Developing New Products and New Services

Innovation: putting anything new into practice

within a firm, irrespective of whether it is new
to the world, copied from competitors, or
adapted from existing products and services

Innovation may apply to: products, services,
processes, organisations

Importance of Innovation:
In operations resources: rapid technology
change, means of building capabilities
In market requirements: increased
competitiveness, shortened lifecycles, fragmented markets

Innovation can be
- Radical step change (Kaikaku): not always sustainable as the operation
becomes fatigued
- Continuous Improvement (Kaizen): small increments may not be substantial
enough to keep up with market requirements over time
- Combination of the two: optimum and sustainable improvement

Six Levels of Novelty

Design is the configuration of the product or service, whereas innovation is anything new that a
company does (products, services, processes)
- Both can lead to a competitive advantage
- Both follow a broadly similar process

Design: concept generation, screening, preliminary design, evaluation and prototyping
Innovation also includes: business evaluation and management of change to deliver new design

15 Stages of New Product or Service Development Process






1. Objectives and Strategy
a. Specific objectives with regards the the number and nature of new products and
services that they will develop over the coming months or years

2. Structure
a. Does it support ideas and innovation?
b. Is there a large R+D department?

3. Idea Generation and Screening
a. Internal sources: employees, sales force, reverse engineering
b. External sources: customers, competitors, legislative requirements,
environmental pressures, technology advances
c. Screening: level of investment needed, ease of implementation, demand from
customers, fit with existing product/service range

4. Concept Development
a. Required that the ideas that go forward are expanded into fully fledged concepts,
especially if there is a significant service element

5. Concept Testing
a. Research technique designed to evaluate whether a prospective user
understands the idea of the proposed product or service
b. Do they react favourably to it and feel it offers benefits
c. Done by talking directly to users, sales staff or service providers

6. Business Analysis
a. Involved a comprehensive investigation into business implications of each
concept
b. Market assessment and budget drafting for development and introduction of each
proposed new product/service

7. Project Authorisation
a. When top management commits corporate resources to the implementation

8. Service Design and Testing
a. Conversion of the concept into an operational entity
b. Products largely centres around a specialist team
c. Service involves input of prospective users and co-operation of operations
personnel who will ultimately be delivering the service

9. Process and System Design and Testing
a. Applicable to both products and services
b. Products: new production processes or develop new equipment
c. Services: totality of the delivery process, not just experience of customer

10. Marketing program Design and Testing
a. Services: devised in conjunction with the service department
b. Product: marketing program may be entirely separate from development process

11. Personnel Training
a. Mainly applies to service development, employees familiarised with new service

12. Product/Service Testing
a. Determines potential customers acceptance while pilot run ensures smooth
functioning

13. Test Marketing
a. Saleability of new service and field tests sample a limited number of customers

14. Launch
a. Production or delivery and marketing in place and testing, begin full scale launch

15. Post Launch Review
a. Determines whether the strategic objectives were achieved or if further
adjustments are needed

Factors Influencing NPD and NSD
Product/Service Features
- Originality
- Degree of protection from competitors
- Amount of capital investment required

Organisational Characteristics
- Size of company
- Organisational structure
- Degree of in-house capacity

Environmental Factors
- Maturity of marketplace
- Nature of supply chain
- Industry Association Sponsorship
- Formal or informal process

Likely to follow a formal process if:
- new products with major process impact
are developed
- number of interrelated innovations being
developed simultaneously
- new product is protected by licence or
patent
- product life cycles are long
- competitors unlikely to enter maker with a
similar product/service
- innovation is original or new to the world

Ethical Innovation

Patent: provides a legally protected right to exploit an invention. Only granted to something that
is novel (new to the world) but must also have a practical application
- Typically last 20 years
- Prevents others from submitting identical patent requests
- Ensures new knowledge is shared

Design Rights: enabled an organisation to legally protect the appearance of a product, so that the
design cannot be copied by others
- Coca Colas contour shaped bottle

Copyright: how creative works like books, plays, software and artwork can be legally protected
- Creator given exclusive right to use the copyright material, usually granted for the lifetime
of the author, plus a farther 70 years after their death

Trademarks: distinctive mark that identifies a product, service or organisation

Successful NPD and NSDs
Likely Success Barriers to Success
- Development teams are well led and
include creative people (called Plants
by Belbin)
- Top management isolation
- Development teams are a culture of
trust and sharing information
- Innovation seen as too risky
- Effective Knowledge Management - Short term financial horizons
- Inclusion of suppliers and distributors
in decision making process
- Intolerance of fanatics, inappropriate
culture
- Innovation seen as change/chaos
- Excessive bureaucracy (delays)

Likely to follow informal process if:
- simple modifications to existing
product/service
- innovation is not part of major
change program
- there is no licence or patent
protection
- competitors are actively innovating
- the new product is largely a copy of
a competitors product