CHAPTER: INNOVATION AND

NEW PRODUCT STRATEGY

Topics to be covered: 
Innovation as a Customer-Driven Process
New Product Planning
Innovation as a Customer-Driven Process
• New product opportunities that offer superior
value to customers range from totally new
innovations to incremental improvements in
existing products. The discussion of innovation as
a customer-driven process will be centered upon
the following issues:
• Types of Innovation
• Finding Customer Value Opportunities
• Finding New Product Opportunities
• The Evolution of the Creative Company
• Initiatives of Successful Innovators
(continued…)

• Types of Innovation: Innovation can be

classified according to newness to the market
and the extent of customer value created,
resulting the following types of innovations:
• Transformational Innovation: Products that are
radically new and the value created is substantial.
• Substantial Innovation: Products that are significantly
new and create important value for customers.
• Incremental Innovations: New products that provide
improved performance for greater perceived value.
(continued…)
• Finding Customer Value Opportunities:
Customer value requirements provide important
information for determining where opportunities
exist to develop new products. The objective of
customer value analysis is to identify needs for:
• New products
• Improvements in existing products
• Improvements in the process that produce the products
• Improvements in supporting services
(continued…)
• Finding New Product Opportunities: A
difference between expectations and use
experience may indicate a new product
opportunity. Marketers must be careful about the
following aspects when finding new product
opportunities:
• Matching Capabilities to Value Opportunities
• Customers role in various types of innovations
(transformational, substantial, and incremental)
(continued…)
The Evolution of the Creative Company: Bruce
Nussbaum has suggested the following steps:
• Step1: Technology and Information Become
Commoditized and Globalized
• Step-2: With Commoditization, Core Advantages Can Be
Shipped Abroad
• Step-3: Design Strategy Begins to Replace Six Sigma as
a Key Organizing Principle
• Step-4: Creative Innovation Becomes the Key Driver of
Growth
• Step-5: The Successful Creative Corporation Emerges,
with New Innovation DNA
(continued…)
• Initiatives of Successful Innovators: Characteristics of
successful innovators are shown in the figure given below:
Innovation Feature: How Google Innovates
• The search leader has earned a reputation as
one of the most innovative companies in the
world of technology. These are the illustrative of
the ways Google hatches new ideas:
• Free (Thinking) Time
• The Idea List
• Open Office Hours
• Big Brainstorms
• Acquire Good Ideas
New Product Planning
• The new product planning process is shown in the figure
given below:
(continued…)
• Customer Need Analysis: Analyzing the needs of customers
can be an effective starting point for incremental innovation.
Customer value requirements provide important information
for determining where opportunities exist to develop new
products. Consider the following figure:
(continued…)
• Idea Generation: Idea generation ranges from
incremental improvements of existing products to
transformational products. Sources of new-
product ideas include R&D laboratories,
employees, customers, competitors, outside
inventors, acquisition, and value chain members.
Increasingly, companies are developing “open-
market innovation” approaches to generating
ideas using licensing, joint-ventures, and
strategic alliances.
(continued…)
• Screening: A new product idea receives an initial
screening to determine its strategic fit in the
company or business unit. Two questions need to
be answered here:
• Is the idea compatible with the organization’s mission
and objectives?
• Is the product initiative commercially feasible?
(continued…)
• Evaluation (Concept Evaluation): After
completing initial screening, each idea that
survives becomes a new product concept and
receives a more comprehensive evaluation.
Concept test is a useful way to evaluate a product
idea very early in the development process.
(continued…)
• Business Analysis: Business analysis
estimates the commercial feasibility of the
new-product concept. The following steps
are usually followed:
• Preliminary Marketing Plan
• Revenue Forecasts
• Cost Estimation
• Profit Projection
(continued…)

• Product (and Process) Development: If the

result of the concept test is optimistic, the
product development should focus on the
following issues:
• Product Specifications
• Industrial Design
• Prototype
• Use Tests
• Process Development
(continued…)
• Marketing Strategy Development: Developing
the marketing strategy for a new product varies
depending on whether it is an incremental
improvement or a transformational innovation. A
strategy for a transformational innovation requires
complete clarification regarding the following
issues:
• Segmentation
• Targeting
• Positioning
(continued…)
• Market Testing: Market testing can be
considered after the product is fully developed,
assuming the product is suitable for market
testing. The following options are available:
• Simulated Tests
• Scanner Based Tests
• Traditional Tests
• Web-Enabled Tests
(continued…)
• Commercialization: Introducing new products
into the market requires:
• Finalizing the Marketing Plan
• Coordinating Market Entry Activities across Business
Functions
• Implementing the Marketing Strategy
• Monitoring and Controlling the Product Launch
Thank You!