Product development is the key to the future in the business strategy. In the
business strategy, the top company management signifies the changes necessary
for the company’s future survival and growth and from this can be identified the
basis for product development. The future is what product development can
provide, delivering new products by the least risky, most efficient process to
carry the enterprise forward. It must harmonise with the existing company
activities as it delivers the new. Therefore it has to be an integral part of the
business strategy with full support of top management and cooperation from
management in all areas of the company.
Product development builds systematically from the resources and within the
constraints of the business, progressing through four key stages towards a
satisfied market. The product development process is the system that integrates
the activities in the four stages and its efficient and effective organisation is one
of the major factors ensuring success in product development.
All of product development is underpinned by knowledge – of the product,
market, production, distribution, consumer and society. The more extensive,
complete and accurate the knowledge, the greater the probability of a good fit of
the new product to the business and the market. So the fullest, practicable,
exploration of existing knowledge is important early in the product development
process. This knowledge is extended by information from outside the company,
and by creation of new knowledge inside the company.
The consumers are an integral part of all product development projects, even
in industrial marketing where the immediate customer is the food manufacturer
or food service outlet. The product is built around what the consumers need and
want, and their behaviour in buying, using and eating the product.
Part II
Key requirements for successful product
development
The four important facets of understanding product development are the
place of product development in the business strategy, the product development
process, the knowledge in product development, and the consumer/product
relationship. Thus the new product can be developed to fit most comfortably to
the business that produces it and to the customer who consumes it.
44 Food product development
Product development does not occur in isolation as a separate functional
activity. It is a company philosophy, a basic company strategy and a
multifunctional company activity. In recent years to show this all-encompassing
basis, bringing together product, process, marketing and organisational
innovations, there has been development of an overall innovation strategy.
This innovation strategy is related to the company’s overall business aims and
strategy, as well as the social, economic and technological environment, and the
company’s own knowledge and skills. The business strategy also includes a
product strategy outlining the products of the future. The combination of the
innovation and product strategies is the basis for the product development
strategy, and from this can be developed, with the company’s technology
strategy, the product development programme as shown in Fig. 2.1. In building
business and innovation strategies, it is important to recognise that from them
comes a product development programme both for many years ahead and for the
immediate year.
The innovation strategy is built up in the business strategy from the
innovation possibilities, but only after thorough coordination with the product,
marketing and technology strategies. The product development strategy is then
built from the innovation strategy, together with other parts of the business
strategy such as product mix planning and marketing strategy. Finally from the
new product portfolio and the product development strategy is built the product
development programme. In this way the product development programme sits
harmoniously with the strategic direction of the company, the company’s
technical and marketing capabilities, and the customers in its ultimate market.
2
Developing an innovation strategy
2.1 Possibilities for innovation
Innovation is an integral part of society, and therefore an integral part of an
industry and a company. There are three basic principles of innovation:
1. An innovation is an idea perceived as new by the individual (Rogers, 1962).
2. An innovation causes change, which can be technological or sociological
but is probably a combination of both (Earle, 1997).
3. An innovation involves a wide range of people, in the company, the
company’s environment and the society (Earle, 1997).
Innovation is seen as the state of mind in the company (Kuczmarski, 1996). The
traditional definition of innovation in companies as product development and
process development has expanded to include all the other changes that can occur
(Voss, 1994). Innovation can include ideas for different changes – philosophy,
technology, methods, organisation, market, people. But it is important for the
company to recognise that any of these changes will affect not only the company
but also the other organisations in the food system, the consumers and the
society. Innovations outside the company also cause changes inside the company;
for example, the technological innovation of the supermarket changed food
manufacturing and marketing, the social change of more women working caused
an increase in convenience foods. So innovation is related to the climate within
Fig. 2.1 Product development strategy generator.
46 Food product development
the company and also that surrounding it in the food system and the society as
shown in Fig. 2.2. It is important to observe the changes already occurring
outside and inside the company, and to predict the possible changes that can
achieve the aims of the company to survive and grow. One of the great
difficulties is to differentiate between the true, long-term changes and ‘fashions’
which die quickly. Judging wrongly may adversely affect the company.
The rate of innovation in a company depends on its ability:
? to sense possibilities and to perceive and assess the likely outcomes of
feasible changes;
? to evaluate and rank such outcomes strategically and operationally, in
relation to company objectives;
? to make decisions on the basis of such information and prepare appropriate
strategies;
? to implement plans and changes in managerial and technical terms (Frater et
al., 1995).
These steps are shown in Fig. 2.3.
Fig. 2.2 Climate for innovation.
Fig. 2.3 Innovation chain.
Developing an innovation strategy 47
2.1.1 Sensing the possibilities for innovations
In sensing the possibilities, it is important to study the major changes that are
taking place or predicted in society, in technology, food system, the marketplace
and the consumers. Only then can the possible company initiatives be created.
Social and political changes cause changes in the food industry or may even
prevent innovations in the food industry. Eating food is a universal activity and
therefore the food industry perhaps more than any other industry is enmeshed in
the social and political systems in every country. Society changes in many ways
as shown in Table 2.1.
The political systems and their attitudes to the food industry also change with
societal changes. In 1982, Throdahl suggested that the most important govern-
mental method of encouraging innovation in the food industry was to reduce the
adverse impact of regulations on innovation but did add ‘without sacrifice of social
objectives’. This has been the food industry’s dilemma for the past 100 years and
even earlier – innovation with or without consideration of society. The political
system itself can encourage or discourage innovation, by placing trade barriers or
subsidies which encourage local food production and discourage imports. National
policies, based on societal concerns, needs and wills, can create a reactive environ-
Table 2.1 Changes in society leading to food innovations
Major long-term living patterns: urbanisation, suburban and in-city living
Working patterns: increase in office workers and decrease in blue collar workers
Sex roles: women working, women in former male-dominated positions, women in senior
positions
Economic status: increasing incomes, more equal distribution or more unequal
distribution of incomes
Educational status: knowledge growth from education and the media
Age structure: increasing percentage of old people in Europe and of young people in
South America
Source: After Earle, 1997.
Fig. 2.4 Human values and the food industry
(Source: From Earle and Earle, Building the Future on New Products, C223 LFRA Ltd,
2000, by permission of Leatherhead Food RA, Leatherhead, UK).
48 Food product development
ment for innovation in the food industry. In looking for innovation possibilities,
food companies need to be aware of changes in societal attitudes that fuel political
changes as well as food changes. The social and related political changes have
caused food innovation in the past and will continue to do so in the future. Food
companies need to have methods of monitoring social changes and predicting future
changes (Earle and Earle, 2000). There needs to be greater recognition of human
values in developing innovation strategies as outlined in Fig. 2.4.
Technological innovation spans a broad spectrum of areas from the new crop
and the newly farmed fish, through new refining methods, new preservation
methods, new manufacturing methods, new distribution methods, new retailing
methods, new cooking and preparation methods. But it also includes changes in
technologies of other industries, particularly in those related to the food industry
such as the processing technologies in the pharmaceutical and chemical industries,
in the home appliance technologies and in the electronic and information
technologies. There also needs to be consideration of new scientific knowledge
that may be the basis for new technologies in the future. Companies, even very large
food companies, are often based on one technology; for example emulsion
technology may be the main emphasis and this covers a very wide spectrum of foods
from margarine to mayonnaise to ice cream to sausages. Their knowledge is
extensive in this one technology and it is often more successful to seek innovation
from this basis. When going to a new technology, a great deal of knowledge has to be
found as quickly as possible; this means building up resources either by learning or
by buying a company already using the technology. It is important for companies to
select a basic technology that can lead to many different types of products to satisfy
different markets. Some of the technological areas for innovation (Rizvi et al., 1993)
are shown in Fig. 2.5.
Think break
1. Identify important social and political changes occurring in your company’s
external environment.
2. What changes could be made in the company to relate to these changes so that
the company not only survives but also grows?
Think break
1. What would you identify as major technological developments in the processing
and distribution of food products in your company’s present technological
system?
2. What new technological developments in other parts of the food industry or in
other industries at the present time might cause changes in your company’s
technology?
Developing an innovation strategy 49
Changes in the structure of the food system are also an important source of
ideas for innovation possibilities. There are often changes in the importance of the
various parts – production, ingredient processors, food manufacturers, retailers,
food service – and the pressure for innovation moves from one section to another.
Recently there has been increased new product activity in the ingredients industry,
which is being transmitted to both producers and food manufacturers. Both
vertical and horizontal integration have occurred in the last 50 years, and caused
major innovations. For example vertical integration in the chicken industry led to
chicken as major meat, and to the development of many new products; horizontal
integration led to many new products in the baking industry.
A change in one part of the food system leads to new products in other parts.
In particular, innovations in the primary producing industries produce new
ingredients, which then advance to new consumer products. Canola seed was
developed with low erucic acid, and these seeds were used to produce oil with
high polyunsaturated/low saturated fatty acids, and the oil was then used to
develop oil-based consumer products which were more attractive nutritionally.
The food system changes slowly. During the last century changes were
incremental with some major changes, and the radical changes were well spaced.
This may be caused by:
? maturity of the industry – compared with the innovative industries such as
electronics, it is more difficult to invent new products;
? consumers – many are cautious and suspicious in judging new foods; food
consumers change slowly unless they recognise marked benefits in the new
product, and new benefits are more difficult to design than in other industries,
for example information technology;
Fig. 2.5 Technological areas for innovation.
50 Food product development
? biological product development – it takes time to develop a new plant, a new
animal, a new fish, and even a new safe process, and these are the basis of the
radical changes. Because of the expense of these developments, they were
mainly funded by governments in the past (Earle and Earle, 1997), which also
led to slowness;
? marginal returns on new food products – compared with other industries, for
example the pharmaceutical industry, the profits on new food products are
small.
So it may be that this has been the most suitable innovation method – mostly
incremental product changes, some major changes and a few radical changes.
But with today’s high rate of technological change in other industries, there may
be change in the rate of innovation in the future.
