CHAPTER 7ANALYTICAL ATTRIBUTE APPROACHESTRADE-OFF.docx

CHAPTER 7
ANALYTICAL ATTRIBUTE APPROACHES:
TRADE-OFF ANALYSIS AND QUALITATIVE TECHNIQUES
7-*
*
TRADE-OFF (CONJOINT) ANALYSISDeterminant attributes
together in combinations or sets.Respondents rank sets in order
of preference.Conjoint analysis finds optimal levels of each
attribute.
7-*
*
Conjoint Analysis Input: Salsa Example
Figure 7.2
7-*

*
Thickness
Spiciness
Color
Actual Ranking*
Ranking as Estimated by Model
Regular
Mild
Red
4
4
Regular
Mild
Green
3
3
Regular
Medium-Hot
Red
10
10
Regular
Medium-Hot
Green
6
8
Regular
Extra-Hot
Red

15
16
Regular
Extra-Hot
Green
16
15
Thick
Mild
Red
2
2
Thick
Mild
Green
1
1
Thick
Medium-Hot
Red
8
6
Thick
Medium-Hot
Green
5
5
Thick
Extra-Hot
Red

13
13
Thick
Extra-Hot
Green
11
11
Extra-Thick
Mild
Red
7
7
Extra-Thick
Mild
Green
9
9
Extra-Thick
Medium-Hot
Red
14
14
Extra-Thick
Medium-Hot
Green
12
12
Extra-Thick
Extra-Hot
Red

17
18
Extra-Thick
Extra-Hot
Green
18
17
* 1 = most preferred, 18 = least preferred.
Conjoint Analysis: Graphical Output
Figure 7.3
7-*
*
CONJOINT ANALYSIS:
RELATIVE IMPORTANCE OF ATTRIBUTES
0 20 40 60 80 100 %
Spiciness
Thickness
Color
59.8%
34.6%
5.6%
Figure 7.3 (cont’d.)
7-*

*
CONJOINT ANALYSIS FOR MORE COMPLEX
PROBLEMSFull-profile salsa conjoint analysis (all possible
combinations were included).For larger problems, a fractional
factorial design may be used (selected subsets of the
combinations in which each level and each attribute is used at
least a few times). Rankings and results are similar to the full-
profile analysis.More advanced methods needed for very
complex problems, and also to handle interactions among
attributes.
7-*
*
COMMERCIALLY AVAILABLE CONJOINT
METHODSAdvanced conjoint analysis methods available
commercially include:Adaptive conjoint analysis - respondent
judges the importance of the attributes, then responds to options
that focus on the most important attributes and levels.Choice-
based conjoint analysis - the respondent is shown several
choices in combination and asked which is preferred.Both
procedures reduce the number of attributes to which the
respondent is exposed.
7-*

*
TEMPLATES FOR CREATIVITYAttribute Dependency: Find a
functional dependency between two attributes. Ex.: color of ink
on coffee cup is sensitive to heat and can reveal message if
coffee is too hot.Replacement: Remove a component and replace
with one from another environment. Ex.: antenna is replaced by
headphone cord on Walkman.Displacement: Remove a
component and its function to change the product. Ex.:
Removing floppy drives resulted in ultra-thin PCs.Component
Control: Find a new connection between a component internal
to the product and one external to the product. Ex.: Toothpastes
with whiteners, suntan lotions with skin moisturizers.
Source: Jacob Goldenberg and David Mazursky, Creativity in
Product Innovation, Cambridge University Press, 2002.
Figure 7.6
7-*
*
RELATIONSHIPS ANALYSISForce combinations of
dimensions (features, functions, and benefits)
together.Techniques:Two-dimensional matrixMultidimensional
(morphological) matrixTwo-dimensional example:
person/animal insured and event insured against.Household

cleaning products example uses six dimensions:Instrument used,
ingredients used, objects cleaned, type of container, substances
removed, texture or form of cleaner
7-*
*
ANOTHER FORM OF DIMENSIONAL ANALYSIS
Two key dimensions for winning new product ideas:
Utility lever: How the product will affect the customer’s life
(such as simplicity, fun/image, environmental friendliness,
reduced risk, convenience, and productivity).
Buyer’s experience cycle: The stage when/where the product
will affect the customer (purchase, delivery, use, supplements,
maintenance, disposal).
Source: W. C. Kim and R. Mauborgne, “Knowing a Winning
Business Idea When You See One,” Harvard Business Review,
Sept.-Oct. 2000, pp. 129-138.
Figure 7.8
7-*
*
MORPHOLOGICAL MATRIX:
NEW COFFEE MAKER
Heating:

Heating element in pot
Open flame under pot
Microwave unit
Adding Coffee:
By spoon
Built-in measuring cap
Automatic feed
Filtering:
Filtering paper
Porous ceramic filter
Centrifuge method
Keeping Coffee Warm:
Thermal insulating technology
Warming unit built in
External heat source
Pouring Coffee:
Valve under pot
Pump in lid of pot
Espresso-like jets
7-*
*
OTHER METHODS:
LATERAL SEARCH TECHNIQUESFree associationStereotype
activityLateral thinking - avoidanceCreative stimuli
wordsStudying “big winners”Use of the ridiculousForced
relationships
See Appendix B
7-*

*
LATERAL THINKING — AVOIDANCE
Keep an idea from dominating thinking as it always has in the
past by asking avoiding questions.Ask “Is there another way of
looking at this?”Ask “Why?”Focus on an aspect of the problem
other than the “logical” one.List all possible alternatives to
every aspect of the analysis.Break apart aspects (concepts) of
the problem, or combine them to create even more concepts.
7-*
*
SOME CREATIVE STIMULI WORDSGuest
starsAlphabetTruthOuter spaceCharityHis and
hersStyleNationFamilyVideotapePhotographyTestimonialsDecor
ateFantasyHobbiesHolidaysWeatherCalendarPush buttonSnob
appeal
7-*
*
USE OF THE RIDICULOUSHow can you join two wires
together?Hold them with your teeth.Use chewing gum.Can you

think of others?Do any of these ridiculous ideas suggest a not-
so-ridiculous solution?
7-*
*
Thickness
Spiciness
Color
Actual
Ranking*
Ranking as
Estimated
by Model
Regular
Mild
Red
4
4
Regular
Mild
Green
3
3
Regular
Medium-Hot
Red
10
10
Regular
Medium-Hot
Green
6
8
Regular

Extra-Hot
Red
15
16
Regular
Extra-Hot
Green
16
15
Thick
Mild
Red
2
2
Thick
Mild
Green
1
1
Thick
Medium-Hot
Red
8
6
Thick
Medium-Hot
Green
5
5
Thick
Extra-Hot
Red
13
13
Thick
Extra-Hot

Green
11
11
Extra-Thick
Mild
Red
7
7
Extra-Thick
Mild
Green
9
9
Extra-Thick
Medium-Hot
Red
14
14
Extra-Thick
Medium-Hot
Green
12
12
Extra-Thick
Extra-Hot
Red
17
18
Extra-Thick
Extra-Hot
Green
18
17
* 1 = most preferred, 18 = least preferred.

PART TWO
CONCEPT GENERATION
4-*
*
Concept Generation
Figure II.1
4-*
*
Genius Thinking StrategiesGeniuses find many different ways
to look at a problem. Einstein, for example, and da Vinci, were
well known for looking at their problems from many different
perspectives.Geniuses make their thoughts visible. Da Vinci’s
famous sketches, and Galileo’s diagrams of the planets, allowed
them to display information visibly rather than relying strictly
on mathematical analysis.Geniuses produce. Thomas Edison
had a quota of one invention every ten days. Mozart was among
the most prolific composers over his short life.Geniuses make
novel combinations. Einstein found the relationship between
energy, mass, and the speed of light (the equation
E=mc²).Geniuses force relationships. They can make

connections where others cannot. Kekule dreamed of a snake
biting its tail, immediately suggesting to him that the shape of
the molecule he was studying (benzene) was circular.Geniuses
think in opposites. This will often suggest a new point of view.
Physicist Neils Bohr conceived of light as being both a wave
and a particle.Geniuses think metaphorically. Bell thought of a
membrane moving steel, and its similarity to the construction of
the ear; this led to the development of the telephone
earpiece.Geniuses prepare themselves for chance. Fleming was
not the first to see mold forming on a culture, but was the first
to investigate the mold, which eventually led to the discovery of
penicillin.
Source: Michael Michalko, “Thinking Like a Genius,” The
Futurist, May 1998, pp. 21-25.
Figure 4.1
4-*
*
Historic Mindset Roadblocks
“I think there is a world market for maybe five computers.”
Thomas Watson, Chair, IBM, 1943.
“Computers in the future may weigh no more than 1.5 tons.”
Popular Mechanics, 1949.
“I can assure you that data processing is a fad that won’t last
out the year.” Business books editor, Prentice-Hall, 1957.
“So we went to Atari and said, ‘...We’ll give it to you. We just
want to do it. Pay our salary, we’ll come work for you.’ And
they said no. So then we went to HP, and they said ‘We don’t
need you, you haven’t got through college yet.’” Steve Jobs, co-
founder, Apple Computers.
“640K of RAM ought to be enough for anybody.” Bill Gates,

