Product Innovation

Learning Objectives

I. What is an innovation?

II. Why the case for innovation is even stronger today?

III. Product innovation

i. Explain why some product innovations are unsuccessful.

ii. Examine the process of product innovation.

iii. New Product Development (NPD) framework.

iv. Evaluate the merits of NPD framework.

IV. Why some innovations are popular/unpopular?

© 2013 Berlin Asong. All rights reserved. 2

Innovation

A new idea, practice, process,
product or service that benefits
an individual, group or society.

West, M.A., Farr, J.L. (1990), "Innovation at work", in West, M.A., Farr, J.L. (Eds),Innovation and
Creativity at Work: Psychological and Organizational Strategies, Wiley, Chichester, pp.3-13


novelty
Does it suggest

is a necessary attribute of innovation?


When …and

new to who?


…to the community that
adopts the “innovation” even
though it had long existed?


Is
innovation
Invention

Invention

Not all innovations
are inventions.


TYPES OF
INNOVATIONS

Product/service innovations


Electronic
smartcard
(replaces paper
tickets) for
boarding public
transports in
London.


Process innovations

New ways to achieve an
existing or a new goal.


Finding new
ways to reduce costs,
speed up check-ins,
eliminate delays.

Outsourcing
of call centers.

They cause
adopters to
breakaway from
traditions.
E.g. telephone, PCs, Internet


Feature-led innovation

Augmenting the
attribute(s) of an
existing product,
service, or process.
E.g. microprocessors,
iPad 1→iPad 2→iPad 3.


Modifying the
attribute(s) of an
existing product,
service, or process.


Why should my
firm innovate?


1

Innovate or
If not you will be outran by the competition.
die!

Kodak, the company
that invented the digital camera, filed for bankruptcy in
January 2012, after losing its competitiveness to rivals like… Other players


The 100-year-old iconic
UK high street retailer ceased
operating in Nov. 2008.

2

A means
to create new
markets.


3

A means to find
solutions to organisational &
competitive challenges.


Internal Challenges

Lack of skilled people.
Structural impediment.
Satisfying competing stakeholders’ expectations.
Sustaining a pipeline of innovations.
Rising operations costs.
Financial constraint.
Etc.

External Challenges
Rapid changes.
Slow industry growth.
Changing consumers’ preferences.
Tightening regulatory conditions.
War, civil unrests, & geopolitical tensions.
Rising resources costs.
Economic uncertainties.
Ecological concerns & disasters.
Stiff competition.
Resource shortage.
© 2013 Berlin Asong. All rights reserved.
Etc. 29

4

Innovation can be
a means to sustainable
competitive advantage.


of new products fail.
Solomon et al. 2008


Why?

1

Innovation
Offers nothing
“new”.


2

Consumers were
not yet ready for such
innovations.


The modern credit card,
created by Diners Club in 1950.


The current
adoption of electric
cars is slow…


…amid other reasons,
because of fewer
charging stations.


3

Product
had glitches.

First generation HD TVs


Knowledge@Wharton (2012), “Pop Quiz: Can Indra Nooyi Revive PepsiCo?”. Retrieved
March 31, 2012, from http://knowledge.wharton.upenn.edu/article/2966.cfm


Launched in 1993.
Reasons for
failure:
expensive, poor
handwriting
recognition,
marketing
messages
disguised
imperfections.

4

Product

Planet Price

Product
was poorly Process
Marketing
Place

marketed.
Mix

Physical
Promotion
Layout

People


Tata Nano launched in 2009 has been dubbed a flop.


India car boss Ratan Tata
admits Tata Nano “mistakes”.

Source: BBC (January 2012)


In 1999, Cosmopolitan
rolled out yoghurt line.
Reasons for
failure:
expensive, not a
right fit for a
publishing firm.


5

Innovation was
aimed at the wrong
consumer segment.


6

Innovation
was killed by rival
innovations.


HP’s Apotheker
18 August 2011—

discontinued TouchPad
after 2 months in market.

Former HP CEO Leo Apotheker 48

7

Innovation was
hastily withdrawn
from the market.


Was the TouchPad
killed too early?


What is a
successful product
innovation?


Customers
Impact on customers

Successful innovations society Impact on society

Firm
Impact on firm

NEW PRODUCT
DEVELOPMENT
PROCESS

Philip Kotler & Gary Armstrong (2009) Principles of Marketing, 13Ed.


Ideas generation

Ideas screening

Concept Development
& Testing

Business Analysis

Marketing Strategy

Product Development

Test Marketing

Commercialisation


Merchant
Approach

Formal Informal
Approach Approach


A deliberate effort
designed to encourage
innovative ideas.


…top
management is
committed to spur
innovations.


Innovative ideas come not only
from R&D people but everybody
inside & outside the organisation.


Customers


Capture
innovative ideas
from consumers
by…


Observing
consumers’
behaviours.


Experimentation
(R&D)


…learning
from mistakes.


“Celebrate”
mistakes.


Brainstorming


Questorming


Ideas generators
are rewarded.


Accidental sources, chanced
occurrences, emergent ideas.


