Pioneeriny ProcNcesforNeiiil

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36 I M M Winter 2000
oduct Development at IIS Hest

odaii's rapidiy cttanyiny mariiets and dynamic nem tecli-

nologies not onlii offer attractive opportunities, tiut aiso

present citallenyiny [Oddbloclis fof marMny and product man-

oyers in almost every industrij. Htiiie marhetefs. consultants, and

d :m
c a m c s tisve developed a variety of processes and proce-

dures to effectively manage the development and introduction of

neuj products, ttie groining uncertainty and instatiility intierent in

ttiese rapidly clianginy mafhets tiave presented a sefies of com-

piications ttiat managefs must proactiveiy address. Itiere is o

yroujiny need in most companies today to adapt to and manage

ctionge and innovation as managers attempt to successfully inte-

Orate cutting-edye tectinoioyies uiitti customer needs.

Illuslfalion by: Matl Fostet/Laughing Stock

MM Winter 2000 1 37
 EXECUTIVE
briefing
The authors examined new
product development (NPD]
practices at a firm facing high-
ly uncertain and rapidly chang-
ing market conditions. They
conducted in-depth interviews
of managers who had man-
aged both successful and
unsuccessful new products in
order to identify best practices
for facilitating the entry of new
products into changing mar-
kets quickly, efficiently, and
effectively. The resulting five
practices provide one potential
model for NPD in other firms
facing similar market and tech-
nological conditions.
38 MM W i n t e r 2000
In our recent study of a series of new
product efforts at US WEST, the regional
Bell telephone operating company, now a
part of QWEST Communications, we iden-
tified five new product development (NPD)
practices that have the potential to mitigate
risk and manage uncertainty, while enhanc-
ing the likelihood of new product success.
In order to bring to life the issues faced and
solutions developed by managers who
must deal daily with such challenges, we
conducted 16 retrospective interviews with
new product managers whose NPD proj-
ects we studied.
The Role of Uncertainty
Today's new product strategies must be
developed and carried out within an envi-
ronment of uncertainty caused by the very
technology that leads to the rapid growth
sought by many firms. There are three prin-
cipal elements that characterize this market
uncertainty. First, new and innovative tech-
nologies often make possible products that
go beyond the needs customers can easily
articulate. As such technologies emerge, the
marketer, especially in technologically driv-
en firms, must struggle to determine the
appropriate target market and identify the
customer need the technology can fulfill.
Second, managers are uncertain how
new technologies can be translated into spe-
cific new products having the right attrib-
utes at a price the customer will be willing
and able to pay. Third, it is difficult for
managers to determine the resource levels
at which new product research and devel-
opment should be supported. The huge fail-
ure rate for new products attests to the fact
that traditional business and marketing
plans can only guess at sales projections for
new-to-the-world products. Assessing the
potential of new technologies before they
reach the stage where specific new products
can be envisioned is even more difficult.
Notwithstanding the three elements of
uncertainty we have described, the nonstop
evolution of technology in most industries
and the rapid change that characterizes so
many new markets demands new product
managers continuously introduce new
products and services. In order to do so
successfully, they need tools and practices
that meet the demands of this complex task.
Five NPD Practices
while examining successful and unsuc-
cessful NPD practices at US WEST, we iden-
tified five key practices that can guide man-
agers as they struggle with the challenges of
uncertain and rapidly changing markets:
• Focus on probing, not measuring.
• Limit large scale, quantitative research,
and emphasize qualitative methods.
• Make a little, sell a little.
• Stage the firm's resource commitment
over the life of the NPD process...
• Build distribution channels appropriate
for each new product, including direct
marketing strategies.
While these practices are somewhat dif-
ferent from the traditional practices used to
develop derivative products in stable mar-
kets, we found they specifically address the
critical issues managers are likely to
encounter in today's uncertain and rapidly
changing environment.
Focus on probing, not measuring.
New product development efforts have tra-
ditionally relied on marketing research to
identify new customer needs and assess the
attractiveness of potential new product
offerings. Under traditional NPD practice,
the lion's share of the research budget has
typically been focused on the latter aspect,
while forgoing deeper probing of perhaps
latent customer needs. Today, however,
technology often makes it possible to satisfy
needs beyond those a current customer can
articulate. Under such circumstances, the
questions asked in typical quantitative sur-
vey research can be the wrong ones. In our
interviews, we found that managers of suc-
cessful new products continually probed
and questioned potential customers through
all stages of the product development
process. The new and emerging information
was integrated into the product as it devel-