Microsoft, 1981.
4-*
*
Historic Mindset Roadblocks
“Who the hell wants to hear actors talk?” H.M. Warner, Warner
Bros., 1927.
“Stocks have reached what look to be a permanently high
plateau.” I. Fisher, Prof. of Economics, Yale, 1929.
“We don’t like their sound, and guitar music is on the way out.”
Dick Rowe, Decca Records executive, rejecting the Beatles’
demo tape, 1962.
“This ‘telephone’ has too many shortcomings to be seriously
considered as a means of communication [and] is inherently of
no value to us.” Western Union, 1876.
“Heavier-than-air flying machines are impossible.” Lord Kelvin,
President, Royal Society, 1895.
“Everything that can be invented has been invented.” C. H.
Duell, Commissioner, U.S. Office of Patents, 1899.
4-*
*
Obstacles to Idea GenerationGroup think: We think we are
being creative, but we are only coming up with ideas our group
will find acceptable. Targeting error: We keep going back to
the same demographic targets (e.g., the under-35 or under-50

markets). Poor customer knowledge: Expensive research
spending doesn’t guarantee that customer research was done
well.Complexity: Creative types within organizations, as well as
senior management, often think that the more complex the idea,
the better it is (or the smarter and more promotable they seem).
Lack of empathy: These same managers are also well-educated,
high-income individuals accustomed to an upscale lifestyle.
They may simply not understand the “typical” customer.Too
many cooks: A small new product team works fine, but large
companies especially are prone to internal competition for
power and influence.
Source: Jerry W. Thomas, “In Tough Times, “Hyper-Creatives”
Provide an Advantage,” Visions, 33(3), October 2009, 24-26.
Figure 4.2
4-*
*
Barriers to Firm CreativityCross-functional diversity: Diversity
leads to more creative stimulation but also to problem solving
difficulties.Allegiance to functional areas: Team members need
to have a stake in the team’s success, or they won’t be loyal to
the team.Social cohesion: If interpersonal ties among team
members are too strong, candid debate may not occur, resulting
in less innovative ideas.Role of top management: Management
should encourage the teams to be adventurous, otherwise only
incremental changes will occur.
Figure 4.3
4-*

*
The Role of Management in Stimulating CreativityRecognize
individualityBe tolerant of mistakesBe supportive under
stressTechniques include:Competitive teamsIdea bank of unused
ideas for possible reuseEncourage interaction – even in how
offices are laid out
4-*
*
Required Inputs to the Creation ProcessForm (the physical thing
created, or, for a service, the set of steps by which the service
will be created)Technology (the source by which the form is to
be attained)Benefit/Need (benefit to the customer for which the
customer sees a need or desire)
Technology permits us to develop a form that provides the
benefit.
4-*
*
Some Patterns in Concept Generation

Firm envisions form
tests with customer to see what benefits are delivered
Note: the innovation process can start with any of the three
inputs.
4-*
*
What is a Product Concept?A product concept is a verbal or
prototype statement of what is going to be changed and how the
customer stands to gain or lose.Rule: You need at least two of
the three inputs to have a feasible new product concept, and all
three to have a new product.
4-*
*
Why Do You Need a Product Concept and Not Just an
Idea?Needed to judge whether it is worthy of
developmentPotential customers do not have enough
information to judge the worthiness of an idea: the product
concept gives them the required information.Ex.: Would a taxi
operator like cars with a 10 cents per mile operating cost?
(need)Not if it used Caterpillar tractor technology instead of
wheels! (need plus technology)
4-*

*
New Product Concepts and the
New Product
Need
Form
Technology
New
Product
Need-Tech
Concept
Form-Tech
Concept
Need-Form
Concept
Figure 4.4
4-*
*
The Designer Decaf ExampleBenefit: “Consumers want
decaffeinated espresso that tastes identical to regular.”Form:
“We should make a darker, thicker, Turkish-coffee-like
espresso.”Technology: “There’s a new chemical extraction
process that isolates and separates chemicals from foods; maybe

we can use that for decaffeinating espresso coffee.”
Why would each of these taken individually not be a product
concept?
4-*
*
The Toilet Brush ExampleIdea: A new and improved toilet
brush.Concept: A toilet brush that contains detergent, refillable,
and easy for the customer to attach to the handle.Product
(executions of this concept):Lysol Ready BrushScrubbing
Bubbles Fresh BrushClorox Toilet WandOthers?
4-*
*
Methods for Generating Product Concepts
Two Broad Categories of Methods:Gathering Ready-Made
Product ConceptsUsing a Managed Process Run by the New
Products Team
4-*
*

Best Sources of Ready-Made New Product ConceptsNew
Products EmployeesTechnical: R&D, engineering,
designMarketing and manufacturingEnd UsersLead
UsersResellers, Suppliers, VendorsCompetitorsThe Invention
Industry (investors, etc.)Idea exploration firms and consulting
engineersMiscellaneous (continued)
Figure 4.5
4-*
*
Best Sources of Ready-Made New Product Concepts
(continued)Miscellaneous CategoriesConsultantsAdvertising
agenciesMarketing research firmsRetired product
specialistsIndustrial designersOther
manufacturersUniversitiesResearch
laboratoriesGovernmentsPrinted sourcesInternationalInternet
Figure 4.5
4-*
*
Crowdsourcing as a Creative SourceCrowdsourcing: open idea
solicitation from customers.Dell’s Idea Storm: encouraged
customers to submit ideas for new products and improvements
to existing products online. Over 10,000 ideas were obtained
from sources around the world. Apple used crowdsourcing in

generating ideas for the iPad. Apple monitored reviews and
blogs and also obtained Voice of the Customer data to
understand the needs of potential users. Fiat solicited design
ideas via their website when relaunching the 500 subcompact,
and claims 500,000 combinations.
4-*
*
Lead Users as a Creative SourceKey customers associated with
a significant current trend.Best understanding of the problems
faced, and can gain from solutions to these problems.May have
already begun to solve problems, or can work with product
developers to anticipate the next problem in the future.Example:
X-Games athletes for new high-performance snowboards:They
provide design requirementsare early adopters good at word-of-
mouth.
4-*
*
Toolkits for User InnovationA set of design tools that customers
can use to customize a product best suited to them.Can
incorporate CAD/CAM or rapid prototyping.Example:
International Flavors and Fragrances: Internet-based toolkit that
provides a database of flavor profiles and rules on how to
combine them. Customer can specify flavor mixes that are
immediately made into samples; customer can then make

adjustments until the desired flavor is obtained.
4-*
*
Open InnovationThe process by which a firm searches for
research, innovation, technologies, and products.Increases speed
of research and innovation, cuts risks, and generates new
innovative ideas.Viewed by some as the dominant innovation
model of the 21st century.Inputs can come from internal sources
(marketing, strategic planning) and external ones (customers,
market information, etc.).Sources such as inventors, startup
companies, or university laboratories are actively sought out.
4-*
*
Principles of Open InnovationAccept that “not all the smart
people work for us.”Is both in- and out-bound: obtain knowhow
technology, patents, etc.) from external partners, and also
monetize technology (through licensing, sale, etc.) that is no
longer consistent with corporate strategy.It is not outsourcing!
The external sources are viewed as complementary to internal
sources so that innovation can be more efficient.Selecting the
best partners is critical, and mutual trust is important.
4-*

*
Open Innovation at P&GP&G’s “Connect and Develop” program
allows internal intellectual property to be marketed outside,
spun off, or licensed.Avoids the “not invented here”
syndrome.P&G assigned a team to find external partners, build
brand equity, access new technologies, and create new product
categories.Examples: SunHealth
Solution
s (a P&G partner) developed the UV sensing technology used in
Huggies swimpants with UV sensors, that help parents monitor
their child’s exposure to UV radiation.Mr. Clean scrubbing
brush uses technology originally used as insulation in the auto
industry.Magic Eraser cleaning pad was sourced from a German
chemicals company, and first noticed by P&G in use in Japan.
4-*
*

More Examples of Open InnovationLego: Web forum, sites, and
blogs for participants to share and improve products. Result:
the on-line community was instrumental in the development of
the LEGO robotics system.Philips: Specialized facility in
Singapore (“the Innohub”) that provides realistic environments
for end users and product developers to work on breakthrough
ideas.Some are completely online systems, like the Innocreative
web community.
4-*
*
3-*
*
*

The New Products Process (Ch. 1, 2).The Product Innovation
Charter (PIC) and the New Product Portfolio (Ch. 3).
PIC: strategic plan for new products.
New Product Portfolio ensures alignment with financial and
strategic criteria.
3-*
*
*
Product families that share similarities in design, development,
or production process.
Car industry: $3 billion price tag on a new car platform spread
out over several models.Sony: four platforms for Walkman
launched 160 product variations.Boeing: passenger, cargo,
short- and long-haul planes made from same platform.P&G:
Liquid Ariel for European market, Liquid Tide for North
America, and Liquid Cheer for Japanese market.Black &
Decker: a single electric motor for dozens of consumer power
tools.
3-*
*

*
Find alternate locations. Once McDonald’s had located the best
store front locations, it placed stores in Wal-Marts, sports
arenas, and airports. Starbucks Coffee sells coffee beans,
bottled drinks and ice cream in supermarkets.Leverage your
firm’s strengths in a new activity center. Nike moved into golf
and hockey, and Honeywell is looking into casinos.Identify a
fast-growing need, and adapt your products to that need. HP
identified a need for “total information solutions” leading it to
develop computing and communications products for the World
Cup and other sporting events.Find a “new to you” industry:
P&G in pharmaceuticals, GE in broadcasting (NBC), Disney in
cruises, Rubbermaid in gardening products – either through
alliance, acquisition, or internal development.
Source: Allan J. Magrath, “Envisioning Greenfield Markets,”
Across the Board, May 1998, pp. 26-30.
Figure 3.2
3-*
*

*
“Just-in-time” life (Zipcar)Sensing consumers (home test
kits)The transparent self (personal data services)In search of
“enoughness” (slow food/life)Virtual made real (avatars, virtual
clubs)Co-creation (customized toys, shoes)
Source: A. Hines, J. Calder, and D. Abraham, “Six Catalysts
Shaping the Future of Product Development,” Visions, 33(3),
October 2009, pp. 20-23.
Figure 3.3
3-*
*
*
To chart the new product team’s strategic direction:
What technologies? - What markets?To set new product goals
and objectives:Guidelines for product innovation development,
not processes.

3-*
*
*
Figure 3-3
The Flow that Produces PICs -- Special Emphasis on Role of
Corporate and Platforms
Figure 3.5
3-*
*
Focus
At least one clear technology dimension and one clear market
dimension. They match and have good potential.

Guidelines
Any "rules of the road," requirements imposed by the situation
or by upper management. Innovativeness, order of market
entry, time/quality/cost, miscellaneous.
Goals-Objectives
What the project will accomplish, either short-term as
objectives or longer-term as goals. Evaluation measurements.
Background
Key ideas from the situation analysis; special forces such as
managerial dicta; reasons for preparing a new PIC at this time.