The knowledge and understanding of technology in the total food system is
continuing to grow rapidly and, if this is recognised by the industry, it will
impact on new products, new processes and new manufacturing systems but
more important on the consumers’ and society’s attitudes and behaviour towards
food. However, if acceptance by the consumers is to be widespread and willing,
then they must see obvious overall benefits to themselves; this needs, among
other things, full and clear information. A striking lesson in the difficulties that
may arise is to be seen in the introduction of genetically engineered foods. The
bundle of products and services that the food company calls an innovation is
now in the eyes of the consumers an experience, which they hope is safe and
enjoyable (Pine and Gilmore, 1998). The food industry has gone through:
Commodities C33 Products C33 Services C33 Experience
Innovation occurs today at all these levels in the various parts of the food
system.
Think break
When searching the food system for innovations, some leading questions are:
? What are the changes in the relative importance of the various sections in the
food system?
? How is the capacity of the industry changing?
? What are the changes in the ownership structure?
? Are there predicted take-overs in the industry?
? Are there predicted take-overs from outside? Hostile? Friendly?
? Are there predicted investment changes?
? Are there new companies entering the industry?
? Who are the innovators in the industry?
1. Try to answer these questions.
Developing an innovation strategy 51
Marketplace changes provide a rich source of innovation possibilities
(Earle, R.L. and Earle, M.D., 1999). There needs to be searching for long-term
possibilities, as well as tactical thinking for the immediate marketing plans. Four
areas to consider when looking for long-term marketing possibilities are:
? international comparisons;
? product and service developments;
? market specialisation;
? new distribution methods.
Looking internationally, it is important to take a broad look over many
markets and compare them. The home market in the USA or Europe may be
static, but markets in Asia are increasing rapidly. Alternative possibilities are
either in the home market to increase a market share or to have higher value
products, or in the new market to relaunch the old basic products. As can be seen
with McDonald’s and Coca-Cola, relaunching on a new market is successful in
the long term, but there is a need to keep the home market viable as the basis for
the new venture. The reverse also occurs: products on an overseas market can
produce ideas for the new product in the home market.
Changing the ratio of product to services is another way of identifying
innovations. Once the new product was the main innovation in consumer
marketing but increasingly service has become important. How far does the food
manufacturing company go in providing services for the consumer; how far does
the ingredients company go in providing services for the food manufacturer?
Certainly innovation can be found; for example in food service providing the
materials and the recipe for the dish opens up a whole range of new products to
be supplied to small restaurants; providing complete chilled meals, ready-to-
heat, in supermarkets again leads to many new products.
Market specialisation has gained increasing recognition in searching for
innovations. In the past the food companies tried to provide a wide range of
foods, and their innovation growth was often achieved by buying or
amalgamating with other companies. Today should marketing be more focused
and the innovations aimed at specific target markets? In other words, should
variations of a product be developed for different market segments, so that the
new products are more focused on the people in that market?
Distribution has always been an area for major new developments – from the
grocer’s shop to the supermarket to the mega-market – and one would predict
that there are going to be major changes in the next ten years with the
introduction of e-commerce and other uses of the Internet. The information age
2. Identify possibilities for new products in your company based on this
information.
3. What new technological developments are predicted in the food system that
could affect your company?
52 Food product development
is certainly having a strong effect on all aspects of marketing technology – the
distribution system, the places for selling food, the communications, the
promotion, the sales methods. New food products will certainly come from the
four consumer trends: using the Internet to buy food, food shopping as
entertainment, food shopping for freshness and food shopping for health, all of
which will affect the distribution system (Earle and Earle, 2000).
In searching for the long-term market possibilities, the basic research is to
study the consumers and in the case of the food ingredients company also their
immediate customers. There is a need to take a broad look at the possible
consumers and their future needs, wants and behaviour (Earle and Earle, 2000).
The research is about people – how they think, feel and behave, and why they
think, feel and behave in these ways, and then to relate this to their needs in
future products as shown in Box 2.1 (Hedges, 1969). It is interesting that this
paper was published over 30 years ago, and how many of the predictions have
become reality. An interesting question today is: are the consumers’ knowledge
and attitudes pushing the food industry towards the product quality standards of
the pharmaceutical industry, guaranteeing the safety and the effectiveness of the
food products? What innovation possibilities does this uncover?
Box 2.1 Some future consumer needs predicted in 1969
? Increasing importance of smell in foods
? Foods light in substance but strong in flavour
? Texture a more important featured characteristic
? Packaged goods accepted as norms
? Dieting and slimming will become an increasing occupation
? The family mealtime will break down
? Strong conservatism in food taste progressively breaks down
? Better nutritional standards eliminate the danger of between meal hunger
? Meal nibbling for social/psychological reasons increases
? Increased public sophistication in dietary and nutritional matters
Source: After Hedges, 1969.
Think break
1. Identify eight innovation possibilities for your company, two under each of the
following areas:
(a) society changes,
(b) political changes,
(c) technological changes,
(d) food system changes.
Developing an innovation strategy 53
2.1.2 Evaluating the innovation possibilities for the company
The innovation possibilities may be market related, e.g. a new market niche, a
growing market area; technology related, e.g. a new process, increased
automation; resource related, e.g. a new crop, a new ingredient; society related,
e.g. increased income, poorer health; consumer related, e.g. single complete
meals, children-friendly meals. These innovation possibilities need to be
analysed against the company’s capabilities and the company’s objectives. The
company evaluates from ‘might do’ to ‘can do’ to ‘should do’.
The company’s climate and capabilities are a major evaluation factor in
studying innovation possibilities. One company may be very conservative, and
not want change, so it chooses a low level of innovation as the company climate
and therefore in its business strategy. Another company may want to be at the
forefront of change, so it has a company climate of innovation, and includes
innovation as a major part of its business strategy. This incorporation of
innovation into the company philosophy sets the basis for the product
development. If the company has low-level innovation, product development
consists of cost cutting and minor product improvements; at high-level
innovation, product development is searching for a unique product that will
cause a major change to industry, market and consumers. Many companies have
a mixture of innovation and conservatism.
No change Radical change
0% _______________________________________________________ 100%
C35C35C35
Conservatives Moderates Innovators
The company may think of change as technical, but it is the commercial change,
particularly as related to the consumer, that is the important change. This
spectrum is also related to risk-taking: companies can vary from aversion to risk
to seeking risk. It is important to recognise the present level of innovation in the
business strategy and also the philosophy for risk-taking in the company.
Companies cannot quickly change from one level of innovation to another.
Before viewing the innovation possibilities for the company, it is often
interesting for the company to take a look at itself:
2. Select an important product area for your company and study it for:
(a) international comparisons,
(b) product and service developments,
(c) market specialisation,
(d) new distribution methods.
From this identify eight innovation possibilities.
54 Food product development
? Is it blinded by the glare of the oncoming future, trying to muddle along in its
present markets and technology?
? Is it searching fearlessly and widely for new opportunities?
? Is it moving in a focused direction with a strong sense of purpose?
There are basic company qualities that affect evaluation of possibilities such as
size of the company, financial status, type of product mix, place in the market,
standard of production and marketing. But when judging the innovation
possibilities, it is more important to study the company’s experience, expertise
and knowledge in innovation. It is important to make a quantitative analysis of
the company’s rating in innovation, and it is helpful to use a set of innovation
indices and compare these, if possible, with the ratings of other companies or the
industry in general. Various suggestions have been made for innovation indices,
including the success of new products, new product development effectiveness
and the innovation level of the company as shown by Kuczmarski (1996). He
suggested that the following indices should be determined over a three-year
period.
1. Success rate of new products:
(a) survival rate: new products still on market/total number of products
commercialised,
(b) success rate: new products exceeding revenue forecasts/total number of
products commercialised,
(c) innovation sales ratio: cumulative annual revenues from new products/
total annual revenues.
2. New product development effectiveness:
(a) R&D innovation effectiveness ratio: gross profits from commercialised
new products/R&D expenditures to new products,
(b) return on innovation: cumulative net profits from new products/
cumulative new product total expenditures for all commercialised,
killed and failed new products,
(c) process pipeline flow: number of new product concepts in each stage of
the development process at year-end,
(d) innovation revenues per employee: total revenue from new products/
number of employees devoted to innovation initiatives.
3. Innovation level:
(a) R&D innovation emphasis ratio: R&D expenditure to new products/
total R&D expenditure,
(b) newness investment ratio: expenditure to new-to-world products/new
products total expenditures,
(c) innovation portfolio mix: percentage of products new-to-the-world,
line extension, repositioning, new-to-company, product line improve-
ments.
Developing an innovation strategy 55
These are quantitative measures (metrics) of new product development success
and effectiveness, and of the innovation level of the company, and these can
be used to compare the company’s performance with that of other companies.
Campbell (1999) studied innovation in manufacturing companies in New
Zealand over a five-year period using a simple comparison of product success:
? number of new products;
? number of improved products;
? new and improved products as percentage of total sales;
and asked the companies to state their level of success in new products and their
level of change in technology as shown in Table 2.2. These are mean scores for
New Zealand manufacturing companies in a variety of industries so are not
typical scores for the food industry. But they show the differences that can be
found between the most innovative and the least innovative companies. The
innovative companies tended to be innovative in all parts of their business, as
can be seen from their much higher scores, than least innovative companies, for
change in production, plant equipment, marketing and support systems. It is
interesting to note that the highly innovative companies launched more products
but had a slightly lower success score than the moderately innovative
companies. It was found that these highly innovative companies tended to have
a truncated product development process and missed some of the evaluation
steps, while the moderately innovative tended to have more stages and more
analysis.
Table 2.2 Company innovation indices in New Zealand manufacturing over five years
Innovation indices Highly Moderately Least
innovative innovative innovative
Number of new products 26 9 8
Number of improved products 48 22 5
New products, % of total sales 42 19 18
Improved products, % of total sales 32 25 15
Success of new products* 4.0 4.6 3.5
Change production processes
C121
2.6 2.5 1.9
Change management,
marketing, support systems
C121
3.5 2.7 2.4
Comparative status of plant equipment
C122
2.9 2.9 2.1
* Scores, 1 (most failed) to 5 (highly successful).
