This discussion simulates a collaborative ideation process where you will analyze a common user challenge, generate creative solutions, and build on the

Student Resource

Chapter 10: Creating new products and services

Chapter 10: Creating new products and services

• In the following PowerPoint slides you will find the key headings from CHAPTER 10 together with the main illustrations, tables, etc.

• There are also slides summarizing the key messages in bullet-point fashion, and a wide range of activities which you can use to help students explore around these themes.

• Finally there are some reflection questions which can be used as the basis for discussion or assignments.

Learning Objectives

By the end of this chapter you will develop an understanding of:

• a formal process to support new product development, such as stage- gate and the development funnel

• product and organizational factors which influence success and failure

• choosing and applying relevant tools to support each stage of product development

• the differences between products and services and how these influence development

• applying the lessons of diffusion research to promote the adoption of innovations.

Core themes and material

from the book

Implementation as a journey

The development funnel

Figure 10.2 of the book presents the ‘development funnel’ showing that there is a structure in place which reviews both technical and marketing data at each stage

A simplified 4 stage model

• Concept generation – identifying the opportunities for new products and services.

• Project assessment and selection – screening and choosing projects which satisfy certain criteria.

• Product or service development – translating the selected concepts into a physical product or a new service.

• Product or service commercialization – testing, launching and marketing the new product or service.

Project selection

Two filters:

Aggregate product plan – attempts to integrate the various potential projects to ensure that the collective set of development projects meet the goals and objectives of the firm, and help to build the capabilities needed.

Developing specific product concepts. The two most common processes at this level are the development funnel and the stage gate system.

Product development

This stage includes all the activities necessary to take the chosen concept and deliver a product or service for commercialization.

Success factors in new product development

• Product advantage

• Market knowledge

• Clear product definition

• Risk assessment

• Project organization

• Project resources

• Proficiency of execution

• Top management support

Winning at new products

Product development influential factors

Concept generation

On the Portal there are several tools to help with concept generation, for example:

Design methods Creativity tools Competitiveness profiling Value curves Lead user methods Market research tools

See https://johnbessant.org/tools-for-innovation-and- entrepreneurship/

Concept generation

Follow the link below to hear a podcast on how market research marked a shift from a producer-led to a consumer- led approach to business

https://www.bbc.co.uk/programmes/w3csv3gm

Quality function deployment

• Identify customer requirements, primary and secondary, and any major dislikes.

• Rank requirements according to importance.

• Translate requirements into measurable characteristics.

• Establish the relationship between the customer requirements and technical product characteristics, and estimate the strength of the relationship.

• Choose appropriate units of measurement and determine target values based on customer 
requirements and competitor benchmarks.

QFD matrix

Figure 11.5 of the book presents QFD matrix that

was originally developed in Japan and claimed to have helped Toyota reduce its development time and

costs by 40 %

Differences between products and services

• Tangibility. • Perceptions of service quality:

• tangible aspects; • responsiveness; • competence; • assurance; • empathy.

• Simultaneity. • Storage. • Customer contact. • Location.

Characteristics of service innovators

Characteristics of service innovators continued

Success factors in service innovation: the SPOTS model

SPOTS model

There is a full description of the model on the Portal

https://johnbessant.org/tools-for-innovation-and- entrepreneurship/

Diffusion of innovations

• Diffusion is the means by which innovations are translated into social and economic benefits.

• We know that the impact of the use of innovations is around four times that of their generation

• However, the benefits of innovations can take 10–15 years to be fully effected, and in practice most innovations fail to be adopted widely, and so have limited social or economic impact.

Rogers’ definition

Rogers’ definition of diffusion is used widely:

‘the process by which an innovation is communicated through certain channels over time among members of a social system. It is a special type of communication, in that the messages are concerned with new ideas’

Rogers’ 3 types of innovation decision

• Individual, in which the individual is the main decision-maker, independent of peers. Decisions may still be influenced by social norms and interpersonal relationships, but the individual makes the ultimate choice. For example, the purchase of a consumer durable such as a mobile phone. 


Rogers’ 3 types of innovation decision

• Collective, where choices are made jointly with others in the social system, and there is significant peer pressure or formal requirement to conform. For example, the sorting and recycling of domestic waste.