oped over time, and the most attractive tar-
get market Was identified.
"it's really part and parcel with not being
able to do a lot of specific targeting because
you lion't know a whole lot at that point in time about who your
market is."
Another approach for probing rather than measuring
involved the use of prototypes, instead of concept descriptions,
to enable potential users lo better visualize the functionality of
nt'w products during market research efforts. For example,
wlien the personal computer was just a concept In the '70s, how
many of us could have imagined its use for desktop publishing
or analysis of spreadsheets, not to mention its use as an encyclo-
pedia, or as a repository of photographic images? It often
requires hands-on experience to begin developing an under-
standing of what a new technology really means.
"Let people see it instead of reading off an 8 1/2 x 11 sheet of
paper... You know, let 'em play with it."
Input gleaned from probing prospective users not only
helps managers to refine their product, but it also reduces the
level of uncertainty inherent in a changing market.
Limit large scale, quantitative market research, and
emphasize qualitative methods. The traditional research
emphasis on opportunity assessment as opposed to probing
for customer needs may result in a tendency to use large-scale
quantitative survey research over smaller, more qualitative
studies. In an effort to bridge the gap between what technolo-
gy offers and the consumer needs, the managers of several
successful products at US WEST were more prone to seek the
benefits of qualitative research. This hands-on, interactive,
and often one-on-one feedback can help to refine a new
product idea.
"We move into qualitative screening, mostly one-on-one inter-
I'icws where they are dealing with a prototype, or focus groups ivhere
the}/ are dealing with a concept... Further screening is done based on
what continues to test out high... (We) begin to prioritize those and
whittle those down to maybe a dozen or so."
Qualitative research also was employed to better under-
stand how a new product under development fit the context in
which aistomers would use it. Understanding human factors in
new product design is especially important for new products
that call for changes in behavior among consumers, a common
characteristic of technological breakthroughs.
"We did a lot of research in terms of positioning... does it simpli-
fy their life, is it convenient, is it viable, that type of thing... YJe also
did a lot of human factors testing, especially early on and then ongoing
as we delivered enhancements to the product... Based on all that
research we cleaned it up and made n very easy-to-understand and use
interface. I think that's absolutely critical... Qualitative (research) is
necessary and I think we do a good job of it. We need to give it a little
more flexibility and latitude."
While qualitative research played a central role, the man-
agers we interviewed remained committed to an important,
though limited, role for quantitative research targeted at certain
specific tasks: forecasting sales, determining appropriate price
points, and selecting the best potential target markets.
"It's pretty well-deftned that you do some quantitative analysis...,
literally taking a concept out there and saying, "Would you buy this if
it were priced at X?"
Thus, in rapidly changing markets, the development of
viable products having the right mix of functionality, pricing, and
market positioning calls for a combination of qualitative and
quantitative market research with a dear emphasis on the former.
Make a little, sell a little. While it is often critical to conduct
extensive marketing research, both qualitative and quantitative,
before introducing a new product to the market, managers of
several successful products found that some of their best infor-
mation came from customer feedback once the product had been
launched. In an environment of rapid change and continuously
evolving technologies, it becomes imperative to get the product
to market as quickly as possible. Although this practice often
involves a certain amount of risk, getting a new product on the
market quickly can become a source of substantial information
drawn straight from the consumer. In such markets, our inter-
views suggest that managers should sometimes release new
products early—perhaps before they are "perfect"—with the
intent they will continue to modify the product as they go along.
"We don't let the engineers spend too much time building the per-
fect product... We get it out the door and modify as we go."
The 3M company encourages this practice, having coined
the phrase "make a little, sell a little," and relies on it to reduce
uncertainty for innovative new products. As one US WEST man-
ager who had formerly worked at 3M noted;
"We (at iM) were 'brainwashed' with that idea of'just make
something.' Make a little bit of it, bring it out, and see if somebody will
buy it If they buy it that's great, if they don't - we'll bring it back and
redo it."
Of course, it is important to recognize the difference
between an early version of a product with perhaps limited
functionality and one full of bugs. Even early versions are
expected to be largely bug-free, if not always easy to use or suf-
ficiently developed to meet all of the customers' expectations.
By employing the "make a little, sell a little" concept, man-
