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60 YEARS

MA K I
I
N
N
G
T H E

a look at the ev o l u t io n o f r e s e a r c h o n
, in n o v a t io n a n D g r o w t h
new proDucts
MANN
B Y D O N A LD R . LE H

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0
T H O U G HT L E A D E R S H I P F R O M M S I 5 0

❱ COVER STORY ❰

T
HE FACT THAT most facebook, the ipod or the model
new product ventures t). the allure of spectacular suc-
end in failure can limit cess is particularly strong for small,
enthusiasm for emerg- young firms that have relatively
ing products, innova- little to lose in terms of brand eq-
tion and growth. how- uity or capital if they fail. in larger
ever, a low success companies, successful outcomes
rate may be accept- make heroes out of the developers/
able, or even appro- architects (steve Jobs, sergey brin,
priate, if the potential benefit (the henry ford) and generate huge fi-
profit) of a new product is suffi- nancial windfalls for the companies
ciently greater than the cost of fail- that market them.
ure. for a 20-percent success rate,
as long as the potential gain is four second, there is tremendous
times the size of the potential loss pressure for publicly traded com-
(ignoring benefits such as learn- panies to produce high growth
ing or product-line synergy and rates, thereby justifying and/or
costs like reputation tarnishing), increasing price/earnings ratios
then one should go ahead with the and stock price. this second force
launch on an expected value basis. explains why companies often
acquire other companies—and
in spite of the high failure rate, frequently overpay for them in the
the drive for new-product-driven process. a parallel force exists for
growth stems from two principal small family-owned firms as the ar-
motivations. first, there is hope rival of new generations produces
for a “right-tail” result (i.e., a spec- a need for more cash to sustain the
tacular success, such as google, growing extended family.

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F IGU RE 1 : C h a n g e i n Pri o ri ti e s

1974-1994 1994-1996 1996-1998 1998-2000 2000-2002


Developing Successfully Innovation Marketing New product/
new business introducing really and really new innovation: innovation (6)
Opportunities (1) new products (1) products and Creating
and Improving markets (2) customers, • Market research
the new product • Forecasting adoption/ creating really that provides timely
development diffusion; incorporating new products (6) consumer insights
• Discovering and
process (3) customer reactions and testing really new • Speed to market
input products and services
• Best practices • Evaluating new
• Anticipating future • Concept testing for identifying products and projects
scenarios “breakthrough” new
• Developing product platforms
• Marketing-driven organizational
vs. market-driven processes and culture • Best practices for
development: The for innovation identifying fresh
benefits of leading consumer/customer
vs. following insights
• How marketing can
play the most effective
role

MSI Research Priorities • the possibility that other (unnoted) practices that are
Given the key role of growth, in general, and new products, correlated (occur concurrently) with the “best practice” drive
in particular, it is interesting to see how both their importance the result; and
and the aspects of them considered most crucial have evolved • the question of whether the practice leads to success
over time. To assess this evolution from the perspective of busi- or vice versa.
ness, it is useful to focus on the research priorities developed by That is, successful firms can afford, and hence are more
the Marketing Science Institute. Beginning in 1974, MSI has likely, to engage in a number of activities, such as support-
surveyed its members (currently 72) to ascertain what issues ing social causes, providing employee benefits like day care
were most crucial and needed more attention (research). Figure and spending on research and development or advertising.
1 highlights the change in priorities over time. Untangling what causes what is non-trivial and requires data
First, somewhat surprisingly, developing new products was over multiple time periods, as well as careful (econometric)
not identified as a high priority topic between 1974 and 1992, analysis.
although developing business opportunities was the highest More interesting than the focus on method (best prac-
priority topic from 1984 to 1985. By contrast, from 1992 on, tices) are the topics identified as high priority. First, “break-
some variation on new products, innovation and growth has through” product platforms (aka really new products)
consistently been a top priority. remained a central concern. Second, attention was directed
More interesting is how the specific focus has evolved over toward the now common topic of customer insights.
time. Through the 1980s, the top priorities concentrated on The 2000-2002 priorities showed a lessening in concern
improving (innovating) the marketing mix, with no special about new products, as attention shifted to the Internet
focus on new products. The 1992-1994 priorities spotlight and new media. In terms of specifics, interest in consumer
improving the new product development process (i.e., efficien- (customer) insights, speed to market and evaluating/selecting
cy). For 1994-1996, the top priority was forecasting both new among products remained high.
product sales and future environments. The 2002-2004 priorities showed both a re-emphasis on
From 1996-1998, attention turned from minor (“lemon- the topic and an important shift in emphasis. For the first
scented”) innovations to “really new” (discontinuous) innova- time, growth was identified as the key aspect, with innovation
tions, which created or revolutionized product categories. In and new products now appropriately thought of as means to
addition, interest began to focus on not just single innovations, this end/goal. Second, the role of metrics in assessing product
but on developing organizations capable of producing multiple development, including the more qualitative aspect of idea
new products over time. generation, became more prominent—especially as they
From 1998-2000, attention was focused on the topic du related to predicting success and failure.
jour: best practices. While observing the practices of other The 2004-2006 priorities marked the ascension of growth
successful companies can indeed provide suggestions/ to the top priority, a position it has held for three of the last
hypotheses about what works, it is far from scientific or four sets of priorities. Discontinuous growth strategies ef-
reliable. Problems include: fectively combined the older emphasis on really new products
• the failure to see if unsuccessful companies follow with growth. The emphasis on organic growth signaled the
the same practices; increased emphasis on internal growth (vs. external via

