136 PART ONE DIRECTING THE OPERATION ‘ Most people see the snack market as dynamic and innova- tive, but actually it is surprisingly conservative. Most of what passes for innovation is in fact tinkering with our marketing approach, things like special offers, promotion tie-ins and so on. We occasionally put new packs round our existing prod- ucts and even more occasionally we introduce new flavors in existing ranges. Rarely though does anyone in this industry introduce something radically different. That is why “Project Orlando” is both exciting and scary. ’ Monica Allen, the Technical Vice-President of PJT’s Snack Division, was commenting on a new product to be mar- keted under PJT’s best-known brand ‘Dreddo Dan’s Surfer Snacks’. The Dreddo Dan’s brand made use of surfing and outdoor ‘action-oriented youth’ imagery, but in fact was aimed at a slightly older generation who, although aspir- ing to such a lifestyle, had more discretionary spend for the premium snacks in which the brand specialized. Current products marketed under the brand included both fried and baked snacks in a range of exotic flavours. The project, internally known as Project Orlando, was a baked product that had been ‘in development’ for almost three years but had hitherto been seen very much as a long-term devel- opment, with no guarantee of it ever making it through to market launch. PJT had several of these long-term projects running at any time. They were allocated a development budget, but usually no dedicated resources were associated with the project. Less than half of these long-term projects ever even reached the stage of being test marketed. Around 20 per cent never got past the concept stage, and less than 20 per cent ever went into production. However, the com- pany viewed the development effort put into these ‘failed’ products as being worthwhile because it often led to ‘spin- off ’ developments and ideas that could be used elsewhere. Up to this point ‘Orlando’ had been seen as unlikely ever to reach the test marketing stage, but that had now changed dramatically. ‘Orlando’ was a concept for a range of snack foods, described within the company as ‘savory potato cookies’. Essentially they were 1½ inch discs of crisp, fried potato with a soft dairy-cheese-like filling. The idea of incorpo- rating dairy fillings in snacks had been discussed within the industry for some time, but the problems of manufactur- ing such a product were formidable. Keeping the product crisp on the outside yet soft in the middle, while at the same time ensuring microbiological safety, would not be easy. Moreover, such a product would have to be capable of being stored at ambient temperatures, maintain its physical robustness and have a shelf life of at least three months. Bringing Orlando products to market involved over- coming three types of technical problem. First, the formu- lation and ingredient mix for the product had to ...

1. 136 PART ONE DIRECTING THE OPERATION
‘ Most people see the snack market as dynamic and innova-
tive, but actually it is surprisingly conservative. Most of what
passes for innovation is in fact tinkering with our marketing
approach, things like special offers, promotion tie-ins and so
on. We occasionally put new packs round our existing prod-
ucts and even more occasionally we introduce new flavors in
existing ranges. Rarely though does anyone in this industry
introduce something radically different. That is why “Project
Orlando” is both exciting and scary. ’
Monica Allen, the Technical Vice-President of PJT’s Snack
Division, was commenting on a new product to be mar-
keted under PJT’s best-known brand ‘Dreddo Dan’s Surfer
Snacks’. The Dreddo Dan’s brand made use of surfing and
outdoor ‘action-oriented youth’ imagery, but in fact was
aimed at a slightly older generation who, although aspir-
ing to such a lifestyle, had more discretionary spend for the
premium snacks in which the brand specialized. Current
products marketed under the brand included both fried
and baked snacks in a range of exotic flavours. The project,
internally known as Project Orlando, was a baked product
that had been ‘in development’ for almost three years but
had hitherto been seen very much as a long-term devel-
opment, with no guarantee of it ever making it through to
market launch. PJT had several of these long-term projects
running at any time. They were allocated a development
budget, but usually no dedicated resources were associated
with the project. Less than half of these long-term projects
ever even reached the stage of being test marketed. Around
20 per cent never got past the concept stage, and less than