*
Degree of Innovativeness
First-to-market
Adaptive product
Imitation (emulation)Timing
First
Quick second
Slow
LateMiscellaneous
Avoidance of competition with certain firms
Recognition of weaknesses
Patentability
Product Integrity
3-*
*

*
New products in this firm will…
Technologies:Use our fine furniture designers (Herman
Miller)Utilize innovative design (Braun)Gain value by being
bottled in our bottling system (Coca-Cola)
Markets:Be for babies and only babies (Gerber)Be for all sports,
not just shoes (Nike)Be for all people in computers (IBM)
Guidelines:Proliferate our product lines (Rubbermaid)Be almost
impossible to create (Polaroid)Use only internal R&D (Bausch
& Lomb)Be offered to the market hard to get (Ganz
Webkinz)Have high value to us and to the customer (Kodak)
Figure 3.1
3-*
*
*
Focus: Technology strengths: Apple’s operating system,
hardware, applications, and services, product design and

development skills. Marketing requirements: “cutting edge”
products with seamless integration and high performance,
intuitive, simple, and fun to use.
Goals: Revolutionary new products should be platforms for
future products, due to cost of “really new” product
development. New products should be a leadership position in
the market.
Special Guidelines: Apple aims to be the best, not necessarily
the first, in new product categories.
The Result: Apple’s first “tablet computer,” a revolutionary new
product and the “next big thing.” No single tablet computer had
established a dominant position. Apple’s iPad objective was
leadership, and to add capabilities and applications to future
iPads.
Figure 3.6
3-*
*
*
A new products team does everything a firm does
Budget plan, - financial analyses, - development plans.Align
decisions & actions with the PIC.The PIC determines new

products platform (types) for development .
3-*
*
*
Strategic goals (defending current base of products versus
extending the base).Project types (fundamental research,
process improvements, or maintenance projects).Short-term
versus long-term projects.High-risk versus low-risk
projects.Market familiarity (existing markets, extensions of
current ones, or totally new ones).Technology familiarity
(existing platforms, extensions of current ones, or totally new
ones).Ease of development.Geographical markets (North
America, Europe, Asia).
3-*
*
*

Figure 3.9
3-*
*
Low Market Newness
High Market Newness
Low Product Newness
Improvements to Existing Products
(35%)
Additions to Existing Product Lines
(20%)
Medium Product Newness
Cost Reductions
(20%)

New Product Lines
(15%)
High Product Newness
Repositioning
(6%)
New-to-the-World Products
(4%)
Source: Adapted from Robert G. Cooper, Scott J. Edgett, and
Elko J. Kleinschmidt. Portfolio Management for New Products,
McMaster University, Hamilton, Ontario, Canada, 1997, p. 63.
*
*

*
*
*
*
*
Figure 3-3
The Flow that Produces PICs -- Special Emphasis on Role of
Corporate and Platforms
*
*
*
*
*
*

*
Background
Key ideas from the situation analysis; special forces such as
managerial dicta; reasons for
preparing a new PIC at this time.
Guidelines
Any "rules of the road," requirements imposed by the situation
or by upper management.
Innovativeness
, order of market entry, time/quality/cost, miscellaneous.
Goals-Objectives
What the project will accomplish, either short-term as
objectives or longer-term as goals.
Evaluation measurements.
Focus
At least one clear technology dimension and one clear market
dimension. They match and
have good potential.
Low Market Newness
High Market Newness
Low Product Newness
Improvements to Existing Products
(35%)
Additions to Existing Product Lines
(20%)

Medium Product Newness
Cost Reductions
(20%)
New Product Lines
(15%)
High Product Newness
Repositioning
(6%)
New-to-the-World Products
(4%)
Source: Adapted from Robert G. Cooper, Scott J.
Edgett, and
Elko J.
Kleinschmidt.
Portfolio Management
for New Products
,
McMaster University, Hamilton, Ontario, Canada, 1997, p. 63.
Chapter 9

Concept Testing
9-*
*
Most Ideas Are Eliminated Before Concept TestingPIC
eliminates new product ideas before concept development.Ideas
excluded:Ideas requiring technologies the firm does not
have.Ideas for customers whom the firm has little
knowledge.Ideas that offer too much (or too little)
innovativeness.Ideas missing dimensions: not low cost, too
close to certain competitors, etc.
9-*
*
Ron’s Rule for New Consumer Products
Benefit must be obvious.
Little or no education to use.

Good price/value.
Market Analysis and Initial ReactionMarket analysis: in-depth
study of the market for PIC focus. Initial reaction: preliminary,
inexpensive concept assessment:Avoid “bazooka effect” -
quickly blasting out concepts without forethought or aligned
with PIC.Respect “fragility of ideas” — have more than a single
person involved.Use more than pure intuition — keep records
and stay objective.
9-*
*
Questions for the Initial Internal ScreeningMarket Worth: what
is the attractiveness of the new product to the target
customer?Definitely/Probably would buy?Firm Worth: Does the
new product enhance the firm’s competencies?Fit, core
competencies, asset utilization?Competitive Insulation: Can the
product advantage be maintained vs. competition?
9-*

*
Concept Testing Cautions and ConcernsIf the prime benefit is
one of 5 senses (smell, taste, touch, sight, auditory).If the
concept involves new art and entertainment.If the concept
embodies new technology that users cannot visualize using.If
concept testing is mishandled by management, then blamed for
product failure.If customers simply do not know what problems
they have.Consider: FedEx, the Ferris wheel, the microwave,
diet fast food burgers
9-*
*
Procedure for a Concept TestPrepare concept statementClarify
specific purposesDecide format(s)Select
commercializationDetermine price(s)Select respondent
type(s)Select response situationDefine the interviewConduct

trial interviewsInterview, tabulate, analyze
9-*
*
Some Key Issues in Concept TestingConcept statement:
narrative, drawing, model?Respondent group: Lead users? Large
users?Response situation: Where? How?Interviewing sequence:
Is the concept understandable? Believable? Important?
Interesting? Realistic? Would it work? What problems do they
see? Would they buy?Test procedure, change and implement,
study findings.
9-*
*
Mail Concept Test — Verbal Description
Here is a tasty, sparkling beverage that quenches thirst,
refreshes, and makes the mouth tingle with a delightful flavor

blend of orange, mint, and lime.
It helps adults (and kids too) control weight by reducing the
craving for sweets and between-meal snacks. And, best of all, it
contains absolutely no calories.
Comes in 12-ounce cans or bottles and costs 60 cents each.
1. How different, if at all, do you think this diet soft drink
would be from other available products now on the market that
might be compared with it?
1 2 3 4 5
Not Very different ( ) ( ) ( ) ( ) ( ) Very Different
2. Assuming you tried the product described above and liked it,
about how often do you think you would buy it?
1 2 3 4 5
Would never buy it ( ) ( ) ( ) ( ) ( ) More than once
a week
Figure 9.1
9-*
*
Mail Concept Test — Sketch

Figure 9.2
9-*
*
Benefit Segmentation in Swimsuit Market
Figure 9.3
9-*
*
Aqualine
Islands
Splash
Molokai
Sunflare

2
3
1
Fashion
Comfort
Joint Space Map Showing Ideal Points
Figure 9.4
9-*
Chart14.362.482.483.652.742.742.534.374.373.483.453.452.632
.692.69
Sheet12.482.744.373.452.694.363.652.533.482.63
*
Conjoint Analysis in Concept Testing: EZPassKey attributes:
number of accounts to open, how to apply and pay for an
account, number of EZPass lanes at each toll plaza, etc.11-
minute video of product in action and its effectiveness in
reducing congestion.Respondents all received the video, a
questionnaire, and scenario cards showing combinations of
attributes.

9-*
*
Market Research to Support Concept Testing: BASES300 adult
female respondents surveyed.Nestle Refrigerated Foods example
(Contadina Pasta)75% top-two-boxes score (24% definitely +
51% probably would buy).Median top-two-boxes score for this
category: 61%.Split respondents into favorable (the 75% in the
top two boxes) and unfavorable.Both groups liked the same
things: product is natural, offers variety, is fresh, saves time, is
easy to prepare.Most common negative: price.
9-*
*
BASES (continued)BASES tried three positioning statements:
Homemade, Pasta Dinner, and Superior; Superior was found to
have more likes and fewer dislikes and was selected.Obtain

adjusted trial through rough rule of thumb: 80% of the
“definitely” + 30% of the “probably” will actually buy, or:
(0.8 x 24%) + (0.3 x 51%) = 34.5%Assuming 48% awareness
and 70% availability, we get :
AW x T x AV = 0.48 x 34.5% x 0.70 = 11.6%
9-*
*
BASES (continued)Total number of trial households:
target households x trial rate =
77.4 million x 11.6% = 9 million.To get an estimate of Repeat,
use:
Repeat for similar products = 39%
Average customer repeat = 2.5 times
No. of units bought per purchase occasion = 1.4
Repeat estimate = 39% x 2.5 x 1.4 = 136.5%
(Note: this repeat calculation is slightly different than in the
text, but is used at BASES.)
9-*

*
BASES (continued)Therefore the final prediction of sales based
on A-T-A-R is:
9 million x 136.5% = 12.3 million.According to Nestle, the
greatest uncertainty was in the Repeat estimate of 39%, so a
worst case scenario was tried.
Even at a worst-case 27% repeat rate, sales forecast was still 8.5
million which still surpassed Nestle objectives.
9-*
*
Dell AR Perceptual Map
New Segment Potential
0
3
2
1

-1
-2
-3
-1
-2
-3
1
2
3
S3
30%
*
*
*
*
*

6-*
Analytical Attribute TechniquesProducts are made of attributes
— a future product change must involve one or more of these
attributes.Three attributes:
FeaturesFunctionsBenefitsTheoretically, features permit
functions, which provides benefits.
6-*
*
Gap AnalysisDeterminant gap map - produced from managerial
input/judgment on products.AR perceptual gap map - based on
attribute ratings by customers.OS perceptual map - based on
overall similarities ratings by customers.
6-*

*
Figure 6.2
6-*
Rate each brand you are familiar with on each of the following:
Disagree Agree
1. Attractive design 1…2…3…4…5
2. Stylish 1…2…3…4…5
3. Comfortable to wear 1…2…3…4…5
4. Fashionable 1…2…3…4…5
5. I feel good when I wear it 1…2…3…4…5
6. Is ideal for swimming 1…2…3…4…5
7. Looks like a designer label 1…2…3…4…5
8. Easy to swim in 1…2…3…4…5
9. In style 1…2…3…4…5
10. Great appearance 1…2…3…4…5
11. Comfortable to swim in 1…2…3…4…5
12. This is a desirable label 1…2…3…4…5
13. Gives me the look I like 1…2…3…4…5

14. I like the colors it comes in 1…2…3…4…5
15. Is functional for swimming 1…2…3…4…5
Obtaining Customer Perceptions
Figure 6.4
6-*
Snake Plot of Perceptions
(Three Brands)
Aqualine
Islands
Sunflare
Attributes
Ratings
Figure 6.5
6-*
*
Figure 6-5
Snake Plot of Brand Ratings
Chart111122233344455566677788899910101011111112121213
1313141414151515

Aqualine
Islands
Sunflare
2.15
2.27
3.83
2.4
2.77
3.57
3.48
2.98
2.31
2.2
2.48
3.65
3.68
3.2
2.29
3.81
3.15
2.57
2.29
2.29
3.51
3.57

3.09
2.21
2.52
2.72
3.67
2.51
2.72
3.57
3.47
3.09
2.32
2.6
2.33
3.8
1.97
2.39
3.68
2.28
2.25
3.65
3.77
3.04
2.4
Sheet1AqualineIslandsSunflareMolokaiSplash12.152.273.833.1
22.4422.42.773.573.012.4133.482.982.313.22.1942.22.483.653.