C121
Scores, 1 (not at all) to 4 (completely).
C122
Scores, 1 (more than 10 years behind) to 4 (fully up to date).
Source: From Campbell, 1999.
56 Food product development
The company objectives and goals are also important in studying innovation
possibilities. What is the company wishing to achieve, where and when? The
innovation possibilities need to be ranked against these objectives – in particular
innovation possibilities need to fit into the general direction of the company and
not involve technologies, markets and finances, which are well outside the
objectives of the company.
The innovation possibilities are screened to choose the most suitable for
further study. In selecting the innovation paths, it is important to retain contact
with the twin areas of business and society, as shown in Fig. 2.6. The factors
used for screening vary with the company and the types of innovations, but
Think break
1. Compare the innovation scores either between your company and other
companies in the industry, or if this is not possible between different product
areas in your company.
For the last five years, collect the following information:
Sales growth over last 5 years ________
Number of new products ________
Number of improved products ________
New products – proportion of sales ________
Improved products – proportion of sales ________
Success of new products
All failed _______________________________________________ 100% success
Changed production processes
Not at all _______________________________________________ Completely
Changed marketing methods
Not at all _______________________________________________ Completely
Changed company organisation
Not at all _______________________________________________ Completely
Age of technology
More than_______________________________________________ Fully
10 years behind up-to-date
From these results, how do you rate your company – highly innovative, moderately
innovative, not innovative?
2. In what areas do you think your company has the knowledge and skills for
innovation in the future – raw materials, processing, products, distribution,
marketing, communications, consumer experience?
3. In what areas do you think your company has the financial resources for
innovation in the future – raw materials, processing, products, distribution,
marketing, communications, consumer experience?
4. What do you see as your company’s barriers to innovation?
Developing an innovation strategy 57
important factors are related to the company, market, technology, society,
predicted outcomes, project needs and company resources. Some important
evaluation factors for innovation possibilities (Kuczmarski, 1996) are shown in
Table 2.3. Major factors are those that are important in evaluation while critical
factors are those that are directly related to product success and must be
Fig. 2.6 The business and societal decisions for innovations.
Table 2.3 Evaluation factors for innovation possibilities
Major factors Critical factors
Company
Fit with strategic objectives Exploits internal strengths
Impact on existing business
Market
Consumer need intensity Product/service uniqueness/differentiation
Source of competitive advantage
Technology
Company competence in technology Relation to present technologies in company
Society
Impact on ethical constraints Agreement with religious rules
Impact on political constraints Agreement with government regulations
Predicted outcomes
Sales and profits potentials Return on investments
Degree of risk
Needs and resources
Financial needs Financial resources
Knowledge needs Knowledge resources
Source: After Kuczmarski, 1996.
58 Food product development
evaluated. The remaining innovation possibilities after screening are incorpo-
rated into the building of the business strategy.
2.2 Incorporating innovation into the business strategy
The innovation strategy/strategies are formed within the business strategy, along
with other strategies such as product, technology and marketing, as shown in
Fig. 2.1. The formulation of company goals and strategies is very much an
iterative process, integrating the various strategies in the direction of the
business goals, and using forecasts and analysis of possible outcomes, with an
understanding of the company’s capabilities.
Top management develops an innovation blueprint – a vision that defines
the future role that innovation plays in the long-term goals of the company
(Kuczmarski, 1996). The basis of this is an understanding of how innovation
affects the company’s main stakeholders – consumers, staff and shareholders;
how it is related to the value of their company – capital value, share price; and
how it is related to the value of their brand(s). This blueprint is the standard for
accepting an innovation possibility into the business strategy.
The top innovation possibilities are combined with the blueprint to develop
an innovation summary, which is built up with the product, marketing and
technology strategies into an innovation strategy.
2.2.1 Combining strategies – product and innovation
The product strategy develops a balanced and rolling programme for the product
mix during at least the next five years, with an outline product mix for later
years. The forward planning of the product mix depends on the culture and size
of the company, volatility of the market and the rate of technological
development. In a large company with a reasonably stable market and slow
change of technology, planning can be ten or more years; in a small company
with few resources it can be one or two years.
In the product mix planning, there is recognition of today’s breadwinners and
also of the future breadwinners, the place in the product life cycle of the product
areas, the competitive status of the products now and in the future. This identifies
the areas for product improvements, line extensions, repositioning, new
innovations in the present product system and radical new products outside the
present system. There needs to be a constant interplay between the innovation
summary and the development of the product mix, so that out of it will come the
product development strategy that will be the basis for the product development.
It is also important at this time to predict the effect on products that other
innovations will have – for example, a new processing line, or a restructuring of
part of the company. Often these are analysed separately, especially the company
reorganisation, with little thought of how this would affect the product strategy
and therefore the financial outcomes of the company in the future. There can be
Developing an innovation strategy 59
very adverse outcomes. They may be cost saving at the time, but may have severe
impacts on the new product planning and the future returns.
2.2.2 Combining strategies – technology and innovation
The technology strategy for the company is also interwoven with the innovation
strategy. In building the technology strategy it is essential first to identify the
competence of the company with the present technologies and the ability to
develop new technologies. A systematic method is used, comparing the
technological competence of the company against other companies. This gives a
truer indication of how technologically skilled the company is, rather than using
subjective statements of company staff who may have vested interests in the
present technology. It is difficult for outside consultants to assess the company’s
abilities for new technological areas. A combined project team with company
staff and consultants using quantitative analysis is probably best for analysing
technology competence throughout the company – raw materials, processing,
distribution, marketing, and products. There is a need to study:
? base technologies that are necessary for the chosen product–market mix;
? key technologies which provide competitive advantage;
? new technologies, which could become tomorrow’s key technologies.
A technology mix needs to be developed for the future incorporating all of these.
The technology strategy is related to the innovation possibilities that have been
selected in the innovation summary, the product mix and the technology mix as
well as the company’s technological capabilities as shown in Fig. 2.7.
A technology strategy can identify:
? new base or core technology that may lead to a range of new products;
? base or core technology that is needed for an original new product;
? key technology change that will be a unique competitive chance for the
company;
? improved technology that will lead to higher product quality, more varieties
of products or cost reductions.
In developing a technology strategy, it is important to relate it to the products,
consumers and markets. Sometimes a new processing or production technology
Think break
1. What are the basic product areas in your company’s product mix? In the product
mix, identify today’s breadwinners – the products providing the main part of the
sales revenue, and tomorrow’s breadwinners. What is the place of the other
products in the product mix?
2. From your study of the product mix, what types of product innovation do you
predict for the next few years?
60 Food product development
may appear an attractive advance but may give product changes that are not
recognised by the consumers or may even be unattractive to the consumer.
Irradiation is a long-time technological innovation that has not come to be used
because of consumer resistance to it. Genetically engineered crops are another
instance today. It is also important to study the technological need, possession
and lack of technology in the company and outside sources of technology, in
developing the technology strategy:
In looking at new raw materials, some factors to study are shown in Table
2.4. Raw materials are an important technological area for innovation in the food
Fig. 2.7 Building the technology strategy.
Table 2.4 Factors in raw material innovation
Materials
New agricultural and marine resources/materials
New processed raw materials, ingredients
New packaging materials
Constraints and new freedoms
Social constraints on raw materials changing
Availability/costs of raw materials changing
Government controls on raw materials changing
Effects of economic/political changes on materials
Changes in company standards for materials
Developing an innovation strategy 61
industry, but consumer and political pressures today indicate that more care
must be taken in sourcing them, so that the development and the production
environment and methods are visible. Saying that the raw material pathways in
international trade are too complex will not be an answer in the future – this may
see more joint ventures in raw materials innovations.
In the food industry, it is critical to combine the necessary production,
processing and marketing technologies in technology innovation to ensure a
successful innovation.
2.2.3 Combining strategies – market and innovation
The important first step in market innovation is to identify the target market
segment (Schaffner et al., 1998). The company must group consumers,
industrial customers, retailers or food service organisations into coherent groups
which have similar behaviour, attitudes, needs and wants, so that the same
marketing method can be used for all members of the group. Once the target
market is identified, then the information on which to build the market
innovation strategy can be collected. The innovation strategy can stay with the
present target market, expand this into similar market segments, or look for new
market segments in the national or international markets. In a true innovation, it
can be creating a new market.
The marketing orientation in the business strategy is guided by the
company’s interpretation of consumer or customer needs and wants. This is
implemented in the marketing strategy. The overall marketing strategy is based
on developing the consumers/customers’ concept of the company and also their
concept of different product areas. As consumers’ behaviour, needs and wants
change, the company needs to adapt and develop an innovation strategy in
parallel with these changes. The company needs to be flexible and change its
relationship with the consumers as consumers change. The innovation strategy is
based on the company/consumer relationship and also the product/consumer
relationship:
Company
C32
C33
Consumer
C32
C33
Tangible product
In the case of the tangible product in the supermarket, the consumer is relating to
the brand, the company and the product.
Think break
1. What are the basic technologies in raw materials, processing, distribution,
marketing in your company?
2. What are the key technologies in each area?
3. What new technologies do you see developing in each area in the future?
4. Does your company have the competencies for these new technologies?
5. If not how could the company acquire them?
62 Food product development
In the case of the food service, there is also the service relationship where
seller, buyer and product interact:
Consumer
C32
C33
Food service provider
C45C38 C46C37
Product
In the take-away or restaurant or institution, the consumer is reacting to the
service provider and the service as well as the food. In industrial marketing, the
customer is also reacting to the seller as well as the product and the services
provided.
In developing an innovation strategy in marketing, the company can be
changing the consumers’ concept of the company, the brand, the products and
the services.
The marketing strategy is strongly related to the product strategy. It is
influenced by the stage of the product life cycle the product has reached. Is the
market innovation to launch a new product in a new market, to launch an old
product in a new market, an improved product in the present market, relaunch a
product in the present market? Or even to drop a product – also an innovation
but with the aim of death instead of life?
