Chapter 2The New Products ProcessThe

Chapter 2
The New Products Process
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The Procter & Gamble Cosmetics SagaStarting point: senior
management commitment to new products.P&G’s Cosmetics
business unit had no clear product strategy, unfocused product
initiatives, and too many customer segments being targeted – in
short, a lack of focus.P&G Cosmetics skillfully used all three
strategic elements and made the weak business unit profitable.
*
P&G Cosmetics and the PICSituation Assessment:Underserved
consumer market that wanted quality facial product such as
cleansers, eye products, etc.Supply chain was uncoordinated as
production and shipments were not tied to demand; market
forecasts were not driving shipping schedules.PIC recommended
a strategic focus on products for the face – other opportunities
would not be pursued.

*
P&G Cosmetics and the New Products ProcessP&G Cosmetics
used a phased process like that of Chapter 1.Project teams
established early in process.Consumer research done early and
used in the process (the voice of the customer).Tough
evaluation steps were carefully implemented as new products
were compared to best practices and benchmarks.
*
P&G Cosmetics and the New Product PortfolioP&G Cosmetics
systematically added new products such that maximum buzz and
excitement was created in the marketplace.If already several eye
makeup products on the market, they would not immediately
launch another. Management called this an “initiative rhythm”
for product launch.
*
P&G Cosmetics and the Role of Effective Team
ManagementSenior Cosmetics executives were committed to
success as was corporate level management.Initiative Success

Managers were hired to lead strategy development, manage
evaluation meetings, train employees, etc.The best team leaders
were sought and rewarded based on performance.
*
The Phases of the New Products Process
Phase 1: Opportunity Identification/Selection
Phase 2: Concept Generation
Phase 3: Concept/Project Evaluation
Phase 4: Development
Phase 5: Launch
Figure 2.1
The Evaluation Tasks in the New Products Process
Figure 2.2
Opportunity Identification/
Selection
Concept Generation
Concept/Project Evaluation
Development
Launch
Direction;
Where should we look?
Initial Review:
Is the idea worth screening?
Full Screen:
Should we try to develop it?
Progress Reports:

Have we developed it?
Market Testing:
Should we market it?
*
Phase 1: Opportunity Identification/Selection
Active and passive generation of new product opportunities as
spinouts of the ongoing business operation. New product
suggestions, changes in marketing plan, resource changes, and
new needs/wants in the marketplace. Research, evaluate,
validate, and rank them (as opportunities, not specific product
concepts). Give major ones a preliminary strategic statement to
guide further work on it.
*
Activities that Feed Strategic Planning for New
ProductsOngoing marketing planning (e.g., need to meet new
aggressive competitor)Ongoing corporate planning (e.g., senior
management shifts technical resources from basic research to
applied product development)Special opportunity analysis (e.g.,
a firm has been overlooking a skill in manufacturing process
engineering)
*

Sources of Identified OpportunitiesAn underutilized resource (a
manufacturing process, an operation, a strong franchise)A new
resource (discovery of a new material with many potential
uses)An external mandate (stagnant market combined with
competitive threat)An internal mandate (new products used to
close long-term sales gap, senior management desires)
*
Phase 2: Concept Generation
Select a high potential/urgency opportunity, and begin customer
involvement. Collect available new product concepts that fit
the opportunity and generate new ones as well.
*
Phase 3: Concept/Project Evaluation
Evaluate new product concepts (as they begin to come in) on
technical, marketing, and financial criteria. Rank them and
select the best two or three. Request project proposal
authorization when have product definition, team, budget,
skeleton of development plan, and final PIC.