212.3653.683.22.292.692.463.813.152.573.242.3672.292.293.51
2.812.483.573.092.213.192.292.522.723.672.952.36102.512.723
.573.082.4113.473.092.322.932.35122.62.333.83.042.24131.972
.393.683.152.28142.282.253.652.732.2153.773.042.42.852.29
Data Reduction Using Multivariate AnalysisFactor
AnalysisReduces number of attributes to a smaller number of
factors, each containing a set of attributes that “hang
together”Cluster AnalysisReduces the original number of
respondents to a smaller number of clusters based on their
benefits sought, as revealed by their “ideal brand”
6-*
*
The AR Perceptual Map
Figure 6.9
6-*
Aqualine

Islands
Splash
Molokai
Sunflare
Gap 1
Gap 2
Fashion
Comfort
Failures of Gap AnalysisInput comes from questions on how
brands differ (nuances ignored)Brands considered as sets of
attributes; totalities, interrelationships overlooked; also
creations requiring a conceptual leapAnalysis and mapping may
be history by the time data are gathered and
analyzedAcceptance of findings by persons turned off by
mathematical calculations?
6-*
*

Dell AR Perceptual Map
0
3
2
1
1
-1
-2
-3
-1
-2
-3
1
2
3
Gap 3
HP
Compaq
Lenovo

DELL
Gap 1
Gap 2
Performance
Flexibility
Chapter 11
Sales Forecasting and Financial Analysis
11-*
*
Commonly Used Forecasting Techniques

Figure 11.2
11-*
*
Technique
Time Horizon
Cost
Comments
Simple Regression
Short
Low
Easy to learn
Multiple Regression
Short-medium
Moderate
More difficult to learn and interpret
Econometric Analysis
Short-medium
Moderate to high
Complex
Simple time series
Short

Very low
Easy to learn
Advanced time series (e.g., smoothing)
Short-medium
Low to high, depending on method
Can be difficult to learn but results are easy to interpret
Jury of executive opinion
Medium
Low
Interpret with caution
Scenario writing
Medium-long
Moderately high
Can be complex
Delphi probe
Long
Moderately high
Difficult to learn and interpret
Financial Analysis for NPD is DifficultTarget users don’t know
facts.If they know they might not tell us.Poor execution of
market research.Market dynamics.Uncertainties about marketing
support.Biased internal attitudes. Poor accounting.Rushing

products to market.Basing forecasts on history.Technology
revolutions.
11-*
*
Forecasting Satellite Radio Demand by Expert OpinionIn 2000:
forecast for 2007 was 36 million subscribers.In 2001: forecast
revised to 16 million.By end of 2006: actual number of
subscribers = 11 million.
Source: Sarah McBride, “Until Recently Full Of Promise,
Satellite Radio Runs Into Static,” Wall Street Journal, August
15, 2006, pp. A1-A9.
11-*
*

Forecasting Satellite Radio Sales with ATAR + Concept Test
Purchase IntentionsIn 2000, 213 million vehicles in U.S.95%
availability, 40% awareness.Market potential = 213 million x
95% x 40% = 81 million.Assume half can afford satellite radio
= 40.5 million.Percentage that will be among the first to try the
new technology = 16%.Forecast for first year = 40.5 million x
16% = 6.4 million.Projected yearly growth rate =
10%.Assuming this growth rate, by end of 2006, expected total
sales = about 10 million.Note: not too far from the attained
number = 11 million!
11-*
*
Top 2-Box Purchase Intention ForecastingExample: hand
cleanser from Chapter 9:Definitely buy = 5%Probably buy =
36%Based on history, calibrate:80% of “definitelies” actually
buy33% of “probablies” actually buyForecasted market share =
(0.8)(5%) + (0.33)(36%) = 16%.

11-*
*
Top 2-Box Purchase Intention Forecasting (continued)The 16%
forecast assumes 100% awareness and 100% channel
availability.Adjust to account for less awareness and
availability. E.g., 60% of the market is aware of the product
50% channel availabilitymarket share is recalculated to 16% x
(0.6)x(0.5%) = 4.8%.
11-*
*
Forecasting Sales Using A-T-A-R ModelAssume awareness =

90% and availability = 67%.Trial rate = 16% (16% of the
market that is aware of the product and has it available tries it
at least once).RS = proportion who switch to new product =
70%.Rr = proportion who repeat purchase the new product =
60%.Rt = Long-run repeat purchase = RS /(1+Rs-Rr) =
63.6%.Market Share = T x Rt x Awareness x Availability =
16% x 63.6% x 90% x 67% = 6.14%.
The following bar chart shows this procedure graphically.
11-*
*
A-T-A-R Model Results:
Bar Chart Format
Figure 11.3
11-*
*

The Life Cycle of Assessment
Figure 11.5
11-*
*
Calculating New Product’s
Required Rate of Return
Risk
% Return
Reqd. Rate
of Return
Cost of
Capital
Avg. Risk

of Firm
Risk on
Proposed
Product
Figure 11.6
11-*
*
NPD Real-Options Analysis Assessment
Data:Startup costs in Year 0: $70,000.The cash flows for Years
1 through 4 are estimated to be $40,000 in a high-demand
scenario, or $10,000 in a low-demand scenario.The probabilities
of a high- or low-demand scenario are both 50 percent.The
product concept could be abandoned after Year 1, and the
equipment could be sold for $38,000.Discount rate = 12%.
Figure 11.7
11-*

*
NPD Real-Options Analysis (continued)
Cash flow in Year 1 for each demand scenario:
Cash flow in Year 1 if option taken to abandon project and
equipment is sold:
Therefore the project would be abandoned after Year 1.
11-*DemandYear 1Year 2Year 3Year
4TotalHigh40,00040,000/(1.12)
= 35,71440,000/(1.12)2 = 31,88840,000/(1.12)3 =
28,471$136,073Low10,00010,000/(1.12)
= 8,92910,000/(1.12)2 = 7,97210,000/(1.12)3 =
7,118$34,018DemandYear 1Take Option to Abandon and Sell
EquipmentTotalLow10,00038,000$48,000

*
NPD Real-Options Analysis (continued)
Now assess NPV for each demand scenario, assuming project is
abandoned after Year 1 if demand is low.
Expected value of investment is:
(0.5)($51,494) + (0.5)(-27,143) = $12,176
Since this expected value is greater than zero, the firm should
make the investment.
Source: Edward Nelling, "Options and the Analysis of

Technology Projects," in V. K. Narayanan and Gina C.
O'Connor (eds.), Encyclopedia of Technology & Innovation
Management, Chichester, UK: John Wiley, 2010, Chapter 8.
11-*DemandYear 0Year 1Year 2Year 3Year 4TotalHigh-
70,00040,000/(1.12)
= 35,71440,000/(1.12)2 = 31,88840,000/(1.12)3 =
28,47140,000/(1.12)4 = 25,421 $51,494Low-
70,00048,000/(1.12)
= 42,857-$27,143
*

Hurdle Rates on Returns and Other Measures
Figure 11.8
Explanation: the hurdles should reflect a product’s purpose,
or assignment. Example: we might accept a very low
share increase for an item that simply capitalized on our
existing market position.
11-*
*
Hurdle Rate
Product
Strategic Role or Purpose
Sales
Return on Investment
Market Share Increase

A
Combat competitive entry
$3,000,000
10%
0 Points
B
Establish foothold in new market
$2,000,000
17%
15 Points
C
Capitalize on existing markets
$1,000,000
12%
1 Point
Concept Evaluation Checklist
Strategic Fit
Does the concept fit with corporate vision?
Customer Fit

Does the concept allow the customer to better meet consumer
needs?
Consumer Fit
Does the concept satisfy an unmet consumer need?
Market Attractiveness
Is the concept unique relative to competition?
Technical Feasibility
Is the concept feasible and protectable?
Financial Returns
Will the project break even soon?
Source: Erika B. Seamon, “Achieving Growth Through an
Innovative Culture,” in P. Belliveau, A. Griffin, and S. M.
Somermeyer, The PDMA Handbook 3 For New Product
Development, Wiley, 2004, Ch. 1.
Figure 11.10
11-*
*
Technique Time Horizon Cost Comments
Simple Regression Short Low Easy to learn

Multiple Regression Short-medium Moderate More difficult to
learn and interpret
Econometric
Analysis
Short-medium Moderate to high Complex
Simple time series Short Very low Easy to learn
Advanced time
series (e.g.,
smoothing)
Short-medium Low to high,
depending on
method
Can be difficult to
learn but results are
easy to interpret
Jury of executive
opinion
Medium Low Interpret with
caution
Scenario writing Medium-long Moderately high Can be complex
Delphi probe Long Moderately high Difficult to learn
and interpret
Hurdle Rate
Product