• Authoritative, where decisions to adopt are taken by a few individuals within a social system, owing to their power, status or expertise (e.g. adoption of ERP systems by businesses, or MRI systems by hospitals).

Models of diffusion

In practice the precise pattern of adoption of an innovation will depend on the interaction of demand-side and supply-side factors:

• Demand-side factors – direct contact with or imitation of prior adopters, adopters with different perceptions of benefits and risk.

• Supply-side factors – relative advantage of an innovation, availability of information, barriers to adoption, feedback between developers and users.

The S-curve

Barriers to adoption

• economic – personal costs versus social benefits, access to information, insufficient incentives

• behavioural – priorities, motivations, rationality, inertia, propensity for change or risk

• organizational – goals, routines, power and influence, culture and stakeholders

• structural – infrastructure, sunk costs, governance.

Factors affecting diffusion

In predicting the rate of adoption of an innovation, five factors explain 49–87% of the variance:

• relative advantage • compatibility • complexity • trialability • observability.

Relative advantage

• Relative advantage is the degree to which an innovation is perceived as better than the product it supersedes, or competing products.

• Typically measured in narrow economic terms, for example cost or financial payback

• Non-economic factors such as convenience, satisfaction and social prestige may be equally important.

Attributes of innovation

• Primary attributes, such as size and cost, are invariant and inherent to a specific innovation irrespective of the adopter.

• Secondary attributes, such as relative advantage and compatibility, may vary from adopter to adopter, being contingent upon the perceptions and context of adopters.

Compatibility

• Compatibility is the degree to which an innovation is perceived to be consistent with the existing values, experience and needs of potential adopters.

• Two distinct aspects of compatibility:

• existing skills and practices, • and values and norms.

• Few innovations initially fit the user environment into which they are introduced. Significant misalignments between the innovation and the adopting organization will require changes in the innovation or organization, or, in the most successful cases of implementation, mutual adaptation of both.

Complexity

• Complexity is the degree to which an innovation is perceived as being difficult to understand or use.

• In general, innovations which are simpler for potential users to understand will be adopted more rapidly than those which require the adopter to develop new skills and knowledge.

Trialability

• Trialability is the degree to which an innovation can be experimented with on a limited basis.

• An innovation that is trialable represents less uncertainty to potential adopters, and allows learning by doing. Innovations which can be trialled will generally be adopted more quickly than those which cannot.

• Sometimes called ‘divisibility’ – how far can the risk of adoption be broken down into small steps rather than requiring a full commitment at the outset

Observability

• Observability is the degree to which the results of an innovation are visible to others.

• The easier it is for others to see the benefits of an innovation, the more likely it will be adopted.

• The simple epidemic model of diffusion assumes that innovations spread as potential adopters come into contact with existing users of an innovation.

Checklist: Relative advantage

• How well does my plan show how much better off people will be when they adopt it? • Why is this plan better than what has been done before? • What advantages or benefits may there be to accepting the plan? • Who will gain from the implementation of the plan? • How will I (or others) be rewarded by adopting the plan? • How can I emphasize the plan’s benefits to all?

Checklist: Compatibility

• How well does my plan demonstrate that it is compatible with current values, past experiences and needs?

• Is the plan consistent with current practice?

• Does the plan meet the needs of a particular group?

• Does it offer better ways to reach our common goals?

• Who will naturally support and agree with the plan?

• Can it be favourably named, packaged or presented?

Checklist: Trialability

• How well does my plan allow for trialability?

• Can the plan be tried out or tested?

• Can uncertainty be reduced?

• Can we begin with a few parts of the plan?

• How can others be encouraged to try out the plan?

• Can the plan be modified by you or others?

Checklist: Complexity

• How well does my plan provide for easy communication, comprehension and use?

• Is the plan easy for others to understand? • Can it be explained clearly to many different people? • Will the plan be easily communicated? • How can the plan be made more simple or easy to

understand? • Is the plan easy to use or follow?

Checklist: Observability

• How well does my plan provide results that are easily observed and visible to others?

• Is the plan easy for others to find or obtain?

• Can the plan be made more visible to others?

• How can I make the plan easier for others to see?

• Will others be able to see the effects of the plan?

• Are there good reasons for not making the entire plan visible?

