
knowledge sharing provides innovation and efficiency by encouraging teamwork and
knowledge sharing whereas integrated innovative provides innovation and quality by means
of cross functional groups. Customer focus, cross functionality, documentation, system
integration and some other factors that influence the effectiveness of new service
development.