Strategic Role or Purpose
Sales
Return on
Investment
Market Share
Increase
A
Combat competitive entry
$3,000,000
10%
0 Points
B
Establish foothold in new
market
$2,000,000
17%
15 Points
C
Capitalize on existing
markets
$1,000,000
12%
1 Point

Chapter 10
The Full Screen
10-*
*
Concept Selection DifficultiesAmong biggest product
management challenges.Possible that every NPD project has
passed all the hurdles so far.The firm needs a good concept
selection procedure to reduce NPD concepts.Otherwise
management must:Guess (and select the wrong project)Approve
too many projects (and underfund everything).
10-*
*

The Full ScreenA necessary evil: very powerful with long-
lasting effects.Forces pre-technical evaluation, and summarizes
what must be done:ResourcesProcessesMethods range from
simple checklists to complex mathematical models.
10-*
*
Screening AlternativesJudgment/Managerial OpinionConcept
Test followed by Sales Forecast
- if only issue is whether consumers will like itScoring Models
10-*
*

A Simple Scoring Model
Answer: Go boating.
Figure 10.2
10-*
*
Values
Factors:
4 Points
3 Points
2 Points
1 Point
Degree of Fun
Number of People
Affordability

Capability
Much
Over 5
Easily
Very
Some
4 to 5
Probably
Good
Little
2 to 3
Maybe
Some
None
Under 2

No
Little
Student's Scores:
Skiing
Boating
Hiking
Fun
4
3
4
People
4
4
2
Affordability
2

4
4
Capability
1
4
3
Totals
11
15
13
Source of Scoring Factor Models
Figure 10.3
10-*

*
A Scoring Model for Full Screen
Note: this model only shows a few sample screening factors.
Factor Score (1-5) x Weight =
Weighted Score
Technical Accomplishment:
Technical task difficulty
Research skills required
Rate of technological change
Design superiority assurance
Manufacturing equipment…
Commercial Accomplishment:
Market volatility
Probable market share
Sales force requirements
Competition to be faced
Degree of unmet need...
Figure 10.4

*
The ScorersScoring Team:
Major Functions (marketing, technical, operations, finance)
New Products Managers
Staff Specialists (IT, distribution, procurement, PR, HR)
Scoring Problems:
May be always optimistic/pessimistic
May be "moody" (alternately optimistic and pessimistic)
May always score neutral
May be less reliable or accurate
May be easily swayed by the group
May be erratic
10-*
*
Industrial Research Institute Scoring Model
Technical success factors:

Proprietary PositionCompetencies/SkillsTechnical
ComplexityAccess to and Effective Use of External
TechnologyManufacturing Capability
Commercial success factors:
Customer/Market Need Market/Brand Recognition Channels to
MarketCustomer StrengthRaw Materials/Components
SupplySafety, Health and Environmental Risks
Source: John Davis, Alan Fusfield, Eric Scriven, and Gary
Tritle, “Determining a Project’s Probability of Success,”
Research-Technology Management, May-June 2001, pp. 51-57.
Figure 10.5
10-*
*
Alternatives to the Full ScreenProfile SheetEmpirical
ModelExpert SystemsAnalytic Hierarchy Process
10-*

*
A Profile Sheet
Figure 10.6
10-*
*
NPD Project Screening ModelIdea: analyze NPD variables on
past successes and failures to predict a new early-stage product
chances of success, and to identify weaknesses to be addressed
before NPD project approval.Current practices split the
screening model: must-meet and should-meet criteria.Must-meet
are “yes-no” questions even one “no” screens the project
out.Should-meet are scales, and high scores offset (compensate
for) any low scores.
10-*

*
Criteria Based on the NPD StudiesMust-Meet Criteria (rated
yes/no):Strategic alignmentExistence of market needLikelihood
of technical feasibilityProduct advantageEnvironmental health
and safety policiesReturn versus riskShow stoppers (“killer”
variables)
Figure 10.7
10-*
*
Criteria Based on the NPD Studies
(continued)Should-Meet Criteria (rated on scales):Strategic
(alignment and importance)Product advantage (unique benefits,
meets customer needs, provides value for money)Market
attractiveness (size, growth rate)Synergies (marketing,

distribution, technical, manufacturing expertise)Technical
feasibility (complexity, uncertainty)Risk vs. return (NPV, IRR,
ROI, payback)
Figure 10.7 (cont’d.)
10-*
*
Analytic Hierarchy Process (AHP)AHP gathers expert judgment
and uses it to make optimal decisions.In AHP screening models,
the respondent identifies the key criteria in the screening
decision, assessing which are the most important. Each choice
(project) is rated on each criterion.The AHP software calculates
scores for each project and ranks them in terms of
preferability.AHP analytical models such as Expert Choice are
commercially available.
10-*
*

Diagram for Analytic Hierarchy Process (AHP)
Figure 10.8
10-*
*
Products 1, 2, 3, and 4
Goal: Select Best NPD Project
Market Fit
Tech. Fit
Dollar Risk
Uncertainty
Product Line
Channel
Logistics

Timing
Price
Sales Force
Design
Materials
Supply
Mfg. Tech.
Mfg. Timing
Differential Advantage
Payoffs
Losses
Unmitigated
Mitigated
Product Line
Abbreviated Output from AHP
Figure 10.9
Recommendation: P1 is preferred as it has the highest overall
weight as calculated by AHP.
How did this happen? P1 was ranked by the managers as among
the highest on all of the most important criteria.
10-*

*
Ranking of Alternatives:
Project
Overall Weight
P1
0.381
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
P2
0.275
xxxxxxxxxxxxxxxxxxxxxxxxxxxx
P3

0.175
xxxxxxxxxxxxxxxxxx
P4
0.170
xxxxxxxxxxxxxxxxx
Values
Factors:
4 Points
3 Points
2 Points
1 Point
Degree of Fun
Number of People
Affordability
Capability
Much
Over 5

Easily
Very
Some
4 to 5
Probably
Good
Little
2 to 3
Maybe
Some
None
Under 2
No
Little
Student's Scores:
Skiing
Boating
Hiking
Fun
4
3
4
People
4
4

2
Affordability
2
4
4
Capability
1
4
3
Totals
11
15
13
Products 1, 2, 3, and 4
Goal: Select Best NPD Project
Market FitTech. FitDollar RiskUncertainty
Product Line
Channel
Logistics
Timing
Price
Sales Force
Design
Materials
Supply

Mfg. Tech.
Mfg. Timing
Differential
Advantage
Payoffs
Losses
Unmitigated
Mitigated
Product Line
Ranking of Alternatives:
Project
Overall Weight
P1
0.381
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
P2
0.275
xxxxxxxxxxxxxxxxxxxxxxxxxxxx
P3
0.175
xxxxxxxxxxxxxxxxxx
P4
0.170
xxxxxxxxxxxxxxxxx

+
PART THREE
CONCEPT/PROJECT EVALUATION
8-*
*
+
Chapter 8
The Concept Evaluation System
8-*
*

+
The Evaluation System
Figure 8.1
8-*
*
+
Concept/Project Evaluation
Figure III.1
8-*
*
+

Planning the Evaluation System: Four ConceptsRolling
EvaluationPotholesPeopleSurrogates
8-*
*
+
Rolling Evaluation (or, "Everything is Tentative")Project is
assessed continuously (rather than a single Go/No Go
decision).Financial analysis is built up continuously.Not enough
early data for complex financial analyses.Risk: killing off too
many good ideas early.Marketing begins early in the
process.Key: new product participants avoid "good/bad”.
Mindsets & premature closure.
8-*
*

+
Potholes
Know what the really damaging problems are and focus on them
when evaluating concepts.
Examples:Campbell Soup focuses on manufacturing cost and
taste.Drug companies focus on FDA approval.Software
developers focus on customer willingness to learn complex
software.
8-*
*
+
PeopleProposal is hard to stop once there is buy-in on the
concept.Need tough, demanding hurdles - especially late in new
products process.Personal risk associated with new product
development.Need system that protects developers and offers
reassurance (if warranted).
8-*

*
+
Surrogate Questions
Give better answers to the real questions.
Real Question Surrogate Question
Will they prefer it? Did they keep the prototype product we
gave them after the concept test?
Will cost be competitive? Does it match our manufacturing
abilities & costs?
Will competition leap in? What did they do last time?
Will it sell? Did it do well in field testing?
8-*
*

+
The A-T-A-R Model: DefinitionsBuying Unit: Purchaser or
department/buying center.Aware: Purchaser is aware of the new
product with some characteristic that differentiates it.Trial: A
purchase or consumption of the product.Available: Percentage
of purchasers who have access to buying the product.
Repeat: The product is purchased at least once after trial.
Figure 8.6
8-*
*
+
An A-T-A-R Model of Innovation Diffusion
Profits = Units Sold x Profit Per Unit
Units Sold = Number of buying units
x % aware of product
x % who would try product if they can get it
x % to whom product is available
x repeat measure (what is the average number of units bought

per person per year, including repeats)
x Number of units repeaters buy in a year
Profit Per Unit = Revenue per unit - cost per unit
Figure 8.5
8-*
*
+
A-T-A-R Model Application
10 million Number of owners of video cellphones
x 40% Percent awareness after one year
x 20% Percent of aware owners who will try product
x 70% Percent availability at electronics retailers
x 1.20 Measure of repeat (20% of customers buy a second
phone)
x $50 Price per unit minus trade margins and
discounts ($100) minus unit cost at the
intended volume ($50)
= $33,600,000 Profits
8-*

*
Chapter 5
Finding and Solving Customers’ Problems
5-*
*
Problem-Based Concept Generation
Figure 5.1
5-*

*
Problem Analysis Procedure
1. Identify product or category.
2. Identify heavy users.
3. Gather problems associated with product/category & rate
importance of benefits & satisfaction.
4. Sort & rank problems according to severity or importance:
- Avoid “omniscient proximity” — frequent minor problems
mentioned first.
5-*
*
Problem Analysis Applied to the Cell PhoneKeeping the unit
clean.Breaks when I drop it.Battery doesn’t stay charged long
enough.Finding it in dark.Battery dies in mid-conversation.Who