Another important aspect of developing the market innovation is the
competition and the company’s competitive position. Is the innovation reacting
to the competitors’ actions or is it proactive, acting before the competitors? The
positioning of the products relative to the competitors is important in building
the market. The market segment may be the same but the positioning of the
product to the segment may be the innovation. For example, a tin of baked beans
is an everyday commodity product but the new positioning could be to change to
a nutritional market segment and position the beans as a high-protein food. This
may be too major a change!
The marketing innovation can also come from changes in the marketing
technology, e.g. changing the communications, the retailers or other organisa-
tions in the market channel, the pricing methods. These changes can cause
innovation in the methods of marketing. In evaluating the marketing innovation,
sales and profits predictions are often used, but it is also important to study the
consumers’ reactions to the innovation, difficulties in accessing the market and
the company’s capability in entering the market.
2.2.4 Unification – the combined innovation strategy
In developing the company’s innovation strategy, aspects of innovation in the
product, technology and marketing strategies are combined with the innovation
possibilities. The company has to decide which is the ‘lead’ innovation and then
choose the other strategies to complement it. One company may decide that the
critical innovation is to change from providing food for people to providing
health to people. This will need to be combined with a major raw material and
processing technology change from general food technology to pharmaceutical
Developing an innovation strategy 63
technology. The knowledge, safety and ethical standards in selecting raw
materials and in controlling processes will need to be higher. The company may
need to acquire or merge with a pharmaceutical company to gain the knowledge
and the facilities. The marketing strategy will also change – communication
through the medical profession instead of TV advertising around general
viewing programmes; selling through specialist health boutiques in the
supermarket and through pharmacies; a different brand.
Another company may aim to stay as an energy food supplier for children,
teenagers and young adults, and to increase their market size have decided to
enter the international market. This will lead to a standard processing line (or
kitchen facilities if they are in the food service industry) easily adapted to
different national infrastructures; strong raw material and ingredients specifica-
tions; understanding of cultural needs as a basis of the advertising and public
relations; building of an international brand.
This interrelationship of the various strategies is mapped out in Fig. 2.1, so
that an interlocking overall business strategy can be built up.
2.3 Building up the innovation strategy
There are now a number of innovations that have passed the initial screening
against the company’s aims and then had their relationships with the product,
marketing and technology strategies assessed. These need to be brought together
into the final innovation strategy as shown in Fig. 2.8. Whatever direction its
innovation strategy may take, a company needs the knowledge and techniques to
create, design and develop the innovation, as well as the resources and
implementation skills to bring it to fulfilment. There are many innovation
strategies, and they can be combined in various ways, but they need to be
analysed on their predicted outcomes before they are accepted into the company.
So there is a need in building an innovation strategy firstly to study the total
system and the company’s situation in it and then to predict the changes that
may occur in the system, and to state the optimal situation for the company in
the future. In developing innovation strategies, a food company will consider its
Fig. 2.8 Building the final innovation strategy.
64 Food product development
raw materials, technology, markets, targeted consumers and their wants and
needs, but need also to set out clearly:
? the company’s place in the food system;
? the company’s means of achieving the innovation aims;
? the company’s organisation and resources for innovation.
2.3.1 The company’s place in the food system
The two main food channels are the fresh product channel and the processed
product channel. The fresh products channel has increased a great deal in
importance in the last few years and it is predicted to grow further because of
improved distribution technology and consumers’ evident wish for fresh
products. The processed products have been the mainstay of the food industry
because of their enhanced storage life and the amount of variation that can be
achieved in the products. The next decision is to decide on the stage of the food
system: production, ingredient processing, manufacturing, distribution or retail.
There is increased innovation in the production sector with many new types and
varieties of fruits and vegetables; farming of an increasing variety of fish;
organic farming; new types of animals. This is as well as genetic engineering,
which up to now has concentrated on farming methods, such as resistance to
herbicides and higher yields, rather than potential for product innovation.
Innovations from the ingredient processors have increased markedly and this is
an increasingly powerful part of the food industry. Food manufacturing has
mainly concentrated on incremental changes, with some new innovations such
as UHT processing and extrusion. The retail sector is a continuous area for
innovation, both inside the supermarkets with own label products, organic
products and boutique stalls, and outside with the increase in food stores
associated with petrol stations and the rising growth of takeaways and
restaurants. Some possible innovation strategies for the various stages in the
food industry are shown in Box 2.2 (Earle 1997).
Vertical integration has been an important innovation strategy in the past, for
example in the chicken industry, and in large multinationals which have
combined ingredients processing with food manufacturing. Recently in some
companies there has been a breaking of the integration with selling off the
ingredients processing section by large food companies and of contracting
farmers instead of owning farms in the production, processing and marketing
integration. Retailers increasingly have a high degree of integration, although
not always ownership, with production, processing and manufacturing, and are
more strongly involved in innovation in the food system. Food manufacturers
are increasingly directed in innovation by the food ingredients’ processors and
the retailers. It is interesting to speculate how the food manufacturers will
develop innovation strategies in the future; it would appear that today’s strong
influence on their innovations of retailers and ingredients suppliers may make
them redundant in innovation or spur them into new directions.
Developing an innovation strategy 65
2.3.2 The company’s means of achieving the innovation aims
In the innovation strategy, the company needs to decide the means for achieving
the innovation: grow own technology, acquisitions, mergers or licensing. These
are all methods of bringing the innovation to fruition and the choice depends on
Box 2.2 Some possible innovation strategies for the various
stages in the food system
Food service – Fast foods is an area which will develop further in the global
scene, with international foods from fusion of meals and snacks from
different countries.
In some countries, particularly the USA, the fast food companies could
develop more fresh take-home meals or part meals.
Retailers – New developments will start in the USA to cope with the
changing consumer needs. There could be innovation in types of stores, the
present supermarkets’ domination changing into different types of stores –
fresh food markets, convenience stores, take-home meals outlets. Increasing
use of the Internet in retailing.
Manufacturers – In seeking ‘total food technology’, the manufacturer could
seek innovations in the retail sector, developing new retail outlets which they
could own or be in joint ventures with other manufacturers or retailers. Two
possible innovations are:
? marketing a specialised group of nutritionally designed products through
nutrition boutiques;
? cooperation with fast food outlets to develop a new combined
manufacturing and retail system to provide fresh meals or part meals for
taking home.
Ingredients’ processors – This is an innovative sector at the present time and
one can only see them increasing their industrial marketing to have
cooperative programmes with their customers, both food manufacturers and
food service, and increasingly involving farmers and fishers.
Farmers and fishers – They could increasingly manage a ‘fresh’ chain from
the farm and sea to the ‘fresh’ supermarket and to the food service outlet.
There could be closer relationships with the food processors in developing
new food ingredients by animal, plant and fish breeding. Ownership could
ensure that new varieties and more sustainable production methods are linked
directly to the needs of the consumer.
Source: After Earle, 1997.
66 Food product development
resources in the company, time available, costs, risks involved and the
probability of success.
If the decision is to develop the innovation within the company, there has to
be the decision on whether the change has to be incremental or discontinuous.
This means that the management decides if the innovation is to grow from the
present base or if this is to be a completely new direction – maybe a new plant or
a new market or a new product platform. In the industry, is it strengthening its
position, changing position or moving out? Is the company organisation staying
the same, gradually changing or completely changing? There also needs to be a
specification of risk – high, moderate or low risk.
This is really setting the company philosophy for innovation. A large
company may say that it has different types of innovation in different parts of
the company – some strategic business units may be high risk, discontinuous
change, growing their own technology; other strategic business units can be low
risk, incremental changes, acquisitions. But usually the company has one
philosophy; there may be venture parts of the company that have a different
philosophy. The degree of risk in an innovation strategy varies with the
company; two different companies may decide to develop the same product for
the same market – for one it is high risk and for the other it is low risk (Souder,
1987). Two companies developing frozen bread dough and two developing low-
fat beef are compared in Table 2.5.
Table 2.5 Innovation strategies and their risks in different companies
Frozen bread doughs
The innovation is frozen bread dough as a consumer product in supermarkets
? A small baker marketing bread in its local area is looking at an innovation strategy for
marketing frozen bread doughs to supermarkets nationally. This is a high-risk venture
as both the technology and the market are new to the company.
? A large baking company which is marketing cakes, biscuits and frozen pastry to
supermarkets is considering marketing bread doughs to supermarkets. This is a low-
risk venture because it has the technology and the market already and it is a new
product to expand the range.
Low-fat beef
The innovation is a production method for growing beef cattle to produce low-fat beef
? A group of farmers is setting up a new processing and marketing cooperative to
market the beef in the local market as gourmet products for high-class restaurants.
This is an innovation with a high capital cost for plant, but a low risk as the farmers
are already selling beef in this market, and know it well. The risk is that the market
may be too small to carry the capital cost.
? A meat company, with processing facilities and marketing system selling beef to
hamburger processors in an overseas market, is seeking to set up a marketing system
in the overseas country through meat importers and restaurant distributors. This is a
high-risk venture as the company does not know the marketing system for beef to
restaurants, and also the consumers’ requirements for low-fat beef which is grass-fed.
There is no capital cost for equipment, but costs in setting up the marketing system.
Developing an innovation strategy 67
2.3.3 The company’s organisation and resources for innovation
It is important that the company sets out the innovation strategy clearly for all to
read because it is going to be the basis of the criteria for decisions in setting up
the product development programme and also during the individual product
development projects. The innovation strategy is the basis for all innovation in
the company, and the basic strategy leads to the company direction for
innovation. For example many large food companies want to keep their position
in the industry consolidated with some growth, and this would likely be
associated with incremental changes, low risk, gradual company organisation
change, and internal technology with acquisitions when necessary to acquire
new technology. The small company with a new technology and wishing to
grow would combine discontinuous change, with high risk and major company
change, and would grow its own technology. It is important to recognise the
interrelationship of the innovation strategy with product development. All
product innovations of course lead to new products, but most processing
innovations and marketing innovations and even some of the organisational
innovations lead to new products. So the innovation strategy has to be studied
and incorporated when building the product strategy.