*
Stages of Concept/Project EvaluationScreening (pretechnical
evaluation)Concept testingFull screenProject evaluation (begin
preparing product protocol)
The first stages of the new products process are sometimes
called the fuzzy front end because the product concept is
still fuzzy. By the end of the project, most of the fuzz should
be removed.
*
Phase 4: Development (Technical Tasks)
Specify the full development process, and its deliverables.
Undertake to design prototypes, test and validate prototypes
against protocol, design and validate production process for the
best prototype, slowly scale up production as necessary for
product and market testing.
*
Phase 4: Development (Marketing Tasks)
Prepare strategy, tactics, and launch details for marketing plan,
prepare proposed business plan and get approval for it, stipulate
product augmentation (service, packaging, branding, etc.) and

prepare for it.
*
Phase 5: Launch
Commercialize the plans and prototypes from development
phase, begin distribution and sale of the new product (maybe on
a limited basis) and manage the launch program to achieve the
goals and objectives set in the PIC (as modified in the final
business plan).
*
The Evolution from Concept to New Product
Figure 2.3
Corresponding New Products Process Phases:
*
Methods for Accelerating Time to MarketHave a clear product
innovation charter.Have a third-generation new products
process that permits overlapping phases.Use a new product

portfolio and careful project selection to allocate scarce
resources.Focus on quality: “get it right the first time.”Have an
empowered cross-functional team.
Source: Robert Cooper (1993).
*
Additional Techniques for Accelerating Time to Market
Organization: not just an empowered team, but also effective
team leadership and focus on organizational learning and
knowledge transfer.
Intensify Resource Commitments: Integrate vendors and
resellers, get users involved and capture the Voice of the
Customer.
Design for Speed: use computer-aided design, rapid
prototyping, common components, get fast trial.
Rapid Manufacturing: standard processes, computer-aided
manufacturing, just-in-time delivery.
Rapid Marketing: Use rollouts, spend as needed to generate
awareness, offer trial purchasing.
Figure 2.4
*
What About New Services?Successful new services tend to
come from firms that use a systematic process much like the

new products process – the tools all fit.Iterations may be more
frequent since they are less expensive.Unique, superior service
must be delivered, to achieve success.Speed to market with
services is important, especially in enhancing reputation, image,
and customer loyalty.Most important adjustments have to do
with the “customized” experience of each service
customer.Therefore the human interaction between service
provider and customer is of highest importance.Consider how
the customer evaluates the service: it may be viewed as the sum
of its parts.
*
New Service ExamplesJet Blue: focused on friendliness,
customized experiences, easy communication by website, stress
on safety, gathers much customer feedback.FedEx: customers
are co-creators and provide early input, ethnographic studies
suggest opportunities such as greater access, more digital
services, and service offerings such as photocopying (hence the
purchase of Kinko’s).
*
What About New-to-the-World Products?The challenges are
different, but the first phase remains the same: opportunity
identification and development of a strategic statement.Clear
connection required between the radical innovation and the
firm’s strategic vision.A firm may establish a transition

management team to move the R&D innovation project to
business operating status.The new products process is more
exploratory: need to bring in Voice of the Customer (VOC)
early.Lead users may be critical here (see Chapter 5 discussion).
*
Managing Breakthrough InnovationIncubation StageInvolves
customer and market interaction as well as technical
development.Tolerate failure but learn from it (Google claims a
60% failure rate on innovative products).Longer and much more
expensive than typical business development, but required for
breakthrough opportunities.Discovery-Driven PlanningForecasts
and plans evolve as more information becomes available.
*
The Role of the Serial InnovatorMid-level, technical employees
who think and work differently and follow their own new
products process.Critical to firms being able to launch radical
innovations successfully and repeatedly over a long period of
time (Apple, P&G, Intel).Challenge: Identify, manage, and
properly reward the serial innovator (they are rare!).
What Does the Serial Innovator Contribute?Can bridge the gap