“out there” hears me?Dropped calls.Looking up numbers.Voice
fades in and out.Hard to hold.Health risks?Can’t cradle between
ear and shoulder.Antenna breaks off.Flip cover breaks
off.Disruptive instrument.Can’t see facial/body language.Rings
too loud/too soft.Wrong numbers.Fear of what ringing might be
for.
Figure 5.2
5-*
*
The Bothersomeness Technique of Scoring Problems
Figure 5.3
5-*
*
List of pet owners' problems:
A

Problem Occurs
Frequently
B
Problem is
Bothersome
A x B
Need constant feeding
98%
21%
.21
Get fleas
78
53
.41
Shed hairs
70
46
.32

Make noise
66
25
.17
Have unwanted babies
44
48
.21
Problem Analysis: Sources and Methodologies ExpertsPublished
SourcesContacts with Your Business Customers or
ConsumersInterviewingFocus groupsObservation of product in
use (ethnographic research)Role playing
5-*
*

Dyson Air Multiplier Fan Problem Analysis Conventional fan
problems:Spinning blades chop airflowHard to cleanBlades can
be dangerous to childrenFan tips overEnergy inefficient Air
Multiplier: bladeless (uses technology adapted from hand
dryers), and attractively designed.Airstream is smooth and
danger is eliminatedLow center of gravity eliminates
tippingMuch more effective and efficient coolingNo blades to
clean
5-*
*
Typical “Problem” Questions for Focus GroupsWhat is the real
problem?What are attitudes and behaviors of users for the
product/category?What product attributes and benefits do the
users want?What are dissatisfactions, problems, and unfilled
needs?What changes occurring in their lifestyles are relevant?
5-*

*
Problem Analysis: Observation and Role PlayingObservation:
Carmakers send designers to parking lots to watch people
interact with their cars (Ford “gorilla research”).Observation:
Honda obtains insights about size of SUV passenger
compartments by observing U.S. families.Role Playing: Bausch
and Lomb generate ideas on making contact lenses more
comfortable by getting pairs of executives to act out skits where
they were the eyeball and contact lens.
5-*
*
Problem Analysis in ActionToyota pickups redesigned with a
V8 engine and larger passenger compartment for North
American tastes.Domino’s Pizza position as fast delivery
worked until competition caught up, then found their average

taste was now a problem in focus groups.
- Product development produced a better tasting pizza which is
Domino’s new competitive position.
5-*
*
I. SCENARIO PLANNING
Stage 1 Orientation: Key Focal Issue under uncertainty defined
Stage 2 Exploration: Driving Forces & Critical Uncertainties
identified
Stage 3 Scenarios: 4-box matrix Scenarios created
Stage 4 Options: Strategies, Actions & Changes defined
Stage 5 Integration: Early Warning Signs developed
Stage 1 Orientation: Key Focal Issue under uncertainty
definedKey Focal Issue defined in clear statementTime

specificsPlace specificsKey interviews & research needed
Ex: How will Linux affect ABC company, customers, and
suppliers in the USA and globally in next 10 years?
Stage 2 Exploration: Driving Forces identified – ABC Company
& Linux*
Customer push
Government mandate
Supplier push
Windows backlash
Copyright laws
Terrorist strike on MS
Anti-USA sentiment
Company profits
Budget reductions
Vendor adoption
Application availability

Future of LinusTorvalds
Future of Bill Gates
Survival of Sun
SCO lawsuit
*A Note on Scenario Planning, Garvin & Levesque, HBS 9-
306-003
Stage 2 Exploration: Pairs of Critical Uncertainties
identifiedIdentify & rank driving forces behind issue.Rank
issues to determine 2 most Critical Uncertainties.
External Push/Acceptance. 2. Total Cost of Ownership.
Linux for ABC Co.
Stage 3 Scenarios: 4-box matrix Scenarios createdCreate 4-box
matrix with x, y axes for 2 Critical Uncertainties.Create
descriptive narrative for each box.

Low
Low
High
High
Total Cost of Ownership
External Push/Acceptance
Focal Issue: How Linus affects ABC company, customers,
suppliers?

Niche Market
Penguins Rule!
Penquins for Profit
Why Bother?
Wall Street Journal, Dec. 18, 2009

Rise and Fall of the Linux Dynasty
Linux was officially declared dead today, as Linus Torvalds
accepted the position of Chief Technical Officer at MS. Linus
declared his complete abandonment of the open source version
of the operating system he created. The hurdles were too high
to overcome, Linus said. Its advantages were never accepted as
significant enough to warrant the high costs of conversion and
difficulty finding technical support. Torvalds indicated he was
working with MS to find the next new technology.
Linux 10 Years Later
After years of litigation, MS and Linux have reached parity with
similar products and support. While MS still owns 50% of
desktops, Linux and MS share the transactions processing space.

Linux has the majority of middleware and mobile solutions.
Widespread litigation, IP issues and limited supply of skilled
workers have driven up costs. But the technical superiority and
elegance of Linux continue to attract new users, especially as
vendors deliver new products to fit both platforms.
Who Stuffed the Penquin?
We can today derive some lessons for the future as we look
back at a platform that was heralded in 2003 as having great
promise. Open Source was an open question back then.
Unfortunately, the question was answered in large part by SCO
prevailing in its lawsuit regarding their Intellectual Property
contained within the Linux base code. Despite low costs
associated with Linux, lack of confidence in its future and few
leaders in the field led many, although not all, companies to
abandon their conversion effects.

Linux Dethrones MS
In a move that just a few years back was not even a twinkle in
Linus Torvald’s eye, Linux finally surpassed MS as the
dominant desktop and general purpose operating system. As
vendors entered the field with new applications, driving down
costs, more organizations and governments began to adopt the
technology. With a plentiful supply of skilled technicians and
improved security, Linux became the de facto standard in the
industry.

Low
Low
High
High
Total Cost of Ownership

suppliers?
Niche Market
Penguins Rule!
Penquins for Profit
Why Bother?

IMPLICATIONS
Fewer Linux vendors and suppliers primarily due to
consolidation
Relatively no impact on customers, connectivity
IMPLICATIONS
Vendors emphasize support of Linux; hardware optimized for
Linux
Customers move from MS to Linux
Connectivity – applications run on Linux

IMPLICATIONS
Fewer vendors and product offerings
Operating systems become irrelevant
Customers not drive towards Linux
Connectivity – no major implications
OPTIONS
Migrate systems to Linux

Re-evaluate apps architecture
Re-rationalize tools, frameworks, architectures and procedures
for a Linux World
OPTIONS
Maintain legal awareness
Track the technology
Develop an exit strategy
Avoid acquisition of new Linux-based technology

IMPLICATIONS & OPTIONS
OPTIONS
Maintain strategic relationships with Linux vendors
Leverage options to minimize costs
Reassess existing portfolio to define conversion priorities
OPTIONS

Maintain legal awareness
Track the technology closely
Identify areas for Linux fit
Maintain Linux core team
IMPLICATIONS
Lower prices; new vendors in market
IT must respond to high demand for Linux-based systems;
retraining & budget impact

Apps required to interface with Open Source databases
Stage 5 Integration: Early Warning Signs developedSelect
Leading Indicators & Signposts for emergence of each scenario
integrated into decision-making.Use scenarios to evaluate
strategic investment decisions.
ABC Warning Signals: 1. SCO wins lawsuit over Linux, 2. MS
changes its pricing model, 3. Non-USA countries demand
Linux, 4. Sun declares bankruptcy.
Wild Card Events Examples & ConsequencesNo-Carbon Policy:
Global warming may cause governments to put high taxes on
fossil fuels, shifting demand to alternative sources of energy.
This changes the allocation of R&D investment toward
alternative energy, possibly causes new “energy-rich” nations to

emerge, and ultimately may lead to a cleaner environment for
everyone.Altruism Outbreak: This is the “random acts of
kindness” movement – solve social problems rather than leaving
it up to the government. Schools and other institutions will
revive due to community actions, and perhaps inner cities would
be revitalized.Cold Fusion: If a developing country perfects free
energy, it becomes prosperous overnight. It gains further
advantages by becoming an energy exporter.
Figure 5.6
5-*
*
Creating the Concept CommunicationBest media?Paper
cardSlideVideoProduct
Description?PhysicalBrandPriceFeatures?Benefits?
New Product Concept Example:

My Best Pet Dog FoodMy Best Pet is a dog owner’s dream
come true – the best tasting, all-natural,
best nutrition and health food you can
give your faithful, loving companion in
convenient bite size nuggets. Made from
real meat, chicken, fish, and supplements, it is priced similar to
other premium dry dog food brands.My Best Pet has all-natural
herbal supplements that repel fleas, resist shedding, and keep
your doggy friend’s teeth and breath healthy and fresh, while
providing a balanced diet and nutrition.My Best Pet will keep
your dog living better, longer, and healthier!
Exercise: Concept Generation Research - New Cell PhoneWork
in table teams.Fill out frequency and importance rating sheet
(from Figure 5.2).Select new cell phone features to
improve.Create Concept Slide.Present in class.
List of pet owners' problems:
A
Problem Occurs
Frequently
B
Problem is
Bothersome

A x B
Need constant feeding
98%
21%
.21
Get fleas
78
53
.41
Shed hairs
70
46
.32
Make noise
66
25
.17
Have unwanted babies
44
48
.21

Low
Low
High
High
Total Cost
of Ownership
suppliers?
Niche Market
Penguins Rule!
Penquins for Profit
Why Bother?
Rise and Fall of the Linux Dynasty
Linux was officially declared dead today, as Linus Torvalds

accepted the position of Chief Technical Officer at MS. Linus
declared his complete abandonment of the open source
version of the operating system he created. The hurdles
were too high to overcome, Linus said. Its advantages were
never accepted as significant enough to warrant the high
costs of conversion and difficulty finding technical support.
Torvalds indicated he was working with MS to find t he next
new technology.
Linux 10 Years Later
After years of litigation, MS and Linux have reached
parity with similar products and support. While MS still
owns 50% of desktops, Linux and MS share the
transactions processing space. Linux has the majority of
middleware and mobile solutions. Widespread litigation,
IP issues and limited supply of skilled workers have
driven up costs. But the technical superiority and
elegance of Linux continue to attract new users,
especially as vendors deliver new products to fit both
platforms.
Who Stuffed the Penquin?

