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Professor John Gourville prepared this case. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2019 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

J O H N G O U R V I L L E

Four Products: Predicting Diffusion (2019)

One job of product managers, marketers, strategic planners, and other corporate executives is to predict what the demand will be for a new product. This task is easier for certain classes of new products than for others. For new consumer package goods, for instance, one can look at past product rollouts, one can look at similar products currently in the marketplace, or one can do test markets— selling the product in a small section of the country to assess consumer acceptance. Quite often, for new products that represent incremental variations or improvements over existing products, marketers do a pretty good job of understanding how that product will be adopted in the marketplace. This is not to say that managers always get it right, as has been made evidently clear in the case of New Coke,1 dry beers,2 and the Edsel.3 However, more often than not, managers of incremental new products predict demand within the right order of magnitude.

Contrast this with “new-to-the-world” products—products that represent great improvements over products currently in the marketplace or those that represent completely new classes of goods and services. For these types of products, consumers have either (1) no benchmark or (2) an inappropriate benchmark for understanding the product. Consider the telephone. When first introduced to the world, it was dismissed as a curiosity item, unlikely to replace the seemingly adequate telegraph. And with the personal computer, it took consumers years to understand what it was and how it might impact their lives, and even then, it still only penetrated 30% of homes 15 years after it was first developed.4

For these new-to-the-world products, it is much more difficult to predict consumer acceptance (at least in the short run). This is not to say that firms do not try. Many firms develop predictions either

1 New Coke was a reformulation of Coca-Cola’s flagship product. It was introduced to the world on April 23, 1985, after blind taste tests showed it to be preferred to traditional Coke. Consumer backlash was almost immediate, forcing Coca-Cola to reintroduce its traditional product as Coca-Cola Classic and to eventually drop New Coke in most markets.

2 Dry beers were a 1980s attempt by the beer manufacturers to expand the market for beers. They were lower in alcoholic content, crisper, less sweet, and had less aftertaste. After several years of activity, they almost completely disappeared from the marketplace.

3 The Edsel was introduced in 1957 by the Ford Motor Company to great fanfare. Ford anticipated sales of over 1 million vehicles in its first several years. In the end, however, consumers found it to be ugly and uninspired. It sold only about 100,000 units before it was discontinued in 1960, its name synonymous with the greatest flop in automotive history.

4 Tom Coughlin, “Personal Computer And Mobile Phone Growth To Drive Storage Trends,” February 7, 2016. https://www.forbes.com/sites/tomcoughlin/2016/02/07/personal-computer-and-mobile-phone-growth-to-drive-storage- trends/#2b2582a3518d, accessed July 2019.

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in-house or by hiring a top-notch consulting or market research firm to do a demand assessment. The approach taken in these efforts often is one of adding up the pieces—for example, “We predict 10% adoption within Segment A, 25% adoption within Segment B, and so on.” Unfortunately, these systematic approaches often rely upon predictions and assumptions that are shaky at best. The result is that sales estimates miss by many orders of magnitude. They are not off by 10% or 20%, they are off by factors of 10, 20, or even 100. As one colleague notes, “We’re not talking the difference between a single and a home run, we are talking about whether we are even in the right stadium.”

Where do these predictions go astray? One answer is that these methods grossly underestimate how long it will take for that demand to materialize. We refer to this as “product diffusion”—the rate and scope of product adoption among the target market. The first step in predicting demand for new-to- the-world products is understanding what factors inherent in those products will either encourage adoption or hinder adoption among target customers. What product characteristics will accelerate product purchase and usage, and what product characteristics will act as roadblocks?

Over the next set of pages, you will see four innovative products—some more innovative than others, perhaps. Ten years from now, some of these products may be well entrenched in our (or some customer segment’s) daily lives. Others may be still struggling to gain customer acceptance. Still others may have long since disappeared, never having gained sufficient traction in the marketplace.

Of course, it would be nice to predict demand for each of these products with some degree of reliability. As a first step, however, a marketer might settle for understanding what consumer adoption and product diffusion might look like. The goal of this exercise is to compare and contrast these four products to determine why one might diffuse rapidly and another not at all. What are the product characteristics that make Product X a likely star and Product Y a likely dog?

Exhibits 1, 2, 3, and 4 provide brief media accounts of innovations that have been introduced to the marketplace. Your job is to (1) rank the four innovations in terms of how rapidly and broadly they will diffuse in the marketplace, and (2) identify those high-level characteristics that account for those predictions. Note that it is insufficient to say “this product will never fly” or “this is a silly product.” Rather, you need to dig down and determine why it will never fly or why it is a silly product. You should also ask what changes could be made to the product to increase the likelihood of acceptance. Finally, you should think about target-market selection. Perhaps a product makes absolutely no sense for the masses but will be particularly attractive to a segment of the population. What might such a segment be and how rapidly and broadly will the product diffuse within that segment?

