1. Innovation and hence New
Product development is
critical for B2B firms
B2B Assignment
Submitted To:
Prof. Subrat Sarangi
Submitted By:
Nairita Bhagat
11202147

2. Innovation and hence new product
development is critical for B2B firms
A recent study finds that innovation is now the number one level for business profitability and growth.
But New Product management is in trouble.
• 44% of firm’s product development project fails to meet profit objectives
• Only one in seven concepts is winner.
• 32% of business rate their NPD speed and efficiency “very poor”.
• Only 27% rate their NPD profitability relatively-to0spending as “high”.
• 28% of business don’t even measure their NPD performance results.
Even worse, NPD productivity is declining:
• Sales from New products are off, according to the Product Development and Management Assn.
It fell from 32.6% of total company sales in the mid 1990s to 28% in 2004.
• But R&D spending has remained constant at about 2.8% of sales.
• So that’s a 14% drop in output per spending in less than a decade.
• New product productivity varies widely by industry; the best firms are 12% more productive
than the worst.
• New product development cycle time reduction of 42% over past 10 years suggests that firms
are picking only the low-hanging fruit. For example:
• A 43.7% decrease in “new to world/market” innovations, 1990 to 2004.
• An 80.1% increase in existing product improvements and modifications.
• Not only are portfolios unbalanced, portfolios contain too many low value-to-the-company
projects and far too many projects for the limited resources available.
• The best NPD performers today match just the average performers of 1990.
As we know that in any particular segment for example cement there are only few major players in the
B2B market and the B2B products are almost same for all the firms. It’s quite difficult to differentiate the
products and also to go for a complete NPD. But firms need to differentiate its products from each
other.
For example if consider the case of a cement industry, the composition of the cement remains the same
because the cement composition cannot be changed it has to be the same, the only thing which can be
done is to add some extra features to it like long lasting, more stronger etc. Same is the case with the
other firms like the electrode firms there are different grade s of electrodes so all the major players will
have the same grades, thus how to differentiate it from others. Thus in B2B firms the first mover
advantage is very high. Because once you are the first mover you get the advantage of the innovation
for example the termite proof ply woods it was the first of its kind, ply woods existed but termite proof
didn’t thus there you get the advantage of the first mover. But also the product didn’t change
completely only a new feature was added to it.

3. Same is with the case with the electrode industry L&T was the first to invent the corrosion free
electrodes thus it got the advantage of the first mover but soon the others copied it. And also it was not
the something completely different from the original product only a new feature was added to it.
Thus continuous innovation is needed for the B2B firms but at the same time B2B firms can’t go for a
complete revolutionary change because the base product remains the same. And also if you are the first
mover then only that innovation leads to successful business.
Developing new products is a crucial function for any business to business company. Without new
products a business may experience declining sales and loss of market share to more nimble innovative
competitors. Developing an active product development process that consistently innovates is
extremely important to long term company success.
Few companies are completely satisfied with their new product development efforts, but some
companies do a much better job than others at innovation by finding, developing, launching and
marketing new products. These companies are able to achieve new product success because they follow
some fundamental concepts:
They achieve a balance between investments in new products and generating current and
future sales and profits.
They analyze cost and performance data and develop significantly better products, not just
differentiated ones.
They follow a process that allows them to identify potential successful, and eliminate low
potential, products early in the process. The development process is focused, disciplined
and is repeatable.
Top management is actively supportive of the process and prioritizes product development
teams and efforts, while letting the teams perform their functions autonomously.
Product development efforts are budgeted and funded.
The marketing group plays an important role from the beginning and uses the company
strategic marketing plan to identify market segment strategies and to prioritize product
development efforts.
The product development team learns and understands the potential user requirements,
stated and unarticulated, and their operations from purchasing to after sales service.
They focus early in the process on the marketing plan and commercial launch of the new
product.
They do extensive due diligence on new products before making a go/no go decision.
They form cross-functional teams early in the process to guide the product development
and market planning.
They are willing to seek outside expertise for new technologies, or specialized marketing or
sales skills that may be needed for the target markets.
They are willing to cannibalize their own products to achieve market success.
They seek to develop global products that can be customized to meet local requirements.
They protect their intellectual property and reply quickly to infringements.