We can today derive some lessons for the future as we
look back at a platform that was heralded in 2003 as
having great promise. Open Source was an open
question back then. Unfortunately, the question was
answered in large part by SCO prevailing in its lawsuit
regarding their Intellectual Property contained within the
Linux base code. Despite low costs associated with
Linux, lack of confidence in its future and few leaders in
the field led many, although not all, companies to
abandon their conversion effects.
Linux Dethrones MS
In a move that just a few years back was not even a
twinkle in Linus Torvald’s eye, Linux finally surpassed
MS as the dominant desktop and general purpose
operating system. As vendors entered the field with
new applications, driving down costs, more
organizations and governments began to adopt the
technology. With a plentiful supply of skilled
technicians and improved security, Linux became the
de facto standard in the industry.

Low
Low
High
High
Total Cost
of Ownership
suppliers?
Niche Market
Penguins Rule!
Penquins for Profit

Why Bother?
IMPLICATIONS
suppliers primarily due to
consolidation
customers, connectivity
OPTIONS
awareness
strategy
new Linux-based
technology
IMPLICATIONS & OPTIONS
IMPLICATIONS
support of Linux;

hardware optimized for
Linux
to Linux
–
applications run on Linux
OPTIONS
relationships with
Linux vendors
minimize costs
portfolio to define
conversion priorities
IMPLICATIONS
product offerings
become irrelevant

towards Linux
– no
major implications
OPTIONS
awareness
technology closely
Linux fit
core team
IMPLICATIONS
vendors in market
pond to
high demand for Linux-
based systems;
retraining & budget
impact
interface with Open
Source databases

OPTIONS
to Linux
-evaluate apps
architecture
-rationalize
tools, frameworks,
architectures and
procedures for a
Linux World
Chapter 2
The New Products Process
2-*
*

The Procter & Gamble Cosmetics SagaSenior management
committed to new product development.No clear Cosmetics
product strategyunfocused product initiativestoo many customer
segments targetedCosmetics used strategic elements to make
business unit profitable:New products processProduct
Innovation Charter (PIC)Product portfolio
2-*
In early 2000s, P&G bought Wella and Clairol for more than
$10 billion, a boutique hair salon chain, and partnerships with
perfume companies Valentino and Dolce & Gabbana under A.G.
Lafley, CEO, building to almost $20 billion in revenue. Now
they are divesting over 100 HBA brands including Wella,
Clairol, CoverGirl merging them with Coty Inc. in a $13 billion
deal on brands totalling about $6 billion sales/year.
*
P&G Cosmetics PICSituation Assessment:Underserved
consumer market wanted quality facial products (e.g., cleansers,

eye products)Supply chain uncoordinated:production and
shipments unaligned with demandmarket forecasts not driving
shipping schedules.PIC recommended a strategic focus only on
facial products.
2-*
Basically, P&G was out of its comfort zone, and did not know
enough about the culture and brand equity of HBA products –
out of their comfort zone!
*
P&G Cosmetics & the New Products ProcessP&G Cosmetics
used a phase process similar to Chapter 1 with project
teams.Consumer research done early (the voice of the
customer).Tough evaluation steps carefully implemented as new
products were compared to best practices and benchmarks.
2-*
*

P&G Cosmetics & the New Product PortfolioP&G Cosmetics
systematically added new products to maximize buzz and
excitement in the marketplace.Management used “initiative
rhythm” for product launches:If several eye makeup products
were on the market, they would not immediately launch another.
2-*
*
P&G Cosmetics &
Effective Team ManagementSenior Cosmetics executives and
corporate management committed to success.Initiative Success
Managers hired to lead strategy development, manage
evaluation meetings, train employees, etc.Best team leaders
rewarded based on performance.
2-*

*
The Phases of the New Products Process
2-*
Figure 2.1
*
The Evaluation Tasks in the New Products Process
Figure 2.2
Phase 1. Opportunity Identification/
Selection
Phase 2. Concept Generation
Phase 3. Concept/Project Evaluation
Phase 4. Development
Phase 5. Launch
Direction;

Where should we look?
Initial Review:
Is the idea worth screening?
Full Screen:
Should we try to develop it?
Progress Reports:
Have we developed it?
Market Testing:
Should we market it?
2-*
*
Phase 1: Opportunity Identification/SelectionActive and passive
generation of new product opportunities as spinouts of ongoing
business operations.New product suggestions, changes in
marketing plan, resource changes, and new needs/wants in the
marketplace. Research, evaluate, validate, and rank
opportunities.Give major opportunities a preliminary strategic
statement.
2-*

*
Activities that Feed Strategic Planning for New
ProductsOngoing marketing planning (e.g., need to meet new
aggressive competitor).Ongoing corporate planning (e.g., senior
management shifts technical resources from basic research to
applied product development).Special opportunity analysis
(e.g., a firm has been overlooking a skill in manufacturing
process engineering).
2-*
*
Sources of Identified OpportunitiesAn underutilized resource (a
manufacturing process, an operation, a strong franchise).A new
resource (discovery of a new material with many potential

uses).An external mandate (stagnant market combined with
competitive threat).An internal mandate (new products used to
close long-term sales gap, senior management desires).
2-*
*
Phase 2: Concept GenerationSelect a high potential/urgency
opportunity, and begin customer involvement. Collect available
new product concepts that fit the opportunity. Generate new
opportunities.
2-*
*
Phase 3: Concept/Project EvaluationEvaluate new product
concepts (as they begin to come in) on technical, marketing, and

financial criteria. Rank them and select the best two or
three.Request project proposal authorization with product
definition, team, budget, skeleton of development plan, and
final PIC.
2-*
*
Stages of Concept/Project EvaluationScreening (pretechnical
evaluation)Concept testingFull screenProject evaluation (begin
preparing product protocol)
The first stages of the new products process are sometimes
called the fuzzy front end because the product concept is
still fuzzy. By the end of the project, most of the fuzz should
be removed.
2-*
*

Phase 4: Development (Technical Tasks)Specify the full
development process, and its deliverables. Undertake to design
prototypes, test and validate prototypes against protocol, design
and validate production process for the best prototype.Slowly
scale up production as necessary for product and market testing.
2-*
*
Phase 4: Development (Marketing Tasks)Prepare strategy,
tactics, and launch details for marketing plan.Prepare proposed
business plan and get approval for it.Stipulate product
augmentation (service, packaging, branding, etc.) and prepare
for it.
2-*

*
Phase 5: LaunchCommercialize the plans and prototypes from
development phase.Begin distribution and sale of the new
product (maybe on a limited basis).Manage launch program to
achieve the goals and objectives set in the PIC (as modified in
the final business plan).
2-*
*
The Evolution from Concept to New Product
Figure 2.3
Corresponding New Products Process Phases:
2-*

*
Methods for Accelerating Time to MarketHave a clear PIC
(Product Innovation Charter).Have a third-generation new
products process that permits overlapping phases.Use a new
product portfolio and careful project selection to allocate scarce
resources.Focus on quality: “get it right the first time.”Have an
empowered cross-functional team.
Source: Robert Cooper (1993).
2-*
*
Additional Techniques for Accelerating Time to
MarketOrganization: not just an empowered team, but effective
team leadership - focus on organizational learning and

knowledge transfer.Intensify Resource Commitments: Integrate
vendors and resellers, get users involved, and capture the Voice
of the Customer.Design for Speed: use computer-aided design,
rapid prototyping, common components, get fast trial.Rapid
Manufacturing: standard processes, computer-aided
manufacturing, just-in-time delivery.Rapid Marketing: Use
rollouts, spend as needed to generate awareness, offer trial
purchasing.
Figure 2.4
2-*
*
What About New Services?Successful new services tend to
come from firms that use a systematic process much like the
new products process – the tools all fit.Iterations may be more
frequent since they are less expensive.Unique, superior service
must be delivered, to achieve success.Speed to market with
services is important, especially in enhancing reputation, image,
and customer loyalty.Most important adjustments have to do
with the “customized” experience of each service customer.The

human interaction between service provider and customer is of
highest importance.The customer evaluates the service as the
sum of its parts.
2-*
Another note about service is that it has no category, and is part
of perfect competition. People do not compare just hotels to
one another, for example. They may compare their hotel service
experience to Zing cell phone customer service, Nordstrom’s, or
a Disney World experience.
*
New Service ExamplesJet Blue: focused on friendliness,
customized experiences, easy communication by website, stress
on safety, gathers much customer feedback.FedEx: customers
are co-creators and provide early input, ethnographic studies
suggest opportunities such as greater access, more digital
services, and service offerings such as photocopying (hence the
purchase of Kinko’s).
2-*

Interestingly, Southwest Airlines mostly owns humor as a
defining competitive edge, and helps mitigate negative service
experiences. SWA even has notebooks on successful humor
routines for new cabin attendants to use. Customers can recount
their favorite SWA humor routines, and it helps build loyalty.
FedEx not only owns the best overnight delivery promise
reputation, but also TLC handling of packages. For example,
many sensitive electronics companies (e.g., Dell, Apple) use
FedEx instead of UPS because UPS is infamous for packages
having to survive a 5-foot drop test. Beware of how your
operations and logistics could contribute to negative brand
image, and lost business!
*
What About New-to-the-World Products?The challenges are
different, but the first phase remains the same: opportunity
identification and development of a strategic statement.Clear
connection required between the radical innovation and the
firm’s strategic vision.A firm may establish a transition
management team to move the R&D innovation project to
business operating status.The new products process is more
explanatory: need to bring in Voice of the Customer (VOC)

early.Lead users may be critical here (see Chapter 5 discussion).
2-*
Two basic types of new-to-the-world products:Non-STEP
innovations – potentially disruptive innovations that do not
significantly alter SOCIAL, TECHNOLOGICAL, ECONOMIC,
OR POLITICAL/Regulatory aspects – e.g., potable water
treatment systems. These could be blue ocean ideas or not.STEP
innovations – that forever change some or all aspects of STEP –
e.g., the humble plow that sped up settlement evolution,
disrupting the nomadic hunt and gather societies. This is the
rare 1% of all innovations. Next up? Room temperature nuclear
fusion, which essentially disrupt all other forms of commercial
energy in the world.
*
Managing Breakthrough InnovationIncubation StageInvolves
customer and market interaction as well as technical
development.Tolerate failure but learn from it (Google claims a
60% failure rate on innovative products).Longer and much more
expensive than typical business development, but required for
breakthrough opportunities.Discovery-Driven PlanningForecasts

and plans evolve as more information becomes available.
2-*
*
The Probe-and-Learn Process for New-to-the-World
ProductsFocused (limited-performance) prototypesExample:
Iomega Zip Drive: over 50 prototypes were built to test out
ideas with customers.“Lickety-Stick” iterative process: non-
linear, more flexible process in which dozens of prototypes may
be tried (“lickety”) before settling on one that customers like
(“stick”).
2-*
*

