Process of New Product Introduction - Research Paper Example

New Product Introduction Introduction New Product Introduction (NPI) or, sometimes, New Product Development (NPD) is the process by which organizations launch a new product or service into the market for the first time (Moore, 1999). In other words, NPI involves the entire process involved in introducing a new product in the market. Two parallel paths may be used in the NPI process; idea generation, design of the product, and detail engineering on one hand, and market research and market analysis on the other. In many cases, organizations view NPD as the first point in the generation and commercialization of new products within the product lifecycle management process. The process of introducing a new product should ideally be very easy. However, many companies find the whole process very challenging. Increased customer expectations, cost challenges, and competitive pressures are but a few of the factors that drive companies toward improving the processes involved in their New Product Introduction. The aim of this article is to discuss how and why NPI is challenging to many organizations. Difficulty in Managing New Product Introduction The main objective of New Product Introduction is obtaining the highest number of sales possible. However, most companies make losses instead of profits when they first launch a new product. There are many factors that project managers overlook when preparing to launch their products or even services. Overlooking even the smallest of these factors can put disarray into the whole process of new product introduction (Bernstein and Macias, 2001). Depending on the audience, for example, NPI can take on a different twist of meaning than that intended by the company’s management. Study of the Competition Many companies do not consider their competition when they are about to launch their products. The product managers responsible for launching a particular product do not pay much attention to other companies that produce more or less similar products as those the company is about to launch into the market (Moore, 1999). Many companies make the assumption that the unique qualities of their products will be enough to help them achieve optimal profits. What the companies should do before introducing any new product into the market is to make a thorough study of what the competition has to offer. Studying the competition includes studying their marketing objectives and materials. This will give the product managers a chance to come up with unique ways through which they will be able to draw as many customers as possible when they introduce new products (Kim and Wilemon, 2002). Ideal Customers It is common to find marketers who do not pay enough attention to the customers who they are trying to reach out. Not having a definite or the right kind of target customers can lead to a failed new product launch. To achieve success in the product launch, it is important to consider the right customer base. These are the people who are most likely to buy the product once it is launched (Khurana and Rosenthal, 1998). To do this, the marketer needs to identify the area of need among the target customers. It is always better and far much cheaper to satisfy an existing need than it is to create a need that cannot be satisfied very easily. When you identify the specific area of need of a particular audience, this will help you package your product in a way that it draws the customers’ full attention; otherwise they will turn to the competition to find the services and products that they need (Sullivan, 1995). To be able to know exactly who should consume the product, there are a few questions that need to be answered. For instance, who is, or is not supposed to consume or use the product? At what time can people access it? What will its cost after it is officially launched? The consumers are bound to ask these and more questions (Smith and Reinertsern, 1998). To avoid embarrassment during the actual launch day, it is a good idea to know all the answers to the questions that are expected from the prospective customers. Value Proposition Some product managers do not think much about the products that they are about to launch for the public to buy. They do not realize that if they fail to pay attention to their products, then it is quite unlikely that they will be able to convince other people to buy it when they launch it (Sullivan, 1995). Before launching a new product, the company and the people involved in the product development and introduction should take time to clearly understand exactly what it is they are going to be selling. The company’s best prospects can only be achieved if the product is unique enough (Moore, 1999). The company should identify and act on a good reason why their prospective customers should buy their products and not those produced by the many competitors out there. The product manager should know all there is to know about the strengths of the product that is about to be launched. Making consumers think that about the positive aspects is quite challenging, but it has to be done if the launch is to achieve anything (Moore, 1999). The only way of making sure that people are aware of the strengths of the product is by advertising it based on its strengths and needs of the intended customers. Marketing Strategies and Tactics Many marketers and product managers do not have a definite marketing strategy. Failure to define and choose the right marketing channels can disrupt the process of New Product Introduction in a big way. To avoid such an occurrence, the marketers in an organization need to come up with winning marketing strategies (Ulrich and Eppinger, 2004). These are marketing strategies that have been well though out and have the potential to attract as many customers as possible to the newly launched product or service. It is advisable to have a multi-marketing plan which will ensure that as many people as possible have access to the product. Multi-channel marketing includes selling the product over the counter and through the internet. To test how successful the marketing strategy is, a marketer can make use of focus groups to determine how people might perceive the soon to be