between technology and market, in iterative fashion.Begin by
understanding customer problem then discover technical
solutions to those problems.Oscillate between customer need
and technology solution.Can also bring in market information
(e.g., is the market demand large enough?).
The Serial Innovator “Process”Not really a process! (no steps or
fixed order).Activities include:Finding a problem important to
customers.Check potential market size and revenue
stream.Understand the problem: technology solutions,
competition, customer requirements.Determine if the problem is
interesting to customers (willing to pay) and to the firm (fit
with product strategy).Invent solution to problem and check
customer acceptance with a prototype.Get the product into
development and gain market acceptance for it.
Recognizing Serial Innovators: Innate CharacteristicsSystems
thinking (can connect disjointed information).High creativity
(though not exceedingly high).Curiosity in several areas of
interest.A knack for intuition based on expertise.A sincere
desire to solve customer problems.
Source: Griffin, Price and Vojak, Serial Innovators: How
Individuals Create and Deliver Breakthrough Innovations.
Spiral Development and the Role of PrototypesSpiral
development implies many iterations between firm and
customer. Useful for new-to-the-world products.“Build-test-
feedback-revise” process:Early non-working (focused)
prototype (e.g., cell phone made of wood or foam)Tested with
customersCustomer feedback obtained on what needs to be

changedBased on the feedback, the next prototype is prepared
and the cycle continuesNote: early prototypes may precede
customer specifications! The new products phases may be done
out of order.
Spiral Development in ActionFocused (limited-performance)
prototypesExample: Iomega Zip Drive: over 50 prototypes were
built to test out ideas with customers.Other terms
encountered:“Lickety-Stick” iterative process: non-linear, more
flexible process in which dozens of prototypes may be tried
(“lickety”) before settling on one that customers like
(“stick”).Also known as “probe-and-learn” process.
*
Project:
The Project is a comprehensive assessment of what you have
learned during this course.
The Final Project has two parts: Limitations of Blockchain and
Emerging Concepts.
Blockchain continues to be deployed into various businesses
and industries. However, Blockchain is not without
its problems. Several challenges have already been associated
with the use of this technology. Identify at least 5 key
challenges to Blockchain. Additionally, discuss potential
solutions to these challenges. Lastly, please discuss if we will
see the limitations to blockchain be reduced or mitigated in the

future.
There are several emerging concepts that are using Big Data
and Blockchain Technology. Please search the internet and
highlight 5 emerging concepts that are exploring the use
of Blockchain and Big Data and how they are being used.
Conclude your paper with a detailed conclusion section which
discusses both limitations and emerging concepts.
The paper needs to be approximately 7 pages long, including
both a title page and a references page (for a total of 8-10
pages). Be sure to use proper APA7 formatting and citations to
avoid plagiarism.
Your paper should meet the following requirements:
· Be approximately seven pages in length, not including the
required cover page and reference page.
· Follow APA7 guidelines. Your paper should include an
introduction, a body with fully developed content, and a
conclusion.
· Support your answers with the readings from the course, the
course textbook, and at least ten scholarly journal articles to
support your positions, claims, and observations, in addition to
your textbook.
· Be clearly and well-written, concise, and logical, using
excellent grammar and style techniques. You are being graded
in part on the quality of your writing
PART TWO
CONCEPT GENERATION

*
Concept Generation
Figure II.1
*
Chapter 4
Creativity and the Product Concept
*
Genius Thinking StrategiesGeniuses find many different ways
to look at a problem. Einstein, for example, and da Vinci,
looked at problems from many different perspectives.Geniuses
make their thoughts visible. Da Vinci’s famous sketches, and
Galileo’s diagrams of the planets, allowed them to display
information visibly. Geniuses produce. Thomas Edison had a
quota of one invention every 10 days. Mozart was among the
most prolific composers during his short life.Geniuses make
novel combinations. Einstein found the relationship between
energy, mass, and the speed of light (the equation E =
mc²).Geniuses force relationships. They can make connections
where others cannot. Kekulé dreamed of a snake biting its tail,
immediately suggesting to him the circular shape of the benzene