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2002-2004 2004-2006 2006-2008 2008-2010 2010-2012
Growth, Growth (1) Connecting Innovation (4) Using market
innovation, and innovation with information
new products (4) • Ensuring customer-
growth (1) • Novel approaches to identify
relevant innovation to new product opportunities for
development profitable growth
• Improved metrics/ • Organic growth • Engaging customers
ROI for new product through innovation and • Service innovation (1)
introduction/failures, • Discontinuous growth design
strategies that reshape • Co-creation
idea generation and • Aligning product
offering (product) the industry • Testing and • Identifying
innovation with
portfolio forecasting opportunities enabled
customer expectations
by technology
• Early prediction of • Creating a culture of
marketplace acceptance • Identifying
innovation opportunities arising
• Development and from economic
validation of better conditions
prediction/forecast
methods • Social issues shaping
marketing practice

mergers and acquisitions) now prominently espoused by lead- Sixty Years of Research
ing companies such as General Electric and Procter & Gamble. A complementary perspective to the priorities identified by
The 2006-2008 priorities conjoined innovation with managers can be observed by examining the academic litera-
growth. It also highlighted the growing emphasis on involving ture on the topic. Given the large body of work in this area,
customers in the innovation and product-development process, it is impossible to adequately cover all of it. Nonetheless, by
and formally identified design as a key (and emerging) focus. In examining award-winning and other relevant papers, one can
addition, it returned to the topic of the organization, specifi- get a pretty good sense of the developments over time. Specifi-
cally a culture of innovation. cally, award-winning papers through 2010 were examined from
The 2008-2010 priorities continued the evolution of Journal of Marketing (H. Paul Root), Journal of Marketing
emphasis by identifying other aspects worthy of exploration, Research (William F. O’Dell), Marketing Science (Frank Bass
including service, while retaining a focus on product develop- and John Little) and Journal of Consumer Research (Robert
ment co-creation and technology. Ferber).
The current (2010-2012) priorities again place profit- An impressive fraction of award-winning papers addressed
able growth at the top, highlighting the roles of information the general area of new products, innovation and growth.
and technology. It also, unsurprisingly given the state of the These were then supplemented by papers in these journals that
economy, identifies the role of economic conditions and social appeared on the top five pages of a Google search based on the
issues as particularly relevant aspects. words “new products,” “innovation,” “growth” and “market-
Examining these priorities across time reveals an interest- ing.” Papers in the most focused journal in the area, Journal of
ing progression. The focus has moved from innovation aimed Product Innovation Management, were not included because they
at improving the mix in general, to, initially, new products, and were so numerous (i.e., the entire May 2011 issue was devoted
then to really new products/discontinuous innovation. In- to product design). Clearly, it is an important resource for
novation itself then emerged as a major theme, including idea anyone interested in the topic.
generation, creativity and aspects of design. Most recently, the Next, a convenience sample of three professors was asked
focus has shifted to organic growth, with new products seen to go over the list and add key references. Finally, the author
more as a means to this end. added a few personal favorites. The result is a relatively unsci-

br i efly • Despite high product failure rates, marketers continue to be motivated


by the possibility of spectacular new product successes and importance
of growth for financial performance.
• The emphasis has moved from the lone inventor to teams and collaborative approaches.
• Future efforts may favor structured creativity tools and seek improvements through
product design and execution.