The innovation strategy as a basis for product development defines:
? the innovation areas and the types of innovation;
? the overall aims of the innovations;
? the growth in sales revenue/profits expected;
? the aims of the innovations in growing the present markets or diversifying
into other markets;
? the resources and the timing available for the innovation strategy and the
individual innovation programmes;
? the company organisation for innovation.
In the innovation strategy within the business strategy, there is a need for top
management to outline the type of organisation, and the resources of people,
finance, time and equipment, which will be provided for the development of the
innovation. An innovation strategy without defining the means for carrying it
out is apt to be slow in actioning, and some parts of it may never be put into
Think break
1. How does your company regard risk in innovation?
2. What type of innovation strategy does your company use most often: company
change, organisational change, technology change, marketing change, market
change or consumer needs and wants change?
3. What are the company’s methods for making each of these changes – internal
development, licensing, acquisition, merging or outside contracts?
68 Food product development
action. The Board of Directors needs to balance the company’s ideal innovation
strategy and the company’s capabilities and resources before finalising the
innovation strategy.
2.4 Getting the innovation strategy right
The company in its yearly development of business plans may be adjusting or
rolling forward the present innovation strategy or/and developing a new
innovation strategy. Developing a completely new innovation strategy could
result in forming a new company or a new strategic business unit in the present
company if there is a major change requiring new technology and marketing.
The rolling forward of the present innovation strategy is an incremental process.
A change of innovation strategy results in major company changes and is
obviously expensive in resources of people, time and money. Hence the reason
for a number of companies not considering new innovation strategies and
becoming conservative and stagnant. Whether it is a rolling change or a new
innovation strategy, there is a need every year:
? to determine if the focus of the innovation strategy needs to change;
? to study the balance of innovation areas in the strategy;
? to analyse the innovation areas both operationally and strategically;
? to determine the company’s capabilities and organisation for the innovation
areas.
The innovation strategy for the company is a portfolio of strategies that needs to
continue achieving the overall aims of the company in the changing business
strategy.
2.4.1 Analysis of mix of innovation projects
In the area of new product innovations, there is a need to analyse the mix of new
products to see if the new product relates to the present product mix and to the
company’s innovation strategy position. Cooper (1998) identified four types of
companies in innovation strategy development:
1. Prospectors – the industry innovators.
2. Analysers – the fast followers.
3. Defenders – the holders of secure positions.
4. Reactors – the responders to competitive pressures.
His analysis of their project types is shown in Table 2.6.
The emphasis here is on products but it is indicative for all innovations. There
are companies seeking innovations that will change the company; others that
wish to innovate in their present area and situation. Souder (1987) called these
respectively promotive and restrictive organisations. In the promotive organisa-
tion, growth and innovation were the important goals; acquisition and product
Developing an innovation strategy 69
diversification were cited as means. Growth and innovation were ranked higher
as goals than market share maximisation, profit maximisation and company
stock (share price) maximisation. In restrictive companies, market share, stock
price and profit maximisation were often ranked higher than growth. It is
important to see that the mix of proposed innovation projects fits into the
company’s overall desire to be a prospector, analyser, defender or reactor.
2.4.2 The company’s capabilities and organisation
The company organisation is also a necessary part of the analysis for the
innovation strategy – is it a centralised, rigid top-down organisation or a fluid
organisation with lower-level managers in major decision-making positions over
resources and direction? The type of organisation has a major influence in
deciding whether innovations are suitable for the company. The knowledge and
the resources in the company are also determining factors. If the company does
not have the knowledge or the ability to collect and analyse information to create
the knowledge, then the innovation strategies are restricted. There needs to be a
long-term commitment to technology and technological knowledge to build
strongly innovative strategies. Also if there is not sufficient discretionary capital
for new ventures, then there is difficulty in funding the more innovative
Table 2.6 Project types by business strategies
Project type Prospector Analyser Defender Reactor
New-to-the-world (%) 30 6 7 0
New-to-the-firm (%) 15 16 17 8
Additions to existing 22 42 40 48
product line (%)
Improvements to 11 16 11 13
existing products (%)
Repositionings (%) 8 8 9 11
Cost reductions (%) 15 17 21 12
Number of firms 30 22 22 4
Source: From Product Leadership: Creating and Launching Superior New Products by Robert
Cooper. Copyright C223 1998 by Robert G. Cooper. Reprinted by permission of Perseus Book
Publishers, a member of Perseus Books, LLC.
Think break
1. Where would you place your company – prospectors, analysers, defenders or
reactors?
2. Does analysis of your new products in the last five years agree with this?
70 Food product development
strategies. Souder (1987) summarised some of the qualities of an innovative
organisation:
? Willingness to accept change, altered behaviour and disruption.
? Long-term commitment to technology.
? Patience in permitting ideas to gestate, and decisiveness in allocating
resources to these ideas having the greatest commercial prospects.
? Willingness to confront uncertainties and accept balanced risks.
? Alertness in sensing environmental threats/opportunities, and promptness in
responding to them.
? Openness of internal, cross-departmental communications; diversity of
internal talents and cultures; existence of many external contacts and
information sources.
? A climate that fosters the natural confrontation and resolution of
interdepartmental rivalries and conflicts, and the development of reciprocal
role-persons.
This checklist for studying the innovation characteristics of a company has not
been bettered over the years, and should be regarded as fundamental to the
evaluation of the company for innovation.
2.4.3 Strategic and operational analysis
This is a very important step in ensuring that innovation can be successful in the
company. It is the time when the people to be involved in the projects are
brought together with the people who have been developing the business
strategy and the innovation strategy. It is both a creative and an analytical
exercise. The creative abilities of the designers and developers will start giving
‘flesh’ to the innovation strategy. The outcomes of the various sub-innovation
strategies and then the innovation strategy as a whole need to be predicted.
This needs to be an interactive, multifunctional, multidisciplinary activity in
the company, so that the various departments and people who are going to be
involved in the projects are knowledgeable about the strategies and have been
involved in prioritising them. There may be a need for consultants to provide
information and for facilitators to conduct the discussion but this has to be an
internal, creative activity. The company group as a whole needs to feel that it has
been involved in developing the innovation strategies so that they will take them
on enthusiastically through the next stages. The Board members need also to be
involved in some of the discussions so that they have an understanding of the
knowledge and the abilities for innovation in the company. They also indicate
where the company is focused for the future and the goals that they see the
company has to achieve. Such an interactive building of innovation strategies can
be simple in the small company – it probably does it continuously over cups of
coffee or pints of beer. But even a small company must do it formally at least
once a year. In the larger companies, it may be more difficult but with interactive
computer systems the discussions can evolve without too many large meetings.
Developing an innovation strategy 71
For major strategy changes, this identification and ranking of the innovation
possibilities can take some time. It is essentially a creative process followed by an
analytical step, which is reiterated time and time again. Everyone needs to have
the same interpretation of the proposed innovation strategy and the necessary
outcomes. For ranking, various techniques may help from simple scoring on the
ranking factors, to use of the Delphi method. Again there needs to be discussion
on differences in the scores, and re-scoring until agreement is reached. Some
factors to study in the combined discussions are shown in Fig. 2.9.
It is important to identify innovations that:
? will fail;
? cannot be accommodated in the company;
? will need an effort beyond the resources of the company;
? will take too long to complete or have an indeterminate end point;
? will cause a problem because there is not the necessary integration of design,
production, marketing.
It is also important to identify innovations where the technology is uncertain, or
where the transfer from basic or strategic research to development needs
advanced and difficult technological research.
Predicting the outcomes of the innovation strategy, in particular the
prediction of success, may be intuitive and subjective at this stage. But of
course there are levels of success that will need to be predicted if decisions are to
be made on the projects. Both the resources available and changes in the
environment will affect the outcome of the innovation – changing a probable
success into an actual failure. So the important success targets for the company
are identified, and then the external and internal environments. The individuals
in the group make predictions on the outcomes for each success measure. They
may be subjective descriptions such as:
Complete dud Doubtful Should be OK Probable success Out-of-this-world
Or on scales:
Definitely a failure _______________________________ Definitely a success
Alternatively the Q sort method can be used in which a set of cards, one for each
individual strategy, is given to each group member. Group members sort them
individually into five categories from definitely a success to definitely a failure,
or just into two categories – Yes, a success/ No, a failure (Green et al., 1988). It
is important after each rating of the company measures to show the participants
all the scores, and then to repeat the scoring. If the scores are widely different
and consensus is not being reached, then further discussions need to be held. It is
important not to do just a success or failure for the overall innovation, but to do
it on the individual measures to see where differences are occurring.
The problems in these subjective measures are that some innovations, which
could be successful, are dropped and that some failures are carried on. It is better at
72 Food product development
Fig. 2.9 Factors for discussions on innovation strategies.
this preliminary stage to give the project the benefit of the doubt and keep it in for
the later stages. Another problem might be that all the projects are mediocre, but
one feels that as they are ranked, the top five should be chosen. It is very important
to be critical and to recycle rather than go on. It is much cheaper to recycle than to
take below-standard strategies on to the next more expensive stages. Maybe you
need other people in the group to give more creative and useful ideas!
2.4.4 Quantitative analysis of most suitable strategies
After ranking, the innovation strategies that could lead to success are identified.
Now the predicted outcomes and inputs need to be more detailed. Usually this
means more financial analysis and determination of the probabilities of
achieving these outcomes. A range of predicted sales revenues and the related
costs of development and launching the innovation, need to be determined so
that possible outcomes such as break-even times, return on investment (ROI),
present values, can be analysed. The sales revenues and profits can be predicted
for 3–5 years or the life of the innovation. Some important outcomes and costs,
and their relationships to probabilities of success and project timing are shown in
Fig. 2.10. Increasing the money spent on the project can reduce the times and
may increase the sales revenues and the probability of success, so it is important
to make predictions on these inter-relationships.
