Transcript Product Management - WebCampus

@ [email protected]
W www.ru.nl/fm/driessen
www.linkedin.com/in/paulhdriessen
@paulhdriessen
New Product Development
Session 1a: Introduction &
Dr. Paul H. Driessen
1
Today’s Agenda
1a: Introduction
•
•
•
About innovation
About the course
About the assignment
1b: Product Strategy
•
The importance of product strategy based on
customer value
2
Peter Drucker (1909-2005)
“Business has only two basic functions:
marketing and innovation”
3
Where do we stand?

You will have some background in:
• Marketing Management
• Marketing Research
• What did you learn so far?
• What do you expect from this course?
4
Market orientation - innovation
“[…] innovations facilitate the conversion of
market-oriented business philosophy into superior
corporate performance” (Han et al. JM 1998)
Market
orientation
Innovation
Performance
i.e. innovation is one way of
implementing market orientation
5
FMCG brands under pressure
“They should innovate more. There are
too many me-too products”
Bas Keibek, CEO of consultancy firm OC&C
(cited in Intermediair)
Do you agree?
6
Innovation for survival

Products introduced in the last 5 years
generate (Hultink & Robben JPIM 1995)
• 41% of sales
• 39% of profits
7
New products and sales promotion
in the automobile industry
Impact of…
NP introduction on revenue
NP introduction on profit
NP introduction on firm value
Promotions on revenue
Promotions on profit
Promotions on firm value
NP introd. on use promotions
Source: Pauwels et al. (JM 2004)
Short run Long run
+
++
+
++
+
++
+
++
+
+
-
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+ = positive impact; ++ = strong positive impact; - = negative impact
P&G: $2 billion a year on R&D
“Promotions may win
quarters, innovation
wins decades”
Bob McDonald, CEO P&G
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Gillette (subsidiary of P&G)
Gillette’s Mach3 (and Gillette’s Venus derived from that)
• Introduced in 1998
• Reported to have cost more than $750 million in R&D costs
• What came next from Gillette’s R&D labs?
Importance of new products
Facilitates implementing market orientation
 Needed for differentiating from competitors
 Needed for LT survival

So what is the problem?
(i.e. why a course on
NPD?)
11
Inertia
= keep on doing the same thing, absence
of change
 But, by definition, innovation is change

• For the customers
• For the firm
NPD is mainly about overcoming this
inertia!!
12
Philosophy of the course



Based on our ideas about marketing: creating
customer value and being market oriented
Innovation (and thus product management) is a
way of substantiating market orientation
Therefore we focus on creating customer value
through new products
What does creating
customer value require?
13
Customer intimacy
“True customer intimacy (…) requires a deep
understanding of the context in which our
products and services are used in the course
of our customers day-to-day lives”
(Fournier et al. HBR 1998)
How can you obtain such
understanding?
14
Aim of the course
Obtain insight in the management of new
products from a marketing perspective (i.e.
not engineering or design perspective)
 Learn tools and theories that may help you
in the various aspects of NPD
management
 Obtain insight in NPD management in
practice

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We follow the product life cycle
NPD
Launch Growth
Maturity
Decline Elimination?
Focus: physical consumer products
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Product life cycle stages
Launch
Growth
Maturity
Decline
Sales
Low
Growing fast
Peak
Decline
Profits
Negative
Rising
Begin decline
Decline to 0
Innovators
Early adopters
Mass
Laggards
Few
More
Me-too rivals
Declining #
Expand market
Penetration
Defend share
Milking
Marketing costs
High
High
Falling
Low
Product
Basic
Extensions
Diversify
Phase out
Customers
Competitors
Strategy
Is the PLC a good management tool?
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Lectures and seminars

Lectures for
• introducing topics
• giving overview
• add to literature

Prepare! You may
be asked to reflect
on an article
Seminars for
• helping you with assignment
• presenting results of the assignment
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Assignment: NPD Project
 Teams
of 4 students
 Produce an idea for a new product or
service
 Report will be a business plan
 Apply concepts and techniques
 Primary and secondary
data collection
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Procedure

Today: form teams

First presentation: Seminar of March 6
• Your idea
• Technical description of the innovation
• Design of your data collection

Deadline of report: April 24
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Outline of the project/report
The new product/service
1.
•
Market analysis
2.
•
•
•
5.
Segmenting
Targeting
Marketing strategy
3.
4.
Base your idea on customer needs
Positioning
Financial plan
Lessons learned
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Grading
 Course
grade:
• 50% written exam grade
• 50% assignment grade
 Assignment
•
•
•
•
grade:
Presentation 1: 10%
Presentation 2: 10%
Presentation 3: 30%
Written report: 50%
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The exam is about…
… well, everything
Reader (find the links on Webcampus)
 Lectures
 Seminars