Ah-ha moment


Seek new product or service ideas through the…

forbesindia.com
Jobs-to-be-done
methodology.
Clayton Christensen


If you can’t
generate
it, buy it.


The iPod
concept was the
brainchild of
Anthony Fadell,
before he got
hired by Apple.


Ideas generation

Ideas screening

Concept Development
& Testing

Business Analysis

Marketing Strategy

Product Development

Test Marketing

Commercialisation


Suitability Acceptability Feasibility


Is the new product idea an
excellent fit with the company?

Does it have potential to improve
the growth of the company?
Suitability

Is it a good fit with the
company’s product portfolio?


Does the new product idea meet
the expectations of stakeholders?

What’s the potential return on
investment of the new product idea?
Acceptability

What and how much risks are involved?


Does the firm has the resources
to develop the new product idea?

Feasibility Can the required resources
be mobilised in time?


Ideas
screening
effected by
potential
consumers.


Ideas generation

Ideas screening

Concept Development
& Testing

Business Analysis

Marketing Strategy

Product Development

Test Marketing

Commercialisation


In-house testing Off-house testing


Ideas generation

Ideas screening

Concept Development
& Testing

Business Analysis

Marketing Strategy

Product Development

Test Marketing

Commercialisation


How much sales
our we aiming for?

What’s the
projected profit?

How much costs
would be incurred?

Ideas generation

Ideas screening

Concept Development
& Testing

Business Analysis

Marketing Strategy

Product Development

Test Marketing

Commercialisation


Product

Planet Price

Marketing
Configure the right
Process
Mix
marketing mix for
Place

the new product.
Physical Promotio
Layout n

People


Ideas generation

Ideas screening

Concept Development
& Testing

Business Analysis

Marketing Strategy

Product Development

Test Marketing

Commercialisation


Product goes
into ‘full’ development
and production.


Ideas generation

Ideas screening

Concept Development
& Testing

Business Analysis

Marketing Strategy

Product Development

Test Marketing

Commercialisation


Product is made available to
limited customers | region aimed
to test its likely acceptance.


Ideas generation

Ideas screening

Concept Development
& Testing

Business Analysis

Marketing Strategy

Product Development

Test Marketing

Commercialisation


Launched in March 2012


What challenges or
problems could I face during
the commercialisation phase?


New Product Development Process
Criticisms


1

Ideas generation

Ideas screening

Concept Development
& Testing

In practice, Business Analysis

NPD is not a Marketing Strategy

linear process. Product Development

Test Marketing

Commercialisation

112

2

Ideas generation

Ideas screening

Concept Development
& Testing

Some activities Business Analysis

are performed Marketing Strategy

simultaneously. Product Development

Test Marketing

Commercialisation

113

3

Ideas generation

Ideas screening

Concept Development
& Testing

Some radical Business Analysis

innovations skipped
some stages of the Marketing Strategy

NPD process. Product Development

Test Marketing

Commercialisation

114

DIFFUSION OF

INNOVATION

3D TVs have been
around for some
years now, yet the
adoption rate has
been very slow.
Why?
Source: socialexcerpts.com


…attempts
to explain why some
people are quick in
adopting new products
or services.

Source: alldaytech.com


…or why some
people are slow in
adopting (oravoid)new
products or services.


Dr. Everett M. Rogers
Diffusion of Innovation


the spread of something,
DIFFUSION = over a period of time.


INNOVATION = idea, service, product, etc.


2.5% 13.5% 34% 34% 13.5% 2.5%


Factors influencing
consumers' adoption
of an innovation…


Product Consumer

Message Messenger


Is the innovation difficult
to use, or understand?
Complexity


Does the innovation offer significant
benefits than existing product, etc.?
Relative advantage


Does the innovation
offer observable results?
Observability


Does the innovation fit my
beliefs, lifestyle, values, needs?
Compatibility


Can the innovation be tested
or tried on a limited basis?
Trialability


Age.
Gender.
Occupation.
Income.
Personality.
Referencegroup.
Perception.
Education.
Attitude.
Culture.
Belief. 133

Reference Groups
Clubs
Gangs
Churches
Classmates
Interestgroups
Politicalaffiliations
Onlinecommunities
Professionalassociations


Source: threestatesplusone.blogspot.com

The content of the
message affects the
adoption of innovation.

Do you think
the message in
this advert is
communicated
effectively?


Does this AD
get its message
across effectively?
Does it increase your
interest to know
more about Vita
Coco?
Source: www.celebritybug.net


…sound, text, fonts, colours,
pictures, white space affect how
the message is perceived.


Which features are (not)
highlighted in this AD?

Source: Apple.com (2012)


…the medium that
carries or conveys the
message to the receiver.


Radio.
Magazine.
Newspaper.
Opinionleader.
Spokesperson.
Fan-boysandfan-girls.
Socialmedia.
Directmail.
Television.
Internet.
Leaflet. 143

Samuel L. Jackson, iPhone 4S TV Ad

Source: Apple.com (2012)


Lance Armstrong,
former spokesperson
of the Nike brand.

Source: deadspin.com


The doping evidence made
Armstrong an untrustworthy
messenger of the Nike brand.


Which “adopter” category are you?
Does it depend on the product or service?


Product Innovation

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