At the heart of the innovation process is new product development. Most organizations have a delineated process for developing new products or services: opportunity identification, concept generation, product evaluation, product development, and product launch. Let us examine each of these:
Opportunity Identification
Where do new business ideas come from?
• Sales people. They have a good handle on what customers want.
• Customers. They usually know what they need and what would make their lives easier.
• Emerging markets. A middle class with purchasing power has emerged in India and China.
• Crises. 9/11 created an expanded market for security-based products and services.
• Periphery Markets. New inventions span connected products. For instance, cell phones create a huge market for ringtones, leather cases and software applications.
• Scientists. Right now, stem cell scientists are developing medical products to save lives.
• Technological Breakthroughs. Stents, cell phones, GPS systems, pacemakers--need I say more?
• Empathetic Design. Ethnographic research identifies customer needs as they live their lives.
• Ideation Sessions. Facilitated ideation sessions with diverse participants can bring out useful ideas.
• Demographic Changes. The Millennial generation wants different services and products than the Baby Boomers did. How can you woo this new group of consumers?
Simplest to Hardest
The late Charles Kettering, GM’s head of research, nearly broke his arm trying to crank start his car one morning. A few days later a friend was killed while crank-starting his car. Kettering sat down and listed 10 major obstacles to overcome before cars could be started automatically. He arranged them from simplest to hardest, started to solve the problems one at a time. The result was his first invention: the Delco self-starter.
An innovative company is constantly engaged in seeking opportunities to evoke new ideas that will lead to revenue streams. Some ideas might not be right for today, but might be right five years from now. Some ideas might not be right in their current form but when tweaked, polished, or altered, might be winners.
Concept Generation
Ideas are raw; they must be formed, molded, and articulated. Concepts have to be stated in terms of customer needs. A concept for a new food product might be “a nutritious, easy-to-make breakfast drink aimed at the teen market.” A concept for a new kind of healthcare delivery might become “a fast, no appointment needed, inexpensive health care clinic aimed at people with common, minor illnesses and ailments.”
Whereas ideas may come from many sources, usually it is a team of Production, R and D, and Marketing people who hammer out the concept statement, which needs to be articulate and understandable to many different internal stakeholders. The concept statement is specific enough to give direction to the product developer, and general enough to allow for wiggle room.
Project Evaluation
At this point, the entire project is evaluated for organizational mission fit, financial viability, marketability, resources available, and technological feasibility. Sometimes this is called a concept screen. The concept is screened through these filters:
• Will this project be profitable?
• What is the projected ROI?
• Is mass production feasible?
• Can we obtain the necessary raw materials?
• Does this project fit with the organizational mission? Strategic priorities?
• Does the target market want this product? How much will they pay for it?
There are several possible results of the evaluation process. The concept might be sent back to committee for further refinement or tabled because of competing priorities. It might be killed because the return on investment is too small, or it could be sent on to product development.
Product Development
A cross-functional product development team should include people from Production, Marketing, Research and Development, Packaging Engineering (if needed), and Accounting. The team develops timelines and work plans. The team sketches out a marketing plan. Raw material sources are sourced.
Most importantly, product-development teams develop prototypes. Several gallons of a new cleaning compound might be mixed in a vat and then tested at customer locations. A CAD/CAM rendition of a new car might be presented to prospective customers. Models might be created out of clay or cardboard. These prototypes are usually malleable enough to be altered as needed.
At any point along the way, or at every step, a GO/NO GO decision needs to be made. If any crite ria or screens fall short, the project might be killed. If the project is still a GO at this point, the project might go into a test market. The product or service is introduced into several markets and the results are monitors. One problem of test marketing is that the company tips it hand to the competitor. On the other hand, a competitor might try to sabotage the test market by buying up the experimental product, or flooding the market with their own coupons.
Launch
The product or service, if it has gotten this far, is now introduced to the marketplace. The launch stage is usually very hurried as there are a multitude of last-minute details. Can you imagine the logistics of getting a new product into warehouses all over the country or the world? Promotions, advertising, packaging, internal and external messages need to be coordinated. Salespeople need to be trained and motivated. Manufacturing needs to churn out the product without a hitch. Or if the manufacturing is done in the Far East, the product needs to be built and shipped. Sometimes companies do phased rollouts instead, introducing the new product to different regions sequentially rather than simultaneously.