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  • 1. Business Market Management 3 rd edition New Offering Realization Chapter 6
  • 2. Section III: Creating Value Business Market Management, 3 rd edition Chapter 6-
  • 3. Chapter 6: New Offering Realization
    • Overview
      • Realization Strategy
      • Realization Process Models
      • Market-Oriented Realization
      • Summary
    Business Market Management, 3 rd edition Chapter 6-
  • 4. Overview
    • Businesses create value with new offerings by:
      • Lowering customer’s total costs
      • Providing superior performance in customer’s application
      • Meeting customer’s changing requirement and needs
      • Lowering supplier’s cost
    Business Market Management, 3 rd edition Chapter 6-
  • 5. Definition
    • New Offering Realization
      • Process of developing:
        • New core products or services
        • Augmentation to construct market offerings
        • Bringing to market
    Business Market Management, 3 rd edition Chapter 6-
  • 6. Business Market Management, 3 rd edition Chapter 6- Realization Strategy Creating Superior Value Through New Market Offerings Realization Process Market-Oriented Research and Development
  • 7. I. Realization Strategy Business Market Management, 3 rd edition Chapter 6-
  • 8. Realization Strategy
    • New offering realization has the potential to provide significant outcomes in:
      • Strengthening the firm’s market position
      • Improving the firm’s resource utilization
        • To reuse, produce, and process know-how
      • Vehicle for organization enhancement and renewal
    Business Market Management, 3 rd edition Chapter 6- However, most firms find new offering realization seldom delivers these rewards
  • 9. Causes for Failure
    • Unanticipated shift in technology or market requirements
    • Mistaken expectations of other functional areas’ performance
    • Unexpected technical problems
    • Problem solving delays
    • Unresolved policy issues
    Business Market Management, 3 rd edition Chapter 6- Fact: 35%-80% of new offerings fail
  • 10. Critical Success Factors for New Product Performance
    • Strongest driver of profitability
      • Existence of high-quality, rigorous new product process emphasizing:
        • Up-front homework
        • Tough Go/Kill decision points
        • Sharp early product definition
        • Flexibility
    Business Market Management, 3 rd edition Chapter 6-
  • 11. Processes that differentiate Successful New Product Development Teams
    • Senior management commitment
    • Clear vision of immutable goals for the new product
    • Improvisation process in which teams try many ideas quickly and are flexible
    • Diversified Communication portfolio that went beyond formal reports and memos
    • Teams focused on achieving goals and objectives
    Business Market Management, 3 rd edition Chapter 6- Chances of product success using these 5 methods = 98%
  • 12. Building a Successful Strategy
    • Create, define, and select a set of development projects that will provide superior products and processes
    • Integrate and coordinate functional tasks, technical tasks, and organizational units
    • Manage development efforts to effectively achieve the business’s purpose
    • Work toward making development a long-term competitive advantage for the company
    Business Market Management, 3 rd edition Chapter 6-
  • 13. Development Strategy Framework Business Market Management, 3 rd edition Chapter 6- Market Strategy Technology Strategy (adapted from: Wheelright & Clark 1992) Technology Assessment & Forecasting Market Sensing Aggregate Project Plan Project Management & Execution Development Goals & Objectives Post-Project Learning & Improvement
  • 14. Development Goals & Objectives
    • Overall Development Goals:
      • Learning
      • Efficiency
      • Speed-to-Market
    Business Market Management, 3 rd edition Chapter 6-
  • 15. Learning
    • Learning: gains in design and process knowledge and know-how. Learning is paramount for organizational enhancement and renewal
    • Maximize learning:
      • every development project advances the company’s capabilities
      • plan which series of projects to undertake and carry out
      • assess each project’s achievements and/or failures
    Business Market Management, 3 rd edition Chapter 6-
  • 16. Efficiency
    • Efficiency: is concerned with getting the most out of available resources
    • A firm needs to manage efficiency across all realization efforts
    Business Market Management, 3 rd edition Chapter 6-
  • 17. Speed-to-Market
    • Speed-to-Market: the time it takes to complete a development cycle
    • Firms must understand what advantage speed-to-market provides and how it gauges performance for this goal
    Business Market Management, 3 rd edition Chapter 6-
  • 18. Project Objectives
    • Development Speed or Time-to-Market
    • Product Cost
    • Product Performance
    • Development Program Expense
    Business Market Management, 3 rd edition Chapter 6- Every development project will confront tradeoffs among these 4 objectives. Making the correct choices is paramount to the project’s success (Smith and Reinertsen)
  • 19. Development Speed or Time-to-Market
      • “ The time between the first instance someone could have started working on the development program and the instance the final product was available to the customer.”