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entific and potentially biased, but hopefully useful, perspective to examining the benefits to pioneering and modeling sales
on academic research in the area addressed over the last 60 takeoff, as well as methods such as information acceleration and
years. stock trading, to provide early prediction of product sales.
In examining past research, it is useful to divide the research Work on understanding is more diverse. The 1950s are
and problems into five broad areas. The first has to do with largely forgotten. Nonetheless, in 1955 the key topic of word of
creation and includes aspects such as ideation and design. A mouth got a major boost from Elihu Katz and Paul Lazarsfeld’s
second key area is forecasting, both in terms of whether a new book Personal Influence (Transaction Publishers, 2005). Given
initiative will succeed and the actual sales (and profit) level it the current focus on Web-based influence via blogs, tweets,
attains over time. A third area, and one particularly relevant to social networks and customer reviews, it would be instructive
academics, involves understanding how and why new prod- to re-examine classic work in this area, including Arndt’s 1967
ucts come into being and how markets respond to them. A Journal of Marketing Research paper on “product-related con-
fourth area of great importance (albeit receiving less academic versation.” Recently, word-of-mouth work has again become
scrutiny) involves the management of development and imple- prominent, largely focused on the Internet and social networks.
mentation. This includes issues of organizational culture (e.g., Another stream of research relates to how customers view
market and customer orientation), incentives, inter-functional and evaluate new products, specifically how they categorize
coordination and alliances/partnerships. Finally, there is a need them and evaluate specific features as exemplified by Everett
to evaluate new products and initiatives, including their impact M. Rogers’ classic work, Diffusion of Innovations (Free Press,
on the stock market. (Some research has shown that major 2003). Considerable effort has also gone into understanding
innovations have a positive, if not totally immediate, impact on what characteristics of the product and the firm lead to market
stock price). This Appendix provides a list of key papers, orga- success and failure, as well as the impact of satisfaction on
nized by decade and general focus. To access it, please see an subsequent purchases.
extended version of this article on the Marketing Management A managerial focus has been evident for a long time, begin-
page at MarketingPower.com. ning with Wendell Smith’s work on product differentiation in
Significant work on creation and design emerged in the the 1950s. Considerable effort has been directed at identify-
1980s. The work initially focused on conjoint analysis and was ing the optimal strategy for new product introduction, as well
followed by methods for incorporating consumer insights via as responses to competitive introductions. In contrast to the
the use of focus groups, lead users and the “voice-of-the cus- other areas, valuation had received relatively little attention
tomer” approach. Most recently, the focus has been on enhanc- with the exception of the Chaney et al paper, “The Impact of
ing creativity via structured methods and incenting individuals New Product Introductions on the Market Value of Firms”
to contribute to the innovation process. (Marketing Science Institute, 1991). Since 2000, however,
Efforts to predict the success of new products date at least spurred by the increased emphasis on metrics, several articles
back to Fourt and Woodlock’s 1960 paper. Bass’ seminal paper have examined the impact of innovation and R&D spending on
provided a parsimonious model for durable adoption. From the stock prices.
late ’60s and through the ’80s, a legion of new product fore- Figure 2 provides a classification of the papers in the
casting models appeared including SPRINTER, ASESSOR, online Appendix by topic area over time, with several observa-
LITMUS and NEWS, elements of which are found in the tions emerging. First, academic research has concentrated on
current standard, BASES. More recently, attention has turned forecasting, understanding and managing new products and

F I GU RE 2 : A p p e n d i x Cl a s s i fi c a ti o n

Create Predict Understand Manage Value


’50s 2 1
’60s 3 3
’70s 1 5 1
’80s 4 6 4 3 1
’90s 2 6 6 8 1
2000s 2 2 10 13 5
TOTAL 9 22 26 25 7

