The document discusses new product development for startups and small businesses. It makes three key points: 1) New product development is one of the most important aspects of starting a new business and will influence the company's direction. Developing a product that meets market needs is critical for success. 2) Small businesses often take a more heuristic approach to new product development due to limited resources. This can be an advantage over larger companies if costs are lower. 3) The process of developing a new product helps shape a company's strategy and determines its viability, as the product is usually the initial source of revenue. Getting the product right is essential for survival in the early stages.

1. First Draft (January 2007)
Chapter New Product Development
and Strategy
Does a new product succeed or fail because of its positioning, its price, its
promotion, its availability or its timing? Or is it because of its strong or weak
competition, the economic situation or even the weather or a health scare?
Entrepreneurial Success comes back to the product – the venture is the vehicle.
Introduction
New product development is one of the most important aspects of a new enterprise start up
and is the activity that will most influence and guide the direction of the firm throughout its
life. The process of new product development and the success of the product in the market
will primarily determine how well the company will sustain itself and be the key to developing
any competitive advantage of the firm over others. The new product development function
has been neglected in entrepreneurship literature, yet it is an extremely important key to
success in the new venture and an extremely difficult process considering new entrepreneurs
may not as yet developed the all round expertise, experience and resources of large
companies. Another area of neglect in new product development and entrepreneurship
literature is the actual formulation, design, packaging and manufacturing process
development of a new product, which is the link between technology and the market in any
new venture creation.
One of the keys to successful new product and process development is the design and
production of a new product with the minimal resources possible without sacrificing any
quality of the finished and marketable article. For the entrepreneur, this process must be
undertaken in a heuristic manner (discussed later), rather than through any strict disciplinary
approaches, advocated and practiced by large companies. This is one of the ways a new
venture can gain competitive advantage over larger companies, if the product and process
can be designed and built for a fraction of the cost that more established enterprises can
achieve. Thus product development is one of the most important processes of new venture
creation. New product development is a discipline where the technical aspects are learned as
you go along the process, as most of these aspects are not in any text books, but come from
people’s lives and experiences. This is a reality of new product development that even MNCs
have to face. New product development is both a manifestation and extension of strategy in
terms of what the company puts into the marketplace, steering the direction of the enterprise
and at the same time, an influence upon strategy or a restraint upon strategy because
founder and/or team capabilities limit the set of options available to the new venture in terms
of what can be done in the marketplace in terms of product.
The new product development process is so close to the concepts of idea, opportunity and
decision to start up a new enterprise, as well as where you will go in the marketplace – you
cannot by definition have a start up without beginning the new product development process.
One can observe in the marketplace that some new companies almost seem immediately to
make a high impact on the market. Others enter the marketplace and seem to go nowhere,
while others grow gradually over a long period of time. The difference in these companies
comes back to the initial new product development process, where some are able to quickly
develop a new product and make profits despite of high costs and design flaws through

2. generating high revenues. Others do the same but fail to generate profits and revenues to
sustain their venture, while yet others can internally sustain themselves while their idea
manifested into a product slowly develops recognition, distribution and sales in the
marketplace, where revenues eventually flow over the breakeven point to generate profits to
sustain the venture. New product success depends on many factors which will influence the
destiny of the new venture. In later venture life the decisions about future investment of
profits and the strategic soundness of those decisions will determine long term sustainability
of the firm. New product development is one of the most important aspects of long term
sustainability.
In the early life of the new venture the conventional rules of management and strategy are
discarded in a scramble to develop a product and get it quickly into the marketplace to
generate enough sales to survive. This is a very haphazard time where best practices and
production efficiencies are almost irrelevant in the minds of any founder, particularly in the
SME. The jump is made with primarily intuition backing the strategy and it is the faith in this
strategy that keeps the founder and the firm going forward. This adds great risk and pressure
of which statistics of new product failures lend support. This chapter will look into the issues
involved in new product development and the strategies underlying the process to assist the
new venture creator develop some form of roadmap across this critical period in the new
venture and following periods of growth and development of the enterprise.
New Product Development in the Malaysian Perspective
There are many estimates and statistics presented by various authors about new product
failure rates in the marketplace. Robert Calvin in his book Entrepreneurial Management claims
that 80% of new products fail after being launched1. Observing new product launches here in
Malaysia tends to confirm this, even those launched by MNCs. Failures take slightly longer to
acknowledge in Malaysia due to the distribution driven approach to the market in the
consumer products arena, where products are pushed to consumers from the shelves to
customers through the heavy use of in-store promotions and promoters. This figure of 80%
would be accurate in the cosmetic sector, slightly less in the household product sector and
even less in the agriculture sector, as competing products tend to have similar functions and
benefits to what is already in the market and market fragmentation and distribution gaps
influence sales very heavily. In Malaysia, the perceived risk of launching radical new products
tends to stifle innovation, where many companies tend to prefer being product followers,
allowing others to innovate to reduce risk.
This mental encapsulation prevents companies coming out and differentiating themselves
from the competition and expanding their position in the market as a trend setter, where they
resign themselves to being trend followers. This attitude and perception makes the Malaysian
market less innovative than perhaps some other countries in the region, which has to change
if Malaysia is going to take its rightful position in the global market as an innovative country.
This situation if skilfully studied can potentially lead to numerous new product opportunities
for a new venture. If differentiation can be developed and accepted by consumers, then there
is plenty of room for new ventures in this country. Likewise, due to the emphasis by
companies on being followers, there is plenty of opportunity to develop new brands, which
can be protected by creating a source of competitive advantage that has barriers developed
to prevent competitors emulating the product quickly. This is of course very easy to say, but
with the right perspectives, it is possible to exploit the strategy of product differentiation and
enhance a position in the market through the correct use of branding. This originates in the
new product development process.
New product development is approached differently by firms. In Malaysia, larger firms tend to
either develop a very bureaucratic and formal procedure or act upon the whim of the
managing director, or more so combine the above, which leads to a less than effective
process. In a discipline which is talking about the need for faster new product development