    Business Market Management, 3 rd edition Chapter 6-
  • 20. Product Cost
    • The total cost of the product to the supplier, including all costs incurred in marketing, sales, and support services. These costs are part of the purchase price.
    Business Market Management, 3 rd edition Chapter 6-
  • 21. Product Performance
    • How well the product meets requirements and preferences that target customers have specified
    Business Market Management, 3 rd edition Chapter 6-
  • 22. Development Program Expense
    • Consists of all the one-time development costs a specific project incurs
    Business Market Management, 3 rd edition Chapter 6-
  • 23. Aggregate Project Plan
    • Mechanism
      • “ to ensure that a collective set of projects will accomplish the development goals and objectives and build the organizational capabilities needed for ongoing development success.”
    Business Market Management, 3 rd edition Chapter 6-
  • 24. Constructing an Aggregate Project Plan
    • Three basic steps:
      • Mapping the varying kinds of development projects
      • Making capacity decisions
      • Making provisions for gaining critical skills and capabilities
    Business Market Management, 3 rd edition Chapter 6-
  • 25. Mapping the Kinds of Development Projects
    • Derivative Projects
      • initiatives that realize small advances in current offerings or production processes
    • Platform Projects
      • are in the middle of the development spectrum & harder to define. They entail more product and/or process changed
    • Alliances and Partnership Projects
      • those done in conjunction with one more more outside firms
    Business Market Management, 3 rd edition Chapter 6-
  • 26. Business Market Management, 3 rd edition Chapter 6- Research & Advanced Development Projects Derivatives & Enhancements Addition to Product Family New Gen Product New Core Product Product Change Less More Alliances and partnership projects (can include any of the above project types) Mapping the Five Types of Development Projects R & D Derivative Platform Breakthrough Less More Process Change Derivative projects Platform projects Breakthrough Projects New Core Process Next Gen Process Single Dept. Upgrade Incremental Change
  • 27. Making Capacity Decisions
    • Management must make hard decisions about the number and the mix of projects to start or complete with the available resources.
    Business Market Management, 3 rd edition Chapter 6- “ When organizations overextend their resources, productivity declines, the number of projects ‘in process’ increases, projects take longer to complete, and the rate of project completion declines.” -- Wheelwright and Clark
  • 28. Capacity Decisions
    • Evaluate the number of projects undertaken at one time
    • Resequence some projects to provide a better mix and flow
    • Decide on a preferred level of development capacity utilization
    Business Market Management, 3 rd edition Chapter 6- Remember: building in slack can reduce overall development time!