molecule. Geniuses think in opposites. This will often suggest a
new point of view. Physicist Neils Bohr conceived of light as
being both a wave and a particle.Geniuses think metaphorically.
Bell thought of a membrane moving steel, and its similarity to
the construction of the ear, leading to the telephone
earpiece.Geniuses prepare themselves for chance. Fleming was
not the first to see mold forming on a culture, but was the first
to investigate the mold, which eventually led to the discovery of
penicillin.
Source: Michael Michalko, “Thinking Like a Genius,” The
Futurist, May 1998, pp. 21-25.
Figure 4.1
*
Historic Roadblocks to Creativity
“I think there is a world market for maybe five computers.”
Thomas Watson, Chair, IBM, 1943.
“Computers in the future may weigh no more than 1.5 tons.”
Popular Mechanics, 1949.
“I can assure you that data processing is a fad that won’t last
out the year.” Business books editor, Prentice-Hall, 1957.
“So we went to Atari and said, ... ‘We’ll give it to you. We just
want to do it. Pay our salary, we’ll come work for you.’ And
they said no. So then we went to HP, and they said ‘We don’t
need you, you haven’t got through college yet.’” Steve Jobs, co-
founder, Apple Computers.
“640K of RAM ought to be enough for anybody.” Bill Gates,
Microsoft, 1981.
*

Historic Roadblocks to Creativity
“Who the hell wants to hear actors talk?” H.M. Warner, Warner
Bros., 1927.
“Stocks have reached what look to be a permanently high
plateau.” I. Fisher, Prof. of Economics, Yale, 1929.
“We don’t like their sound, and guitar music is on the way out.”
Dick Rowe, Decca Records executive, rejecting the Beatles’
demo tape, 1962.
“This ‘telephone’ has too many shortcomings to be seriously
considered as a means of communication [and] is inherently of
no value to us.” Western Union, 1876.
“Heavier-than-air flying machines are impossible.” Lord Kelvin,
President, Royal Society, 1895.
“Everything that can be invented has been invented.” C. H.
Duell, Commissioner, U.S. Office of Patents, 1899.
*
Obstacles to Idea GenerationGroup think: We think we are
being creative, when in reality we are only coming up with
ideas that our group will find acceptable. Targeting error: We
keep going back to the same simple demographic targets (for
example, the under-35 or under-50 markets. Poor customer
knowledge: Lavish research spending doesn’t guarantee that
customer research was done well.Complexity: Creative types
within organizations, as well as senior management, often think
that the more complex the idea, the better it is (or the smarter
and more promotable they seem). Lack of empathy: These same

managers are also well-educated, high-income individuals
accustomed to an upscale lifestyle. They may simply not
understand the “typical” customer.Too many cooks: A small
new product team works fine, but large companies especially
are prone to internal competition for power and influence.
Source: Jerry W. Thomas, “In Tough Times, “Hyper-Creatives”
Provide an Advantage,” Visions, 33(3), October 2009, 24-26.
Figure 4.2
*
Barriers to Firm CreativityCross-functional diversity: Diversity
leads to more creative stimulation but also to problem solving
difficulties.Allegiance to functional areas: Team members need
to have a stake in the team’s success, or won’t be loyal to the
team.Social cohesion: If interpersonal ties among team members
are too strong, candid debate may not occur, resulting in less
innovative ideas.Role of top management: Management should
encourage the teams to be adventurous, otherwise only
incremental changes will occur.
Figure 4.3
*
The Role of Management in Stimulating CreativityRecognize
individualityBe tolerant of mistakesBe supportive under
stressTechniques include:Competitive teamsIdea bank of unused
ideas for possible reuseEncourage interaction – even in how

offices are laid out
*
Required Inputs to the Creation ProcessForm (the physical thing
created, or, for a service, the set of steps by which the service
will be created)Technology (the source by which the form is to
be attained)Benefit/Need (benefit to the customer for which the
customer sees a need or desire)
Technology permits us to develop a form that provides the
benefit.
*
Some Patterns in Concept Generation
Customer need
tests with customer to see what benefits are delivered
Note: the innovation process can start with any of the three
inputs.
*

