734NPM New Product Management Topic 1

Topic 1:
Introduction to new product management
New product management is arguably the most important activity for any organisation. The
creation and commercialisation of the company's first new product or any other new launch
was the reason for the existence of the business in the first place. New products can take a
form of tangible goods or services. Each additional new product continues to drive the
future sales of the organisation. In a sense, all other company activities are servants to the
new product process marketing, operations, finance, HR and other functions must wait on
the new product before being able to perform their own tasks. Once the new product idea
has been discovered and approved for development, the other departments within the
organisation (i.e., sales, engineering, manufacturing and marketing) get involved in the
process of getting the new idea to the market for a successful launch. That is what this
subject is all about.

In terms of the flow of this subject, the following diagram shows the topics we will cover. We
will use this diagram throughout the course, to confirm where we are at each step. The
diagram shows that we will cover the new product management process, starting from the
creation of the idea till its commercial launch and launch management. We will begin this
course by looking at a number of fundamental issues in new product management.

Topic Flow Progression

Source: developed for this topic

This topic contains the following parts:

The importance of new products

What is a new product and what leads to success?
The strategic elements of product development

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Learning resources

Chapter 1 of the textbook is essential: Crawford CM & Di Benedetto A 2015, New products
management, 11th edn, McGraw-Hill Education, New York. (Chapter 1 of the 10th edition.)

Appendix 1: Schneider, J & Hall, J 2011, 'Why most product launches fail', Harvard Business
Review, vol. 89, no. 4, pp. 2123.

Key terms and concepts

- Product development - Product success

- Product innovation - Product failure
- Process innovation - Product classification

Part 1: The importance of new products

Organisations cannot ignore the need to develop new products. The text mentions that
businesses invest in new products because they hold the answer to their biggest problems.
In general terms, firstly, they provide the means of future growth in sales and in the size and
profitability of the company. Secondly, consumers are constantly on the lookout for
products that will satisfy their needs better. New needs will arise as customers lives and
social circumstances change, and as new technological breakthroughs occur. Thirdly, if the
company does not innovate, competitors will, and often this is the reason why many
businesses fail. Fourthly, there is the effect of the product life cycle. As new products are
launched older products are often in various stages of decline, leaving gaps in the companys
portfolio that must be filled by new products.

As the textbook states, developing new products is difficult and challenging, and many of
them fail in the market (note Figure 1.1 on page 8 of the textbook; page 10 of the 10th
edition). But it remains one of the most exciting career avenues for business studentsthe
adventure of creating and marketing a successful new product.

Note the issue of globalisation and new product development. The material you will cover in
this subject applies equally to developing products for local and global markets. Note the
importance of culture. The text mentions that firms with a global innovation culture have the
most effective global new product programs.

Note briefly the last section here on how product development is different from other
marketing activities (pages 1113 of both editions). Essentially, new product development is
neither a single academic discipline nor an exact science and requires a hands on approach
to many development issues. It requires creativity, teamwork and ability to work under tight
timeframes. Also, note the difference between product innovation and process innovation,
and how new product ideas are often unplanned. As managers who thrive on planning, we

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need to be able to deal with the creative and often unplanned nature of new product
discovery and development.

Textbook

You should read pages 513 of the textbook (pages 513 of the 10th edition).

Activity 1.1

Make a note of the products that you come into contact with every day. Take time to build a
rough list from the time you get out of bed until the time you go to bed again. How many
products can you think of? Are they useful products or do they have flaws? Are there any
products that are missing that would be good to have, i.e.: products that you could use but
that havent been created yet? Feel free to include any services in your list.
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Part 2: What is a new product and what leads to success?

There are two main issues in this part: identifying what a new product is, and the reasons
why products succeed and fail.

Defining and classifying new products

What actually is a product? We could class anything that can be transferred in a marketing
exchange process as a product. This means that products can be both tangible and
intangible, and can include ideas, causes, thoughts (a penny for your thoughts!), and
basically anything that can be conceptualised.

