Screening

Once ideas for a new product have been generated, a company must then sift through them to develop only those with genuine potential – a process known as screening As far as possible, the screening process has to attempt to avoid two potential types of errors: GO errors, where products are developed that ultimately fail or do not meet objectives, and DROP errors, where ideas are abandoned that would ultimately have succeeded. GO errors are recognizable, at least by the organiza­tion that makes them, but most DROP errors are unrecognised because the project has not gone ahead (unless of course a competitor makes a success of an idea that has been abandoned).

In practice, the screening process is normally multi-stage, with at least some kind of review at several points in the process. Since risks may be high, and organizational politics may play a part, it is usually recommended that, in at least one of the stages, a formal process is undergone in which the idea is evaluated against predetermined objective criteria.

Development

The stages in development will vary according to the nature of the product and the work required to develop a new version, but it is important to include stages of the screening process before activities that involve the commitment of large amounts of finance; also, it would not make sense to spend large amounts in developing a new product without producing evidence that there would be some demand for it. Stages in the process are typically as follows:

1. initial appraisal;

2. detailed business analysis and investment appraisal;

3. technical development;

4. market testing;

5. launch.

A traditional view of the development process is that one stage should precede another. With increasing competition, reducing time to market has become very important in many industries. To reduce the time to market, some of the activities may go on at the same time – sometimes known as parallel processing. This puts a pre­mium on good communications in the company between functions such as technical R&D and marketing. To avoid the delays and com­plications that might be involved in handing a project from one func­tion in the organization to another, multi-disciplinary teams known as venture teams may be created, and in some circumstances the team may be given the new product to manage when it is on the market. If such a team is created, it is likely that higher management will make the GO or DROP decision to avoid the risk of the bias of an enthu­siastic but optimistic team taking over.

3.4. Product portfolio theory

The notion of a portfolio exists in many areas of life, not just for products. Underpinning the concept is the need for a business to spread its opportunity and risk. A broad portfolio signifies that a business has a presence in a wide range of product and market sec­tors. Conversely, a narrow portfolio implies that the organization operates in only a few or even in one product or market sector.

A broad portfolio offers the advantage of robustness in that a downturn in one market will not threaten the whole company. Against this advantage is the problem of managing business interests that may be very different in nature and the company may be said to lack strategic focus. An organization operating with a very narrow portfolio (perhaps just one sector) can often concentrate wholeheart­edly upon its sector, but it can become vulnerable if there is a down­turn of demand in the one sector it serves.