4. Why there is a need to develop new products and services
A B2B organisation might have a NPD programme for the following reasons:
• Maintain market position and reputation as an innovating organisation
• Defend market share
• Be in the forefront in the development of new markets gaining market share before others
• Take advantage of new technology
• Optimise resources, including production and supply chain management so as to gain competitive
advantages
• To offer greater customer value and satisfaction
• To attract the best possible staff and expertise
Size and scope of a new product development programme
Some B2B organisations will have a larger NPD programme than others. The size of the NPD programme
will depend on the industry, the products and services marketed, customer demand and the level of the
competition.
The need for a NPD programme will be higher where:
• Customer demand is for new, progressive hi-tech products and services (electrical, engineering,
computerised goods).
• The company maintains competitive advantage by continuously bringing new products on to the
market (Sony, 3ms)
• Where there is intense competition (car industry)
• Where there is a tradition in the industry for new product innovation (information technology)
B2B New product development
New-to-the-world – Products/services that create a new market or niche segment
The most famous new-to-the-world product over the last decade has to be the development of IT,
digital technology and the introduction and growth of the world-wide-web. Biotechnology is opening up
enormous possibilities. The multitude of both B2B and B2C new products now available through the use
of these media has explosively created enormous markets in both B2B and B2C sectors. We are reliable
informed that nanotechnology is the next mind-boggling growth area. Interestingly enough the
opportunity for new product development also spawns an ‘anti’ industry new product development
area that feeds off the growth concept; an example might the demand for organic products as a reaction
to the increase use of chemicals in agriculture.
Nanotechnology – the next revolution
Nanotechnology is the rapidly emerging technology enabling scientists and experts to manipulate
matter at the ‘nanoscale’ level and build precision, miniaturised machines and mechanisms at the
molecular and atomic level using a basic unit of measure called a ‘nanometre’, or ‘nm’. Nms are
unimaginably, mind-bogglingly small. In fact they are 40,000 times smaller than the width of a human
hair. There are one billion nm's to a meter, 25,400,000 nm's to an inch. Each nm is only three to five
atoms wide. It’s about building things smaller, faster, cheaper, stronger, more precise than ever
imagined working with individual components (atoms and molecules) at the nanoscale. Super small
computers and communication devices [think bacteria size] with today's MIPS (millions of instruction
per second) capacity, or supercomputers the size of a sugar cube, possessing the power of a billion

5. laptops, or a regular sized desktop model with the power of trillions of today's PC's. Materials a
thousand times stronger and 10 times cheaper to produce than anything currently on the market,
‘anorobots’ injected into the body to serve as programmable antibodies seeking out bacteria, viruses
and cancer cells, cars producing a 1000 miles to the gallon and batteries powerful enough to run a car
the size of the smallest torch battery. It is claimed it will revolutionise medical science, manufacturing,
biotechnology materials technology, food technology, IT, environmental sciences, astrophysics to name
but a few. Where will it all end?
New product extensions – new (brand) variations of existing products
Many products have valuable names that can be extended into other, similar areas. So Mars moves into
mars ice cream and Mercedes into the small car specialist market with the Smart car. Taking a business
magazine on line could be considered a B2B brand extension.
New line extensions – additions to existing products
New sizes, new flavours, different price options, bolt-on services, added to existing products are
examples of line extensions. For example, offering manufacturers more chemical flavourings, or
different shape or different materials for packaging. Infotainment systems, steer-by-wire and ride and
vibration control devices in the car industry.
 Product improvements – Cars are a good example of products where continuous
improvements are made each year, with increased safety, road handling, driver/rider
comfort, entertainment features, environmental improvements, etc, constantly needed so as
to pre-empt customer requests and competitor incursions.
 Repositioned products - Taking an existing product that will probably be in a non-growth or
declining market, revamping it in some way and offering the product to a different market
segment or to the same market but as a different product. Many hi-tech companies have
attempted to reposition themselves as e-business brands, airlines such as BA have attempted
to dominate the business passenger market (it failed) and engineering companies have
striven to show themselves as industrial specialists rather than all-round generalists.
To be successful in innovation, you have to have a process.
•Creativity requires structure and discipline and can enhance rather than stifle quality and
output.
•The first and most important principle of growth through innovation is that invention may be
long to R&D, but innovation does not. Innovation is a creative process that must include all
business functions to be successful. Everybody, not just marketing, owns it.
•Innovation is not just product innovation, but includes service innovation, business model
innovation, and lots of ways to grow your business by innovating to be successful in innovation;
you have to have a process.
•Creativity requires structure and discipline and can enhance rather than stifle quality and
output.