In the end, one should be able to identify that handful of factors that generalize across a broad class of products. You might even develop a template or framework that allows you to assess products beyond those identified in this case.

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Exhibit 1 Excerpt from an Article in Forbes, May 29, 2018

This Beijing Startup Designed an Autonomous Robot Suitcase with Facial Recognition

By Ben Sin

The annual trade show CES (Consumer Electronics Show) is a deluge of smart appliances, many of which do things totally unnecessary–case in point, the talking A.I.- powered toilet–but there are some products that legitimately excite the masses and prove to be of real-world use.

A Beijing startup named ForwardX is hoping its self-driving robot suitcase belongs in the latter camp. Having made its debut at the Las Vegas trade show to positive coverage, the Ovis is ready to hit the global market with a crowdfunding campaign that starts today.

The company foresees most of its initial customers to be Americans, which explains why the marketing effort is mostly centered around its [Northern California] office. But a week ago, I got the chance to meet company founder Nicholas Chee for a demonstration in Hong Kong.

At first glance, the Ovis looked like any other suitcase: it's rectangular, black, has four wheels. But upon closer examination, I could see it has two USB ports for charging gadgets and a 170- degree wide-angle camera lens that is essentially the Ovis' eye. That, combined with the facial recognizing, body movement-tracking algorithm developed by Chee, allows the Ovis to follow its owner around without additional assistance.

At CES, the suitcase could only follow a person from behind. Since then, the company has improved functionality so the suitcase can now follow its owner side-by-side, and according to Chee, avoid obstacles (aka moving humans) that may get in the way. …

I conducted my own test during our meeting, and I found that the Ovis mostly lived up to the marketing claims–it followed one of Chee's

colleagues from hotel entrance to check-in desk and successfully stopped when someone got in its way–but there were also slight bugs here and there, including a 10 second stretch when the Ovis began spinning in circles.

Chee claimed these software kinks will be worked out long before the product hits the market. Considering the funding ForwardX has already secured … and Chee's pedigree (he studied electrical engineering at Beijing's University of Science and Technology and won China's prestigious Robocon competition in 2003), the company should be able to work things out.

There's one more reason to be confident: the Ovis isn't ForwardX's first self-driving product. Ovis actually has an older brother of sorts–a self- driving factory flatbed truck that is being used in some of the warehouses of JD.com, one of China's e-commerce giants.

Chee, 37, said he started ForwardX two years ago after a decade of working as hardware and software engineer for various companies in China because he "wanted a companion during his travels."

As mentioned, ForwardX is aiming this at the U.S. market so Ovis has been built to cater to the [stricter] U.S flying regulations. For example, the suitcase has a built-in weight sensor to detect its own weight; its 50wH battery (that can supposedly push the Ovis for 12 miles) can be easily removed to get through security; and the suitcases' lock is TSA-approved. … [The] final retail price will be around $700.

Personally, I'm happy just lugging my own bag at airports. But then again, I'm no jet-setting CEO.

Source: From Forbes.com. © 2018 Forbes. All rights reserved. Used under license.

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Exhibit 2 Excerpt from an Article in the Santa Fe Reporter, October 2, 2018

Death Becomes Him Entrepreneur Tackles Cremation Industry through Science and Design

By Julie Goldberg

Disclosure: For many years, I have served in some capacity as a judge for MIX Santa Fe's BizMIX competition5, an accelerator program for local entrepreneurs. I always enjoy reading the various pitches and proposals and, as an inherently lazy person, admire all the folks in Santa Fe toiling to create new restaurants, services and products for the rest of us.

This year, one of the initial pitches last spring stuck out to me as it proposed a business to revolutionize cremation via new technology with help from Los Alamos National Laboratory. Always on the look-out for science-meets-world stories, as well as a sucker for anything that sounds like the premise for a zombie flick, I contacted Parting Stone founder Justin Crowe and invited myself over to his Second Street studio to learn more.

Crowe, 30, received a BFA in ceramics from Alfred University but, even as an art student, was just as drawn to the commerce side of the endeavor. When he analyzed all the things he loved about pottery—an obsession from the age of 10—he soon realized he loved creating things and he also loved selling them: an entrepreneur was born.

"Building businesses feels like building art," he says. "You start with nothing, you have an idea in your head … you have to figure out the tools that you need and the people you need and the funding you need and … slowly you take the world that's in your head and get the rest of the world to see it like that. That was my process with art and that's also my process with business."

5 Mix Santa Fe is a Santa Fe, New Mexico-based community effort to encourage business, artistic, and social development. BizMix is a business plan competition they run every year.

Crowe began creating products and selling them on the internet. One is named Paul, a giant torso whose crotch serves as a phone charger. Another iterates on the selfie-stick by allowing users to take photos in which they appear to be holding hands with someone else. Both were intentionally funny and designed as objects of both aesthetics and discourse.