3. processes2, Malaysian companies still lag behind, which opens up even more opportunities for
SMEs.
SMEs in Malaysia, at least those in consumer products lack potential exit strategies or
contingencies for failed products that SMEs in many Western countries have available to
them; that of a channel of discontinued stock (i.e., $2 or ₤1 shops), where failed products
can be disposed of at a heavy discount. The cost of new product failure in Malaysia is writing
off inventory completely, along with the development costs, customer ill-feeling and almost
certain closure with a deep sense of failure. Secondly, if the product is successful, it will most
likely lead to copying by competitors, some of which will be much larger firms with greater
resources, brand image, salesforce, larger promotional budgets and greater distribution
capability. The advantage that being the innovator has and incumbency in the marketplace is
lost due to a wide gap in market power (based on distribution ability) between small and
large companies. These are central issues that the new venture founder must consider before
start up.
While looking at the Malaysian perspective, one other issue provides the SME or the new
venture with an opportunity. As many commentators see globalism as one of the largest
influences on markets in this new century, especially with MNCs developing and launching
products for the ‘Malaysian’ market based on extensions of international brands with slight
modifications, more reflective upon that MNC’s history in the Malaysian market rather than
modifications made to suit the Malaysian market, the Malaysian market remains very complex
and heterogeneous, often very difficult to understand. Malaysia is one of a number of few
countries with a significant makeup of a number of racial groups. The complexity does not
stop there, as within each racial group there is great diversity. The Malays are far from a
homogeneous consumer group, with different influences upon their histories3, thus providing
them with different orientations and consumer tastes. The Chinese are also diverse, some
coming to Malaysia long ago, adopting Malay customs (the Babas), while others migrated
from various regions in China to Malaysia and primarily maintain their Chinese culture4. Some
live partly integrated into the ‘Malaysian’ culture, while another group rarely mix from school
through their working careers with other ethnic groups. Some are English educated, while
others are Chinese educated, thus the Chinese cannot be seen as one coherent group5 or
market.. There is also a vast difference between urban markets and rural markets6 where
consumer tastes and preferences vary significantly. Even with the rapid development of the
new middle class in Malaysia, it still remains divided along ethnic lines7, thus developing into
two distinct markets in many product areas, ethnically segregated shops, banking,
entertainment, pop music, food, fashion, reading materials, etc. This is reinforced by the
segregation in education and careers of the various ethnic groups8.
Thus Malaysia within the context described above can be seen as a number of sub-markets
within the Malaysian market as a whole. This runs contrary to the concept of the
cosmopolitan man and agrees with Crawford’s observation that there is little market
homogeneity, even within a nation9. Even with the increasing number of foreign competitors
launching into the Malaysian market, local SMEs still have great opportunities if they are able
to understand the various consumer needs and wants of each ethnic group and find these
niches to be large enough to sustain a new business. The downside of this issue however is
that targeting specific ethnic niches may not provide a market large enough to develop any
economies of scale and the firm will not be able to grow past a certain point.
The Role of Product Development in the Enterprise
As mentioned in the introduction, new product development is the manifestation of the idea
to exploit the chosen opportunity. It is the centre of all strategies and the vehicle that will get
the enterprise going in the market. New product development is the chosen basis of growth
for companies like Siemens, Nokia, Sony, Apple and Glaxo of which they have completely
relied upon as a strategy. These companies are what they are today because of new product

4. development. The place of new product development in the web of company strategies and
operations is shown in figure 6.1.
Figure 6.1. The Relationship of New Product Development to the Enterprise
Sales Finance Profit
s
Strategic
Marketing Management
Process Development
Standards
Skills & Learning
New Product
Resources
Development
Production
Intellectual Property
Regulation Product Design
Strategy
Supply
Chain
Purchasing Management
Growth Accounting Survival
Whether an enterprise is a home based industry, a manufacturing operation or a service
business, the new product development process is paramount to developing the overall
direction of the company. In most cases, it will be the only source of revenue for the venture
and total means of survival, as new product development will set the whole future scenario
for the enterprise. If the new product fails to reflect a need in the marketplace, it is most
likely to fail, beginning heavy consequences to the enterprise. If the new product is not
differentiated from competitors’ products, this will lead to tough competition and price
cutting, which will erode potential enterprise revenues and make it very difficult for the new
enterprise to survive in an industry of stronger and larger firms. Conversely, if the product is
highly differentiated from competitors’ products in the marketplace, the new venture will
have to take enormous efforts to establish it in the marketplace, requiring a lot of time and
resources to do so.
Growth to a sustainable size and direction are two of the early primary objectives of the new
enterprise. These early on override profitability, organisation and efficiency in the early part
of new enterprise development. Gibb and Scott developed a strategic small business model
which shows the factors which influence growth of the enterprise10. This model provides a
framework for SME development that incorporates most of the strategic issues involved in the
‘top down’ corporate planning models of Ansoff, Porter and Steiner, from a micro perspective.
The model has been developed on the assumption that growth is extremely important to the
SME to reach minimum economies of scale, growth is synonymous with success and growth
is regarded as economically desirable because SMEs are regarded as the basis of future large
firms and generators of employment11. Gibb and Scott’s model assists the enterprise
determine how to change, accounting for the dynamic environment the new enterprise must
face in developing its strategic direction, with consideration of its internal capabilities.

5. Gibb and Scott’s model is broken down into five components. The performance base
represents a profile of the existing business which can be broken down into sub-components
like market trends, which would include product and marketing mix and competition,
production trends, which would include measures of utilisation, efficiency and quality, etc.
and financial and management trends, which would include issues like net worth, liquidity
and gearing. This would be very similar to the position audit in the conventional strategic
planning process as is espoused by writers like Steiner.
The base potential for development is the overall strength of the business and its capabilities.
This would include many parameters that would influence the firm to change and grow, such
as the firms liquidity, technology, physical assets, human resources, accumulated experience
of markets, customers, product development, financial and networking, the personal
objectives of the founder and influence of family and peers, his or her personal capacities,
visions and attitudes and the ideas base of the new venture or existing enterprise for the
development of existing and future products, entry into what markets and ambitions for
growth. This would equate to the resource audit in conventional strategic planning.
The key internal and external influences on development is very similar to the strengths,
weaknesses, opportunities and threats (SWOT) analysis found in most strategic planning text
books. The Gibb and Scott model is shown in figure 6.2. below;
Figure 6.2. A Model of Growth Through Product/Market Development
Where the Business Could Go
The Outcomes
(Emerging Targets)
Size and Depth of Change
Key Internal Key External
Influences The Process Influences
TIME
On the of On the
Development Product/Market Development
Process Development Process
The Base for Potential Development
Where the business is
currently (Performance)
Gibb and Scott (1985)
The above model was developed on the basis of researching how 16 SMEs approached the
issue of product/market development, from where the following assumptions of how SMEs
undertake this activity were derived;
1. Planning takes place around a specific project or number of small projects,

