The document discusses key definitions and concepts related to product development, emphasizing the difference between innovation and invention, with innovation being a sustainable process aimed at meeting market needs. It highlights challenges faced in product launches, such as the high rate of failure and the importance of effective trade-off analysis and business priorities. Additionally, it introduces various metrics for evaluating innovation success and outlines a framework for effective decision-making in R&D.

1. Guest Lecture
Modified for LinkedIn Profile
Hans Ludi, PhD

2. DEFINITIONS
 New Product
Company decision
 Innovation vs. Invention
 An invention is doing something once.
 Innovation starts with a market need.
 An innovation is transforming an invention into
profits.
 Sustainable innovation is innovating “over and
over” again.
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Copyright © Hans Ludi. All rights Reserved.

3. DEFINTIONS
NEW PRODUCT DEVELOPMENT PROCESS SUMMARY
enterprise wide development functions enterprise wide
3% of R&D budget
 7 – 15%
COMMERCIALIZE
CONCEPT DEFINITION DESIGN to RAMP -UP & SUPPORT
Release
Approval Approved Begin
for Sale Obsolescence
to write BP * BP Stage Gate
Ideas BP: Business Plan Feasibility Develop - Valid -
ment dation
Sensi - good Physical
? tivity to go Model
RFS RIP
1 yes

 2 no ’s
Dev. Contract
• Dates:
• COGS:
• Sales Price:
•...
•...
?
BOM
COGS
80% fixed
Product Concept
•...
• does it fit with strategy
• does it fit with company
Advanced Technology Group
*
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Copyright © Hans Ludi. All rights Reserved.

4. CHALLENGE
On average 40% of new products fail to meet revenue
and profit targets after launch.
On average about 1 to 3-5 new products are cancelled
during development.
In consumer and high-tech industries these numbers are
much higher (90% fail after launch).
R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, Research Technology Management, Jan.-Feb. 2004, pp. 31 ff
WHY is this and WHAT
should the number be?
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Copyright © Hans Ludi. All rights Reserved.

5. Example 1
Trade-Off Analysis & Business Priorities:
Sensitivity Analysis
Time
Product
To
Cost
Market
Development Feature
Cost Set
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Source: P.G. Smith $ D.G. Reinersen in “Developing Products in Half The Time”, Van Nostrand Reinold, 1991

6. Example 2
Better Expensive Than Late
33%
22%
Percent Loss in
Total Profit
3.50%
50 % Development Product Cost 9% Ship Product 6
Cost Overrun Too High Month Late
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Source: Reinertsen, Donald, McKinsey & Company, “Blitzkrieg Product Development”, Electronic Business Magazine, August 1983

7. Example 3
Technology Management vs. Market Development
Customers know
Technology Gorilla Market
exactly what
Development Price Competition
they want
Customers do not Market AND
Market
really know what Technology
Development
they want Development
Existing technologies Existing technologies
Modified from Barry Siadat, “Technology do not provide do provide
Delivers Challenges at W.R. Grace, “
Research-Technology Management, © 1996. desired features desired features 7
IRI, Inc. Oct. 1996, 36-43, Fig. 11

8. Example 3 con’t Modified from Barry Siadat, “Technology
Delivers Challenges at W.R. Grace, “
Research-Technology Management, © 1996.
IRI, Inc. Oct. 1996, 36-43, Fig. 11
Technology Gorilla Market
Development Price Competition
Market AND
Market
Technology
Development
Development
On a global basis
14 % of new products are launched
in this segment. They make up W. C. Kim & R. Mauborgne, “Blue Ocean Strategy”,
Harvard Business Review, 2005, Harvard Business
for 38% of the revenues and School Publishing Corporation, p. 7.
61% of the profits of all new products.
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Copyright © Hans Ludi. All rights Reserved.

9. Example 4
Effectiveness vs. Efficiency
Achieving the desired result
vs.
Output
Input
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10. 10
Source: USA Today, November 3, 2004. Data analyzed by MaryJo Sylwester

11. Innovation Metrics
 Vitality Index
 Return on Innovation (ROI)
 Staffing Matrix
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Copyright © Hans Ludi. All rights Reserved.

12. Return on Innovation
Cumulative N-Year Net Profits
from new products
ROI =
Cumulative N-Year Expenditures
from new products
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13. SUSTAINABLE INNOVATION
The right people make the right decision(s) at the right time!
The customer will tell you that you made the right decision
because they are “wowed” by your product and the profits
will tell you that you made the decisions at the right time.
A state-of-the-art metrics system will combine these two and
tell you that you made the right decision(s) at the right time.
Continuous success with new products and sustainable
innovation will ultimately tell you that you have the right
people.
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Copyright © Hans Ludi. All rights Reserved.

14. “I contend that people like me – CEOs,
CFOs, and other business types – must
adopt the attitude that we, in fact, work
for R&D if we truly want to succeed!”
Leonard Schleifer, CEO, Regeneron
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15. Appendix
Heilmeier's Catechism
George Harry Heilmeier (born May 22, 1936) is an American
engineer and businessman, who was a pioneering contributor to
liquid crystal displays.
credits these observations to G. Heilmeier, "Some Reflections on
Innovation and Invention," Founders Award Lecture, National
Academy of Engineering, Washington, D.C., Sept. 1992.
http://en.wikipedia.org/wiki/George_H._Heilmeier
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16. Heilmeier's Catechism
 What are you trying to do? Articulate your objectives
using absolutely no jargon.
 How is it done today, and what are the limits of current
practice?
 What's new in your approach and why do you think it will
be successful?
 Who cares?
 If you're successful, what difference will it make?
 What are the risks and the payoffs?
 How much will it cost?
 How long will it take?
 What are the midterm and final "exams" to check for
success?
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