A product change is a change in the organization’s product or service output. New product innovations have major implications for an organization because they are often an outcome of a new strategy and may define a new market. In addition, product life cycles are getting shorter, so that companies need to continuously come up with innovative ideas for new products and services that meet needs in the market place. Product innovation is the primary way in which many organizations adapt to changes in technologies and competition.
Product development is a risky, high stake game. Some experts estimate that 80 per cent of the new products fail upon introduction and another 10 per cent disappear within five years. Despite the high failure rate and the fact that successfully launching a new product costs big money, thousands of new products appeared in one recent year, including 5000 new toys. Many of those products will never generate an economic return. Consider such flops as Procter & Gamble’s Fit Produce, a motorized two wheeler you ride standing up. Companies that successfully develop new products usually have the following characteristics:
- People in marketing have a good understanding of customer needs.
- Technical specialists are aware of recent technological developments and make effective use of new technology.
- Members from key departments – research, manufacturing, marketing cooperate in the development of the new product.
These findings mean that the ideas for new products typically originate at the lower levels of the organization just as they do for technology changes. The difference is that new product ideas flow horizontally among departments. Product innovation requires expertise from several departments simultaneously. A new product failure is often the result of failed cooperation.
One approach to successful new product innovation is called the horizontal linkage model, which is illustrated. The model shows that research manufacturing and marketing must simultaneously develop new products. People from these departments meet frequently in teams and task forces to share ideas and solve problems. Research people inform marketing of new technical developments to learn whether they will be useful to customers. Marketing people pass customer complaints to the research department to use it in the design of new products. Manufacturing informs other departments whether a product idea can be manufactured within cost limits. One example is when Hewlett-Packard’s engineers wanted to do away with the on-off switch on a line of new low cost computers. When marketing heard the idea, they immediately pointed out that the average customer would not understand how the printer could turn on and off without a manual switch and would get frustrated looking for one. When the horizontal linkage model is used, the decisions about developing a new product are joint ones.
Many of today’s successful companies also include customers, strategic partners and suppliers in the product and service development process, in line with the open innovation approach discussed earlier. Teams of IBM researchers, for example, regularly visit customers where they sit in on design meetings or brainstorming sessions, help customers solve problems or just hang around and see how IBM’s products and services could serve them better.
Fast cycle Teams
These trends are partly in response to pressure in the environment for developing and commercializing products and services incredibly fast. Sprinting to market with a new product requires a parallel approach or simultaneous linkage among departments. This kind of team work is similar to a rugby match wherein players run together, passing the ball and forth as they move down the field. Speed emerges as a pivotal strategic weapon in the global marketplace for a wide variety of industries. Some companies are using fast cycle teams to deliver products and services faster than competitors giving them a significant strategic advantage. A fast cycle team is a multifunctional and sometimes multinational team what works under stringent time lines and is provided with high levels of resources and empowerment to accomplish an accelerated product development project. For example, by using the Internet to collaborate on new designs with suppliers, fast cycle teams at a company take a new kitchen or bath faucet from drawing board to store shelf in only 16 months. The time saving means engineers can work on three times as many projects and introduce up to 15 new designs a year for today’s fashion conscious consumers, helping the company move from number three in market share to a tie for number one.