6. 2. Strategic planning in any formal way is unlikely to exist, but through the development
of a specific project a certain degree of strategic awareness will develop, without it
the firm will run into blind alleys,
3. The absence of formal plans may not reflect on the capability of the SME,
4. The product/market development is highly dynamic characterised by a great deal of
learning during the process by the founder/owner manager of the SME – they will
usually take the approach of coming up against problems and solving them,
5. The development process will not necessarily reflect itself in traditional indicators like
increased revenue and employment,
6. Lack of growth in the SME may not necessarily reflect a lack of ideas for
development, growth is heavily dependent upon the founder/owner manager having
time and resources available, which is an important factor in taking a proactive
approach to development,
7. External information is more likely to be acquired by the founder/owner manager
through friends and networks rather than from secondary data and information and
how dependable this information is will depend upon the quality and variety of the
network, and
8. Strengths and weaknesses of the base will be an important factor in the eventual
success of the new development.
The Gibb and Scott model allows SMEs to fully take account of administrative and institutional
blocks and hindrances, such as ‘red tape’ and bureaucracy and incentives and other
assistance available. Internal factors such as capabilities and resources can be matched
against constraints and opportunities in the external environment to determine a way forward
for the enterprise. The model more accurately reflects the development of an SME where the
influence and attitudes of the founder/owner manager are strongly reflected in the process.
Fundamentally the new product development process is very similar between large, very
large, SMEs and even micro-enterprises. There is very little difference in the information
required to undertake the process and the steps that need to be taken. In the new venture
however the new product development process is haphazard, flexible and almost completely
informal, while still achieving the same end result as much larger companies. Although many
academics and practitioners advocate a formal new product development process, there is
little evidence to suggest that any formal process is more effective than the way a new
venture/entrepreneur undertakes new product development. In fact many corporate
organisations are looking for ways to make their organisations more entrepreneurial.
The Development of New Products
Companies have a number of options to grow. A company can expand its geographical area,
i.e., launch its products in new markets, acquire new businesses and their products, or
develop their own new products. Without new product development, the option of
geographical expansion is limited because in today’s international markets, companies usually
face either the same competitors or different competitors with similar products. Even a
company with a product based on a new breakthrough technology cannot maintain its
competitive advantage forever and must continue to develop or acquire new products in
order to keep in front of its competitors who will eventually catch up with them.
Products have a limited life and new products must be created to replace those near the end
of their lifecycle. Markets and technologies are changing quickly even in the most stable
markets, which is leading to shorter product lifecycles. If one observes the market brands
have long lives but the products under the brand umbrella are continually changed and
updated almost in a seasonally fashion. Thus companies which don’t continue to introduce
new products run the risk of becoming irrelevant to the marketplace. Markets and industries
are changing so rapidly that 40% of the Fortune 500 companies that existed in 1975 do not
exist today12.

7. New product development is an important aspect of the competitive environment. If existing
companies don’t launch new products, it is most likely their competitors will gain advantage
in the marketplace, which will eventually erode the company’s position in the marketplace
and later effect revenues, profitability and survival. New products are a strategy that
companies use to introduce enhancements into the market so they can claim benefits over
their competitors. Today on average, new products (those introduced into the market within
the last 5 years) represent 33% of a company’s sales13. In some markets, mobile phones,
televisions, white goods, automobiles, etc., this figure is 100%.
While new product development is one of the most important aspects of competitive strategy,
it is also one of the riskiest. New product failure rates have risen from 45.6% in 1961 to over
80% today14. Cooper’s definition of the new product development process underlies it’s
strategic importance to a firm as …”a defined product strategy for the business goals and
objectives clearly communicated to all, there are clearly defined users of strategy focuses to
give direction of the business total new product effort, i.e., where you want to go. The basic
new product effort has a long term thrust and focus,”15. Trott’s definition “the actual
development of new products is the process of transforming business opportunities into
tangible products”16 links new product development to the process of exploiting opportunities
in the entrepreneurial process.
Finally, companies in the same industries, with similar products, have basically the same
strategy choices and generic themes to pursue win similar groups of customers, thus product
development is one of the major ways a firm can differentiate itself from the its competitors.
Types of New Products
Amongst the large number of products coming out onto the market each year, it is
sometimes very difficult to distinguish what is really a new product. One could not claim that
a new chilli sauce or sambal balacan launched into the market to be a new product unless
there is some form of differentiation from what already exists in the market. Even if there
was some differentiation, this must be recognised by consumers. What is important according
to Rogers and Shoemaker is that the product is perceived to be new by consumers17, i.e., the
product is perceivably different, relative to what is already on the market. The overwhelming
majority of products launched onto the market are usually variations of existing products,
with changes in either the brand, level of service, technology, features, packaging, price, or
quality dimensions, or a combination of them. Only about 10% of new products introduced
are both new to the company and the market – an item not sold by that company before or
an item not sold in the market before18. Thus there are many ways of classifying new
products, given the many forms they can take.
• New to the world products are the first of their kind in the market. They are
usually something invented or enhanced by a significant change or advance in
technology, such as a new discovery or different method utilising modified processes,
materials or methods in producing a product. These products would revolutionise the
market segment or even create a new market, which may require significant
consumer learning to become familiar with the new product. Examples of this would
be the new micro-chip processors, Intel has just announced, which will make
computers more energy efficient, light weight and smaller19, the progression from
land line based telephones to mobile phones and now hand phones, the progression
from typewriters to electric typewriters to word processors and personal computers,
the change from wood, to gas to electric and microwave cooking and the Sony
walkman and Ipods. New to the world products make up only a small proportion of
new products and they are perceived as the riskiest types of new products to launch
as manufacturers have to deal with consumers inexperience with the new concepts
and incompatibilities with their prior consuming experiences, which act as barriers to
consumer adoption20.

8. • New Product Lines (New to the Firm) are not new to the market but new to the
firm launching them into the market. This is where a company would enter a market
for the first time, where success and profitability will depend upon the timing they
entered the market, i.e., as a pioneer, early follower, early or late majority or as a
late follower. The later the company enters the market, the less will be the concept
risk taking, but the greater will be the competitive risk. Intellectual property value
decreases as more firms enter the market with similar competitive products, leaving
little room for product differentiation. Figure 6.3. below pictorially shows the situation
in-terms of competition, potential profitability and IP value in relation to the time a
firm enters a new market for that company.
Figure 6.3. Competition, potential profitability and IP value in relation to the time
a firm enters a new market for that company
• Additions to Existing Product Lines are products that extend a range marketed
by a firm. The product is different from existing products either in function or
consumer application or as a variant of an existing product, such as a different pack
size, flavour or fragrance, etc. Companies usually introduce additions to existing
product lines to enhance their position in the market they are competing in,
consolidate their position, to fill a perceived gap where consumers aren’t served well
or to react to competitors.
• Improvements and Changes to Existing Products are undertaken to improve
quality or make the product more convenient to use by the consumer. This is often a
continuous process by companies, but when the product has been overhauled
substantially, companies may undertake a relaunch or promotional campaign to
inform consumers about the change. Sometimes products are phased out with a
replacement product to maintain their competitive position in the market. This
happens continually in the mobile phone market, sometimes a number of times each
year.
• Product Repositioning are products that are retargeted at new consumer groups
or a larger proportion of consumers sharing the same wants. For example, a
detergent may be repositioned in a new pack size to attract new consumers, or
aspirin was repositioned as a remedy for blood clots and prevention of strokes and