The pipeline timing for the innovations needs to be predicted to ensure there is a
flow of innovations throughout the future years and that innovations are not
jumbled for both timing and resources. There is a need to predict the resources
needed for the innovations: raw materials, plant, equipment and distribution
system; but most important are the human resources. There is a need to predict the
skills and knowledge needed for the innovation and to relate this to the skills and
knowledge available in the company. If they are not available, how can they be
met? It is surprising how little consideration has been taken of this in recent years –
much knowledge and skills have been lost permanently and it is difficult to find
new skills and knowledge. In the middle of the last century, there was a philosophy
to keep the experienced people going a little longer as you bring in the new people,
gradually absorbing the old knowledge and skills into the new minds as well as
Think break
Choose two recent products developed by your company, and score them for
chances of success:
? as if this prediction had been done at the outset of the development; and
? after the development was concluded, with the benefit of hindsight.
Do this using three different methods of scoring. Score some of the factors in Fig. 2.9,
as well as the overall prediction of success.
74 Food product development
acquiring new skills from outside. For example, one salt manufacturing company,
in changing from processing in open salt pans and marketing salt bricks and sticky
crystalline salt, to triple-effect evaporators and free-flow salt, kept both going side-
by-side so that the old operators and their customers were kept as the new
customers and operators developed. There was only one problem – marketing sold
the new salt to stall holders in the markets in West Africa; they still wanted the old
sticky salt because peaks of salt could be formed in the tin cans used to measure
salt for sale! This was an important selling point. So research had to start again –
on making the running salt into sticky salt!
To sum up, it is important that the innovation portfolio:
? is balanced in levels of innovation, in timing of development,
? achieves the company’s objectives,
? is readily acceptable to the markets,
? blends with the societal and political needs and attitudes,
and that:
? resources are available, in particular knowledge and skills,
? company cooperation is organised,
? company personnel and organisation can make the innovations happen.
The innovation portfolio is the basis for the next few years, which can roll
onward with yearly tweaking, and with major changes perhaps every 5–8 years.
But the major changes need to be developing through the years and not be
suddenly introduced. If there is a dramatic change caused by a major advance in
technology or a major social upset such as a war or a major entry into the
industry, then there does need to be a fast reaction in the innovation portfolio
and a dramatic change in the company. Emergency reactions are part of
developing innovation strategies and portfolio.
Fig. 2.10 Quantitative analysis of innovation strategies.
Developing an innovation strategy 75
2.4.5 Decisions
Decision making is the key activity in innovation from the business strategy to
the evaluation of the results of the practice of the innovation. At this stage it is
major decision making of the top management who must:
? accept the innovation strategy into the business strategy;
? provide the resources;
? set up the organisational structure for the innovation; and
? determine the measures against which the innovation has to be judged
throughout its development and in the final application.
Top management is given the knowledge to do this, but it must decide what
knowledge is needed. Knowledge costs money and usually the depth and width
of knowledge are set by the money that top management makes available. It is
important that this triangular relationship between knowledge, finance and
decision making is understood by both top management and the people
providing the information. There can be excess costs, inadequate information
and poor decision making!
There are 10, 20, 50, maybe even 100 innovation strategies in a large,
multinational company. How can they be compared and the decisions made? The
decisions can be made on the financial analysis alone but this is dangerous at this
early stage. The top management needs also to be given scoring on the other
measures, which have been given as important aims for the company. Manage-
ment can be presented with separate analysis of the different innovations, but
needs to be shown the outcomes and inputs of different mixtures of innovations in
possible innovation portfolios. It is the total picture that is necessary and not just
the individual innovations. Sometimes the directors on a Board make a decision on
one innovation strategy at one meeting and another at the next meeting, and the
decisions can be counter-productive. It is the yearly presentation of the long-term
innovation portfolio that is necessary for good decision making.
2.4.6 Total innovation management
This decision-making process leads to the total innovation management for the
company – direction, areas, resources and timing (Voss, 1994). The innovation
Think break
For the two company products that you chose in the last Think break, imagine that
you are preparing for a presentation to the company’s Board of Directors, so that they
can select the most suitable innovative strategy for further development. Outline each
innovative strategy and then using some of the factors in Figs 2.9 and 2.10, analyse
the viability of each innovative strategy and the suitability for the company. How
would you present the innovation strategies and their analysis to the Board?
76 Food product development
strategy sets the direction for innovation, the portfolio specifies the areas and the
management plan outlines the process for innovation and the measures for
following the innovation as shown in Fig. 2.11. In organising the innovation
portfolio, it is necessary to have a careful study of the resources and time
available. There is a need to place a priority on the individual innovations and
ensure that they are following the company’s business aims over time. There is
also a need to consider the present activities in the company and to ensure that
the innovation portfolio fits in with the use of resources and time. In other
Fig. 2.11 Total innovation management.
Developing an innovation strategy 77
words, the innovation portfolio is not a plan on a green field, it is being applied
into a present system.
The innovation management plan shows how the company is bringing these
innovations to fruition – it sets out the process that will be used, and the methods
of controlling the process and the outcomes expected from the process. General
milestones need to be clearly spelt out. Again there is a need to show how the
innovation management is related to the day-to-day management of the present
activities. It is important that company staff recognise how this is to be done at
the beginning of the development and not be presented with it late in the
development.
Management needs to unite the innovation strategy with the innovation
portfolio and the business plan for the present activities to produce the total
innovation management plan. Total innovation management includes all the key
processes of product development – product design, process development,
product commercialisation and product launching; as well as the other innovation
areas such as technology change, technology acquisition, marketing change,
marketing acquisition, organisational change and organisational acquisition.
Each process interacts with each other and the interfaces between them need to be
considered in developing the final innovation strategy and management. The aim
of total innovation management is to increase the efficiency and the effectiveness
of innovation in the company, leading to strong, focused, development of the
company. The company stops jumping on bandwagons and buzz words,
sometimes diversifying and sometimes returning to core business, sometimes
innovative and sometimes conservative. It understands where it is going, how it is
going to get there and when it is going to get there.
It is important at this point to analyse the innovations again to see if the
decisions to include them need to be changed because of greater possibility of
failure, lack of resources or poor timing.
2.5 Focusing the product development programme
Now that the general areas for innovations have been identified and are securely
embedded in the overall business strategy and plan, the product development part
of innovation needs to be recognised and developed. The product development
may be coming from a major market change or from a new processing
Think break
1. Define innovation summary, innovation strategy, innovation portfolio, innovation
management.
2. How could all of these be combined in your company into total innovation
management?
3. Do you think this is a useful method for organising innovation in your company?
78 Food product development
development or a new raw material or even a reorganisation of the company into
different units or subsidiaries; as well as specific product innovations identified as
needed by the company. It is important to recognise that the product development
comes from different innovation areas. Also the product development needs to be
associated with the present product mix and its predicted future development. This
is the start of creative activity in the product area. Given the innovation strategy
direction, what can we do in product development?
2.5.1 Relating to the core competencies
It is important that the product development strategy is related to the technology
and marketing strategies in the overall innovation strategy. The product
development is related to the present core competencies of the company and,
even more importantly, the developing core competencies of the company (Katz,
1998). It is also important to identify where the core competencies are in the
food system – with the retailers and food service, with the retail or food service
manufacturing companies, the ingredient processors, the producers, or the
surrounding market research companies, advertisers, university departments,
research organisations or consultants. The basic direction in the innovation
strategy for product development is to identify how a unique and superior
product can be developed to satisfy consumers’ known and unknown needs and
wants. Some products and their underlying technologies identified by Katz
(1998) are shown in Box 2.3.
These examples are mostly large American companies with some European
multinationals and Japanese companies, and may not be indicative of the food
industry in other countries. But Katz identified some of the key technologies that
are the basis of product development in these companies. It is interesting to see
for example how rheology in different facets is a common core technology. The
core technologies can also be divided into science-based and engineering-based.
In some cases the author identified the core competency clearly, in others they
were confused – maybe this is typical of companies. Some can identify core
competencies, others are less sure. In no place were the marketing and consumer
competencies identified – just as important core competencies as is organisa-
tional capability in product and processing technologies.
2.5.2 Relating to the product mix
The product portfolio is the collection of products produced by the marine and
agricultural farmers and harvesters; manufactured and marketed by the food
ingredient processor and the retail foods manufacturer; and for the retailer and
food service, the food products marketed. In large companies in the food
industry, there are many products in a product mix so that they are usually
grouped into product areas, which are further subdivided into product lines. A
product line is a group of products that are related, either used for similar
purposes or possessing similar characteristics (Schaffner et al., 1998). The
Developing an innovation strategy 79
Box 2.3 How major core competencies affect development of
hot new products
Products Core competencies Companies
Low-fat meat products Particle size analysis, Swift-Eckrich, Kraft Foods,
protein–fat interactions, Doskocil Food Service Co.,
actual fat reduction in tissues, Nestle′, Lean & Free Products,
flavour improvement National Starch and Chemical
carbohydrate chemistry
Fruit and vegetable Physical structure, Kagome Kabushiki Kaisha,
products biochemical changes in Tropicana Products,
ripening, flavour chemistry, Ocean Spray Cranberries
breeding, biotechnology,
enzymes, antioxidants
Coffee products Structure and biotechnology Nestle′, Procter & Gamble,
of coffee beans, Kraft Foods
co-spray drying, glass transition
technology, particle size
management, caffeine effects,
compaction
Tea Antioxidants, phytochemistry, Lipton, Nestle′,
flavours, colour development, Procter & Gamble,
oxidation and antioxidants, Mitsui Norin Co.,
enzymes, Sky Food Co.,
cloud emulsions Coca-Cola
Chocolate Phytochemistry, Nestle′, Hershey Foods,
cold extrusion, viscosity, FMC Corp.,
low-calorie fats, rheology, M&M Mars
flavours
Dairy products Texture, flavour, Kraft Foods, Schreiber Cheese,
nutrition, foaming, P&G, Nestle′,
heat denaturation, Calpis Food Industry,
particle size, Danone,
protein stabilisation, GalaGen
ultrafiltration,
mineral separation,
microbiology
Grain products Rheology, refrigeration, Nestle′, Kellogg,
glass transition, retrogradation, General Mills, Pillsbury
nutrition, flavours,
extrusion, refrigerated doughs
Source: Based on material from Katz, 1998 by permission of Institute of Food Technologists,
Chicago, Ill.