Figure 1.4 (page 14 of the 11th edition) in the textbook (Figure 1.3, page 14 of the 10th
edition) illustrates how products can be classified in an organisation. These definitions are
important because they play a big part in the new product development process. Make a
note of the six different categories of products and consider how they differ in terms of risk
and potential rewards to the company and the customer. For example, new-to-the-world
products are more difficult to develop and are riskier to both the company and the
consumer. Gillettes new multi-blade razors faced significant technological challenges before
being brought to the market. New-to-the-firm products are essentially innovative copies of
the new-to-the-world technologies and are less risky to develop.

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Despite risks associated with new products, the world is full of stories of successful
productsfrom early passenger aircraft to modern mobile phones. However, for each one of
these successful products there are many failed products that are hardly discussed at all.

There are many different statistics available on new product failure, and one must be careful
how to interpret them. For example, some companies do not regard a product as having
failed if it achieved its original objectives. Even though it has disappeared from the market, it
may have been successful for a short time. Conversely, a product that is apparently
successful in the market may be considered a failure by the company if it has not met its
original design and marketing objectives.

What makes one product a success and another a failure? The text states that one
consistent reason for success is a uniqueness and superiority of the new product. The
common causes of product failure include absence of a consumer need for a product (no
demand) or inability of the product to meet consumer needs and offer value-adds. Other
factors that lead to products failure including organisations inability to support growth,
product not fulfilling the claims, being similar to the existing offers, need for substantial
consumer education, and market not being ready for the new revolutionary product, can be
found in the article by Schneider and Hall (2011) in your reading list.

Textbook

You should read pages 1416 of the textbook (pages 1316 of the 10th edition) noting the
new product categories in Figure 1.4 on page 14 of the textbook (Figure 1.3 on page 14 of
the 10th edition).

Some issues about new product success are covered on pages 1416 (pages 1316 of the
10th edition) but mostly on page 16 of both editions. In addition, there is a useful discussion
on pages 78 (of both editions) about success rates. You can also look at the article by
Schneider and Hall (2011) for more details about factors that cause products to be
successful.

Activity 1.2

a) Using the categories of products mentioned in the textbookfrom new-to-the-world to

cost reductionstry to think of new products in your country or region that fit into
each category. Which of these products stand out in your mind as a consumer? Why?

b) Should product imitations be a category in the textbook list of categories? That is,
products that just follow other products exactly in their design? Do you think that
these products do as well in the market as the original product? Why?
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Activity 1.3

a) Try to think of a well-publicised, successful new product introduced in your local region
in the last year. What do you think were the main factors accounting for its success?

b) Can you think of a major new product that failed or was withdrawn from the local
market in the last few years? Discuss the factors that might have led to its failure.
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Part 3: The strategic elements of product development

There are three strategic elements that underlie the entire process of new product
development:

The new products process

A product innovation charter
A product portfolio.

You need to keep these three factors in mind as you study this subject. In this part we
discuss the new products process only. The remaining strategic elements are covered in later
topics.

Figure 1.5 on page 19 of the textbook (Figure 1.4 on page 19 of the 10th edition), which is
also shown over the next page, displays the five basic phases of the new products process.

The basic new products process

Phase 1: Opportunity Identification and Selection

Phase 2: Concept Generation

Phase 3: Concept/Project Evaluation

Phase 4: Development
(includes both technical & marketing tasks)

Phase 5: Launch

Source: Figure 1.5 (Crawford & Di Benedetto 2015, p. 19).

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This is a good opportunity to familiarise yourself with the process and to consider how this
process might apply to the development of different products. Some products require an
extremely systematic and intensive process with strict evaluations at each stage as
mentioned in the text. Other products might require only two or three phases with limited
evaluation during development. To see this, think about the categories of new products and
consider the development work required to increase the chance of success and reduce the
risk of failure.

As a manager, you need to be conscious that a new products process may require a
considerable investment in time and money which should match the needs of the process
and its potential profitability. For example, Woolworths in Australia retail a large biscuit
called an Anzac biscuit packaged loosely in a basic plastic container. They now sell a smaller,
bite size version of this same biscuit packaged in the same container. This simple product
extension should not need a sophisticated new products process. While the five phase
mentioned above may suggest a sequential progress, neat and linear process is not quite
typical because phases are often not sequential but overlapping. Note the discussion about
accelerating time to market, cross-functional teams and the Go/No-go decision including
fuzzy gates.