9. heart attacks from an analgesic, which was under attack for health reasons and
heavy competition from paracetamol based product.
About 10% of new products launched are new to the world products, which increases to
around 18% in moderate to high tech industries. New product lines are about 26% of new
products, but much higher at 37.6% in moderate to high tech industries. Additions to product
lines are around 26%, but dropping to 18% in high tech industries. Product changes and
improvements are around 26% of new products, 19.8% in moderate to high tech industries
and product repositionings are 7%, but almost non existent in moderate to high tech
industries21. Thus, the majority of new products are developments and variations based on
existing products.
Products can be either goods or services. The primary goal of a product is to fulfil a service
that enhances human experience22, which both goods and services can do. Both have
tangible components for example, a facsimile machine is a good providing a service, cars
must be serviced after purchase, a haircut provides something tangible, a written insurance
policy is something tangible, providing assistance in time of need, people will buy a cup of
coffee at the Coffee Bean, even though they could purchase a cup of coffee much cheaper at
a kedai kopi along the side of the road and a university education produces something
tangible. Looking another way, just because something can be stored in a warehouse as
inventory doesn’t mean that it doesn’t need a distribution system23, such as insurance
industry.
Entrepreneurial New Product Development
No standard set of procedures or processes exist in new product development. There are
department stage, activity stage, cross functional, decision stage (stage-gate) and process
models espoused in the literature. Different industries take different orientations towards new
product development, where for example pharmaceutical companies will be dominated by
scientific, technological and regulatory issues, while food companies are dominated by
consumer research that leads to minor product changes. Yet some industries still take a
craftsman approach in the joinery, furniture, décor and kitchen refurbishing industries. Even
the moderately high tech fragrance business creates products through more an artistic
approach, rather than a scientific approach, which has as much to do with psychology,
consumer tastes, blending just as an artist on canvass would do as it does with chemistry24.
In reality, new product development has as much to do with making assumptions, short
cutting the logic process through the use of heuristics, which are little rules of thumb that
firms with experience in the industry have grown to believe in25, such as ‘30% of people who
hear about a new brand will try it’. Hunches, gut feeling and intuition are heavily relied upon
to progress products, contrary to what most of the literature about new product development
advocates.
Successful new product development comes from experience and with it, the individual
discipline and maturity to know when they are biased in their thinking of potential success or
failure of a product. Industry knowledge is very important, but it must be used objectively
without emotional baggage, i.e., ‘we have a long history in that market and it is ours’, or ‘we
have always been successful with new products in this market’, etc. These are cognitive
biases that can lead to failure, that some would call market arrogance. As MNCs employ more
graduate executives to fulfil managerial roles in companies without climbing the corporate
ladder so as to speak, the insider industry advantage is getting less and less. Marketing
executives without grass root industry experience, passion for the industry and a tangible
‘feel of it’, relying primarily on data for decisions, potentially lay open some opportunity for
the entrepreneur who has passion, diligence and sound intuition. The ‘new’ executives, often
surrounded with market research and advertising consultants with the power to sign check
books, so often get things wrong and wonder why a champaka fragrance – as beautiful as it
is, is not accepted by consumers who associate the fragrance with grave yards and jasmine is

10. rejected by 80% of the consumers. The facts are, agreed by the majority of all literature in
new product development is that;
• Less than 5% of new products launched on the market are successful,
• Out of 100 new ideas, less than 2 become a commercial reality,
• Most companies are followers in the market and not innovators,
• Very few really novel innovations are ever launched commercially, and
• Most new products are actually only incremental steps in enhancement of products,
rather than something completely new.
Although new product development is one of the most important strategies for sustainability
of a company, too many companies turn away from innovation and cut costs and expenses as
a reaction to declining performance, without looking into the root causes, which may be
product life-cycle based or competitive based, which require a new product development
solution. Usually a panic response further stifling innovation of the company. The new
product development option is often seen as a more difficult alternative, as under pressure,
the following problems arise;
• Finding the right opportunities and appropriate innovation necessary to develop
them,
• Reducing development times without reducing quality and innovation,
• Building and maintaining brand equity through a strong product,
• Integrating market, design engineering and production processes to produce, and
products that are considered useful and desirable by consumers.
The above is the trap for those who do not view new product development as a continuous
process, even if it is an implicit and background process, within the company and the minds
of those who manage it.
The entrepreneur, especially after start up and turning into an SME can be trapped by the
scenario above, lending support to Drucker’s postulation that entrepreneurship is only a stage
in the development of a firm and the entrepreneurial state can be grown out of26. This is
compounded by the small firm’s lack of resources, time, technology and expertise to research
new ideas and innovations to develop the business27. SMEs are even more limited in their
strategic options because of their inability to influence the environment and marketplace, due
to their size like larger companies28. Cupelled with lack of knowledge29, the entrepreneur
requires specific strategies and processes to take account of these weaknesses and navigate
its birth and growth in a very focused way, that adapt to rather than change the environment
and marketplace.
Strategy is the action a company takes to achieve one or more of its goals and the strategic
management process is the way in which managers develop these strategies30. New product
development as discussed in the introduction is the manifestation of strategy and will dictate
how the company interacts with its environment and how successful and sustainable the
company will be in the future. Due to size and age of a start-up or SME, the development
process will differ greatly from large firms and will take place ‘bottom up’ or by the founder
him or herself31 and primarily involve the skilful utilisation of assets, skills and resources, to
take advantage of their best competences in developing new products and entering the
marketplace. Thus the entrepreneur or SME will have a set of competences that are relatively
unique to him or her32, which will provide the basis of future action. This is the nexus of
creativity, innovation and selected strategy, discussed in chapter 2 that the entrepreneur uses
to create a market niche or position with some form of competitive advantage, utilising what
he or she has in terms of ideas, competences and resources. How these factors are
integrated together will determine the entrepreneur’s capability and performance in the
marketplace. To achieve this, the most important resource is skill and knowledge possessed
by the entrepreneur. To a great degree this skill can only be learned through experience and
difficult to imitate from other firms33. This is not different from large firms which learn as they