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growth much more than on creating or FiG U r e 3: Future D i recti ons rather than improvements within the
valuing it. Second, while prediction has classic new product funnel, is likely the
been a steady area of interest, work on • Structured Creativity key to future success.
understanding and managing continues • Design for Another direction for future
to grow and essentially dominates the • Production efficiency research (and company efforts) is
literature examined here. Finally, valua- (cost + resources) increased emphasis on brand and cus-
• Repair
tion seems to be emerging as a key topic. tomer vs. product-based growth. These
• Upgrade
Where will the emphasis be in the • Disposal/Re-Purposing
other perspectives provide additional
future? Recognizing the fallibility of ways to imagine growth. They also pro-
• Implementation
forecasts (hence the recurring interest • Cross-Functional Plus
vide important standards for evaluating
in better forecasts in the MSI priorities). • Beta Sites growth: Essentially a successful innova-
The following areas, outlined in Figure • Scaling Up; Shutting Down tion requires a superior product that is
3, seem likely to be important. • Organic Creation/Internet/ consistent with (or enhances) a com-
Opportunistic pany brand’s image and appeals clearly
creation/Design • Customer Engagement to either existing customers (leading
Over time, the emphasis moved from the • Customer Developed and Refined to expanded margin per customer) or
• Flexibility VS. The “Funnel”
lone inventor as almost mythical hero new customers (generating customer
to teams/labs (e.g., Xerox PARC, Bell acquisitions).
Labs and GE, which has recently expanded its R&D spending). The final area is less pleasant. To many constituencies,
More recently, external collaborations have been emphasized, growth is not seen as a mechanism for economic improvement,
including alliances/partnerships with other companies and with but rather as a drain on resources and a means to encourage a
customers via lead users and beta sites. Attention has shifted to more wasteful and less-fulfilling lifestyle. Failure to consider this
listening to “common folk” and customers and incorporating position and respond to some extent seems to be a recipe for
their ideas and “Duct-Tape” solutions to problems. Particularly conflict, if not disaster. Hopefully doing a better job in the other
interesting in this regard is the importing of non-U.S., less- areas in general, and design in terms of efficient use of resources
developed-country designs to industrialized country company and provision for disposal and re-purposing in particular, will
product lines (i.e., reverse innovation). help counteract the current criticism. MM
In the future, two areas seem ripe for further exploration. This article is one of a series based on presentations from the
One is further development of structured creativity devices to Marketing Science Institute’s 50th anniversary conference, where
identify growth options. The other is design. Beyond aesthetic marketing thought leaders gathered to celebrate MSI’s achievements
design, some important “industrial” design issues remain critical, and explore the future of marketing.
including design for:
• Efficient production in terms of both cost and resource use;
• Repair; ✒ donaLd r. LehMann is George e. warren professor of business at
• Easy upgrade; and Columbia University in new York. He may be reached at DrL2@columbia.edu.
• Disposal and/or repurposing.
Another area that is relatively under-researched is imple-
mentation/execution. As anyone involved in sports knows, a
well-executed strategy can beat a poorly executed one—even
if the second strategy is logically/potentially superior. Thus,
Need More Marketing Power?
areas such as cross-functional coordination, use of beta sites
and means for scaling up (and the ability and willingness to go to marketingpower.com
scale back in the face of weak demand) will remain important.
Organization culture and market orientation, as well as the ama articles
ability to coalesce around a strategy either by consensus or via a Managing Sales Force Product Perceptions and Control Systems in
the Success of new Product introductions, Journal of Marketing
(hopefully charismatic) leader, such as Steve Jobs of Apple, also
Research, 2010
play important roles.
A third area, organic creation, is really an extension of the Back to Basics: Managing Valuable Product Knowledge and Data
Aberdeen Group, 2009
first. So-called customer engagement, in the form of customer-
developed and customer-refined (and evaluated) designs/prod- ama webcast
ucts, is increasingly recognized for its potential to drive organic Growing Constituent Engagement, Loyalty and Lifetime Value,
growth. In effect, these recognize the “new normal” (i.e., that Convio and The NonProfit Times, 2011
firms are no longer in charge of their products). Flexibility,

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Appendix: Noteworthy Literature

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Fern, E. F. (1982), “The Use of Focus Groups for 370. [Little, Bass]
Idea Generation: The Effects of Group Blackburn, J. D. and Kevin J. Clancy (1980),
Size, Acquaintanceship and Moderator on “Litmus: A New Product Planning Model,” Pringle, Lewis, R.D. Wilson and E.I. Brody
Response Quantity and Quality,” Journal in Proceedings: Market Measurement and (1982), “News: a Decision-Oriented Model
of Marketing Research, 19, 1-13. [Root] Analysis, Robert P. Leone, ed. Providence for New Product Analysis and Forecasting,”
R.I.: The Institute of Management Sciences, Marketing Science (Winter), 1-30.
Green, P., J. Carroll and S. Goldberg (1981), 182-193.
“A General Approach to Product Design Silk, Alvin J. and Glen L. Urban (1978), “Pretest-
Optimization via Conjoint Analysis, Journal of Claycamp, H.J. and I.E. Liddy (1969), Market Evaluation of New Packaged Goods:
Marketing, 43 (Summer), 17-35. [Root] “Prediction of New Product Performance,” A Model and Measurement Methodology,”
Journal of Marketing Research (November) Journal of Marketing Research, 15 (2), 171-191.
Griffin, Abbie and John R. Hauser (1993), “The 414-420. [O’Dell]
Voice of the Customer,” Marketing Science, 12
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Chan (2011), “Securities Trading of Concepts “Multiattribute Approaches for Product Concept
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Sorin Solomon (1999), “Toward Identifying 497-517. Journal of Marketing Research, (May), 16 (2).
the Inventive Templates of New Products: A [O’Dell]
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(1990), “Competitive Strategies for Late of Optimal Dynamic Product Launch and Networks,” Journal of Marketing Research, 47
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