launched product. Communication There is nothing as important as proper communication about the product or service to be launched. There are some product managers in many companies who overlook this when they want to launch a new product. This makes their work of luring customers to the product very hard. In actual sense, this has not to be this way always (Bernstein and Macias, 2001). The use of traditional and other mainstream media can help a lot in the process of introducing a new product to the market. The publicity that a product or service receives will determine how fast people are going to buy it once it has been launched (Sullivan, 1995). A successful product launch needs to be properly planned for, otherwise it will present a lot of management problems. The financial burden will not be as bad as when the launch is not well planned for. A well thought out new product launch will also ensure that many people get to know about the product that is about to be launched and they will flock into shops to buy it. Having a theme for the launch campaign is very important. This will not only make the product introduction management easier, it will also send the message about the product to a whole range of people. Posters, radio plugs, flyers and TV advertisements can be used for this purpose. This is the opportunity that marketers have to tell their clients or customers why they should buy the new product or service. New product introduction may be difficult to manage for those people who like doing things without involving other people (Moore, 1999). The success of any business depends on the managers’ ability to delegate responsibilities. There should be a group of other people within the marketing team who can help out in the whole process. They can even chip in some ideas on how best to launch the product. Team work is very important in the process of launching a product, because when people unite to do something, the best comes out of that unity. Financial constraints also play a part in making the process of introducing a new product in the market difficult to manage (Moore, 1999). Proper product introduction cannot be achieved if there is a shortage of funds to finance the whole process. There are very things that have to be done before the actual launch itself. If there is no money, then this makes it hard for the product managers to plan for the launch, which may turn out to be a disaster if the money issue is not solved. To avoid situations where money becomes an issue during a product launch, it is important to prepare an all inclusive budget for the whole process. The managers in the company should budget for everything that is involved with the product launch to avoid frustrations. Open Innovation Introduction Open innovation is the approach of research and development that involves a company opting to share its knowledge and ideas with other firms. The approach is rather adaptive and less conservative than the closed innovation system (Chesbrough, 2006). In an open innovation system, a firm seeks to acquire knowledge and technology from another company. This system has room for joint development among multiple companies. In this innovation system, the companies involved are willing to share ideas even out of the firms. In this case, both the selling and buying companies achieve the returns they wanted; it is a win-win kind of system (Chesbrough, 2006). To understand what the open innovation system is all about, it is important to have a look at the closed innovation system. Open Innovation versus Closed Innovation The traditional closed innovation approach to research and development was in popular use during the 20th century. During this period, companies funded other large research companies and labs to come up with new technologies that led to the production of new products. This new products were able to help companies to obtain large amounts of profits and in the long run they were able to gain competitive advantage over their rival firms (Cooper and Edgett, 2008). One company that has often used open innovation is Microsoft. In 1980, the company bought nonexclusive rights for a computer prototype, DOS, from Seattle Computer Products. The following year, Microsoft had acquired all rights for the first sold version. A few months later, the giant computer manufacturer, IBM, introduced the first PC which the DOS program from Microsoft. This saw the profits of Microsoft skyrocket almost overnight (Christensen, 1997). In a closed innovation system, everything is done from inside the organization. This is in contrast to the open innovation system where there is a free flow of information and knowledge across the boundaries of a firm (Chesbrough, 2006). Over the last decade, a lot of companies have moved from closed innovation to open innovation. Based on culture is this shift. Many business owners believe in the success of adapting themselves to new situations. How is this open innovation different from the traditional closed innovation? The open innovation system operates on the basis that research and research results can traverse the boundaries of a particular company (Chesbrough, 2006). For example, if a company can utilize a technology they are given the chance to acquire it legally. This creates a win-win situation; something that is missing is the closed innovation approach to research and development. Chesbrough (1996) states that companies which are established sometimes approach entrepreneurs as well as venture financiers as threats. He says that these entrepreneurs and venture capitalists should be viewed as “laboratories” that practically test products to customers that are real. Under the open innovation system, it is possible for companies to use one intellectual property and apply it in another market situation. According to Chesbrough (1996), this trend of closed innovation began changing in the 1990s. He notes that during this period, companies were able to compete with other firms which were research oriented. The closed system has been criticized by many people for not being effective enough. For instance, the Xerox Palo Alto Research Center generated many products that did very well in the market. However, it is not everyone in the company who