But after Crowe's grandfather died in 2015, the entrepreneur began thinking less humorously about society's relationship to technology and more intently about the culture's relationship to mortality. "I started to research death and mortality because I was facing my mortality for the first time watching him die," he says.

He was thinking about how people inherently strive to remain connected to their loved ones after they die, and also began mulling the average experience for those whose loved ones are cremated: the trauma of seeing a loved one reduced to ash and bone, followed by the challenge of deciding how to live with those remains. Crowe describes the entirety of the cremation industry as "an unfortunate user experience," and set about improving it.

Knowing a bit about glaze chemistry, he began experimenting with adding ashes to glazes and from there launched Lifeware, a business that incorporated remains into jewelry and other objects. Crowe then began further investigating the funeral industry, a point of interest that became an obsession. …

"We were making cremated remains beautiful and touchable and displayable," he says, but

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nonetheless, people were still left with 12 cups of ashes. Crowe pushed forward. His current business, Parting Stone and its technology, Purified Remains, takes cremated ashes, removes impurities, superheats them into molten remains and then creates "purified remains," a solid object (or possibly many solid objects) that can be touched and displayed.

Crowe applied for and received help from the New Mexico Small Business Assistance Program, which connects small businesses with technical challenges like his to either [Los Alamos National Laboratory] or Sandia National Laboratory. Crowe was paired with [Los Alamos] scientist Chris Chen, who described to me the technical problem of firing the ashes at a high temperature with a small amount of glass to create a solid object as a "very easy" problem to solve.

The science may not be complex (if you have a PhD in material science and engineering at any

rate), but the disruptive nature of Crowe's idea touches on a variety of complex issues regarding attitudes toward death and memorialization. Moreover, the rise of cremation versus burial created an opening for someone with an entrepreneurial spirit. "The death industry is so starved of innovation," Crowe says, and "that's created a situation where there's a lot of opportunity."

On Sept. 20, judges picked Purified Remains as the top BizMIX recipient and awarded it $5,000. Crowe also picked up a CEO through the … process (BizMIX mentor Kimberly Corbitt) and is on his way to launching what appears to be a very successful endeavor.

"The dream is that we're creating a new form of human remains," he says. "The results will be beautiful and touchable and clean, and they're going to have a really good and beautiful user experience."

Source: Julie Goldberg, Santa Fe Reporter, October 2, 2018, accessed online at www.sfreporter.com/news/theinterface/2018/10/03/death-becomes-him, on July 2, 2019.

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Exhibit 3 Excerpt from an Article appearing in The Boston Globe, April 21, 2018

Climate Control: On Your Wrist

The Embr Wave Functions Like a Personal Thermostat, to Cool You Off or Warm You Up

By Hiawatha Bray

The Embr Wave is the sort of gadget you might see on a TV infomercial at 3 a.m. — a chunky little box that straps around your wrist like a watch. Except it doesn’t tell time, but rather functions like a personal thermostat, cooling you off when you’re hot or warming you up when it’s chilly.

It sounds crazy, and even a little scammy. But before you grab for the remote, check out the cast of characters.

The Embr Wave was designed by three guys from the Massachusetts Institute of Technology, two with doctorates in materials science. Their Somerville-based company, Embr Labs, has attracted venture investment from a pair of technology titans, Intel Corp. and Bose Corp., as well as a $225,000 research grant from the National Science Foundation. Researchers at the University of California at Berkeley who tested Embr Wave on their students say it works.

And even at a hefty $300 a pop, Embr Labs has sold more than 4,500 bracelets in just six months. If this is just a gimmick, it’s a mighty effective one.

Co-founder Matt Smith acknowledged that the whole thing seems quixotic. When he and MIT colleagues David Cohen-Tanugi and Sam Shames came up with the idea several years ago, none of them were convinced it would work.

“This is a really weird project,” said Smith. “It goes against intuition.”

In 2013, the three men entered an MIT contest to devise practical uses for advanced materials. Their inspiration came from sitting in a school lab where the air conditioning was way too cold. Instead of donning sweaters, they decided to

invent a way to warm up one person without affecting the surrounding environment.

The Embr Wave bracelet contains a Peltier device, a heat exchanger made of multiple layers of different materials that get hot or cold when electricity is passed through them. By reversing the flow of current, the Peltier device can either cool or warm a person’s skin.

The Wave doesn’t generate nearly enough heat or cold to change a person’s core temperature. But Sam Shames told me that’s not the goal. Instead, the Wave is supposed to work like downing an icy beer in July or holding a steaming cup of coffee in January. It’s the sudden surge of heat or cold that makes us feel better, even though our core temperature has hardly changed.

