Innovation and New Product Planning

Kenneth B. Kahn, Mayoor Mohan

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000327328
• Edition: 1
• Topic: Business
• Subtopic: Operations
• Index: Business

This practical book introduces readers to the essential business aspects of innovation and new product planning. The product planning process is discussed across two broad themes: product development and product management. Importantly, the book emphasizes the 21st-century strategic and creative mindset necessary to drive business innovation activities in a concise, yet comprehensive manner.

The book delves into the front end of innovation and formal product development activities, examining the topics of opportunity identification, concept generation and evaluation, technical development, product design, testing, launch strategies, product management, life cycle management, brand management, and vital elements for international success. There are stand-alone notes that serve to apprise readers on related topics such as the use of agile product development methodologies, the formation of business entities, and recommended best practices for new product development. The book excels at providing relevant examples and applied tools that augment the concepts to offer valuable connections to real-world product planning efforts.

This book is particularly useful as a guide to learning the fundamental concepts and strategies associated with innovation and new product planning. Among student audiences, upper-level undergraduate and first-year graduate students are likely to benefit as the book embraces its position to serve as a primer on product development and management.

Part I

Product Planning at the Business Unit Level

1

Innovation and Product Planning

Today’s marketplace is a cornucopia of products and services. If one were to investigate each of these products and services more deeply, it would be revealed that products and services undergo considerable planning, consume ample resources, and require appropriate execution of strategy just to make it to the marketplace. The process through which a product or service is conceived, brought to market, and managed across the life cycle is called product planning, which is a primary focus of this book. Note that while the terminology of product planning is employed, the term product is used generally to imply a product or a service.

Product planning is very important to a company because, when done properly, it can reduce resource expenditures, drive revenues, and generate profitability. Profitability is often a key objective and driver of product planning because it directly corresponds to the company’s bottom line. Just as important, a product or service reflects the company’s reputation, and thus a company will be intent on launching only those products or services that enhance its image and reputation. Other objectives, such as company awareness, customer satisfaction, and market share attainment, are product planning objectives and underlie a company’s long-term viability and competitiveness. The nature of these objectives exemplifies the strategic implications that product planning poses for a company in pursuit of successful new products. Product planning will not guarantee 100 percent success, but it increases the likelihood of achieving success.

Innovation is another focus of this book and subsumes product planning. By definition, innovation is an outcome such as a new product or service, an overarching process that manifests such outcomes like the product planning process, and a mindset that enables new things and ways of doing things to happen. Innovation is a critical theme for business success and company longevity.

There are many types of innovation, such as product innovation, process innovation, business model innovation, marketing innovation, and organizational innovation (see Note #1 of this book for a discussion of what innovation comprises). These different types illustrate the expansive nature of innovation. Product planning falls within product innovation, and so this book gives particular attention to innovation through a product planning lens.

Definition of Product Planning

The company process called product planning is formally defined as the process of envisioning, conceptualizing, developing, producing, testing, commercializing, sustaining, and disposing of organizational offerings to satisfy consumer needs and wants and achieve organizational objectives. As a complex endeavor, product planning comprises numerous issues and activities, many of which are cross-disciplinary in nature.

To clarify the understanding of the topic, product planning can be characterized as comprising two processes: product development and product management. Product development represents the up-front process, where the product or service is conceived, conceptualized, developed, produced, and tested. All these activities occur before the formal offering of the product or service to the marketplace, which is termed the “launch.”

Product management represents the back-end process, where the product or service is commercialized, sustained, and, eventually, disposed. Product management includes the launch endeavor, along with all activities that occur after the launch.

While distinguishing product planning as product development and product management simplifies the product planning endeavor, separating the two processes can lead to some unfortunate circumstances. For one thing, the separation of product development and product management implicitly assumes a break between the two processes, which overlooks the necessary transition between them. Various new product offerings have failed to reach their potential because product development was not properly linked to the product management team, and misunderstanding about the new product offering abounded. Separating the two processes also implies that product development has a stopping point, which is not really true. Even after launch, product developers should work with product managers to improve, augment, and even broaden the brand or product line. Conversely, product management should not be seen as just a launch and postlaunch activity. In fact, product managers should work with product developers to delineate market trends and customer needs that future offerings should serve. One who undertakes a product planning should acknowledge that product development and product management are two important, interlinked processes within an overarching process called product planning.