80 Food product development
product mix is live and evolving. It is currently profitable and as it changes, its
profitability needs to continue to achieve the aims of the company. This does not
mean that every product in the mix is profitable – there are other aims for
products in a mix. They may complement other products, extend a line to give it
variety, fill a place in the market, and so on.
The product mix is a mixture of products at different stages in the product life
cycle: from new products to products that are at the end of their life cycle and dying.
It is this variation of age that gives the mix its evolving character. The product mix
also has variations in the sales revenue and the profits: some products are the major
revenue earners and some the major profit earners. So the product mix has
characteristics shown in Table 2.7. Sometimes products are also grouped according
to the types of raw materials and methods of processing and distribution, for
example, cereal products and meat products, frozen products and canned products.
2.5.3 Analysis of the product portfolio
In analysing the product mix so as to incorporate the innovation and product
strategies for product development, one has to be aware of what changes can do
to the product mix in the long term. Rash decisions based only on the innovation
strategy may affect some of the products or even the whole mix, causing
imbalance and an overall loss of market potential and profitability. Some
important factors to consider are:
? possible changes of product portfolio with time;
? reactive and proactive strategies;
? market change and technology change from the innovation strategy;
? target revenues and profits from business strategy.
The possible changes can be firstly divided into incremental changes and
discontinuous changes. What are the products that need some new packaging, an
extension of the flavours in the product line, a relaunch as a newer product, a
cost reduction, a new image? Do any of these changes relate to an innovation
strategy? Is the innovation strategy to keep with present product platforms but
add improvements and variety? If the innovation strategy is to move the product
portfolio in a new direction – perhaps to a new market – what new product areas
could be introduced? So it is a case of balancing the possible product mix
Table 2.7 Characteristics of the product mix
Products Marketing Finance
Types of product Types of market Sales revenues
Product platforms Market segments Profits
Product lines Consumers Market potential
Product ages Industrial customers
Product images Food service customers
Product attributes Competing products
Developing an innovation strategy 81
changes with the innovation strategy and also with the long-term balance of the
product mix.
It is also important to understand from the business strategy, if the company
wants to have reactive or proactive strategies. A reactive product strategy deals
with problems as they arise. A proactive strategy is planning ahead to take
advantage of opportunities.
Reactive product strategy Proactive product strategy
Solving problems Market Looking for opportunities
Me-too products, customer complaints, change New product line, new product platform,
second on the market, packaging change superior products, new consumer need
The company may have a mixture of these – most of the resources being for
proactive strategies but some resources kept for reactive projects in case
unidentified problems arise such as new competing products. Each strategy has
its place. The question is not which is right or wrong but which is specific to the
overall business strategy. Defensive strategies can be imitating competitors’
products, always being second and better – allowing the competitor to be on the
market first and then introducing a new product. Another common defence
strategy is to respond to consumers’ requests – some companies base their
products on consumers’ complaints.
The proactive strategies may be technology-based, with emphasis on
producing technically superior products, or marketing-based, building products
to satisfy consumer needs. The innovation strategy is integrated with the
technology and the marketing strategies and will identify the possible changes
that can be made. Product ideas are developed based on these changes. The
product designers need to be involved at this stage, creating ideas for the
innovation strategies and gradually developing a library of new products. These
new product ideas need to be analysed to see that they satisfy the aims of the
innovation strategy. But they must also be compatible with the present and
predicted product mix and can fit into marketing and production constraints such
as production capabilities and quantities, distribution methods and quantities,
product and company images.
Think break
1. Identify some reactive product development strategies that your company used
in the last five years. What changes caused these reactions?
2. Identify some proactive product development strategies that your company has
used in the last five years? What instigated these product development
strategies?
82 Food product development
2.5.4 Planning a new product portfolio
After this product-idea generation related to the innovation strategy and a
preliminary screening of the new product ideas, a map of the company’s product
mix for the next few years can be developed. The incremental product changes
and the new products are fitted into the product mix over time. The aims of the
product mix and the constraints on the product mix are defined, then the actual
planning of the product introductions over time developed. This is the blueprint
or the map for the future of the product mix and for the product development
portfolio (Clark and Wheelwright, 1993) as shown in Fig. 2.12.
At this time the product idea is only a simple description, with identification
of the use and some attributes, and may be a relation to competing products. The
relationship of the product to the other products in the mix needs to be identified.
There is also identification of the target market and the technology area. A range
of costs and/or prices may also be identified. The timing of the introduction of
the improved products and the new products is also identified.
In studying the proposed product mix, it is useful to divide products into
groups according to growth potential, technological capabilities and market
position as shown in Fig. 2.13. It is important to analyse the products in this way,
Fig. 2.12 Planning on a product map.
Fig. 2.13 New product groupings.
Developing an innovation strategy 83
comparing the predicted markets with the technological capabilities. If the new
product areas seem unsatisfactory or if they present major problems to the
company capabilities then they need to be recycled back to the management
group that developed the innovation strategy. The remaining product areas
provide the basis from which the product development strategy is developed.
2.5.5 Categorising the new product portfolio
The product areas from the innovation and product strategies need to be built up
into a new product development portfolio. The new product areas are
categorised as shown in Table 2.8. There are many systems of categorising
new product ideas, for example new-to-the-world, new product lines, additions
to existing product lines, improvements and revisions, repositionings and cost
reductions (Cooper, 1998). The categories in the table are useful for the food
industry where the product mixes are large and there is continuous change to
cope with supermarket wants.
Table 2.8 Categories for new product areas
Type Description Level of innovation
New product platform A completely new technology Very high, discontinuous
and/or market
New direction on A new product line/product High, continuous
present platform
New-to-the-world single A single innovation not Very high, discontinuous
product related to a platform, new
technology
Revamping a product New focus, add new products, High, continuous
platform drop old products, another
market
Product line relaunch New packaging, new image, Moderate, continuous
change in product variety
Product relaunch New packaging, new image, Moderate, continuous
product change
Product line extension Add new products Low, incremental
Product improvement Improve attributes, use, image Low, incremental
Product cost reduction Reduce costs of production, Very low, analysis
marketing
Think break
1. List last year’s product development projects in your company and divide them
into the categories in Table 2.8.
2. Compare this with the previous year’s product development projects categorised
in the same way.
84 Food product development
2.6 Developing the product development strategy
The first stage in designing the product development strategy is to produce more
detailed descriptions of the products, and determine how their development can
be organised within the specified resources and any other constraints that may
have been identified in the final innovation strategy by top management. The
individual projects are identified and their aims, outcomes and constraints. These
are developed from the innovation strategy by the product development team and
will need to get final agreement from management. The team will have to
confirm that the projects are in agreement with the total innovation management
programme. It is important that the team predicts the probabilities for success and
failure as more knowledge is developed about the project.
2.6.1 Identifying the PD Process, outcomes and activities
To develop this knowledge, the product development team or product
development management needs:
? to outline the development needed;
? to determine the outcomes of the different stages of the project;
? to identify the activities needed in each stage of the project;
? to study the present knowledge and resources;
? to identify the knowledge and resources needed;
? to identify problems in design, commercialisation and launching;
? to time the project overall and for different stages.
In outlining the development needed, the team will have the black boxes of the
four stages in the product development process – product strategy development,
product design and process development, product commercialisation and
product launch. From the innovation management plan, it needs to recognise
the outcomes needed overall and those needed at different points in the product
development process. Then the team can identify the major activities needed in
each black box. As will be discussed in the next chapter, it may already have a
framework for the product development process for projects at the different
levels of innovation, and therefore can relate the project into the particular
framework. The team also needs to identify any problem areas in the product
development process for each project – any risks of failure in the product or the
project.
From this, the team can identify the knowledge and resources needed for each
project and relate this to the present knowledge and resources available. Where
there are shortfalls, it will need to identify possible sources. In the case of
3. Are they different or is there a typical pattern?
4. Do you think this pattern might change in the future?
Developing an innovation strategy 85
knowledge, if it is not in the company and there is not information outside, the
team will need to identify how this knowledge can be created and when it is
needed. The team can also start to time the overall project and the stages in the
project.
2.6.2 Prediction of success of products
It is very important at this stage to identify what could be major failures. From
the top management’s identification of the necessary outcomes from the
innovation strategy, the requirements of the product mix development and from
previous measures used by the company in measuring success in past projects,
the team needs to develop a group of measures for those product areas (see
Chapter 1 for possible measures of success/failure). They can be quantitative,
such as meeting certain sales revenues or profits, product costs, project costs,
time for development or time to build sales. They can be qualitative, such as
developing a unique or superior product; achieving the quality of execution of
the technological activities in development, production and marketing;
attractiveness to the market.
For high-level innovation it is important at this time to study the synergy
between:
? product and the market;
? technical needs of the project and the company’s development, engineering
and production resources and skills;
? marketing needs of the project and the company’s marketing skills and
resources.
The prediction of success at this stage has a wide range of probabilities and is
mainly subjective. But it is important that doubtful projects are sent back to the
previous decision makers and not carried forward into the later stages. It is
important that they are not completely dropped as decisions may be made with
insufficient information and sometimes even wrong information.
2.6.3 Types of new product development strategies
Cooper (1998) described the new product development strategy as ‘a strategic
master plan that guides your business’s new product war efforts’. This may be a
rather dramatic definition for commercial product development, but it does
emphasise four very important points: it is strategic, focusing on particular
outcomes; it is an overall master strategy binding product development projects
together; it is a guide for the complete product development programme; it is
part of the company’s business. It is a binding of the product areas into the
whole organisation – functional areas, knowledge and skills areas, people. This
is why it is important to develop a truly effective product development strategy.
The product development strategy sets out in a master plan, the aim or aims,
the projects, the resources and the constraints, so that all involved in new
86 Food product development
product development are aware of the overall company policy for product
development at this time. If the management wants integration of functional
areas, more creativity in the company or more efficiency in product
development, then the product development strategy can incorporate all of
these into the overall aims.
