Tech 101

1. Tech 101 Chapter 1

2. Business Objectives This chapter deals with the steps in the process of new product development. It looks at: • the company • the marketplace • the competition To determine how the new product opportunity will fit into the overall strategy, there are a variety of elements that contribute to a product’s success

3. Business Objectives continued . . . • These factors go beyond the product specifications and performance. • There are the linkages with other things to consider in addition to the specification items such as: • other elements in the organization • the leverage that must occur internally • the predisposition of the organization to new things • the degree of activity in the marketplace • aggressiveness of the competitive players.

4. Business Objectives continued . . . The result of this chapter should be to Determine: • the fit of the new product • the chances of success • the organization’s ability and desire, and, • to carry it off.

5. THE FIT SELECTING THE NEW PRODUCT OPPORTUNITY • Opportunities abound in this world of ours! • How to select the one that gives the desired “result” • What is the desired result for the company? • Is it revenue generation, cash flow, or profit, or does it represent tangible, long-term Growth for the company, strategic positioning, and operational requirements?

6. SELECTING THE NEW PRODUCTOPPORTUNITY continued . . • Is it achievable/feasible? • Not all opportunities are truly opportunities for a company, they may not fit with the company • Exercise can be referred to as the “fitability” of the new product into the company.

7. UNDERSTANDING THE COMPANY’S “FITABILITY” This understanding relates to: • The product • Channels • Manufacturing and Technology A new product opportunity must easily fit into the operational culture of the firm in terms of: • sales and marketing perspective, • engineering perspective • manufacturing, • service, and quality control perspectives.

8. UNDERSTANDING THE COMPANY’S “FITABILITY” continued . . . • If there is an area that is not initially compatible or leverageable, steps can be taken to correct the weakness provided there are not too many. • The new product idea must be tested not only in the marketplace, but also within the firm to determine its fitability and the integratability of the product into the organization.

9. THE STRATEGY WHAT IS THE COMPANY’S STRATEGY IN PURSUING THIS MARKET— ONE-TIME HIT OR STEADY PURSUIT? • To effectively evaluate the fit of a new product, it is necessary to understand the company’s overall product strategy. • What has been the track record for embracing new technologies and product concepts? What were the expectations of each, and what were the results? • The product strategy should attempt to leverage the available product opportunities to create a steady stream of products to create a new, sustainable business unit for the company.

10. THE STRATEGY continued . . . • Regardless of how lucrative an isolated product opportunity looks, few products can succeed as a one-time hit without subsequent market and product development. • A single success in an uncontested market will not remain so for very long thus necessitating the need for continued development.

11. WHERE IS THE MARKETING HOOK? • every product should have a distinct marketing advantage that it brings to the marketplace. Very few products are accepted that are “me to” in nature, so there must be a clear marketing advantage at introduction. • This is what starts the momentum that will carry future sales. It is part of the tactics that must be generated from the strategy.

12. THINK THE SCENARIO THROUGH WITH CONTINGENCYPLANNING • Each new product must have a vision of how it will play out in the marketplace. • The scenarios for success and for failure must be thought through, and a recovery procedure for each worked out. • If it has uncontested reign of the market, and it is a worthwhile market to go after, the competition will enter the race with an offering of its own.

13. The Framework for Planning The planning process has a general framework that must be followed to generate the • Where are we? • Initiate a search of records to create a 5-year history of the company’s performance. (See Figure1-1) • Analyze and draw initial conclusions from the obtained data. Review trends in sales engineering, manufacturing expenses, in addition to the product-related performance. • Use a narrative to describe the general health of the business. Interview a cross section of the employees to find where potential problem areas are • Do not focus on individuals; rather, focus on the results of the organization.

14. The Framework for Planning continued . . . • Next, create as detailed as possible a product line analysis to describe the performance of individual products. Examine the costs, features, benefits, trends, and • Driving forces for each product. • It is also important to include the sales, general, and administrative expenses for each because costs may not be allocated on an activity-based cost basis. (Fig. 1-2)

15. The Framework for Planning continued . . . • Where are we going? • This section of the strategic planning process identifies where the organization wants • to go strategically in the future and what wants to attain • The following are the basic elements: • Mission statement development: • Simply stated, the mission statement is the short, concise description of the business of the company and its objectives. It describes the company’s identity and role in the marketplace.

16. The Framework for Planning continued . . . • Narrative of the dream: Create a detailed narrative of the “dream” of what you want your company to be in the future. • It should discuss the time frame, expected results, financial position, market position, product position, and competitive comparison.