experienced the success of these products. As a result, many of the company’s employees departed to form their own companies, which were able to do mush better than Xerox Palo Alto Research Center (Christensen, 1997). Many companies have gone through the same path as did Palo Alto Research Center. Chesbrough isolated a number of factors which he said caused the closed innovation system to be eroded. These factors include: a. An increase in the mobility of workers who are skilled in specific areas. b. The business capital has expanded c. There are other external options for technologies that are unused d. there are many outsourcing partners who are highly capable According to Bridge (2009), modern companies are oriented towards the open innovation approach rather than the closed system in research and development. However he adds that little proof exists to show that any of these two approaches are more efficient compared to the other. In Bridge’s view contemporary ways of approaching innovation management insist on the importance of networks of innovation, or distributed innovation as captured by the well-liked idea of Open Innovation. Open Innovation in this case is linked with the work of Henry Chesbrough. Bridge also records that there is little, if any, systematic evidence on the effectiveness of open innovation compared to closed innovation. However, it is obvious that most of the companies that have adopted the open innovation system are doing much better that those that still hold onto the closed innovation approach. According to the Business Week Magazine (2006), innovation has changed drastically and companies are changing with times in order to optimize their sales. In today’s business environment, innovation goes beyond the introduction of new products; innovation involves building new markets that meet needs of customers that are yet untapped and reinventing new business processes according to the magazine. More important though, considering the effects of globalization and the power of internet that have well contributed in the widening of the pool of new thoughts and ideas, is the fact that innovation is about identifying and executing brilliant ideas and presenting these to the market in record time; at the opportune moment. While innovation focused on technology and quality and cost control in the 90s, presently, it is about taking the organization that is structured to be effective and rewriting it for growth and creativity (Business Week, 2006). Some of the companies that have been able to be successful while utilizing open innovation include Toyota. According to Business Week (2006), Toyota is a leader in the innovation industry. The automobile company is known to collaborate with other suppliers to come up with better designs for their (suppliers’) products. Apple is another company that has been able to utilize modern open innovation methods to produce some of the most sought after products such as the iPod. Business Week reports that the company used over seven innovations to come up with the iPod. The company made use of branding, the business model and networking to make iPod the market giant it is today (Business Week, 2006). Innovation, be it open or closed innovation, does not work to the benefit of all companies that try it out. Some of the obstacles associated with this problem include consumer demands that keep changing with each passing day, global outsourcing and slow development times. Lack of coordination is also a big barrier to innovation practices in many companies. Conclusion If organizations have to remain in business, they need to be innovative. One means by which companies can display their innovativeness is through the development and introduction of new products in the market. The organization may opt to use open innovation or closed innovation to its advantage in business terms. In history, NPI has been associated with functional divisions such as engineering, marketing, production, and R&D with over-the-wall communication. Today, NPI is taken by many an organization as an important cross-functional business process; one that involves both external partners and internal groups. While each of the two options mentioned above has its specific advantages, they also have limitations. Open innovation has however proved to be more rewarding in today’s business environment compared to its more reserved counterpart. References Bernstein, J. and Macias, D. (2001) Engineering New Product Success:The New Product Pricing Process at Emerson Electric, retrieved 21 December from: http://valuepg.com/Articles/EngineeringNew%20ProductSuccess.PDF Bridge, T.M. (2009) Open versus Closed Innovation: Development of the Wide Strip Mill for Steel in the USA During the 1920s, retrieved 22 December, 2009 from: http://bridge.tm.mbs.ac.uk/2009/12/07/open-versus-closed-innovation-development-of-the-wide-strip-mill-for-steel-in-the-usa-during-the-1920’s/ Business Week (April 24, 2006). The World’s Most Innovative Companies. Retrieved From: http://www.businessweek.com/magazine/content/06_17/b3981401.htm Chesbrough, H. W. (2006) Open Innovation: The New Imperative for Creating and Profiting from Technology, Harvard Business School Press, Boston. Christensen, M. (1997) The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, Harvard Business School Press, Boston, Massachusetts. Cooper R.G., & Edgett, S.J. (2008), Maximizing productivity in product innovation, Research Technology Management, March 1, 2008. Kim, J. and Wilemon, D. (2002) Sources and assessment of complexity in NPD projects, R&D Management, 33 (1) pp. 16-30. Khurana, A and Rosenthal, S.R. (1998) Towards Holistic "Front Ends" in New Product Development", Journal of Product Innovation Management.  15 (1): pp.57-75. Moore, A.(1999) Crossing The Chasm: Marketing And Selling Technology Products To Mainstream Customers, Capstone Publishing Limited. West Sussex. Smith, G. and Reinertsen, D. G. (1998) Developing Products in Half the Time (2nd ed.), John Wiley and Sons, New York. Sullivan, N. F. (1995) Technology Transfer: Making the most of your intellectual property, Cambridge University Press, Cambridge. Ulrich, K.T. & Eppinger, S.D. (2004) Product Design and Development (3rd ed.), McGraw Hill, New York. Read More