The Wave bracelet contains software that varies the effect, producing pulses of heat or cold that you feel on your wrist through the bottom of the device. It’s this constant variation that helps make it effective, Shames said. You adjust the setting by pressing one end of a temperature bar for warm, the other for cool.

Still, the effect isn’t dramatic, like walking into a sauna or a stand-up icebox. In fact, it’s largely psychological. The Wave makes people feel cooler or warmer even though their body temperature hasn’t changed. It sounds a bit like voodoo, especially since Smith said the Wave has no effect on people who are already comfortable.

Hui Zhang was a skeptic. But then she tried it out on students at the University of California at Berkeley, where she is a researcher in “human thermal comfort.” The experiment put 49 students in rooms that were either too hot, or too cold. After wearing the Wave bracelet for 30

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minutes, she said the students reported a distinct improvement, roughly equivalent to a five- degree increase or decrease in room temperature.

“I was surprised when I looked at the results,” Zhang said. …

Shames calls [his target market], the “thermally underserved.” He told me that the now-familiar room temperature standard of 72 degrees Fahrenheit was established in the 1960s by testing men of average build, dressed in suits. No thoughts of female metabolism, nor adjustments for the rise of business casual.

As a result, many of us are always complaining it’s either too warm or too cold at the office, and these people are Embr’s core market. Smith thinks that if enough buy a Wave bracelet, office buildings can turn down their heaters and air conditioners, saving companies millions in energy bills and easing demand for fossil fuels.

So the Wave is more than an odd-looking wristband. It just might be a secret weapon in the fight against climate change. …

Source: From The Boston Globe. © 2018 Boston Globe Media Partners. All rights reserved. Used under license.

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Exhibit 4 Excerpt from an Article appearing on Bustle.com on March 22, 2018

Sliced Ketchup Exists, and It Will Either Be Your Godsend, or Make You Super, Duper Uncomfortable

By Rebecca Fishbein

Ketchup is a universally satisfying condiment, adding a necessary oomph to everything from french fries to hot dogs to, um, salad, DON'T JUDGE ME. Of course, ketchup is also a pain in the butt. It takes forever to come out of bottles and tends to end up being too much or too little. (Don't even get me started on ketchup packets, which are useless, messy, and frequently manage to land on the nearest garment.) Some innovative souls have seen our ketchup woes and come up with a solution: slices of ketchup, which won't squirt or get your bread soggy. Genius.

[T]hese inventive ketchup slices come courtesy of Bo's Fine Foods, and they're dubbed "Slice of Sauce." According to Bo's Fine Foods's website, the slice creator, Emily, was inspired to transform ketchup into a more manageable condiment while trying out some of her family's recipes, as handed down to her by her father, who was a restauranteur in Michigan's Upper Peninsula. Somehow, that experimentation led to Slice of Sauce, a "no-mess, portable condiment that adds a layer to flavor to anything from burgers and sandwiches to wraps and burritos," per the site. …

[T]he Slice of Sauce creator was actually trying to make a BBQ sauce when this dried ketchup was birthed; after braising a bunch of veggies for that sauce, she ended up mixing, grounding, baking and drying them, hence the strip of condiment. And earlier this month, she launched a Kickstarter for Slice of Sauce in hopes of getting the product in stores nationwide.

"We set out to share our passion for healthy living and our love of food," the Kickstarter's mission statement reads. "We want to spread awareness that products with clean labels and ingredients with integrity can also be fun. Slice of

Sauce™ began in our homes but we’re excited to bring it to the shelves of grocery stores everywhere. In addition, we hope Slice of Sauce™ will address a need for healthier alternatives in schools, hospitals, and the military." Emily and her business partner, Thac, plan to use the Kickstarter funds to help finance a manufacturing spot in Brooklyn and the necessary labor to produce the product; they'll also go toward packaging, branding, and shipping, in addition to Kickstarter fees and processing.

"We’ve been working with a manufacturer in Brooklyn, NY to produce our hand-made slices and we're ready to fulfill orders," the site reads. "We’re confident that we can satisfy our backers, however, we encourage your early support in order to ensure timely deliveries."

Slice of Sauce isn't the first dried ketchup initiative of its kind, though it appears to be the first with a crowdfunding campaign. A Los Angeles-based restaurant, Plan Check Kitchen + Bar, started cooking up something called "ketchup leather" back in 2012, and it's pretty much the same thing as Slice of Sauce. Per LAist, chef Ernesto Uchimura invented the ketchup leather, dehydrating ketchup in an oven until the condiment has the consistency of a Fruit Roll-Up. Like Slice of Sauce, this innovation keeps bread from getting soggy.

Then again, as the Atlantic pointed out in 2015, we really don't need to improve burgers by jazzing them up with chewy ketchup. The piece notes that it is cool to add something new to a classic dish, which the ketchup leather succeeds in doing, but

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