11. go in the new product development process, as each product/market is unique, how to
exploit opportunities and neutralise threats. Though intangible, this is a core aspect of
competitive advantage, unmeasurable in any conventional sense, but written about heavily by
Peter Senge and Chris Argyris, outlined previously in chapter 1.
Following the above arguments and problems firms face in new product development, the
most important aspects of entrepreneurial new product development is a continual strategic
awareness of the environment by the entrepreneur and his or her capabilities in innovation,
production and management to see through the selected opportunity into an operational
reality. From the point of view of a start-up or small firm, these activities do not require the
‘specialist skills’ advocated in many strategic planning34 and new product development
processes. There is little evidence to suggest that these processes create more success than
the way a new entrepreneur does things.
Figure 6.4. Entrepreneurial New Product Development, Competencies and
Competitive Advantage
Ideas Opportunities Solutions Realisation Performance
Management
Capability
Spots Evaluates Selects Targets
Creativity Innovation Strategic
Thinking Differentiation
Competitive
Advantage
Capabilities Governing Competitive Costs: to customers
Scope Knowledge:
Industry/market/technical/
process
Competencies Relationships:
Customers/suppliers/
Entrepreneurial, Opportunity
distri butors/relative power
Identification, Network, Conceptual,
Structure: Ability
Organisational, Strategic, Technology,
Commitment, Resources
Figure 6.4 above shows the importance of personal competencies in the entrepreneurial
process, where product development is the key to developing the strategy to realise
opportunities. Performance and growth depends upon a number of factors, which are
governed by the core competencies of the entrepreneur or organisation35. This would suggest
that success and growth has a lot to do with these competencies and investment in the
development of these competencies is important in establishing, maintaining or increasing the
lead over competitors, as it is competencies that enable one to exploit opportunities.
Competencies influence the ability to develop ideas and screen them for opportunities and
select the ones that can be best realised. Competencies also influence the ability to develop
competitive advantage, which ultimately differentiates the product and venture from others in
the market. Selection of the correct solution to identified opportunities, the ability to
understand and create some form of competitive advantage and the ability to manage or

12. organise the enterprise efforts are the factors that influence performance. Through
competencies local companies are able to fight international companies entering the market36
due to their better knowledge of the local situation.
Creativity, Innovation and Strategic Thinking in the New Product
Development Process
The initial process of contemplating the development of a new product is perhaps the most
important aspect of the whole process. It is here where new ideas are spotted, evaluated as
to their opportunity potential, the technology and competencies required considered, various
strategy scenarios mentally extrapolated out to evaluate their effect and benefit to the
enterprise, so that the best strategy solution can be realised. This is the most fluid and
unstructured part of the process where all these possibilities are sorted and evaluated in a
way that does not resemble real and tangible work37. The quality of information used (market
data, knowledge of customers, technology costs, etc) has great bearing on the outcome and
final result of the product development process.
This is a creative process (explained previously in chapter 3) to seek some type of innovation
to warrant the effort to launch a new product onto the market that will have some
competitive advantage over potential competition, whether it be through lower costs,
utilisation of better knowledge of the marketplace, better relationships and ability to utilise a
channel of distribution, a better ability to organize the delivery of product or service or
operation in the market, which will lead to product differentiation from those competitors to
provide some market advantage. Innovation is thus the source of new products, strategy and
competitive advantage of which Drucker postulates there are seven primary sources38,
outlined in table 6.1. below;
Table 6.1. Drucker’s Sources of Innovation
Source Explanation Examples
The Success of a revolutionary product or the • Apple computer
unexpected application of technology from one • Rapid decline of Proton’s
success, industry to another, sudden or unnoticed market share
failure or demographic changes caused by wars,
external insurgencies, migration, etc.
occurrence
An incongruity A change that is already occurring or can • Sugar free products and
between be made to occur within an industry. It sugar replacements due
reality as it may be visible to those inside the to concern for health
actually is and industry, often overlooked or taken for • Increasing demand for
what it ought granted. travel and holidays due
to be to increasing incomes
and leisure time
Inadequacy of An improvement in process that makes • Caffeine free products
an existing consumers more satisfied based on an • Microwave ovens
technology or improvement or change in technology. • Mobile phones
business
process
Changes in New ways and means of undertaking • Health care industry
industry or business based on identified opportunities • Education industry –
market or gradual shifting of the nature of the private education
structure industry.
Perceptual Changes in peoples awareness founded • Leisure and exercise
changes on new knowledge and/or values or industry aerobics & gyms
growing affluence leading to new fashions
and tastes

13. Demographic Gradual shift of demographics in • Establishment of more
changes population by age, income groups or retirement homes
ethnic groups, etc
New New knowledge or application of existing • Video and VCD industry
knowledge theoretical knowledge into an existing • Robotics
industry that can create new products not • Biotechnology
previously in existence
Drucker further postulates that the seven sources of innovation can be manifested into four
types of product/strategy development as summarised39 in table 6.2. below;
Table 6.2. Drucker’s Four Types of Innovation for Product/Strategy Development
Type Description Examples
Invention Totally new product Wright Brothers – airplane
Edison – light bulb
Bell – telephone
Extension New use or different application of an Kroc – McDonalds
already existing product Wilson – Holiday Inn
Duplication Creative replication of an existing concept Wal Mart – Dept. Stores
Pizza Hut – Pizza Restaurant
Synthesis Combination of existing concepts and Smith – FedEX
factors into new use Merryil Lynch – Home equity
financing
Product and strategy innovation is the means by which markets develop. Schumpeter termed
this process creative destruction, where the market evolves through a process of new
products being launched by firms which supersede those already in the marketplace40.
Outdated products will disappear and overtime the market will be represented by a range of
completely new products. This can be very easily seen in the automobile and mobile phone
industries very quickly. This happens in all markets, which can be seen in Figure 6.5. showing
the product evolution of the laundry detergent.
Figure 6.5. The Evolution of the Laundry Detergent

14. The Evolution of the Laundry Detergent
Pre 1900’s
Laundry Blue
Up to Late 1940’s Solid Soaps &
Powders
Laundry
Detergent Bars
1950’s until present Laundry
Detergents
Powders
Laundry Detergents with
Liquids Special
Detergents Additives
Concentrated
1980’s until present
Laundry
Powders
Laundry
Detergent
Tablets
Product evolution occurs primarily through incremental product benefit improvements by
firms launching products into the market to gain advantage over competitors. This is mostly
predictable following changing consumer tastes and lifestyles. Most new products come out
of this process and firms introduce these products in other international markets, thus
intensifying competition across the globe. Then from time to time a firm develops a new
innovation based either upon a new technology or by picking up some technology from one
area and transferring it to their target market to create a completely new form of product in
that market. In the evolution of the laundry detergent the development of the liquid laundry
detergent in the late 1970’s is an example of later and the switch from soaps to synthetic
surfactants is an example of a completely new technology influencing the form of the
product. The key factors influencing the process of product evolution in a market segment
can be best illustrated by the SET diagram developed by Cagan and Vogel41.
Figure 6.6. The Product Opportunity Gap