Companies do have different overall product development strategies as
shown in Table 2.9. In the food industry, all these strategies can be seen – and
companies will say that they are successful for them. Historically there has been
a preponderance of the low-budget conservative, which suits a market dominant
position. As Cooper (1998) indicated from his studies, this strategy does achieve
moderate results; the projects usually have a low failure rate, and the products
are profitable – but wonders if the standards of success are high enough. It tends
to yield a low percentage of new products in the product mix. It is a ‘steady as
you go’ strategy, which shows no dramatic change.
It is important to consider together the drive from the consumer and the
market and the drive from technology change in developing the product strategy
(R.L. Earle and Earle, 1999). Balachandra and Friar (1997) suggested that a
useful analysis is first to identify the context of the new product – is the
Table 2.9 Some product development strategies
Strategy Description Products
Differentiated strategy Technologically sophisticated Premium priced
Strong market orientation Unique features and benefits
High degree of product fit Competitive advantage
Low-budget Low R&D spending Me-too
conservative Highly synergistic with Undifferentiated
present production and Lower price
marketing
Technology push Technology oriented Innovative
Lacks strong market Technology oriented
orientation May not fit consumer needs
Lacks market synergy
Can be costly
Not-in-the-game Simple, mature technologies Low technology
Ill-defined market needs Me-too
Low risk
High-budget diverse Heavy spending on R&D Innovative products
No direction, focus High-risk products
No synergy May not fit consumer needs
New markets
New technologies
Source: After Cooper, 1998.
Developing an innovation strategy 87
innovation incremental or radical, the market existing or new, the technology
level low or high? Using this one can identify the important factors in product
development for different mixes of these factors as shown in Table 2.10. These
are suggestions by Balachandra and Friar, but it is a useful way to study the
product development factors. Ali (1994) also emphasised that in developing a
product, it is useful to know for what types of products the company should
undertake particular activities. The analysis of environmental and situational
factors (firm, project and market characteristics) is a necessary condition for
effective planning of new product development.
2.6.4 The overall product development strategy
The product development strategy lies between the new product portfolio and the
product development programme as shown in Fig. 2.14. They are interconnected
and there is recycling between the three as the final product development
management plan develops in the programme. The product development projects
are being identified from the product portfolio, and the PD Processes and their
management gradually built up. This is a creative as well as a controlled process
as the ideas for the products and the projects are being developed.
The aims of the new product development strategy can be specific:
? the structure of the product mix;
? increase the percentage of sales from new products to 30% in five years;
? returns on investment from new products;
? specific products to be launched in each year;
? returns from specific products or sales in a new market.
But they can also be subjective, for example developing the image of a health-
providing company, or products of superior quality. They can also be
organisational, for example using up the slack production, developing a new
distribution system, developing a new subsidiary. As stated previously, there
Table 2.10 Relative importance of PD factors in different contexts
Contextual variables Level of importance
Innovation Technology Market Market Technology Organisation
factors factors factors
1. Incremental Low Existing Very Low Very
2. Incremental Low New Very Low Very
3. Incremental High Existing Very Very Moderate
4. Incremental High New Moderate Very Moderate
5. Radical Low Existing Moderate Moderate Moderate
6. Radical Low New Low Moderate Moderate
7. Radical High Existing Moderate Very Moderate
8. Radical High New Low Very Very
Source: After Balachandra and Friar, 1997.
88 Food product development
may be aims for the organisation of the product development, for example being
more systematic, separation of incremental and innovative product development,
decreased time to market.
The individual projects and their aims, objectives and constraints are also
starting to be developed although the detail may come later in developing the
product development programme. The aim of the project, the ultimate outcome
desired by the top management, is specified. This aim must be definite and not
vague, straightforward and not complex. It must mean the same to all people, the
management that are confirming it at this time, and the people who are
developing the product commercialisation 6–12 months from now. This aim is
the guide to the product development planning and also to the decision making
during the project. It needs to be agreed in the product development strategy,
although it may develop in detail as the product development programme is
developed. It needs to state the type of product, the target market, the technology
Fig. 2.14 Developing the product development programme.
Developing an innovation strategy 89
(or method of processing and distribution), the type of plant available, the
marketing methods and the size of the market needed. There may be choices in
this aim because there is a need still to study several methods of processing and
marketing, and even several different markets.
There are also limits or guidelines developing for the total product
development programme and the individual projects. They are specified levels
of resources, and these need to be allocated to the different projects. The amount
of spending on each project is always specified, but there is also a need to
recognise the knowledge priorities, in other words people with different types of
knowledge. Where are people with specific technological or marketing knowledge
needed, where is there a need for creative design, strong financial analysis and
consumer research? Where is there a need for different types of managers – senior/
junior, leaders/controllers, knowledge leaders/system leaders? The resources of
people, finance and equipment are limited and priorities and timing have to be
determined. Some projects may have immediate priorities, because they have to
be launched quickly or they are major projects that will take some time but need to
be started immediately. There is also a need to identify how the new product
development is to be achieved – internal R&D, internal product development,
licensing, joint venturing or acquisitions (Cooper, 1998).
The timing of the product launches is set, since this is usually critical because
of seasonal and other market conditions. The timings of particular stages such as
product commercialisation which involve a great deal of resource from the
functional departments and also need to be fitted into the present production and
marketing, are outlined at this stage as they are the basis for developing the
product development programme.
In developing the product development strategies, it is important to specify the
type of market – consumer/retail, industrial and food service. In the latter two, the
service is as important if not more important than the product and really what is
being developed is a product and service strategy. This means that the human
factor becomes more significant and the human resource strategy has to be
integrated with the product strategy, creating a new product/service that has to
include communication and understanding. The service can be an improvement or
a new service, just like the products, but consideration in developing the new
service has to be given to the consumer and to internal staff participation
(Atuahene-Gima, 1996).
Think break
1. Identify a project in your company that includes significant service development
as well as product development.
2. What product development strategy can you identify for this project?
3. What are the aims for this project?
4. What are the outcomes identified for the whole project and for each of the four
stages?
90 Food product development
2.7 Planning the product development programme
The product development programme has to bring the strategy into a new
product plan for the next few years. It is the directional and the controlling
document for the product development projects (Lord, 1999). From the product
development strategy, it can develop a rolling programme, which will be quite
specific for timing and results for the next two years, but will be more general
for future years. The projects have to be integrated in this programme so that the
resources, particularly people and equipment, are being used efficiently. In
recent years, there has been more emphasis on the integration of projects as this
is where efficiency and improved quality of product development can be
achieved. There are problems with the more innovative projects because it is not
known how long it will take to create the new knowledge and bring it into the
product design and the product commercialisation. But certainly for the
incremental changes, this integration of projects can be achieved successfully.
The integration plan needs to take consideration of time, resources and
knowledge. In developing the product development programme, it is important to
recognise what knowledge is required at the different stages of the project and
where this knowledge can be obtained or how it can be created. A great deal of
product development knowledge is tacit knowledge in the individual heads and in
interactive tacit knowledge in the company. This is a very important consideration
in planning the product development programme, especially in large companies.
An outsider may be asked to come in because a team is lacking knowledge; the
outsider immediately asks why they are not consulting someone in the company
who is an expert in this area. In building the programme, there has to be
consideration of personnel and in particular their knowledge and skills. How
knowledgeable are they in the multidisciplinary skills needed in product develop-
ment? Seldom if ever, when interviewing people for product development do the
company personnel ask how creative they are. They look at their academic record
and their experience, but do not ask for proof of their creativity. In other industries,
product designers customarily carry their portfolio of new products to interviews to
show how creative they are; perhaps food product designers should be asked to do
the same.
So the product development programme defines the projects, their integration,
their timing, the resources they can use, the people involved in the project. Two
other important parts to be included are firstly how decisions are to be made by
top management at critical points in the project and how the costs are to be
controlled. Critical points are always the points between the main stages of the
PD Process. But in large projects there may be intervening critical points. For
example a critical point is at the end of product development and process design.
Because of the expense of scale-up, there may also be a critical point after the
laboratory or small-scale trials to find the optimum product and process. At each
critical point, decisions have to be made by senior management on whether the
project is to continue as planned, slowed down or dropped. The outcomes of the
previous development must provide the information for the managers to make
Developing an innovation strategy 91
these decisions. For example, at the end of the product concept development, the
outcomes include product design specifications, some product mock-ups and a
product report. The product report includes the technical feasibility, marketing
suitability, consumer acceptance, future predicted project costs, prediction of
sales revenue and profits, risks, probability of product success and probability of
project success. The details of the product report vary with the company and the
project. For the incremental change, management may want only to have the
product design specifications, consumer acceptance, product costs, predicted
price. It is very important that what is needed as outcomes at the critical points are
clearly identified in the product development programme and agreed by the top
management who are to make the decisions.
It is necessary to define any constraints on the project, from either company
or environmental needs, particularly societal and political constraints. The
company or the society may restrict the raw materials used, the political
regulations may define some of the properties of the products or the processing
method. There may also be cost constraints caused by the price range in the
market, and the company’s pricing structure. Constraints need to be identified as
they outline the ball-park for the product, and the product development.
Finally the product development programme needs to define the measures of
success for the individual projects and the programme. The standards for the final
evaluation of the success of the products in the market also need to be set, so that
the sales revenue, profits and time for sales to grow are all set long before the
product is launched. The standard for the project organisation also needs to be set –
what is the range of timing, what is the quality of the work expected in the project,
what multifunctional integration is expected, what cost over-run can be tolerated?
As described here, developing the product development programme is a
complex and difficult task. What has been said is more directly appropriate to
large enterprises with multiple projects and large resources, but the principles
are just the same, and just as significant, in much smaller companies. The same
considerations apply. It is important to cover them comprehensively and
carefully so that the possible failures and problems are identified before the
major effort and money is spent, rather than in the middle of projects where cost
can grow astronomically.
Think break
1. The product development programme includes a number of projects that have to
run in parallel, and some that run in series. What problems do you see in
planning the product programme to cope with all the projects?
2. How can you set up a system to control the programme, so that it runs efficiently
with project stages and the overall projects completed at the right time?
3. How can the knowledge resources, that is the people with the correct knowledge
and skills, be encouraged to work creatively so the quality of the project is
optimum?
92 Food product development
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