2. 20 per cent ever went into production. However, the com-
pany viewed the development effort put into these ‘failed’
products as being worthwhile because it often led to ‘spin-
off ’ developments and ideas that could be used elsewhere.
Up to this point ‘Orlando’ had been seen as unlikely ever to
reach the test marketing stage, but that had now changed
dramatically.
‘Orlando’ was a concept for a range of snack foods,
described within the company as ‘savory potato cookies’.
Essentially they were 1½ inch discs of crisp, fried potato
with a soft dairy-cheese-like filling. The idea of incorpo-
rating dairy fillings in snacks had been discussed within the
industry for some time, but the problems of manufactur-
ing such a product were formidable. Keeping the product
crisp on the outside yet soft in the middle, while at the
same time ensuring microbiological safety, would not be
easy. Moreover, such a product would have to be capable of
being stored at ambient temperatures, maintain its physical
robustness and have a shelf life of at least three months.
Bringing Orlando products to market involved over-
coming three types of technical problem. First, the formu-
lation and ingredient mix for the product had to maintain
the required texture yet be capable of being baked on the
company’s existing baking lines. The risk of developing an
entirely new production technology for the offering was
considered too great. Second, extruding the mixture into
baking moulds while maintaining microbiological integrity
(dairy products are difficult to handle) would require new
extrusion technology. Third, the product would need to be
packaged in a material that both reflected its brand image
and kept the product fresh through its shelf life. Existing
packaging materials were unlikely to provide sufficient shelf
life. The first of these problems had, more or less, been

3. solved in PJT’s development laboratories. The second two
problems now seemed less formidable because of a num-
ber of recent technological breakthroughs made by equip-
ment suppliers and packaging manufacturers. This had
convinced the company that Orlando was worth significant
investment and it had been given priority development sta-
tus by the company’s board. Even so, it was not expected to
come to the market for another two years and was seen by
some as potentially the most important new product devel-
opment in the company’s history.
The project team
Immediately after the board’s decision, Monica had
accepted responsibility to move the development forward.
She decided to put together a dedicated project team to
oversee the development. ‘ It is important to have represent-
atives from all relevant parts of the company. Although the
team will carry out much of the work themselves, they will still
need the cooperation and the resources of their own depart-
ments. So, as well as being part of the team, they are also
gateways to expertise around the company. ’ The team con-
sisted of representatives from marketing, the development
CASE STUDY Developing ‘Savory Rosti-crisps’ at Dreddo
Dan's
So
ur
ce
: A
la
m
y

4. Im
ag
es
: M
ed
ia
bl
itz
im
ag
es
M04_SLAC8678_08_SE_C04.indd 136 6/2/16 1:00 PM
CHAPTER 4 PRODUCT AND SERVICE INNOVATION 137
kitchens (laboratories), PGT’s technology centre (a develop-
ment facility that served the whole group, not just the snack
division), packaging engineers, and representative from the
division’s two manufacturing plants. All but the manufactur-
ing representatives were allocated to the project team on
a full-time basis. Unfortunately, manufacturing had no one
who had sufficient process knowledge and who could be
spared from their day-to-day activities.
Development objectives
Monica had tried to set the objectives for the project in
her opening remarks to the project team members when
they had first come together. ‘We have a real chance here

5. to develop an offering that not only will have major mar-
ket impact, but will also give us a sustainable competitive
advantage. We need to make this project work in such a
way that competitors will find it difficult to copy what we
do. The formulation is a real success for our development
people, and as long as we figure out how to use the new
extrusion method and packaging material, we should be
difficult to beat. The success of Orlando in the marketplace
will depend on our ability to operationalize and integrate
the various technical solutions that we now have access
to. The main problem with this type of offering is that it
will be expensive to develop and yet, once our competitors
realize what we are doing, they will come in fast to try and
out-innovate us. Whatever else we do we must ensure that
there is sufficient flexibility in the project to allow us to
respond quickly when competitors follow us into the mar-
ket with their own ‘me-too’ products. We are not racing
against the clock to get this to market, but once we do
make a decision to launch we will have to move fast and
hit the launch date reliably. Perhaps most important, we
must ensure that the crisps are 200 per cent safe. We have
no experience in dealing with the microbiological testing
which dairy-based food manufacture requires. Other divi-
sions of PJT do have this experience and I guess we will be
relying heavily on them.’
Monica, who had been tasked with managing the (now
much expanded) development process, had already drawn
up a list of key decisions she would have to take:
● How to resource the innovation project – The
division had a small development staff, some of whom
had been working on Project Orlando, but a project of
this size would require extra staff amounting to about
twice the current number of people dedicated to the
innovation process.