What is a Product Concept?A product concept is a verbal or
prototype statement of what is going to be changed and how the
customer stands to gain or lose.Rule: You need at least two of
the three inputs to have a feasible new product concept, and all
three to have a new product.
*
Why Do You Need a Product Concept and Not Just an
Idea?Needed to judge whether it is worthy of
developmentPotential customers do not have enough
information to judge the worthiness of an idea: the product
concept gives them the required information.Ex.: Would a taxi
operator like cars with a 10 cents per mile operating cost?
(need)Not if it used Caterpillar tractor technology instead of
wheels! (need plus technology)
*
New Product Concepts and the
New Product
Need
Form

Technology
New
Product
“C”=
Concepts
C
C
C
Figure 4.4
*
The Designer Decaf ExampleBenefit: “Consumers want
decaffeinated espresso that tastes identical to regular.”For m:
“We should make a darker, thicker, Turkish-coffee-like
espresso.”Technology: “There’s a new chemical extraction
process that isolates and separates chemicals from foods; maybe
we can use that for decaffeinating espresso coffee.”
Why would each of these taken individually not be a product
concept?
*
The Toilet Brush ExampleIdea: A new and improved toilet
brush.Concept: A toilet brush that contains detergent, refillable,
and easy for the customer to attach to the handle.Product
(executions of this concept):Lysol Ready BrushScrubbing

Bubbles Fresh BrushClorox Toilet WandOthers?
*
What a Concept Is and Is Not
IS: “Learning needs of computer users can be met by using
online systems to let them see training CDs on the leading
software packages.” (good concept; need and technology clear)
IS NOT: “A new way to solve the in-home training or
educational needs of PC users.” (need only; actually more like a
wish)
IS NOT: “Let’s develop a new line of instructional CDs.”
(technology only, lacking market need and form)
*
Methods for Generating Product Concepts
Two Broad Categories of Methods:Gathering Ready-Made
Product ConceptsUsing a Managed Process Run by the New
Products Team
*
Best Sources of Ready-Made New Product ConceptsNew

Products EmployeesTechnical: R&D, engineering,
designMarketing and manufacturingEnd UsersLead
UsersResellers, Suppliers, VendorsCompetitorsThe Invention
Industry (investors, etc.)Idea exploration firms and consulting
engineersMiscellaneous (continued)
Figure 4.5
*
Best Sources of Ready-Made New Product Concepts
(continued)Miscellaneous CategoriesConsultantsAdvertising
agenciesMarketing research firmsRetired product
specialistsIndustrial designersOther
manufacturersUniversitiesResearch
laboratoriesGovernmentsPrinted sourcesInternationalInternet
Figure 4.5
*
Toolkits for User InnovationA set of design tools that customers
can use to customize a product best suited to them.Can
incorporate CAD/CAM or rapid prototyping.Example:
International Flavors and Fragrances: Internet-based toolkit that
provides a database of flavor profiles and rules on how to
combine them. Customer can specify flavor mixes that are
immediately made into samples; customer can then make
adjustments until the desired flavor is obtained.Product
configurators are a kind of user toolkit.

*
Crowdsourcing as a Creative Source
Crowdsourcing: open idea solicitation from customers.Dell’s
Idea Storm: encouraged customers to submit ideas for new
products and improvements to existing products online. Over
10,000 ideas were obtained from sources around the world.
Apple used crowdsourcing in generating ideas for the iPad.
Apple monitored reviews and blogs and also obtained Voice of
the Customer data to understand the needs of potential users.
Fiat solicited design ideas via their website when relaunching
the 500 subcompact, and claims 500,000 combinations in their
car configurator.Threadless invites contributors for T-shirt
designs, encourages users to vote for favorite designs, and
produces and sells the favorites.
*
Drawbacks of User Toolkits and CrowdsourcingMost likely to
generate modest product improvements rather than new-to-the-
world products.Typical user less likely to come up with ideas
that are easily developed into real products.Profe ssionals, or
experienced users may have a more realistic view of what is
feasible.