Checklist: Other factors

• What other resources will I need; how can I get them?

• What obstacles exist; how can we prevent or overcome them?

• What new challenges will be created; and dealt with?

• How can I encourage commitment to the plan?

• What feedback about the plan is needed?

• The process of innovation is much more complex than technology responding to market signals. Effective business planning under conditions of uncertainty demands a thorough understanding and management of the dynamics of innovation, including conception, development, adoption and diffusion.

Summary

• The adoption and diffusion of an innovation depend on the characteristics of the innovation, the nature of potential adopters and the process of communication. The relative advantage, compatibility, complexity, trialability and observability of an innovation all affect the rate of diffusion.

Summary

• Forecasting the development and adoption of innovations is difficult, but participative methods such as Delphi and scenario planning are highly relevant to innovation and sustainability. In such cases the process of forecasting, including consultation and debate, is probably more important than the precise outcomes of the exercise.

Summary

Summary

There is a vast amount of management research on the

subject of new product and service development, and we

are now pretty certain what works and what does not.

There are no guarantees that following the suggestions in

this chapter will produce a blockbuster product, service

or business, but if these elements are not managed well,

your chances of success will be much lower. This is not

supposed to discourage experimentation and calculated

risk-taking but rather to provide a foundation for

evidence-based practice.

Summary

Research suggests that a range of factors affect the success of a potential new product or service:

• Some factors are product-specific (e.g. product advantage, clear target market and attention to pre- development activities).

• Other factors are more about the organizational context and process (e.g. senior management support, formal process and use of external knowledge).

Summary

• A formal process for new product and service development should consist of distinct stages, such as concept development, business case, product development, pilot and commercialization, separated by distinct decision points, or gates, which have clear criteria, such as product fit and product advantages.

Summary

• Different stages of the process demand different criteria and different tools and methods. Useful tools and methods at the concept stage include segmentation, experimentation, focus groups and customer partnering; and at the development stage useful tools include prototyping, design for production and QFD.

Summary

• Services and products are different in a number of ways, especially intangibility and perceived benefits, and so will demand the adaptation of the standard models and prescriptions for new product development.

• The relative advantage, compatibility, complexity, trialability and observability of an innovation all affect the rate of diffusion.

Videos

There are several videos which can help explore and present the key themes of the chapter:

• Project implementation

• Stage gates in implementation

• Success and failure in implementation

• Agile implementation

• Interview with Catherina van Delden, Innosabi about agile innovation

Media: NPD challenges

On the Portal there is a video showing Joe Tidd talking about the challenges of organizing new product development:

Media: NPD challenges

On the Portal there is a video interview with Armin Rau, Strategy Partner of Sicap, talking about some of the innovation management challenges in working in the fast-moving world of software for mobile devices. Transcript of the interview is also available.

http://www.innovation-portal.info/?s=armin+Rau+

http://www.innovation-portal.info/resources/armin-rau- interview-transcript/

Media: Why products fail

On the Portal there is a video showing Joe Tidd talking about some of the reasons for product failure

Media: New product development

Follow the link below to listen to an interview with James Dyson

https://www.acast.com/howibuiltthis/dyson-james- dyson

Tools to help project selection – financial methods

• Discounted cash flows, such as net present value/internal rate of return.

• Cost-benefit analysis.

• Simple calculations of the payback period.

Tools to help project selection – non-financial methods

• Ranking.

• Profiles.

• Simulated outcomes.

• Strategic clusters.

• Interactive.

Tools to help product development

• Design for Manufacture (DFM).

• Rapid Prototyping.

• Computer-aided Techniques (CAD/CAM).

• Quality Function Deployment (QFD). For more on QFD see the toolbox:

•http://www.innovation-portal.info/resources/quality- function-deployment-qfd/

Tool: Risk assessment matrix

On the Portal there is a description of this tool to help assess complexity issues

http://www.innovation-portal.info/resources/risk- assessment-matrix/

Accelerating diffusion

On the Portal there is a tool describing the use of models to help think about accelerating diffusion.

http://www.innovation- portal.info/toolkits/accelerating-diffusion/

There is also an activity linked to this

http://www.innovation- portal.info/resources/accelerating-diffusion-activity/