15. Social
Social and cultural trends
and drivers.
Reviving historical trends
Product
Opportunity
Gap Economic
State of the economy
Technology Shift in focus on where
State of the art and to spend money
emerging technology Level of disposable
Re-evaluating income
existing technology
The rapidly rising levels of affluence in Malaysian consumers, along with most of the rest of
the world, the opening up of the ASEAN economies to open foreign competition and
exponential improvements in technology are rapidly decreasing the life cycle of products in
the market place. Malaysian consumer tastes are very different from a decade ago and over
the next decade will undergo further change as consumers respond to health, leisure and
lifestyle issues. Coupled with the improvements in products that technology, it will no longer
be able to be assumed that product lifecycles will last more than five years as products will
quickly be superseded with new models, versions and complete new designs based on newer
technologies. Advances in ICT and biotechnology will bring many new products and even
allow for the development of whole new industries, as we have seen with the development of
ipods, mobile phones, new medicines based on biotechnology and the like
Innovation will also affect the ways products and services are presented to consumers by
making products more accessible and more convenient to use like the development of
prepaid mobile phone services where accounts can be topped up at provision stores,
convenience stores and petrol kiosks. Re-organising how existing businesses are run has
brought low cost air travel to the region through Air Asia.
Products and services will be also greatly affected by Government regulation. Carbon credits
will force the development of green engines and the increased use of bio-fuels in the
transport industry. Materials used in the manufacture of products will be more heavily
scrutinized like cosmetics forcing in some cases the reformulation and even complete
rethinking of products and their redevelopment. Occupational health and safety issues will
force more consideration about safety issues. Technology development will also create new
materials that will perform better and be more cost effective than existing ones. All the above
scenarios are factors for product evolution, which will be driven through innovation. The
trends towards shorter product lifecycles over the last 50 years42 is shown in figure 6.7.
below;

16. Figure 6.7. The Product Life Cycle Has Shortened Dramatically Over the Last 50
Years
Pharmaceuticals
Food Items
Tools
Fifty Years Ago
Toys
Today
Cosmetics
0 10 20 30
Length of Life Cycle (Years)
Rapid technology development, the ability of strong firms to exercise some degree of control
over the channels of distribution and increasing internationalization of the market is creating
greater market concentration. This can be clearly seen in the Malaysian retail sector where
chains like Giant, Carrefour and Tesco are quickly increasing their market share over more
traditional retail outlets. The effect of market concentration on manufacturers and suppliers is
to reduce their numbers and force some product rationalization where products cater for the
large consumer groups. Increasing market concentration defines the market into more rigidity
and initially creates focus on the major market segments.
At some stage market concentration will reach a point where smaller market segments are
failed to be satisfied by the smaller number of firms operating in the market. If these
unsatisfied market segments are large enough, opportunities develop for smaller firms to
move in and exploit these segments. The market will eventually see a renaissance of smaller
firms offering niche products to unsatisfied consumers sometimes through alternative
channels of distribution. An example of this is the growing number of herbal products and
cosmetics marketed through direct marketing channels.
New opportunities occur when a market becomes concentrated, as further growth in sales by
larger firms doesn’t correlate with increased profits as the cost to service small segments is
high. Smaller firms are able to achieve better profits without direct competition in these
unmet segments by focusing on the most profitable customer niches and keeping costs low.
Companies who are able to scale down the size and capital costs of routine technology used
in the industry, may be able to develop new sources of competitive advantage43. Figure 6.8.
shows diagrammatically the relationship between market concentration and level of
opportunities in a market.

17. Figure 6.8. The Relationship Between Opportunities and Market Concentration
Opportunities
Firms
Market Concentration
Invention Verses Innovation
Many people relate new product development to invention. However invention only makes up
a small part of new products and less than 2% of all patents are actually commercialized.
Inventors are usually good at developing ideas into concepts and tangible items, but not all
inventions satisfy consumer wants and needs. It is particularly difficult for an inventor to
successfully develop a product in the market by themselves because of the tremendous
resources needed to develop the market to make consumers aware and educate them about
the new product. Many inventions, although novel, fail to solve any real consumer needs, or
fail to satisfy them effectively and thus fail to gain much interest from consumers.
An invention will remain a conceptual idea without innovation. It is only really a starting point
in the innovation process which is concerned about turning the idea into a practical and
commercial application. Inventions involve creativity, which is only part of the whole product
development process as explained by Myers and Marquis44 ….”Innovation is not a single
action but a total process of interrelated sub processes. It is not just the conception of a new
idea, nor the invention of a new device, nor the development of a new market. The process
is all these things acting in an integrated fashion”.
Some innovations are radical and lead to great changes in the lives we lead as did the
products45 listed in table 6.3. to our society. But many inventions have come by accident46
and it took innovation to determine potential commercial applications. These examples show
that the majority of these innovations are developed by organizations rather than individuals
due to the need of large resources and technical knowledge. Technical and product
innovation often leads to other forms of innovation such as organizational change to
effectively implement the firm’s strategies based on new products developed into the market
place, as can be seen in the communications and air transport industries.
Table 6.3. Breakthrough Innovations That Changed Our Lives
1. Personal Computers 2. Microwave oven 3. Photocopier

18. 4. Pocket Calculator 5. Fax machine 6. Birth Control Pill
7. Home VCR 8. Communication 9. Bar Coding
Satellite
10. Integrated Circuit 11. Automatic Teller 12. Answering Machine
13. Velcro Fastener 14. Touch-Tone 15. Laser Surgery
Telephone
16. Apollo Lunar 17. Computer Disk Drive 18. Organ Transplanting
Spacecraft
19. Fiber-Optic Systems 20. Disposable Diaper 21. MS-DOS
22. Magnetic Resonance 23. Gene-Splicing 24. Microsurgery
Imaging Technique
25. Camcorder 26. Space Shuttle 27. Home Smoke Alarm
28. CAT Scan 29. Liquid Crystal Display 30. CAD/CAM
Table 6.4. Accidents That Innovation Turned Into Successful Products
A Raytheon engineer working on experimental radar noticed that a chocolate bar in his
shirt pocket melted. He then ‘cooked’ some popcorn. The firm developed the first
commercial microwave oven.
A chemist at G. D. Searle licked his finger to turn a page of a book and got a sweet
taste. Remembering that he had spilled some experimental fluid, he checked it out and
produced aspartame (Nutrasweet).
A 3M researcher dropped a beaker of industrial compound and later noticed that where
her beakers had been splashed, they stayed clean. ScotchGard fabric protector
resulted.
A Dupont chemist was bothered by an experimental refrigerant that didn’t dissolve in
conventional solvents or react to extreme temperatures. So the firm took time to
identify what later became Teflon.
Another scientist couldn’t get plastic to mix evenly when cast into automobile parts.
Disgusted, he threw a steel wool scouring pad into one batch as he quit for the night.
Later, he noticed that the steel fibers conducted the heat out of the liquid quickly,
letting it cool more evenly and stay mixed better. Bendix made many things from the
new material, including brake linings.
Product Life Cycles
As mentioned throughout this chapter, products have a life cycle. The product lifecycle of
products is a reason why companies must continue to develop new products to replace those
in the market place that have come to the end of their useful life. It is extremely difficult to
develop strategy according to the product lifecycle because identifying its various stages is
complex47. Strategy can be both a cause and effect of each stage and thus it is difficult to
forecast sales for each stage in the cycle. However, understanding a products position in the
cycle and the factors that can influence stage, consumer tastes, technology and competition
can greatly assist in strategy development.
Products take a predictable sales and profit path over a limited lifetime, which five stages are
clearly defines48, as shown in figure 6.9.