17. The Framework for Planning continued . . . • Product scope definition: The product scope definition is a means to describe, in a detailed format, the product portfolio in a detailed manner. It should show how the products fit together and leverage off of each another, and where the boundaries are. • Specific market segments: Next, detail the specific market segments for each product. • Do some market research to determine the trends in the marketplace for these areas

18. The Framework for Planning continued . . . • Industry trends: Finally the team needs to look at overall industry trends to determine if they will be active through the planning cycle – the S-curve phenomenon

19. The Framework for Planning continued . . . • How do we get there? • Segment strategy • It should start with a current market assessment of the segment. The purpose is to find out what is going on in the marketplace and to view the trends, both near and long term. • Implementation: Since not all growth is internally generated, especially on a 5-year scope, some of the businesses and product lines may be acquired or brand labeled, or be a result of a joint venture development. (Fig. 1-3) • In this part of the plan, each segment is identified and a strategy is developed.

20. The Framework for Planning continued . . . • Investment/Return • In order to add financial validity to the plan, it becomes necessary to identify the scope of funds required to carry out the plan. • Each company organizational requirement that has been outlined must now have a financial picture attached to it. An investment/return money line should be established for each. This is illustrated in Figure 1-4.

21. The Framework for Planning continued . . . • Action plans • After you have agreement of the principles, it is necessary to generate an action plan. • The action plan should be very specific with times, assignments, and completion dates. Even if it is not complete in total, it is important to establish momentum early and set the pace for the organization. If funds are necessary to be appropriated by senior management, put them on the action plan with an assignment and a completion date.

22. Consistency IS THIS A REASONABLE OPPORTUNITY? • As part of determining if the prospect in question is a real opportunity, one needs to conceptualize and visualize the product offering as part of the company’s future standard offering. • Do not assume that the organization will “step up to the plate” to promote the new product.

23. Consistency continued . . . • Take care to strike a delicate balance between a new product stretch for the organization and something that is unachievable given the resources and mix of players. • Given the development cost, resource allocation, and lost opportunity cost incurred in the creation of the product, a certain amount of introspection and due diligence is required to ensure that the organization can be effective.

24. Consistency continued . . . SETTING THE CRITERIA FOR EVALUATION • To provide some consistency in the evaluation process, it is helpful to have a criterion to evaluate these new product prospects. • A framework could be as simple as a list of criteria that must be satisfied in order to fit in the organization. • The benefit of this type of evaluation is that it removes the emotionality in the decision making process.

25. Consistency continued . . . HOW MUCH OF A STRETCH IS THIS FOR SALES, ENGINEERING, AND MANUFACTURING INFRASTRUCTURE? • It is important to assess how much of a stretch the new product will be for the organization on all of the operational fronts. • A degree of stretch is desirable in each of the operational elements to keep the organization fresh and competitive. A visual way to look at this would be to generate the graph in Figure 1-5 on Page 16

26. Consistency continued . . . THE DANGER OF “PROMISED COMMITMENT” OR GETTING COMMITMENT EARLY • There is a danger of getting what seems to be commitment early from several people in the organization in word, but not necessarily in deed. • it is good practice to involve all the players in the organization at the onset.

27. Differentiating Research and Development • There is a unique and interesting relationship between research and development. • The two disciplines are diverse and separate, although they are often thrown • together in conversation and lumped as one entity. • In actuality the two must function as a relay race, with research establishing the lead position and handing off the intellectual property and know-how to the development people to apply and create new products.

28. Research and Development continued . . . • Research can be thought of as a strategic element of the organization, whereas development can be thought of as more operational in nature. • Many problems in new product development occur when development thinks of itself as strategic. Timelines are not met, costs increase, and they forget that they are an integral part of the revenue-generating organization that must produce results on a specification and a timeline to hit a window of opportunity.

29. Research and Development continued . . . • For fast-moving technology companies, even research needs to be considered as operational, meaning it needs to have usable results, to be on time, to be well defined, and to be easily transferable to development for industrialization and commercialization.

30. Research and Development continued . . . • There are three basic types of research and development • Incremental = a small amount of research and some amount of development • Radical = The radical type is best characterized by a large amount of research and a large amount of development.

31. Research and Development continued . . . • Fundamental = The fundamental type of program is best characterized by a large amount of research and little or no development. Many times these programs degenerate into gathering knowledge for the sake of knowledge, rather than gearing the research toward a specific goal. They may be strictly strategic in nature and won’t have payoff for many years. Another term sometimes used, is pure research.

32. Research and Development continued . . . THE NEED FOR RESEARCH TO BE TIED TO OPERATIONAL GOALS • Since research generates the knowledge and is an integral part of development productizing the technology, it is very important for the research expenditure to be carefully made. • Costs to progress from research to development increase dramatically, so diligence is required at the onset. Simply stated, ensure that research function is tied to operational goals.