Lead Users as a Creative SourceAn important source of new
product ideas.Customers associated with a significant current
trend.They have the best understanding of the problems faced,
and can gain from solutions to these problems.In many cases,
have already begun to solve their own problems, or can work
with product developers to anticipate the next problem in the
future.Example: X-Games athletes for new high-performance
snowboards.They provide design requirements and also are
early adopters and good at stimulating word-of-mouth.
*
What Should You Ask Lead Users (or Any Users)?Ask for
outcomes – what they would like the product to do for
them.Don’t ask what product improvements they
want!Customers say they want low-salt canned soup or low-fat
fast food but don’t buy them!Be “informed” by
customers.Kawasaki Jet Ski: customers said they wanted
padding and other comfort improvements for the standing rider.
But by focusing on the outcome (comfort), competitors found a
better solution (add a seat).
Open InnovationThe process by which a firm searches for
research, innovation, technologies, and products.Increases speed
of research and innovation, cuts risks, and generates new
innovative ideas.Viewed by some as the dominant innovation
model of the 21st century.Inputs can come from internal sources
(marketing, strategic planning) and external ones (customers,
market information, etc.).Sources such as inventors, startup
companies, or university laboratories are actively sought out.

*
Principles of Open InnovationAccept that “not all the smart
people work for us.”Is both in- and out-bound: obtain knowhow
technology, patents, etc.) from external partners, and also
monetize technology (through licensing, sale, etc.) that is no
longer consistent with corporate strategy.It is not outsourcing!
The external sources are viewed as complementary to internal
sources so that innovation can be more efficient.Selecting the
best partners is critical, and mutual trust is important.
*
Open Innovation at Work: P&GP&G’s “Connect and Develop”
program, designed to allow for internal intellectual property to
be marketed outside, spun off, or licensed.Avoids the “not
invented here” syndrome.To execute Connect and Develop,
P&G assigned a team to find external partners, build brand
equity, access new technologies, and create new product
categories.Examples: SunHealth
Solution

s (a P&G partner) developed the UV sensing technology used in
Huggies swimpants with UV sensors, that help parents monitor
their child’s exposure to UV radiation.Mr. Clean scrubbing
brush uses technology originally used as insulation in the auto
industry.Magic Eraser cleaning pad was sourced from a German
chemicals company, and first noticed by P&G in use in Japan.
*
Open Innovation Success Stories: P&G and Clorox
Clorox and Procter & Gamble may be fierce competitors in the
cleaning-products arena, but are also open innovation partners
elsewhere. P&G had the intellectual property for plastic
technology, in particular strong plastic film, which is the
technology used in two Clorox products: Glad Press’n Seal and
also Glad ForceFlex plastic garbage bags. P&G also brought its
global marketing expertise to the table, while Clorox
contributed the Glad brand equity, its R&D knowhow in plastics
and resins, and its organizational structure suited to marketing
plastic film products. Due to this open innovation partnership
and the key contribution of P&G to the plastics technology,

Glad sales doubled within four years, and Glad has become the
second billion-dollar brand at Clorox.
Source: Jacquelin Cooper, “How Industry Leaders Find,
Evaluate and Choose the Most Promising Open Innovation
Opportunities,” Visions, 36(1), 2012, pp. 20-23.
Figure 4.8
Open Innovation Success Stories:
Kraft Foods and Bosch/SiemensKraft Foods sought open
innovation partners for its planned Tassimo Beverage System.
While they had the food knowhow, suppliers, and distribution
channel, they needed assistance in the development and
manufacture of the coffee maker. They assessed different home
appliance manufacturers for manufacturing and R&D
capabilities and competence in the appliance product category,
and also for brand value compatibility, cultural fit, and
compatibility of business strategies. In particular, they sought a
manufacturer that shared Kraft’s attitudes toward quality,
convenience, and responsibility. Ultimately, they selected the
Bosch and Siemens Home Appliance Group.