Roles of Product Planning

Product planning serves various key roles in a company. One of these roles is resource allocation. Product planning analyzes each product or service, whether current or new, to determine the resources that it will need to be successful and prioritize the impact that it has for the company. The company’s finite resources are then proportioned out to those products that deserve to receive these resources. Assuming that most, if not all, products deserve resources, product planning forces the company to optimize the partitioning of company resources across products.

Related to the role of resource allocation is product mix coordination. Here the objective is to balance the various products that the company offers to ensure that a particular type of product is not overwhelming the company’s offerings or diluting customer interest. The role of product mix coordination is to provide a product mix that distinguishes products where some or all are complementary products and provides the strongest market presence possible for each respective product.

Another role is marketing program support. Product planning can provide market information based on the current performance of existing products. Product planning also can enlighten the marketing function to customer comments regarding current products and customer needs. As a result, new marketing programs can be better focused on meeting the intended target markets, and current marketing programs can be refined.

A fourth role is the appraisal of company offerings. Product planning evaluates the performance of current products (and services) to reveal their impact on the business. In many instances, this impact is measured in terms of cash flow, where products are classified as generating a profit or losing money for the company. If the product is profitable, product planners might consider how to sustain and possibly increase the profit being generated; if the product is making a loss, product planners would consider actions needed to turn the product around.

If the product continues to make a loss, then one action that can be taken is the termination of the product. This is another role of product planning called product deletion. The product planner would identify which product (or possibly products) should be deleted and chart a course of action for proper termination of the product(s). This course might include programs to transition customers to alternative products and plans to maintain a spare parts inventory for a product being deleted in order to avoid alienating customers of that product.

Product, Service, or Both

In the previous section, varying terminologies have been used to describe a company offering as a product, service, or even a program. While historically and traditionally, products and services have been distinct, they have become innately intertwined in today’s marketplaces. For example, when buying a car, the product components of the car include chassis, engine, tires, and windows, among other things. But customers also receive warranties on various components of the car, may receive special financing, are given a customer service contact information for complaints, and can access and may participate in a special car servicing program (e.g., free oil changes and tire rotation). Together these items constitute the total package of what is considered “buying a car.” Truly distinguishing products and services may be purposeless or even misleading.

Aside from slight nuances associated with their inherent characteristics, issues and the processes related to the development and management of products and services should be considered equivalent. As mentioned earlier, the term “product” is generally used in this book; the term “service” could be easily substituted for product if preferred.

What Is a Product?

Having clarified the issue of product versus service, there is a need to define what is generally meant by product. Basically, a product is a particular offering that a company provides to customers. This does not mean that the product has to be in a form that would be readily recognized by the final consumer market because the product may be a raw material for the buyer’s product planning process. For example, integrated circuit chip manufacturers such as Intel and Advanced Micro Devices, Inc. (AMD) sell to computer manufacturers like Dell, Hewlett-Packard, and Lenovo, who, in turn, produce desktop computer systems to be sold to businesses and final consumers. Just because products in the business-to-business market differ from products in a final consumer market does not mean that it is not a product. According to the given definition, it is just as much a product and requires just as much systematic product planning.

There is a need to clarify what product means across different contexts, however. This is because a product can mean different things to different people based on the context. Three particular contexts are considered: the nature of innovation, the nature of market demand, and the nature of a company’s internal perspective.

Defining Product by the Nature of Innovation

One way to define a product is by the nature of innovation underlying the respective product. Specifically, the terms “invention,” “innovation,” and “imitation” can be associated with product.

Inventions are not products. They are technical devices, which contain features, are packaged into some form, and provide a function. The distinction of inventions is that these features, form, or function may or may not satisfy a need, want, or desire in the marketplace. A seminal definition provided by Crawford (1987, p. 16) portrays inventions as “taking pre-existing knowledge and combining it in such a way as to develop something that never existed before.”

Innovations are basically inventions around which a marketing program has been built to clearly offer a benefit to customers, which in turn satisfies the market need, want, or desire. Innovations are considered products because customers clearly understand how they satisfy the need, want, or desire. In other words, innovations represent a total package of features, form, and function, concentrating on delivering the benefit to customers.

Innovations can be classified as continuous (incremental) and discontinuous (radical) innovations. Continuous innovations are slight product changes or products that customers can readily understand and use. Such innovations can be the result of the normal upgrading of products and, in most cases, do not require a change in customer behavior. New flavors or brands of potato chips would be characteristic of continuous innovations. Discontinuous or radical innovations revolutionize the market infrastructure, make other technologies obsolete, and in many cases change the lifestyles...