33. THE MODEL FOR R&D • Figure 1-7 represents the flow of information and knowledge. • information comes into research from several sources, including cooperative agreements with other companies’ shared development in a consortium, from university sources, or from other sources as required. The corporate research department then generates the core technology to lay in to the development programs so products can be developed to hit a market opportunity. Figures 1-8 a & b on P. 21

34. Leverage EACH NEW PRODUCT DEVELOPMENT EFFORT SHOULD LEVERAGE VERTICALLY AND HORIZONTALLY WITHIN THE ORGANIZATION – Fig.1-9. • The key to effective new product development is to create leverage in the development arena similar to creating leverage in the manufacturing and sales arenas. • It simply is unaffordable for most companies to continuously start from ground zero on every new product development; consequently, the desire is to leverage past development efforts when starting new programs.

35. Leverage continued . . . • Successive development programs can be thought of as developing concentric rings around a base of core technology. As the programs become more complex and involved, the core increases. Each activity then pushes the outer envelope in terms of technology, purchasing, sales and marketing, and manufacturing systems. • Comment about Fig. 1-11, Page 24.

36. FLOW – Page 26 TAKE AND EXECUTE MANAGEABLE CHUNKS OF DEVELOPMENT • To keep the flow of a new product development program smooth and laminar, each step of the process needs to be identified and broken down into component parts for analysis and execution. • It is important to refrain from selecting huge chunks of activity to complete without detailing the specific parts. • By taking small elements the team can use trial end error in managing uncertainty and essentially “practice” its problem–solving techniques.

37. EVOLVING A SYMBIOSIS • Within the product development team there should evolve a symbiosis, in which an operational perspective governs the members of the team to work for the project. Should one of the members falter, there is enough strength and cognizance such that the other members fill in the void without affecting the performance of the team in total.

38. PURSUIT • The company should evolve a culture of consistent improvement, incremental product development, and timely execution. • The competition does not maintain the status quo, and as such, mandates your firm to initiate consistent, predictable actions that result in increased market share and better competitive posture.

39. SINGULARITY VERSUS PLURALITY A NEW PRODUCT SHOULD FIT INTO A CONTINUUM OF NEW PRODUCTS: A FAMILY SUPPORTED BY A STRATEGY • There has been significant discussion regarding strategy, vision, and operational planning, and all of the steps associated with it. The reminder here is to refrain from one time hit type programs. The single-hit type programs are characteristically seductive, lucrative, and have huge upside potential. These programs also have generally longer lead times, significant uncharted development waters to navigate, and often require huge capital outlay.

40. SINGULARITY VERSUS PLURALITY continued . . . • Long-term success of an enterprise relies on the need to stay on strategy, nurture and execute a plan, and focus on solid strategies and the tactical and operational planning to carry them off effectively.

41. Market Investigation There are two basic types of market research in use today: primaryand secondary • The primary type of research is one of the most direct and accurate forms available because it deals with information obtained directly from a customer. • It is done through surveys, interviews, • and demonstrations. • Surveys can be administered in a variety of mediums

42. Market Investigation continued . . . • Interviews • Demonstrations are another type of primary market research. This type of research offer information in the form of a demonstration and solicits feedback from the respondent.

43. Market Investigation continued . . . SECONDARY • The second type of research is the secondary market research approach. It is characterized by an indirect means for gathering information from readily available sources such as: • Trade shows • Trade literature search • Articles: Articles are an excellent means for documenting trends in the marketplace. • News pieces: News pieces are timely information of the actions of the leaders in the marketplace in a given area. They tell you who is active in an area and to what extent.

44. Market Investigation continued . . . • Observation of trends • F. Financial reports: • Textbooks • Patent search: Patents are available for search to determine the state-of–the-art in a • field of endeavor • Lost sales reports: These internally generated documents can be helpful in determining a competitor’s ability to use their product to secure business. • Internet: It almost goes without saying that the Internet is of the most prolific means of information or disinformation

45. Market Investigation continued . . . Extracting the Opportunity within the Complaint • The customer grants a significant favor by their complaint when you analyze it. The company sold them something that fell short of their expectations, and they thought enough of it to complain.

46. Market Investigation continued . . . What are the customer problems to focus on? • The effective way to navigate the marketplace is to focus on the customers’ needs. • Their problems are the ones that need to be solved in the embodiment of your products and services. • You position yourself as a problem solver and a consultant.

47. Foreign Content of Today’s Products What should be considered: • Analysis of Exchange Rate • Venues for Procurement • Venues for Manufacturing/Assembly/Test • Local Laws • Export Compliance See Fig. 1-13 on Page 40 for cost analysis.