19. Figure 6.9. The Product Lifecycle
Sales & Profits
Sales
Profits
Time
0
The Product
Development
Introduction Growth Maturity Decline
Stage
Losses & Investment
1. The product development stage where an idea is evaluated and developed into a
commercial product. This is where time is spent on developing the product without
any sales revenue at all with increasing costs as time goes on. For an entrepreneur,
especially during start up this can be a very straining upon personal resources,
especially if full time is being devoted to the project without any other source of
income.
2. The introduction stage is where the product is first introduced into the market.
Usually this period takes time, especially during a new enterprise start up as gaining
access to distribution channels is also a learning experience with much trial and error
being undertaken with potential buyers. Established companies with strong
relationships with customers may be able to gain much quicker distribution. However
once distribution is established there is a period where the product moves very slowly
and sales growth is slow while potential customers evaluate the product for potential
purchase and use. The length of this period depends upon many factors, for example
how brand conscious consumers are if the product is similar to others, etc. Table 6.4.
Below shows the expected slow sales growth time for various types of new products.
Profits will be negative or very low during this period because of the high costs of
introduction and necessary promotion required. In the introduction stage a
percentage of sales cannot be used through fund accrual, and thus must be part of
the initial investment. Many products fail due to firms not reserving funds for this
purpose. In most Malaysian cases, especially through retail channels, the firm will
have to finance the movement of stock into the channel for a long period of time,
30-180 days.
Table 6.4. Expected Sales Growth Time Scenarios for New Products
Type of New Product Situation/Scenario Expected Sales growth
Time
New concept products like Consumers will take time to Products will for a period of
ultra concentrated become exposed to the time move very slowly off the
dishwashing liquid, coffee concept and benefit of using shelf before rapid sales

20. creamer and instant coffee. the products. Distribution will growth will occur. This could
take time to gain into the take up to a year in some
more conservative channels. circumstances.
Industrial Products and
Business to Business
Products
The introduction stage is the time when focus must be put into persuading
consumers to switch brands or in the case of a new to the world product or a
significant innovation from existing products invest in educational promotional
activities. Pioneering products although have the first to the market advantage as an
incumbent product are very susceptible to followers who gain some advantage
through learning from the pioneer’s mistakes, especially if they can exercise stronger
influence over the channels of distribution. The pioneer to maintain market leadership
must develop a comprehensive defensive marketing strategy (pricing & promotion,
etc) to fend off challenges49 from future competitors.
3. The growth stage will be entered into if consumers accept the new product and
continue to repurchase it on a regular basis. If this becomes the case then sales will
begin to rapidly rise from faster shelf off-take and gaining new distribution points
from conservative channel outlets that held of on initial purchase and support of the
new product. New competitors will be likely to enter the market and existing
competitors likely to retaliate through discounting and more vigorous merchandising
at store level to maintain their market-share.
As the Malaysian retail sector is a supplier driven market relying on continuous in-
store activity (promotion & merchandising) the new product must be continually
promoted during the growth stage. On an initial low sales base up to 40% of gross
sales are needed for in-store (below the line) activities. The potential strain this can
cause on funding should be underestimated as these costs will be deducted from
invoice revenue. However as sales increase and promotional costs can be allocated
across a larger revenue, the percentage required on in-store funding will lower to
somewhere between 10-20%. The funding effect on a firm during the growth stage
of a product is shown in the example in Table 6.5.
Table 6.5. Effect on Sales Growth on a Firm’s Funding During the growth Stage of
a Consumer Product.
On the manufacturing side, increasing sales volumes allow the firm to purchase
larger quantities of raw materials and packaging and negotiate lower prices leading
to higher manufacturing margins and profits. The time/experience gained also allows
fine tuning of the manufacturing process to make savings through increases in
efficiency through process and labour experience. It is not unusual for direct
manufacturing costs to come down 30% during this period. Likewise the
time/experience factor allows improvement of product quality where the usual
unexpected manufacturing and packaging compatibility problems are ironed out.
The primary objective of the firm during the growth stage is to maintain steady sales
growth until the cost of increasing sales is higher than the extra profit gained. Shelf
off-take velocity, distribution and competition are the three major factors that the
firm needs to consider during the later period of the growth stage. Shelf off-take
velocity is influenced by advertising and in-store promotion and is usually
manipulated and maximized through coordinated promotional campaigns with
corresponding in-store activities, utilizing purchased shelf space from stores,
participation in gondola or block promotions along the aisles and providing discounts

21. at strategic seasonal times, i.e., food items leading up to major festivals. Gaining
extra distribution points in the existing channel and looking for distribution points
outside the existing channel increases marginal sales of the product, i.e., moving to
the hotel trade to gain extra customers. Competitor activity will influence sales
growth according to the effort and activity they undertake in the market-place to
counter the new product and promote their product. Competitors can be countered
to some extend by adding new product benefits and variants to gain further
competitive advantage over the competition, hence the importance of holding back
on some potential product benefits that could have been incorporated into the
original product, for some future time when those features can be utilized for market
leverage over competitors when needed. This is a common strategy used by firms in
the telecommunications, electronic, automobile and other consumer good industries.
Figure 6.10. shows the relationship between sales, profits, shelf velocity, extra
distribution and competition during the growth stage.
4. The maturity stage is where sales slow down and plateau. Products usually enter
this stage when there are a number of competing products in the market. During this
period, competitors will use promotion and discounting to maintain sales levels and
target erosion of competitors’ sales to gain market-share. Competitors will also
launch new product variants with added features and benefits to switch consumer
loyalty towards their brands. During the maturity stage, where competition is at it’s
peak, profitability will begin to decline as extra promotion is needed and firms begin
discounting and lowering prices. In markets where the channels of distribution are
concentrated, i.e., international retailers, some of the smaller brands will be dropped
from product ranges and even a category rationalization can take place, leaving only
a small number of brands.
Firms need to employ strategies to maintain their market-share and sales level, which
mentioned above will erode profitability. Competitors will attempt to vary and
segment the market with new products with added features and benefits and seek
new customers through developing new market segments, i.e., development of a
special bleach for washing, rather than general purpose. Failure to do this would
normally result in loss of market-share in an competitive environment and relegation
to marginality and almost total forced withdrawal from the market.
5. Eventually the product falls into the decline stage where sales begin to go do
almost steadily. This can be a very gradual process in stable technology markets like
food and household products or be extremely rapid in technology based products like
media and communications. The speed of the decline stage is usually governed by
the velocity that consumers change their preferences away from the product towards
another. In food and household products this is normally gradual, as is with
insecticides, or rapid when VCRs where replaced with VCDs and later DVDs in the
home media industry, with the arrival of new technologies.
When the cost of managing the product in the market becomes high in comparison
with the returns or the marginal utility of focusing on a new product with higher
potential returns is better, most medium and large companies with large product
portfolios will usually drop the product off. Smaller companies tend to hold onto a
product until low sales make the product uneconomic to further produce the product.
Sometimes when all brands have been withdrawn from the market, a small company
can hold on to a minimum level of sales for a number of years without needing to
support the product with promotion and discounts. The shoes polish market would be
a good example of this situation.
The product lifecycle can be used as a tool to understand how products develop, maintain
their position and decline in markets. However it can only provide a conceptual understanding
or guide, rather than a specific basis to develop marketing strategies50, as it is in reality very

