New Product Development - Chap 2 - in

Chapter 2: Opportunity Identification and Selection:
Strategic Planning for New Products
MSc. Pham Thi Hong Ngoc

New Product Strategy Inputs
and Identifying Opportunities
Chapter 2.
Opportunity Product Innovation Charter
Identification
and Selection
Product Portfolio

2.1 New Product Strategy Inputs
and Identifying Opportunities

Product Platform Planning
• Many firms find that it is not efficient to develop a single product.

• Hence, they use platforms to create product families that share similarities in
design, development, or production process.
‐ Car industry: $3 billion price tag on a new car platform is spread out over several
models.
‐ Sony: four platforms for Walkman launched 160 product variations.
‐ Boeing: passenger, cargo, short- and long-haul planes made from same platform.
‐ P&G: Liquid Ariel for European market, Liquid Tide for North America, and Liquid
Cheer for Japanese market.
‐ Black & Decker: uses a single electric motor for dozens of consumer power tools.

Product Platform Planning
Product Platform defined as:

• “a set of common components, modules, or parts from which a stream of derivative
products can be efficiently developed and launched” (Meyer & Lehnerd, 1997, p. 7).
• “a collection of the common elements, especially the underlying core technology,
implemented across a range of products” (McGrath, 1995, p. 39).
• “the collection of assets [i.e., components, processes, knowledge, people and
relationships] that are shared by a set of products” (Robertson & Ulrich, 1998, p.
20).
• “a basis for all individual product projects within a family of products” (Crawford &
Benedetto , 2015, p.61).
Opportunity Identification:
Greenfield Markets
• Find another location or venue Once McDonald’s had taken up the best locations for
traditional fast-food restaurants, it continued its U.S. expansion by placing stores inside
Wal-Marts, in sports arenas, and elsewhere. Starbucks Coffee complemented coffee-
shop sales by selling its coffee beans and ice creams in supermarkets.
• Leverage your firm’s strengths in a new activity center. Nike moved into golf and hockey,
and Honeywell is looking into casino opportunities.
• Identify a fast-growing need, and adapt your products to that need. HP followed the
need for “total information solutions” that led it to develop computing and
communications products for the World Cup and other sporting events.
• Find a “new to you” industry. P&G in pharmaceuticals, GE in broadcasting (NBC), Disney
in cruises, Rubbermaid in gardening products – either through alliance, acquisition, or
internal development.
Opportunity Identification:
Emerging Societal Trends
Six Catalysts shaping the future: (tutorial)
1. “Just-in-time” life
2. Sensing consumers
3. The transparent self
4. In search of “enoughness”
5. Virtual made real
6. Co-creation

2.2 Product Innovation Charter
(PIC)

What is the Product Innovation Charter (PIC) ?
• It is the new product team’s strategy.

‐ It is for Products (not processes).
‐ It is for Innovation (think of the definition of new product).
‐ It is a Charter (a document specifying the conditions under which a
firm will operate).
• Typically, it is a document prepared by senior management designed to
provide guidance to the strategic business units (SBUs) on the role of
innovation.

Do Many Firms Have a PIC?
• Most do, according to research, even if they don’t call it by that name.
• Also:
‐ 75% of firms have a formal new product policy of some type (a partial PIC).
‐ 29% have a formal, written complete PIC.
‐ 80% of firms have formalized at least a few of the phases in the new products process.
‐ 86% of the “Best” firms have a PIC and only 69% of the “Rest.”
‐ The more detailed and specific the PIC, the higher are the firm’s innovation rates.
‐ The more specific the corporate mission and senior management direction is spelled out
in the PIC, the better is the performance of the firm’s new products.
Purposes of PIC
1. Focus and integrate team effort

2. Permit delegation
3. Establish the size and range of the “sandbox”

Risks of Poor PIC Development
• Scope creep: Product definition keeps changing: who is the customer?

Is it a standalone product or a platform?
• Unstable product specifications: Required performance level keeps
changing.
The above risks occur due to vague targets (“moving goalposts”) – the
sandbox was never defined, or poorly defined.