Textbook

You should read pages 1823 of the textbook (pages 1823 of the 10th edition).

Conclusion

In this topic we looked at three introductory issues: why new product development is
important, how to define and categorise new products and what leads to success, and the
strategic elements of product development. This topic is just an introduction to the main
topics yet to come, but it highlights the importance of the study of new product
management and its role in deciding the future of the organisation in the market and the
industry.

References

Crawford CM & Di Benedetto A 2015, New products management, 11th edn, McGraw-Hill
Education, New York.

Crawford M & Di Benedetto A 2011, New products management, 10th edn, McGraw-Hill
Education, New York.

Schneider, J & Hall, J 2011, 'Why most product launches fail', Harvard Business Review, vol.
89, no. 4, pp. 2123.

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Feedback about activities

Activity 1.1

Make a note of the products that you come into contact with every day. Take time to build a
rough list from the time you get out of bed until the time you go to bed again. How many
products can you think of? Are they useful products or do they have flaws? Are there any
products that are missing that would be good to have, i.e.: products that you could use but
that havent been created yet? Feel free to include any services in your list.

You may be astonished at the number and variety of new products that you come into
contact with each day. This exercise helps us to understand the importance of products (new
products in particular), for the role they play in daily living.

Activity 1.2

a) Using the categories of products mentioned in the textbookfrom new-to-the-world to

cost reductionstry to think of new products in your country or region that fit into each
category. Which of these products stand out in your mind as a consumer? Why?

b) Should product imitations be a category in the textbook list of categories? That is,
products that just follow other products exactly in their design? Do you think that these
products do as well in the market as the original product? Why?

a) This is a general exercise that draws your attention to the different types of new
products launched into the market from time to time. Many new products are simply
me too offerings that piggyback on another products hard development work. They
do not add any characteristics that stand out in their usefulness to us as a consumer.
Mobile phones are still one of the most incredible standout productsvirtually from
almost anywhere in the world we can use this small object to communicate with other
people, as well as check our mailboxes or log into social media websites. As time goes
by, new mobile phone technologies continue to challenge the boundaries of
innovation and usefulness for the consumer.

b) According to Schneider and Hall (2011), the new products which are similar to the
ones which already exist on the market, remain in the product limbo due to low
differentiation from the existing brands. There is an old saying that imitation is the
best form of flattery, and there will always be opportunities to copy other
technologies. Should it be a category on its own? New-to-firm products are similar, but
mostly involve a company trying to better the original. For example, IBM followed
Apple into the personal computer market and within two years captured 25% of the
market. Pure imitation usually involves little effort and no innovation, and relies on a
strategy that looks for products that are not patent protected.

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Activity 1.3

a) Try to think of a well-publicised, successful new product introduced in your local region
in the last year. What do you think were the main factors accounting for its success?

b) Can you think of a major new product that failed or was withdrawn from the local
market in the last few years? Discuss the factors that might have led to its failure.

a) While analysing successful new products, students can use the factors associated with
product success and failure to prepare their answers. One consistent reason for
success is a unique and superior product.

Common causes of product failure mentioned in the textbook and by Schneider and
Hall (2011) include:

absence of a consumer demand

products inability to meet consumer needs/offer value ads
organisations inability to support growth
product being similar to the existing offers
need for substantial consumer education
idea being too revolutionary for the current market.

b) Apply the same analytical process as in exercise (a). If you found it difficult to obtain
information about a new product failure, then you are in good company. Sometimes
failures are public affairs and there is good information about why the failure
occurred. Mostly it is difficult to find out and companies are reluctant to release the
information. Did the failure reasons you discovered match those mentioned in part 2
above, namely, inadequate marketing, poor product quality, high costs, bad timing,
lack of competitive strength, weak or non-existent test marketing, and poor financial
evaluation?

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