22. difficult to actually determine what part of the cycle a product is actually at and which
strategies should be utilized accordingly.
The product lifecycle can be used to examine product categories, which include classes of
products like petroleum and automobiles, product forms, which would define the type of
products, i.e., in the case of automobiles, sedans, vans and four wheel drives and brands,
which are a specific or group of products marketed by a specific firm or group of firms.
Different product categories will exhibit different life cycles. For example, petroleum products
have an extremely long product life cycle because alternative technology and feed-stocks
from renewable resources have not challenged the product category to date, even with all
the publicity and debate about renewable resource alternatives. This can be compared to the
life cycle of a brand of air freshener which is very short. However the product form it
competes in will have a longer cycle than the individual brands marketed within the form, i.e.,
a liquid, aerosol or gel type or household room, cupboard or automobile air freshener. Figure
6.10. below Shows the difference in lifecycles between product categories, forms and brands
in the recording media industry.
Figure 6.10.
Looking at products within the product lifecycle framework can help distinguish between
styles, fashions and fads. A style is a specific form of expression of a product, i.e., in the
automobile example, a sedan or fastback. A Fashion is something that is accepted at a
particular time such as mag wheels or spoilers on cars. Fads are fashions that enter the
market suddenly, become very popular, peak quickly and become unpopular, because they
do not fulfill a strong need or satisfy it well51, i.e., mens’ carry bags as a fashion accessory in
the early 1980s. Styles can last many years and carry a specific consumer segment following,
while a fashion will become popular for a period of time and slowly fad towards another. Fads
will attract a small proportion of consumers for a short period of time. Figure 6.11. shows the
different lifecycle curves for styles, fashions and fads.
Figure 6.11.
Technology and New Product Development
Intellectual Property
Intellectual property can be defined as a legal entitlement which sometimes attaches to the
expressed form of an idea, or to some other intangible subject matter. This legal entitlement
generally enables its holder to exercise exclusive rights of use in relation to the subject
matter of the IP. The term intellectual property reflects the idea that this subject matter is
the product of the mind or the intellect, and that IP rights may be protected at law in the
same way as any other form of property.52 One of the keys to intellectual property is the
concept of novelty which is something that has not been publicly disclosed in any form,
anywhere in the world The basic forms of intellectual property of listed in the table below:
Table 6.x. Basic Forms of Intellectual Property
Term Definition
Commercialisation Commercialisation of intellectual property is
simply about planning how you will take your
good idea to the marketplace. It involves
working the idea into your business plan,
consideration of protection options and
considering how to market and distribute the

23. finished product.
Patent Is an exclusive right granted for an invention,
which is a product or a process that provides
a new way of doing something, or offers a
new technical solution to a problem.
Manner of manufacture A legal term used to distinguish inventions
which are patentable from those which are
not. Artistic creations, mathematical
methods, plans, schemes or other purely
mental processes usually cannot be patented.
Plant Breeders Rights Are used to protect new varieties of plants by
giving exclusive commercial rights to market
a new variety or its reproductive material.
Industrial Design An industrial design - or simply a design - is
the ornamental or aesthetic aspect of an
article produced by industry or handicraft
Trademark is a distinctive sign which identifies certain
goods or services as those produced or
provided by a specific person or enterprise.
Copyright and Related Rights a legal term describing rights given to
creators for their literary and artistic works
(including computer software). Related rights
are granted to performing artists, producers
of sound recordings and broadcasting
organizations in their radio and television
programmes.
Trade Secrets/Undisclosed Information is protected information which is not
generally known among, or readily accessible
to, persons that normally deal with the kind
of information in question, has commercial
value because it is secret, and has been
subject to reasonable steps to keep it secret
by the person lawfully in control of the
information.
Intellectual property must be defined widely to include trade secrets and commercially
confidential information, which can also be called proprietary technology. Patents as a form
of intellectual property rights have issues related to their scope of protection, are sometimes
hard to justify in terms of costs due to the small market the novelty will serve, are expensive
to gain registration and take a long period of time before they are accepted through process
and review procedures53. Jaffe and Van Wijk state that in many jurisdictions patent
enforcement is very difficult due to slow court systems, bias against foreign plaintiffs, lack of
technical competence and a general inability to enforce judgements54. A survey undertaken
by Lessor found that companies tended not to patent their innovations in many cases, due to
the fear that waiting would allow other companies to copy and counterfeit the product first in
developing countries that had markets too small to justify the cost of registering a patent55.
Grubb argues that in biotechnology, patents as a form of intellectual property rights do not
serve the same purpose as in the electronics industry, where patents are used as ‘bargaining
chips’ in cross licensing agreements and patent pooling as there are common product
standards imposed by necessity and regulation56.
There are other alternative forms of intellectual property protection used by companies that
maintain trade secrecy and advantage over competitors. Trade secrets can be guarded and
protected within an organisation by maintaining employment contracts with secrecy
agreements that can be enforced through contractual remedies. These include specifically
tailored production processes, mode and control of reactions and formulations used in the
production of products by a company. Under legal license agreements, this technology,

24. although unpatented can be protected as proprietary knowledge under contract law. The
rapid changing nature of technology and continual improvement upon processes and product,
is itself a mode of protection, as long as the company maintains pro-active R&D in process
and product development. Patents applications can often become redundant before the
application is even reviewed by the patent office in an environment of continual technology
change.

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