agers send products to market early, without the traditional
development of large-scale marketing campaigns. This approach
affords companies an opportunity to better understand the mar-
ket potential for a new product by obtaining feedback from real
users who have paid real money. Research based on what peo-
ple do (having bought the product), rather than what people say,
inspires more confidence in its validity.
"We can put it on the shelf and sell it as a test—which is better
than quantitative market research."
Thus, the "make a little, sell a little" approach interacts with
the emphasis on continuous probing via qualitative research to
deliver insights that permit ongoing improvement of the prod-
uct through its life cycle.
Stage the firm's resource commitment over the life of the
NPD process. In order to obtain the benefit of the first three of
our suggested NPD practices for rapidly changing markets, a
MM Winter 2000 I 39
certain level of resources is necessary. Just as it can be difficult to
sell a new-to-the-world product to the public, it may be similar-
ly difficult to sell it to upper management. Our fourth NPD
practice may ease the challenge of obtaining organizational
resources and commitment, while mitigating the risks entailed
in spending scarce resources on new products that may fail.
It is well-known that a firm must invest significant
resources to develop an emerging technology into viable prod-
ucts, and then to successfully take those products to market.
Today's stage-gate NPD processes provide a framework for
managing NPD projects in such a manner that buy-in and proj-
ect support from senior management come at early stages in the
product's development, while resource commitments, at least in
part, are delayed until additional information on likely techno-
logical and market feasibility is obtained.
While the stage-gate process encourages management sup-
port from the beginning of the NPD process, it also reduces the
risks entailed in financially supporting a new product too heavi-
ly and too early its development, by postponing some resource
commitments until certain milestones are reached. Staging these
resource commitments is important, since preliminary forecast-
ing of demand for new products in uncertain and rapidly chang-
ing markets is a highly uncertain process, at best.
"Ohhh, forecast? We laugh about it. What's your forecast on...for
tiie next five years? You kind of close your eyes sometimes. It's very
difficult trying to figure out how you're going to ramp up and who's
going to buy."
By committing resources sequentially at the various stages
of the product's evolution, managers can update their assess-
40 I M M W i n t e r 2000
ments before future commitments are made. This mitigation of
financial risk has been a key factor in the growing adoption of
stage-gate NPD processes.
Build distribution channels appropriate for each new
product. The first four NPD practices all point in the direction of
developing a product in stages and integrating customer input
and managerial support along the way. At some point, however,
managers must ask, "How are we going to get this new product
to market?" The traditional mass-marketing approach, using
mass media and massive rollouts, is not conducive to rapidly
changing markets, especially considering that the first version of
the new product going out the door will probably not be the
last. Furthermore, in firms with aggressive NPD programs, the
continuous introduction of a flurry of new products can over-
whelm the traditional sales force with new information and pri-
orities. In such markets, it becomes imperative for marketing
managers to build distribution channels that are both focused
and resource conserving, that get the products to the intended
consumer, and that do not overload the sales staff with so much
new product work that mainstay products receive short shrift.
In order to meet these objectives, the managers we spoke to
for several of the successful projects chose to bypass the normal
sales force for new product introductions. Instead, they used
direct-mail pieces and outsourced telemarketing campaigns to
effectively and efficiently reach the desired target market. US
WEST'S introductory Caller ID promotion, combining direct
mail with an aggressive outbound telemarketing campaign, was
so successful that US WEST was unable, at first, to handle the
customer response.
"Direct mail pieces solicited so many inbound calls that our
inbound numbers were overloaded."
While mass media campaigns and full-scale rollouts are
effective in reaching large numbers of consumers, they have
the potential to offer too much publicity around a product that
may be pointed at an uncertain target or offer limited capacity
at the outset.
"1 can't go on TV ivith this stuff, and a lot of the products we're
working on are nichy, so we are going toward... the one-on-one mar-
keting database relationship."
More sharply focused strategies allow the marketing man-
ager to introduce the product quietly and work with consumer
data to modify and develop the product into one well suited to
the needs of a particular target market. The input provided by
such an approach can be used to help mode! who is buying and
why, as well as how the product can better serve the customer's
needs. Given the uncertainty in the market today, and the desire
to reduce cycle times, these marketing strategies offer more