6. ● Whether to invest in a pilot plant – The process
technology required for the new project would be
unlike any of the division’s current technology. Similar
technology was used by some companies in the
frozen food industry and one option would be to
carry out trials at these (non-competitor) companies’
sites. Alternatively, the Orlando team could build its
own pilot plant which would enable it to experiment
in-house. As well as the significant expense involve,
this would raise the problem of whether any process
innovations would work when scaled up to full size.
However, it would be far more convenient for the
project team and allow its members to ‘make their
mistakes’ in private.
● How much development to outsource – Because
of the size of the project, Monica had considered
outsourcing some of the innovation activities. Other
divisions within the company might be able to under-
take some of the development work and there were
also specialist consultancies that operated in the food
processing industries. The division had never used any
of these consultancies before but other divisions had
occasionally done so.
● How to organize the innovation activities – Current-
ly the small development function had been organized
around loose functional specialisms. Monica wondered
whether this project warranted the creation of a sepa-
rate department independent of the current structure.
This might signal the importance of this innovation
project to the whole division.
Fixing the budget

7. The budget to develop Project Orlando through to launch
had been set at $30 million. This made provision to increase
the size of the existing innovation team by 70 per cent
over a 20-month period (for launch two years later). It
also included enough funding to build a pilot plant which
would allow the team the flexibility to develop responses
to potential competitor reaction after the launch. So, of
the $30m, around $18m was for extra staff and contracted-
out innovation work, $7.5m for the pilot plant and $4.5m
for one-off costs (such as the purchase of test equipment
etc.). Monica was unsure whether the budget would
be big enough. ‘I know everyone in my position wants more
money, but it is important not to under fund a project like this.
Increasing our development staff by 70% is not really enough.
In my opinion we need an increase of at least 90% to make
sure that we can launch when we want. This would need
another $5m, spread over the next 20 months. We could get
this by not building the pilot plant I suppose, but I am reluc-
tant to give that up. It would mean begging for test capacity
on other companies’ plants, which is never satisfactory from
a knowledge-building viewpoint. Also it would compromise
security. Knowledge of what we were doing could easily leak
to competitors. Alternatively we could subcontract more of the
research which may be less expensive, especially in the long
run, but I doubt if it would save the full $5m we need. More
important, I am not sure that we should subcontract anything
which would compromise safety, and increasing the amount
of work we send out may do that. No, it’s got to be the extra
cash or the project could overrun. The profit projections for
the Orlando products look great [see Table 4.1], but delay or
our inability to respond to competitor pressures would depress
those figures significantly. Our competitors could get into the
market only a little after us. Word has is that Marketing’s
M04_SLAC8678_08_SE_C04.indd 137 6/2/16 1:00 PM

8. 138 PART ONE DIRECTING THE OPERATION
calculations indicate a delay of only six months could not only
delay the profit stream by the six months but also cut it by up
to 30%. '
Monica was keen to explain two issues to the man-
agement committee when it met to consider her request
for extra funding. First, that there was a coherent and
well-thought-out strategy for the innovation project over
the next two years. Second, that saving $5m on Project
Orlando’s budget would be a false economy.
QUESTIONS
1 How would you rank the innovation objectives for the
project?
2 What are the key issues in resourcing this innovation
process?
3 What are the main factors influencing the resourcing
decisions?
4 What advice would you give Monica?
Table 4.1 Preliminary ‘profit stream’ projections for the
Project Orlando offering, assuming launch in 24 months’ time
Time period * 1 2 3 4 5 6 7
Profi t fl ow ($m) 10 20 50 90 120 130 135
*Six-month periods.

9. PROBLEMS AND APPLICATIONS
1 How would you go about evaluating the design of this
book?
2 A company is developing a new app that will allow
customers to track the progress of their
orders. The website developers charge €10,000 for every
development week and it is esti-
mated that the design will take 10 weeks from the start of the
design project to the launch of
the website. Once launched, it is estimated that the new site will
attract extra business that
will generate profits of €5,000 per week. However, if the
website is delayed by more than five
weeks, the extra profit generated would reduce to €2,000 per
week. How will a delay of five
weeks affect the time when the design will break even in terms
of cash flow?
3 How can the concept of modularization be applied to
package holidays sold through an
online travel agent?
4 One product where a very wide range of product types is
valued by customers is that of
domestic paint. Most people like to express their creativity in
the choice of paints and other
home decorating products that they use in their homes. Clearly,
offering a wide range of paint
must have serious cost implications for the companies which
manufacture, distribute and sell
the product. Visit a store which sells paint and get an idea of
the range of products available
on the market. How do you think paint manufacturers and

10. retailers manage to design their
services and products so as to maintain high variety but keep
costs under control?
5 Some firms specialize in helping clients to innovate and
design their products and services.
One of the best known of these is IDEO ( ideo.com ). Look at
the website and:
(a) Identify the stages of design innovation that the firm
goes through with its clients.
(b) Assess its approach to design innovation. What does the
firm believe are the most impor-
tant aspects of successful new product and service
development?
(c) Why do you think IDEO is so willing to tell everyone
how to go about the design innova-
tion process? Isn’t that giving away the firm’s expertise for
free?
M04_SLAC8678_08_SE_C04.indd 138 6/2/16 1:00 PM