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Some rules




A deadline = a deadline
Slides will be put on Webcampus ASAP after the
lectures
Contact Ms. Virlée ([email protected])
for practical questions
Now: Q&A
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@ [email protected]
W www.ru.nl/fm/driessen
www.linkedin.com/in/paulhdriessen
@paulhdriessen
New Product Development
Session 1b: Product Strategy
Dr. Paul H. Driessen
25
Introduction

Previous session
• Introduction
• Importance of NPD management
• The philosophy of the course

Today
• Why successful firms fail or
• The importance of product strategy based on
customer value
26
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The case of Digital Equipment

From 1960 to 1980 very successful
manufacturer of mini-computers
• plenty of cash
• a great brand
• good technology, great R&D capabilities

Until ±1980 …..
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DEC’s VAX-11 (around 1976)
DEC and the pc market




DEC
Developing everything
internally
NPD takes 2-3 years
Sells directly and solely
to organizations
Expects high margins




PC market
Outsource development,
assemble parts
NPD takes 6-12 months
Sells through retailers to
consumers and organiz.
Used to low margins
So what?
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Source: Christensen & Overdorf (HBR 2000)
DEC’s fate
DEC failed on the pc-market ….
 … and was bought by Compaq and later
by Hewlett-Packard

Why not focus on the
minicomputer market and leave
the PC market for others?
30
How technologies evolve
performance
New technology
Existing technology
Hmm, why would the
new technology sell at
this point in time?
time
31
How technologies evolve (2)
costs
Existing technology
New technology
time
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Why leading firms fail (1)

Managerial myopia
“The Beatles have no
future in show
business.”
(Decca Records)
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Why leading firms fail (1)
Managerial myopia
 “Small markets don’t
solve the growth needs of
large companies”
(Christensen 1997)

34
Why leading firms fail (1)



Managerial myopia
“Small markets don’t solve
the growth needs of large
companies” (Christensen
1997)
Core capabilities become
core rigidities: develop new
products the old fashioned
way
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Core rigidities in the newspaper
industry



Newspapers were reluctant to invest in digital
media, …
… saw new media as ‘electronic’ newspaper: no
site searching, discussion boards, community
forums, interactive advertising etc. …
… and were outperformed by new entrants that
were not hampered by newspaper routines
Is this in line with Tripsas?
36
Why leading firms fail (2)

Performance of radical new product
introduced by incumbents is determined by
(Tripsas SMJ 1997):
• Investments in new technology
• Technical capabilities
• Specialized complementary assets
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Incumbents vs new entrants
How to link this to cannibalization?
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Willingness to cannibalize
What is it?
 Three dimensions (Nijssen et al. Techn. 2005)

• w2c previous investments (sunk cost fallacy)
• w2c capabilities
• w2c sales
Why is this important?
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“iPad cannibalizing on notebook”
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Traditional perspective on
cannibalization in marketing

Heineken introduced Heineken Light on US
market. Says US beer importer:
“This is really stupid. Heineken already has a light beer,
Amstel Light. Where do you think Heineken Light will
steal market share? Right, Heineken [regular] and Amstel
Light. That’s lesson number 1 in Marketing.”
(cited in NRC, June 18, 2005)
Do you agree? What is different
from the DEC situation?
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Willingness to cannibalize
-.02
Firm size
Specialized
investments
Internal markets
Product champion
influence
-.10*
.20***
.27***
Willingness .54***
to cannibalize
R2=.38
Radical product
innovation
R2=.29
.34***
Future market
focus
Source: Chandy and Tellis (JMR 1998)
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Willingness to cannibalize
-.02
Firm size
Specialized
investments
Internal markets
Product champion
influence
-.10*
.20***
.27***
.34***
Future market
focus
Willingness .54***
to cannibalize
R2=.38
Radical product
innovation
R2=.29
“Our analysis of field interviews and case
studies indicates that radically innovative firms
pay close attention to their markets. However,
the difference lies in distinguishing between
current and future markets” (p. 479)
Source: Chandy and Tellis (JMR 1998)
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W2C and market orientation
Market
orientation
Customer
orientation
R&D strength
+
Willingness to
cannibalize
+
SME
innovativeness
+
Future market
focus
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Source: Hillebrand et al. (JSM 2011)
Conclusions
Incumbents sometimes at a disadvantage
 Size in itself is not the problem
 Being too close to your current customer
can be harmful
 Organizational inertia may hinder innovation

What can organizations do to
overcome this inertia?
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Some solutions
Organize according to market requirements
 Be willing to cannibalize

• Focus on understanding current and future
customers as well as current and future
customer needs
• That is: product strategy based on in-depth
knowledge on customer value
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Next meeting (5-6 March)




Start of the NPD process and the role of
marketing in that process
Product testing and forecasting
NPD in context
Your new product ideas!
(presentations)
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