focused and resource-conserving options.
Whatever the sales staff employed to sell a new-to-the-world
product, it is critical to bring them into the NPD process to get
them interested in selling a new product. In rolling out Caller ID,
US WEST wanted to be certain that its sales people would under-
stand the benefits of this new product from personal experience.
 "Yes, they (the sales force) were busy, but what we did was lend
the sales managers and sales people the Caller ID unit, (saying) you
can use this at your home.. .for free for the first 90 days."
As a result, the sales team had hands-on knowledge of the
product, they could be called on for product input, and they
were excited to sell the Caller ID unit. When the sales force is
overwhelmed with product information, which new product do
you think they'll remember?
Conclusion
Our interviews with 16 US WEST managers entailed, in
each instance, a comparison of a new product development
project that had been judged as successful with another that
had not met expectations. Both consumer and b-to-b products
were represented. The five practices we report were common
across multiple successful projects, but not found for the
unsuccessful ones. While our small sample of projects and our
focus on a single company within a single industry may not be
the best practice in all firms or in all industries, our results are
nonetheless thought-provoking, and worthy of consideration in
any firm whose managers face rapid change and/or technolog-
ical uncertainty.
Qualitative marketing research, quantitative research,
probing techniques, the latest product introduction and fund-
ing practices, and targeted and appropriate distribution chan-
nel strategies are all components of a larger picture. That larger
picture is one of an organizational culture centered on, sup-
portive of, and receptive to cutting edge and technologically
profound ideas. As markets become increasingly competitive
and technology continues to pave new paths to product and
siTvice innovation, managers must be conscious of the current
trends and focused on making the most of them. Building such
a supportive organizational culture is critical to long-run, new
product success.
Doing so without fervent top management support and
commitment is unlikely, if not impossible. Thus, top manage-
ment involvement in creating the right culture is critical to the
NPD process, not only to ensure the commitment of the neces-
sary resources along the way, but to encourage, support, and
believe in new product ideas. Top management commitment to
the NPD process will permeate through the ranks, and will help
develop a culture open to new ideas and new products. As the
3M saying goes: "If you're not creating a nmv product, you're not
doing your job."
With an organizational culture that nurtures, facilitates,
and supports new product development, and with top man-
agement backing for the strategic importance of NPD efforts,
you will most likely see substantial dividends from the use of
these practices. •
Additional Reading
Cooper, R.G. (1990), "Stage-gate system; a new tool for managing
new products," Business Horizons, (May-June), 44-54.
Cooper, R.C. and E.J. Kleinschmidt (1987), "New products: What
separates winners from losers," Journal of Product Innovation
Management, 4:169-184.
Griffin, A. and A.L. Page (1993), "An interim report on measuring
product development success and failure," Journal of Product
Innovation Management, 10:291-308.
Johne, F.A. and P.A. Snelson (1988), "Success factors in product
innovation: A selective review of the literature," journal of
Product Innoi'iition Management, 5:114-128.
Kleinschmidt, E.J. and R.G. Cooper (1991), "The impact of product
iiinovativeness on performance," Journal of Product Innovation
Management, 8:240-251.
Mullins, J.W., D. Forlani, and O.C. Walker, Jr. (1999), "The effect of
organizational and decision-maker factors on new product risk
taking," Journal of Product Innovation Management, 16(3):282-294.
Mullins, J.W. and D. Sutherland (1998), "New product development
in rapidly changing markets: an exploratory study," Journal of
Product Innovation Management, 15(3): 224-236.
About the Authors
John W. Mullins is an associate professor of marketing at
the Daniels College of Business, University of Denver. He holds
degrees from Lehigh University and the Stanford University
Graduate School of Business, and a PhD in marketing from
the University of Minnesota. John may be reached at
jmullins@du.edu.
Sarah K. Sittig is an international marketing strategist for
Skechers USA, Manhattan Beach, Calif. She works closely
with its distributors in more than 30 countries, managing the
marketing programs in both France and Cerm<iny. Sittig is a
graduate of the Master of International Management program
at the University of Denver. She may be reached at
sarahs@skechers.com.
Carol A. Brown is a marketing analyst with Lafarge
Construction Materials, based in Hemdon, Virginia. Prior to this,
she was an Assayer and Research Technologist for Cominco
Ltd., an integrated lead and zinc smelter, in Canada. Brown
holds a Diploma of Chemical Sciences Technology from the
British Columbia Institute of Technology and a license to prac-
tice assaying in the province of British Columbia. More recently
she received her Master of Intemationai Management from the
University of Denver. She may be reached at
carol.brown@lafargecorp.com.
MM Winter 2 0 0 0 | 41