  • 29. Gaining Critical Skills and Capabilities
    • Build technical knowledge:
      • Assignments to project team should build technical knowledge for both the organization and individual (job rotation)
    • Build cross-functional cooperation:
      • Employees with cross-functional skills learn to appreciate how each area contributes to marketplace success
    • Build project leadership capabilities:
      • Individuals need training on working in teams and have a series of project assignments with increasing responsibility
    Business Market Management, 3 rd edition Chapter 6-
  • 30. Concurrent Engineering in Realization Strategy
    • Concurrent Engineering: the process of making a product while they are still in the process of designing it
      • Cross-functional teams responsible for product from inception
        • Design
        • Engineering
        • Manufacturing
        • Procurement
        • Marketing
    Business Market Management, 3 rd edition Chapter 6-
  • 31. Point-Based vs. Set-Based Concurrent Engineering (CE)
    • Point-Based CE
      • Members responsible for the product design develop design alternatives
      • Most promising design solution chosen
      • Counterparts responsible for making the product continue to improve on the design until both groups arrive at a mutually satisfactory solution
    • Set-Based CE
      • Refers to the deliberate effort to define, communicate about, and explore sets of possible solutions
      • Firm uses its accumulated knowledge about its design and manufacturing capabilities to determine feasible ranges for the design parameters
    Business Market Management, 3 rd edition Chapter 6-
  • 32. Set-Base CE & Flexible Market Offerings
    • Standardized Variety: providing extensive product variety at a lower cost by standardising the production process
    Business Market Management, 3 rd edition Chapter 6-
      • Modularity + Commonality =
      • greater flexibility,
      • lower acquisition, manufacturing, and after sales service costs
  • 33. Outside Development Relationships & Networks
    • Firms may require resources that are:
    Business Market Management, 3 rd edition Chapter 6- Seeking or developing the resources in-house or from the outside varies and depends on the kind of project and resources required. Technical Economic Social Political
  • 34. Alternative Development Structures
    • Approaches firms use to gain needed resources
      • Outsource technical resource (acquire it from an outside supplier)
      • License the technology from other firms to gain intellectual property rights
      • Exchange intellectual property rights through cross-licensing arrangements
      • Collaborate with outside firms to co-develop a technical resource the company needs
    Business Market Management, 3 rd edition Chapter 6-
  • 35. Aims of Development Relationships and Networks Business Market Management, 3 rd edition Chapter 6- Technical Economic
    • Viewed as peripheral to realization strategy
    • Recognition that internal development would slow its speed-to-market
    • Use resources from outside supplier to lower development costs
    • Collaborate on common design and technical specifications that do not provide any firm with an advantage
    Social Political
    • Consensus building reduces risk by pooling resources and sharing financial burden of development
    • Persuade industry associations, regulatory agencies, or governments to adopt standards that favor their developed technology
  • 36. Decision Considerations for Outside Relationships & Networks
    • Senior management must consider:
      • Social and strategic factors
      • Understand the technology cycle and resource demands of different kinds of development projects
      • Understand dominant design
        • A single architecture that becomes the acknowledged standard
    Business Market Management, 3 rd edition Chapter 6-
  • 37. II. Realization Process Models Business Market Management, 3 rd edition Chapter 6-
  • 38.
    • Concept for product & process defined
    • CONCEPT APPROVED
    • Establish product & process architecture
    • Define program parameters
    • PROGRAM
    • APPROVAL
    • Build & test complete prototypes
    • Verify product design
    • DETAILED DESIGN APPROVAL
    • Build and Refine 2 nd phase prototype
    • Verify process tools & design
    • JOINT PRODUCT & PROCESS APPROVAL
    • Produce pilot units
    • Operate & test complete commercial system
    • APPROVAL FOR 1 ST COMMERCIAL SALES
    • Ramp up to volume production
    • Meeting initial commercial objectives
    • FULL COMMERCIAL APPROVAL
    Key Decisions Key Milestones A General Realization Process Model: Phases of Development Functional Activities Concept Development Product Planning Detailed Design & Development Commercial Preparation Market Introduction Phase I Phase II Engineering Propose new technologies; develop product ideas; build models; conduct simulations Choose components & interact with suppliers; build early system prototypes; define product architecture Do detailed design of product & interact with process; build full-scale prototypes; conduct prototype testing Refine details of product design; participate in building 2 nd phase prototypes Evaluate & test pilot units; solve problems Evaluate field experience with product Marketing Provide market-based input; propose & investigate product concepts Define target customer’s parameters; develop estimates of sales & margins; conduct early interact with customer Conduct customer tests of prototypes; participate in prototyping Conduct 2 nd phase customer tests; evaluate prototypes; plan marketing rollout; establish distribution plan Prepare for market rollout; train sales force and field service personnel; prepare order entry / process system Fill distribution channels; sell & promote; interaction with key customers Manufacturing Propose & investigate process concepts Develop cost estimates; define process architecture; conduct process simulation; validate suppliers Do detailed design of process; design & develop tooling & equipment; participate in building full-scale prototypes Test & try out tooling & equipment; build 2 nd phase prototypes; install equipment & bring up new procedures Build pilot units in commercial process; refine process based on pilot experience; train personnel & verify supply channel Ramp up plant to volume targets; meet targets for quality, yield, & cost