Source: Jacquelin Cooper, “How Industry Leaders Find,
Evaluate and Choose the Most Promising Open Innovation
Opportunities,” Visions, 36(1), 2012, pp. 20-23.
Figure 4.8
More Examples of Open InnovationLego: Web forum, sites, and
blogs for participants to share and improve proucts. Result: the
on-line community was instrumental in the development of the
LEGO robotics system.Philips: Specialized facility in Singapore
(“the Innohub”) that provides realistic environments for end
users and product developers to work on breakthrough
ideas.Some are completely online systems, like the Innocreative
web community.
*
Advantages and Risks of Open Innovation
Importing new ideas multiplies innovation building blocks—
ideas and expertise, resulting in more total sales generated from

new products.
Exporting ideas raises cash (IBM gets about $2 billion per year
in patent royalties), and improves employee retention, since
creative types know that good ideas will be exported and not
buried.
Exporting signals true worth of an innovation. Eli Lilly offers
pharmaceutical licenses, but if outsiders don’t bite it suggests
the value of the new drug is perceived to be low.
Exporting clarifies core business: Boeing sticks with design and
systems integration, and often finds partners for manufacturing.
Risk: deal is not structured in a way that captures the financial
value of your innovation – ask Xerox!
Proprietary secrets can be lost to a partner, even inadvertently.
Theft of technology, or poaching of top researchers, is a
concern.
Figure 4.9
Chapter 3
Opportunity Identification and Selection:

Strategic Planning for New Products
*
The Strategic ElementsChapters 1 and 2 introduced the New
Products Process.This chapter presents both the Product
Innovation Charter (PIC) and the New Product Portfolio.The
PIC is a strategic plan for new products.The portfolio ensures
that products that meet financial and strategic criteria are
pursued.
*
The PIC: Why Does a Firm Need a New Products Strategy?To
chart the new product team’s directionWhat technologies?/what
markets?To set the team’s goals and objectivesWhy does it
exist?To tell the team how it will play the gameWhat are the

rules?/constraints?Any other key information to consider?
*
Figure 3-3
The Flow that Produces PICs -- Special Emphasis on Role of
Corporate and Platforms
The “Company Within A Company”This describes a new
products team as they do everything a firm does – develop a
budget, do financial analyses, assign tasks, and so on.They need
strategic direction on where they must, and must not,
go.Product team managers ask, “What sandbox should I be
playing in?” – before beginning to think of specific products.
*
Corporate Strengths Provide Direction for the Team
Figure 3.1

New products in this firm will:Use our fine furniture designers
(Herman Miller)Gain value by being bottled in our bottling
system (Coca-Cola)Utilize innovative design (Braun)Be for
babies and only babies (Gerber)Be for all sports, not just shoes
(Nike)Be for all people in computers (IBM)Be almost
impossible to create (Polaroid)Use only internal R&D (Bausch
& Lomb)Meet the needs of Ford engineers (Budd)Offer genuine
value (Lexus)
*
Product Platform Planning
Many firms find that it is not efficient to develop a single
product.
Platform: 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.
*
Opportunity Identification:
Greenfield MarketsFind 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 has recently
moved into golf and hockey, and Honeywell is looking into
casino opportunities.Identify a fast-growing need, and adapt
your products to that need. Hewlett-Packard 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.
Source: Allan J. Magrath, “Envisioning Greenfield Markets,”
Across the Board, May 1998, pp. 26-30.
Figure 3.2
*
Opportunity Identification: Emerging Societal Trends“Just-in-
time” lifeSensing consumersThe transparent selfIn search of
“enoughness”Virtual made realCo-creation
Source: A. Hines, J. Calder, and D. Abraham, “Six Catalysts
Shaping the Future of Product Development,” Visions, 33(3),
October 2009, pp. 20-23.
Figure 3.3

*
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.PDMA study: 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.”According to an independent study: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.
*
The Contents of a Product Innovation Charter
Figure 3.5
*
Focus
At least one clear technology dimension and one clear market
dimension. They match and have good potential.

