Today’s Topic

1. Today’s Topic R&D: Market-focused Product Development

2. Course Schedule • The Marketing Function (Lenovo) • Sales & Sales Channels (GolfLogix) • Internet-based Marketing (HubSpot) • R&D: Product Development (Guidant) • Operations (Crocs) • Product Launch (Invisalign) • Final Exam on Product Launch (Emotiv)

3. Today’s Agenda • Market-focusedproduct development • More on product decisions (resources, objectives, positives-and-negatives) • Next week’s case & assignment: Operations (Crocs)

4. Learnings: R&D • Characteristics of market-focused new product development processes • Process dimensions: What? How? How well? (objectives, structure/discipline, execution quality) • New product development “best practices”

5. Homework Reading Guidant: Cardiac Rhythm Management Business (A)

6. Guidant: CRMB in 1997 • Guidant spun-off from Eli Lilly in 1994 • Guidant is a medical device company • CRMB is a division of Guidant • CRMB was profitable in 1996 (see Exh. 1A, income statement) • Two product lines: - pacemakers (brady - for slow heart beat) - defibrillators (tachy - for fast heart beat)

7. Guidant case….cont’d • CRMB is the market share leader (#1) in tachy (hint: identify the key factors in their success) • CRMB is a follower (#4) in brady • Significantly revised their tachy new product development processes in the early/mid 90’s • Decision on new R&D initiatives (additional investment in bradyoratrial fibrillation or congestive heart failure?)

8. Homework Assignment • List the dozen or more changes Guidant/CRMB made to its tachy product development process; which three do you think had the greatest impact, and why? • Does Guidant/CRMB have the financial resources to pursue new initiatives? • What objectives (decision criteria) should CRMB use in making the decision on whether to invest more in its brady business? • What are the positives-and-negativesof CRMB devoting additional resources to the “brady” business in order to improve its brady market position and financial performance? (identify at least five of each)

9. Effective Product Design and Development What were the product development process changes made by Guidant CRMB? Which 3 changes, in your opinion, had the greatest impact?

10. Dimensions of Process Change • What? --------- objectives and philosophy • How? ---------- structure and discipline • How well? ---- excellent execution

11. Getting Products to Market:from concept to product launch (various names/labels for this activity)… • R&D/Engineering (a misnomer) • New product development (NPD) • Product realization • Product innovation • Product commercialization • Product development & management • …etc…

12. What’s a “New” Product? New to the company New Product Line Completely New Line Extensions Core Product Revisions Repositionings Product Enhancements New to the world

13. Many new products fail… “35 percent of all new [IT] products now fail to achieve minimum acceptable market share or financial return --and the failure rate is rising.” VAR Business, November 1999

14. New Product Failure Rates For every 4 projects that enter development, only 1 makes it to the market. At launch, at least 1 of 3 products fail despite research and planning. An estimated 46% of all resources allocated to product development and commercialization by U.S. firms is spent on products that are cancelled or fail to yield an adequate financial return.              Source : Winning at New Products, Dr. R.G. Cooper, 2001

15. What are some reasons that a new product might “fail” ?(i.e., fail to meet the market and financial objectives set for it)

16. Some Reasons for Product Failures • Mismatched to market needs • Little/no competitive differentiation • Late to market • Too costly (price and/or COGS) • Poor quality • Inability to deliver to customers • Poor service/support • Ineffective sales/channels • Unrealizable objectives • Poor execution/teamwork • …

17. Product Development Process:Overall Structure • Linear (“handoffs”) • Parallel/concurrent (multifunction involvement at all/most stages)

18. Core Product Team and Roles • Marketing - leader, product definition, project management, marketing program, sales training, forecasts, financials • R&D - product development (milestones and dates), tech support for marketing/sales, transfer to manufacturing, support for trials/betas, product fixes/revisions • Operations - manufacturing engineering, manufacturing (ramp), product costs and quality, logistics and service plan

19. Other Team MembersDepends on the Product, Market and Company Practices • Sales? Friendly customers? • Finance? • Information technology/MIS? • Field operations (installation and service)? • Public Relations? • Partner companies (esp. manufacturing and/or sales and service)?

20. Product Development Process:Common Elements • Stages/phases with “gates” • Customer involvement and/or input • Concept-through-lifecycle tenure • Goals/measurements/rewards focused on overall success

21. Example of NPD Stages & Gates

22. Product Development Process:Some Best Practices • design-to-market (customers/needs) • design-to-cost (COGS) • concurrent engineering • requirements “freeze” • time-driven milestones • time-to-market or time-to-volume • fast iteration • cross-team communication • team goal compensation

23. Example: Traditional Milestone Planning Features and Performance Ready- to- Ship (time) Team Resources Cost and Quality

24. Why might it be important to get a product to market sooner rather than later?

25. So maybe…..Time-driven Milestones ? Features and Performance Ready- to- Ship (time) Team Resources Cost and Quality

26. Information Sources • Product Development and Mgmt Assoc (PDMA) www.pdma.org • Product Development Solutions www.npd-solutions.com/bok • New Product Dynamics www.newproductdynamics.com • Guidant case: a great example of best practices

27. Homework Assignment • List the dozen or more changes Guidant/CRMB made to its tachy product development process; which three do you think had the greatest impact, and why? • Does Guidant/CRMB have the financial resources to pursue new initiatives? • What objectives (decision criteria) should CRMB use in making the decision on whether to invest more in its brady business? • What are the positives-and-negatives of CRMB devoting additional resources to the “brady” business in order to improve its brady market position and financial performance? (identify at least five of each)

28. “More Brady?” Market Technology Competitive Financial

29. Topic for Next Class Operations (Manufacturing and Logistics) Making and delivering products, with consideration of time-to-market, costs, responsiveness, outsourcing ---- and how these things impact R&D and Marketing

30. Readings for Next Class • Can Marketing and Manufacturing Coexist? -- read to understand the 8 issues listed in the article’s Exhibit • Crocs: Revolutionizing an Industry’s Supply Chain-- an example of the importance of Operations in the success of a business

31. Assignment for Next Class • In what ways can technical people (R&D, technical sales, etc) assist with the resolution and/or minimizationof the marketing-manufacturing issues cited in the first reading? Provide one thought/example for each of the 8 issues in the exhibit in the “Coexist” reading. • What are Crocs’ competitive advantages? Which of these are related to its operations function? • To what extent do each of these growth strategies leverage Crocs’ competitive advantages: (a) internal manufacturing of raw materials used in compounding, (b) internal development of new products, (c) acquiring companies to get new products, and (d) acquiring companies to get new customers?