  • 39. Augmenting Services in Realization Process Models
    • Phase I: Product Planning
    • Phase II: Detailed Design and Development
    • Phase III: Commercial Preparation
    • Phase IV: Market Introduction
    Business Market Management, 3 rd edition Chapter 6-
  • 40. “ Next Generation” Realization Process Models
    • Fluidity: adaptable, overlapping fluid stages for greater speed
    • Fuzzy gates: conditional “Go” decision
    • Focused: Prioritization methods that examine the portfolio of products and focuses resources on “best bets”
    • Flexible: Each project is unique with its own routing through the process
    Business Market Management, 3 rd edition Chapter 6-
  • 41. III. Market-Oriented Realization Business Market Management, 3 rd edition Chapter 6-
  • 42. Market-Oriented Realization
    • Market-oriented research
    • Creating focused research centers
    • Connecting research with the market
    • Market-oriented development
    • Position statement as a market focusing mechanism
    • Researching market requirements & translating into design specifications
    • Tailoring market introduction of new offerings
    Business Market Management, 3 rd edition Chapter 6-
  • 43. Market-Oriented Research and Advanced Development
    • Role of Research
      • Pioneering or scouting mission for firms
      • Responsible for generating new scientific and technical knowledge
      • Create value over the long term
      • Develop technologies that can commercialize
    • Role of Commercialized Development
      • It uses, adapts, or further develops known technologies to produce new core products or services
    Business Market Management, 3 rd edition Chapter 6-
  • 44. Current Challenges for Market-Oriented Research
    • Greater demand for research to be market oriented
      • R&D budgets stagnant or growing slowly
      • Must demonstrate to senior management its contributions to the marketplace
    • To excel with limited resources
      • Focus research efforts and leverage resources with outside relationships
      • Research needs to connect itself with the market
    Business Market Management, 3 rd edition Chapter 6-
  • 45. Creating Focused Research Centers
    • Choose basic areas of science & technology research to pursue
    • What knowledge should be generated internally? Externally? Collaboratively? Factors to consider include:
      • Sticky Information
      • Lablets, located adjacent to leading universities
      • Technology fusion: combining technologies to create hybrid technologies
      • Social networks
    Business Market Management, 3 rd edition Chapter 6-
  • 46. Connecting Research with the Market
    • Regularly schedule interaction with
      • Design engineers
      • Manufacturing engineers
      • Field engineers
      • Advanced marketing groups
    Business Market Management, 3 rd edition Chapter 6- One-on-one Information Exchanges Structured group-to-group interactions Home and Away Sessions Off-hour events One-on-one meetings Innovation Summits “ Design Bursts” and “Deeper Dives”
  • 47. Market-Oriented Development Business Market Management, 3 rd edition Chapter 6- “ Market-oriented development is a critical factor for enduring market leadership.” --Gerard Tellis & Peter N. Golder
  • 48. Business Market Management, 3 rd edition Chapter 6- Four ways for firms to be marketed oriented in its development of new offerings:
    • 1. Positioning Statements as Market-Focusing Mechanism
    • Assists in focusing project team
      • Target
      • Offering Concept
      • Value Proposition
    • 2. Research Market Requirements & Translate into Design Specifications
      • Lead-User Customers
      • Leap-Frog Customers
      • Quality Function Deployment
      • Prototypes
        • Alpha test
        • Beta test
    • 3. Guide Realization Efforts with Customer Value Assessment
      • Technology Push
      • Market Pull
    • 4. Tailor Market Introductions of New Offerings
      • Know the Local Market
      • Internal Selling
      • Motivate Channel Partners
        • Incentive to change
        • Initial use discount
  • 49. IV. Summary Business Market Management, 3 rd edition Chapter 6-
  • 50. Summary
    • New offering realization is the process of developing new core products or services, augmenting them to construct market offerings, and bringing them to market
    • Realization encompasses all the activities a firm does to transform an idea into a market offering that the firm commercializes
    • New offering realization has the potential to create value for the firm and its customers
    • A firm generates a realization strategy as a means of accomplishing its realization objectives
    • Realization process models delineate the phases and decision points through which development projects progress
    • Firms in business markets should have the intent of being market oriented and customer focused
    Business Market Management, 3 rd edition Chapter 6-
  • 51. Business Market Management, 3 rd edition Chapter 6- All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc.   Publishing as Prentice Hall