3.3. New product development The importance of new products

Change in markets, economies and society has led to short­ening of life cycles, and this has intensified the need for most orga­nizations to innovate in terms of the products they offer. New products can provide the mechanism whereby further growth can take place. Increasing competition, often itself coming from new or modified products, means that innovation is frequently not an option but a necessity.

‘Newness’ can vary from restyling or minor modification to produ­cing products that are ‘new to the world’ and that lead to new mar­kets. The higher the degree of newness, the more likely it is that major gains in sales and profits may be made, but, at the same time, the risks of incurring high costs and market failure are also increased. A single new product failure, if big enough, could bankrupt an organization. It is generally accepted that a very large proportion of new products fail, although precise quantification is impossible as many new products may be kept on the market despite not meeting their original objectives.

Organizations are faced with a dilemma in the management of new product development: new product development is essential, but is also fraught with risks. The successful management of the dilemma is often to produce a large number of new product ideas, most of which will never reach the market because they have been weeded out by an appropriate screening process.

New product idea generation

Ideas for new products can come from many sources. The greater the range of sources used, the more likely it is that a wide range and large number of new ideas will be produced.

• Ideas from customers. For most organizations, the most important source of new ideas will be the customers. Obtaining ideas from customers is a good way of ensuring that ideas are produced that will produce products as a result of ‘market pull’. This means that there will be a market for the products because they are specifically requested by the customers. Surveys and focus groups can help to produce ideas. The more straightforward approaches may give ideas for improve­ments, but more subtle approaches may reveal new needs.

• Ideas from research and development. R&D departments are useful at idea generation when a market oppor­tunity has been identified but for which a solution has not yet been found. In this respect, R&D can lead to competitive advantage, as developments in the pharmaceuticals industry have proven on several occasions (e.g. the introduction of the anti-impotence drug Viagra by Pfizer Pharmaceuticals).

In some organizations, ideas emerge from R&D without a trigger from marketing intelligence. This is called ‘technological push’ and can sometimes lead to overspecified and high-cost products. At other times, technological push can result in a genuine breakthrough that marketing people can then ‘run with’.

• Other sources of ideas. It is impossible to construct a comprehensive list of sources of new products, but the following have proved to be useful in the past:

• advertising agencies (who sometimes have their ‘finger on the pulse’ of market requirements);

• consultants (who may carry out market research on a com­pany’s behalf);

• universities and other academic institutions;

• competitors (where an organization copies a competitive product);

• suppliers (who may have devised a way to use a component or material);

• employees, sometimes through ‘employee idea’ schemes;

• distributors and agents.