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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
The Management
of New Product
Development,and
Entrepreneurship
19
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Innovation,Technological Change and
Competition
Technology refers to the skills,knowledge,
experience,body of scientific knowledge,
tools,computers,machines used in the design
and production of goods and services,
Quantum technological change,fundamental
shift in technology that results in innovation,
?The Internet and genetic engineering are examples,
? Incremental technological change,refinements of
current technology over time,
?Most firms seek incremental product innovations which
allows constant,but small,improvements,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Effect of Technological Change
? Many products undergo constant change and
improvement,
?Electronic products provide a great example,
? This change can be a threat to firms that are slow to
improve but provides benefits to firms that adjust,
?Technological change is both a threat and an
opportunity,
? Smith Corona typewriter company missed out on word
processing and is now out of business,
? Microsoft was quick to embrace graphic user interface
programs and now is dominant in the software business,
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Product Life Cycles
? Refers to demand changes for a product over time,
?Embryonic stage,product is not widely accepted and
has minimal demand,
?Growth stage,many consumers seek out the product
and buy it for the first time,
?Mature stage,demand peaks since most buyers already
have the product and only buy replacements,
?Decline stage,demand falls off perhaps since the
product is obsolete,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Product Life Cycles
Embryonic
Stage
Growth
Stage
Mature
Stage
Decline
Stage
Time
Demand
Figure 19.1
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Relationship Between Technological
Change and Life Cycle Duration
Length of Product Life Cycles
Rate of Technological
Change
Figure 19.2
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Rate of Technological Change
? The rate of change determines the length of the product
life cycle demand curve,
?The computer industry,life cycle is about 18 months; in
the steel industry,it is many years,
? Fads and fashions also impact the life cycle duration,
?Style changes alter the demand for goods,
?Usually,goods subject to fads and fashion changes
will experience shorter life cycles,
? In general,life cycles are getting shorter,forcing
managers to be more responsive to customers,
19-8
Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
The Four Goals of New Product Development
Reduce Product
Cycle Time
Maximize Fit with
Customer needs
Maximize
Manufacturability
Maximize
Product Quality
New Product
Development
Goals
Figure 19.3
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
The Four Goals of New Product
Development
1) Reduce Product Cycle Time,reduce time needed to
develop a product from conception to market
introduction,
? Early to market products can command premium prices
and will have a longer life cycle,
? Can add new features before competitors
2) Maximize fit with Customer Needs,most products
fail because they were not designed to fit customer
needs,
? Ensure customers want the product features before adding
them to the product,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
The Four Goals of New Product
Development
3) Maximize Product Quality,be sure new products
are of superior quality,
? Poor quality in a new product can doom its acceptance
even if quality is fixed later on,
? Quality problems usually result from rushing product to
market,
4) Maximize Manufacturability,the efficiency with
which the product is built impacts its time to market,
? Ease of production can shorten development time,
? Efficient production can also avoid production
problems and improve quality,
19-11
Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Stage-Gate Development Funnel
Principles
? Principle 1,Use a Stage-Gate Development Funnel;
managers often try to fund too many projects at once,
?Stage 1 considers all new ideas,Those that are feasible
and meet the strategic goals of the firm go through Gate
1,
?Stage 2 focuses on the product development plan and
then evaluated at Gate 2,Only the best continue,
?Stage 3 issues a contract book and focuses on
responsibilities,budgets,resources,etc,This is the
symbolic launch of the formal development,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Stage-Gate Development Funnel
Ship
Stage 3 Stage 2 Stage 1
Ideas
Gate 1 Gate 2
Figure 19.4
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Cross Functional Teams Principles
? Principle 2,Cross functional teams seem to be a crucial
part of effective product development,
?Core members of the team are the 3 to 6 people
primarily responsible for the development effort,
?Must ensure there is coordination and communications
between team members,
?Often are located physically together
?Successful teams will develop a clear sense of their
objectives and share a common mission,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Members of a Cross-Functional New
Product Development Team
Team
Leader
Core
Members
Peripheral
Members
Figure 19.5
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Concurrent Engineering Principles
? Principle 3,Concurrent Engineering,Traditional
approach follows a sequential flow between steps,
?This results in long development times and poor quality
when managers do not communicate between
departments,
? Development managers may design the product without
talking with manufacturing,resulting in problems,
?By working concurrently,design and production issues
are considered together,
?Production concerns are addressed while the product is
designed and can still be changed,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Sequential v,Parallel Development
Processes Figure 19.6
Opportunity
Identification
Concept
Development
Product
Design
Process
Design
Commercial
Production
Opportunity
Identification
Concept
Development
Product
Design
Process
Design
Commercial
Production
A Sequential Process
A Partly Parallel Process
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Bring in Customers & Suppliers
? A key reason the products fail is that they do not meet
the needs of the customers,
? Customer ideas and needs should be included in the
design process,
?Solicit customer input from many sources,
? Suppliers are also critical to the success of a product,
?Embrace them during concurrent engineering,
?Seek their ideas and input early in the process,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Product Development Problems
? Successful product development is a critical component
of a successful firm,
?While most managers know this,it can be difficult to
actually carry out good development strategies,
?Many managers have difficulty in releasing control of
their part of the process and allowing groups to take
part,
? Conflict management skills can address this,
? Product development often requires a break in the
traditional organizational culture to be highly successful,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Entrepreneurship
?Entrepreneurs are people that notice
opportunities and take the initiative to
mobilize resources to make new goods and
services,
? Many entrepreneurs work for themselves and start new
firms,
? Intrapreneurs,work in large companies and contribute
to innovation in the firm,
?Intrapreneurs that become frustrated with the lack of
opportunity at some large firms often leave and form
their own business called a new venture,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Entrepreneurship and New Ventures
? Characteristics of entrepreneurs--most share these
common traits,
?Open to experience,they are original thinkers and take
risks,
?Internal locus of control,they take responsibility for
their own actions,
?High self-esteem,they feel competent and capable,
?High need for achievement,they set high goals and
enjoy working toward them,
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Entrepreneurship and Management
? To become involved in an entrepreneurial firm,
?Start your own business as an entrepreneur,
?Work for a growing entrepreneur in their firm,
? Many entrepreneurs enjoy starting a business,but not
running it,
? Develop a plan for the new business
?Design a plan to guide the business similar to a product
development plan,
? The Stage-funnel concept can work well here,
?Firms with no plan usually fail
? Franchising allows you to purchase a plan and
experience of existing firm to reduce risk,
19-22
Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Steps in Developing a Business Plan
Step 1 Notice Product opportunity and develop a basic business idea,What Goods/services to produce
and who are the Customers/Markets?
Conduct Strategic Analysis (SWOT) to identify,
Strengths,weakness,opportunities,threats,
Is the Business opportunity feasible?
Prepare a detailed Business Plan including
Mission,goals,strategic and financial objectives,
resources required,and a timeline of events,
Step 2
Step 3
Step 4
Table 19.1
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Irwin/McGraw-Hill ?The McGraw-Hill Companies,Inc.,2000
Intrapreneurship
? A learning organization encourages employees to act as
intrapreneurs,To help,form,
?Product Champions,person that takes ownership of a
product from concept to market,
?Skunkworks,group of intrapreneurs kept separate from
the rest of the firm,
? Allows workers total flexibility and innovation,
?New Venture Division,allows a division to act as its
own smaller company,
?Rewards for Innovation,link innovation by workers to
valued rewards,