Guidelines
Any "rules of the road," requirements imposed by the situation
or by upper management. Innovativeness, order of market
entry, time/quality/cost, miscellaneous.
Goals-Objectives
What the project will accomplish, either short-term as
objectives or longer-term as goals. Evaluation measurements.
Background

Key ideas from the situation analysis; special forces such as
managerial dicta; reasons for preparing a new PIC at this time.
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.
Figure 3.6
*
Purposes of PICFocus and integrate team effortPermit
delegationEstablish the size and range of the “sandbox”
*
Risks of Poor PIC DevelopmentScope 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.
Both of these risks are elusive targets (“moving goalposts”) that

occur because the sandbox was never defined, or vaguely
defined.
*
PIC Steps: Background, Focus, and GoalsBackground: “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 GuidelinesDegree of InnovativenessFirst-to-
marketAdaptive productImitation (emulation)TimingFirstQuick
secondSlowLateMiscellaneousAvoidance of competition with
certain firmsRecognition of weaknessesPatentabilityProduct

Integrity
*
Product Portfolio: The New Product’s Strategic FitStrategic
goals (defending current base of products versus extending the
base).Project types (fundamental research, process
improvements, or maintenance projects).Short-term versus long-
term projects.High-risk versus low-risk projects.Market
familiarity (existing markets, extensions of current ones, or
totally new ones).Technology familiarity (existing platforms,
extensions of current ones, or totally new ones).Ease of
development.Geographical markets (North America, Europe,
Asia).
*

Objectives of Product Portfolio DevelopmentStrategic
alignment: mix of products reflects the PIC; new products are
“on strategy.”Assessing portfolio value: commercial value of
products in pipeline is maximized.Project balance: select
products that balance the existing product line.Number of
projects: in line with resource requirements; avoid
underfunding.
Strategic Portfolio Model for One SBU in Exxon Chemical
Figure 3.9
*
Low Market Newness
High Market Newness
Low Product Newness
Improvements to Existing Products

(35%)
Additions to Existing Product Lines
(20%)
Medium Product Newness
Cost Reductions
(20%)
New Product Lines
(15%)
High Product Newness
Repositioning
(6%)
New-to-the-World Products

(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
Figure 3.10
*
Strategic Decision Group Portfolio Evaluation Model
Figure 3.11
Expected Commercial Value
Low
High
Probability of Technical Success

High
Low
Pearls
Bread and Butter
Oysters
White Elephants
Source: Robert G. Cooper, Winning at New Products:
Accelerating the Process from Idea to Launch, second edition.
Reading, MA: Addison-Wesley, 1993, p. 185.
*

Portfolio of Product Types
Source: Adapted from Scott Edgett, “Portfolio Management for
Product Innovation,” in K. B. Kahn, S. E. Kay, R. J. Slotegraaf,
and S. Uban (Eds.), The PDMA Handbook of New Product
Development (Hoboken, NJ: John Wiley), 2013, Ch. 9, p. 162.
Figure 3.12DISRUPTIVE
INNOVATION
(New-to-world or new-to-firm)TECHNOLOGY
UPGRADE
(Next-generation)PRODUCT LINE EXTENSION
(Additions to product line)INCREMENTAL INNOVATION
(Improvements to existing products)Number of
Projects10%12%32%46%Resource
Allocation18%22%25%35%Incremental
Sales22%40%15%23%
Background
Key ideas from the situation analysis; special forces such as
managerial dicta; reasons for
preparing a new PIC at this time.
Guidelines
Any "rules of the road," requirements imposed by the situation
or by upper management.

Innovativeness
, order of market entry, time/quality/cost, miscellaneous.
Goals-Objectives
What the project will accomplish, either short-term as
objectives or longer-term as goals.
Evaluation measurements.
Focus
At least one clear technology dimension and one clear market
dimension. They match and
have good potential.
Low Market Newness
High Market Newness
Low Product Newness
Improvements to Existing Products
(35%)
Additions to Existing Product Lines
(20%)
Medium Product Newness
Cost Reductions
(20%)
New Product Lines
(15%)
High Product Newness
Repositioning
(6%)

New-to-the-World Products
(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.

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