Background
Key ideas from the situation analysis; special forces such as managerial dicta; reasons for
preparing a new PIC at this time.
Focus
At least one clear technology dimension and one clear market dimension. They match and
have good potential.
The Contents
of a PIC Goals-Objectives
What the project will accomplish, either short-term as objectives or longer-term as goals.
Evaluation measurements.
Guidelines
Any "rules of the road," requirements imposed by the situation or by upper management.
Innovativeness, order of market entry, time/quality/cost, miscellaneous.
MSc. Pham Thi Hong Ngoc MSc. Pham Thi Hong Ngoc
PIC Steps:
Background, Focus, and Goals
• Background: “Why did we develop this strategy?”

• Focus, or Area: technology and market drivers that (1) fit and
(2) have good potential.
• Goals and Objectives: profit, growth, market status

PIC Steps:
Special Guidelines
• Degree of Innovativeness • Miscellaneous
‐ First-to-market ‐ Avoidance of competition with certain
‐ Adaptive product firms
‐ Imitation (emulation) ‐ Recognition of weaknesses
‐ Patentability
• Timing
‐ Product Integrity
‐ First
‐ Quick second
‐ Slow
‐ Late

An Illustrative PIC for the Apple iPad
• Focus: Technology strengths include Apple’s operating system, hardware, applications, and
services, product design and development skills. Marketing requirements include products on
the “cutting edge” that offer seamless integration and high performance, yet are intuitive,
simple, and fun to use.
• Goals: Revolutionary new products should also be platforms for future products, due to the
cost of “really new” product development. New products should occupy the leadership
position in the market.
• Special Guidelines: Apple aims to be the best, not necessarily the first, in new product
categories.
• The Result: Apple’s first “tablet computer,” a revolutionary new product seen by many at the
time as the “next big thing.” No one tablet computer had established a dominant position yet,
so Apple could be the standard bearer with the iPad. The plan for the future was to add
capabilities and applications to future iPads.
2.3 Product Portfolios

Product Portfolio:
The New Product’s Strategic Fit
• Strategic goals (defending current • Market familiarity (existing markets,
base of products versus extending extensions of current ones, or totally
the base) new ones)
• Project types (fundamental • Technology familiarity (existing
research, process improvements, platforms, extensions of current ones,
or maintenance projects) or totally new ones)
• Short-term vs long-term projects • Ease of development
• High-risk vs low-risk projects • Geographical markets (North America,
Europe, Asia)
Strategic Portfolio Model for One SBU in
Exxon Chemical
Low Market Newness High Market Newness
Low Product Newness Improvements to Existing Products Additions to Existing Product Lines
(35%) (20%)
Medium Product Newness Cost Reductions New Product Lines

(20%) (15%)
High Product Newness Repositioning New-to-the-World Products

(6%) (4%)
Source: Adapted from Robert G. Cooper, Scott J. Edgett, and Elko J. Kleinschmidt. Portfolio Management
for New Products, McMaster University, Hamilton, Ontario, Canada, 1997, p. 63.

A Portfolio
Diagram at a
Hewlett-Packard
Division
Strategic
Decision Group
Portfolio
Evaluation
Model
Chapter 1-2
Summary

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Chapter 2: Opportunity Identification and Selection:

Strategic Planning for New Products

MSc. Pham Thi Hong Ngoc

MSc. Pham Thi Hong Ngoc

MSc. Pham Thi Hong Ngoc

• Many firms find that it is not efficient to develop a single product.

MSc. Pham Thi Hong Ngoc

Product Platform defined as:

MSc. Pham Thi Hong Ngoc

MSc. Pham Thi Hong Ngoc

• It is the new product team’s strategy.

MSc. Pham Thi Hong Ngoc

1. Focus and integrate team effort

MSc. Pham Thi Hong Ngoc

• Scope creep: Product definition keeps changing: who is the customer?

MSc. Pham Thi Hong Ngoc

• Background: “Why did we develop this strategy?”

MSc. Pham Thi Hong Ngoc

MSc. Pham Thi Hong Ngoc

MSc. Pham Thi Hong Ngoc

Medium Product Newness Cost Reductions New Product Lines

High Product Newness Repositioning New-to-the-World Products

MSc. Pham Thi Hong Ngoc

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