NEW PRODUCTS MANAGEMENT
Merle Crawford
Anthony Di Benedetto
11th Edition
McGraw-Hill/Irwin, © 2015
*
PART ONE
OVERVIEW AND OPPORTUNITY
IDENTIFICATION/SELECTION
1-*
*

The Basic New Product Process
Phase 1: Opportunity Identification/Selection
Phase 2: Concept Generation
Phase 3: Concept/Project Evaluation
Phase 4: Development
Phase 5: Launch
Figure 1.4
1-*
*
Opportunity Identification and Selection
Figure I.1
1-*
The expansion of Phase 1.
Note that new product opportunities can come from anywhere.
While companies with a formal new products development
program try to quantify and create a standard process, it remains

largely open-ended.
Incremental product improvements are primarily driven by
internal stakeholders such as marketing, corporate planning,
new products development staff. Some improvements may be
driven externally – most often by competitors with improved
products introduced into the marketplace.
The rest of this chart is primarily about “sorting” the ideas. At
the end of the process it is advisable to create a PIC (Product
Innovation Charter) detailing a strategy for product
development of the idea for all parties to be aligned with.
*
Chapter 1
The Strategic Elements of Product Development
1-*
*

Why Study New Products?It is big business – billions of dollars
annually on technical development alone.The challenge of
creating radical innovation (totally new product categories) is
viewed by business consultant Gary Hamel as “the most
important business issue of our time.”Accelerating innovation
and business growth through innovation are the top business
challenges - the Industrial Research Institute.
1-*
*
The New Products Process is Difficult!
Studies supported by research says 40% of new products fail
— somewhat higher for consumer products, somewhat
lower for business-to-business products.
1-*

*
New Products Success RateFor every 100 ideas:Fewer than 70
make it though initial screeningFewer than 50 pass concept
evaluation and testingA little more than 30 make it through
developmentAbout 30 make it through testingAbout 25 are
commercialized15 are successful.Success rate is lower in
consumer goods (13) and slightly higher in healthcare (16).
Source: Comparative Performance Assessment Study, PDMA,
2003.
1-*
*
Best New Product Firms vs. the RestTop new product firms
average about 49% of company sales and profits from products
introduced in the last five years.Other firms average about

21%.It pays to invest in new product development!
1-*
*
Globalization and New Product DevelopmentTop firms deploy
over 50% of their R&D spending in foreign countries.Global
product teams leverage new product skills across
subsidiaries.Design, R&D, and manufacturing may occur in
different subsidiaries around the world. Difficulties:
coordinating across multiple countries to launch a successful
new product.Having a global innovation culture is important to
success – being aware of differences in business and cultural
environments, and open to global markets.
1-*
The more technology-driven industries maintain a rapid new
product development pace. Companies must commit to a new
products development strategy – e.g., lead the industry, or copy
the leaders. Sometimes, leadership of new product

development means a part of the focus has to be on global
technology drivers, not necessarily specific to the industry
itself, creating that global innovation culture in the company
and industry.
Remember photo copiers in the 1960s? The fax machine in the
1970s-80s? The mobile phone development? The internet in
the 1990s? The skip technology to smart phones, bypassing
laptop computers going on today? What are the disruptive
technologies that are affecting, and will affect, what happens in
our business? Sometimes governments influence technology
development and implementation in the civilian sector.
Remember the heydays of NASA? Computers, digital systems,
advanced satellite communications, space exploration all
resulted in business technology advances sooner than expected.
*
Firms With a Global Innovation CultureProcter & Gamble
products are developed globally in 22 research centers in 13
countries. Market research and testing of Swiffer occurred in
the U.S. and France.Apple did iPod product design and
customer requirement definition in the U.S. and Japan.IKEA
identifies unmet customer needs, and commissions in-house and

outsource designers to compete for the design. Worldwide
partners compete for the manufacturing. IKEA has excellent
global logistics for product delivery to stores and customers.
Source: Loida Rosario, “Borderless Innovation: The Impact of
Globalization on NPD Planning in Three Industries,” Visions,
June 2006.
Figure 1.1
1-*
P&G tripled its innovation success rate, largely by outsourcing
in 2000, and focusing on transformational sustaining
innovations from existing product categories. Today, P&G
spends $2 billion per year on R&D and another $400 million in
consumer research. About a third of new product ideas come
from outsourcing.
Apple focuses on major product and system improvements with
engineering, design, and intuitive user interfaces. Arguably, the
iPhone was a major improvement. But iTunes was a disruptive
breakthrough in music distribution, killing off traditional retail
music stores. They were among the first to provide a major
tablet breakthrough with iPad too.

IKEA’s rockly start in the home furnishings business was driven
by Ingvar Kamprad - the IK in their name - being shut out by
competitors from using their manufacturers and suppliers –
forcing him to develop their own unique and more cost efficient
logistics chain, focusing on better design, self-assembly, and
low prices targeted towards first time young buyers. The EA in
the name is his family farm, Elmtaryd near the village of
Agunnaryd.
*
The New Products Process is About TeamsThe new products
team is cross-functional, from marketing, R&D, engineering,
manufacturing, production, design, and other areas. All
members contribute to the new products processSuccess
depends on how well members interact, and avoiding narrow
functional viewpoints.
1-*
*

Not All New Products Are PlannedMicrowave ovensAspartame
(NutraSweet)ScotchGard fabric protectorTeflonPenicillinX-
raysDynamite
In most cases, an accidental discovery — but someone knew
they had something when they saw it!
Figure 1.2
1-*
The advent of the first microwave oven – the Radarange from
Raytheon and Tappan, followed by the Amana Corp. came from
WWII radar installations in Britain.
Aspartame (Searle), Teflon (Dupoint), and Penicillin were
discovered by accident. X-rays and Dynamite were
systematically discovered by individuals.
*
Types of New Products10% of new products are inventions that
create a whole new market. E.g., Polaroid camera, Sony
Walkman, Palm Pilot, Rollerblade skates, P&G Febreze and
Dryel. 20% are new-to-the-firm products - products that take a

firm into a new category. E.g., P&G brand shampoo or coffee,
Hallmark gift items, AT&T Universal credit card, Canon laser
printer.26% are additions to existing product lines - line
extensions and flankers that flesh out the product line in current
markets. Ex.: Tide Liquid, Bud Light, Apple’s iMac, HP
LaserJet 7P.26% are improvements and revisions to existing
products - current products made better. E.g., P&G’s continuing
improvements to Tide detergent, Ivory soap.7% are
repositionings – products retargeted for a new use or
application. This may include retargeting to new users or new
target markets. E.g., Arm & Hammer baking soda as a
refrigerator deodorant; aspirin repositioned to help prevent
heart attacks; Marlboro as a man’s cigarette.11% are cost
reductions - products that provide the customer similar
performance at a lower cost. This may be a new design or
production process.
Figure 1.3
1-*
*

The Strategic Elements of Product DevelopmentThe New
Products Process (Chapter 1 and 2)A phased process that takes
the new product idea through concept development, evaluation,
development, launch, and post-launch.The PIC - Product
Innovation Charter (Chapter 3)A strategy for new products that
ensures that the team develops products in line with firm
objectives and marketplace opportunities.The Product Portfolio
(Chapter 3)Deciding which new products are best, given
strategic objectives and financial constraints.
1-*
*
The Basic New Product Process
Phase 1: Opportunity Identification/Selection
Phase 2: Concept Generation
Phase 3: Concept/Project Evaluation
Phase 4: Development
Phase 5: Launch
Figure 1.4
1-*

*
Issues in the New Products ProcessBetween each phase are
evaluation tasks or decision points, where Go/No Go is
decided.Pressure to accelerate time to market may result in
overlapping phases - cross-functional teams are used to
accomplish this.Fuzzy gates are commonly used: this is a
“conditional Go” while analysis continues, which may incur
additional costs and time/resources.Hollow gates are when the
Go decision is made but no financial support is provided, often
delaying or denying implementation.
1-*
*
Third-Generation New Products ProcessSome firms use what is

called a Third-Generation process.This is a flexible
interpretation of the basic process, which allows overlapping
phases and fuzzy gates.This flexibility is particularly important
in the development of new-to-the-world, breakthrough products.
1-*
*
The New Products Process Interacts With the Other Strategic
ElementsThe firm’s attempts at product development will be
unfocused without a Product Innovation Charter. The PIC helps
the team identify strategic opportunities.Product Portfolio
considerations help the firm decide whether a new product
opportunity adds financially and strategically to the current line
and avoids spreading scarce financial and human resources too
thin.
1-*
*

So, Does All Of This Actually Work?The best product
developers in the business win the Outstanding Corporate
Innovator award, selected by the Product Development &
Management AssociationRecent winners: Hewlett-Packard, Dow
Chemical, Maytag, Harley-Davidson, Corning, Royal DSM,
Bausch & Lomb.All have had a sustained commitment to
innovation, with remarkable results in terms of new products.
1-*
*
90
40
10
0
10
20
30
40
50
60

70
80
90
Sometimes Quoted
in Press
Research ReportsSometimes Claimed
Percent of Products that Fail

CHAPTER 7ANALYTICAL ATTRIBUTE APPROACHESTRADE-OFF.docx

More Related Content

Similar to CHAPTER 7ANALYTICAL ATTRIBUTE APPROACHESTRADE-OFF.docx (20)

More from mccormicknadine86 (20)

Recently uploaded (20)

CHAPTER 7ANALYTICAL ATTRIBUTE APPROACHESTRADE-OFF.docx