Product innovation

Product innovation
Product innovation is the creation and subsequent introduction of a good or service that is either new, or improved on previous goods or services of its kind. Product innovation is defined as:thing the development of new products, changes in design of established products, or use of new materials or components in the manufacture of established products. This is broader than the normally accepted definition of innovation to include invention of new products which, in this context, are still considered innovative.

New product development

New product development (NPD) is the term used to describe the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation, product design and detail engineering; the other involves market research and marketing analysis.

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Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management used to maintain or grow their market share.

The Innovation Diamond

Product innovation is the engine that drives growth and prosperity for many companies. It is also one of the most difficult undertakings of the modern corporation. Why are some companies so successful? How do some businesses make it seem so easy one new product winner after another?

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Exceptional performance in product innovation at these companies is no accident. Rather, it is the result of a disciplined, systematic approach starting at the top of the organization. Best practice research has uncovered a common theme in organizations that excel at product innovation.

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Four key areas of best practice stand out as common denominators: product innovation and technology strategy; portfolio management both strategic and tactical; idea-to-launch new product development process, and the right climate and culture for innovation. These four performance drivers comprise the Innovation Diamond

1. A Product Innovation and Technology Strategy for the Business

Top performing businesses put a Product Innovation and Technology Strategy in place, driven by the business leadership team reflecting their strategic vision of the business. This strategy guides the businesss new product development direction and helps to steer resource allocation and project selection. Developing a product innovation strategy is one key to success.

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A good Product Innovation Strategy includes: The goals for the businesss product innovation effort, and how these goals tie into the broader business goals The arenas of strategic focus in which product, market and technology areas the business will focus its product development efforts. This strategy is more than just a list of this years development projects; it has a much longer term commitment Defining resource allocation via strategic buckets (i.e. areas of focus) and mapping of anticipated major initiatives over a multi-year period to yield the product roadmap.

2. Portfolio Management: Strategic Resource Commitment

Best performers have an effective portfolio management system in place that helps the business leadership team effectively allocate resources to the right strategic buckets and projects. Effective portfolio management involves both strategic and tactical portfolio management.

Strategic Portfolio Management:

Product development projects are aligned with the business strategy Resource allocations in the portfolios mirror the business strategy Effective balance of projects occurs in the portfolios (for example, between long-term and short-term projects).

Tactical Portfolio Management:

Good ranking and prioritization of projects Portfolios generally contain high value projects Good balance between resources available and numbers of projects underway to avoid a resource crunch.

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Formal portfolio management systems in many best practice companies integrate a variety of tools effective gates, scorecards, the productivity index, strategic buckets and product roadmapping to help select and prioritize new product projects.

3. High Quality Idea-To-Launch System

An effective new product development process or Stage-Gate System exists in top performing businesses a system that drives new product projects from idea to launch and beyond. Many companies claim to have an IdeaTo-Launch Process, but the best performers achieve the required breadth and depth across the entire system.

Key process components include:

A strong customer focus supported by voice-of-customer research Front-end loading undertaking appropriate, often extensive up-front homework prior to development (i.e. voice-of-customer research, market research, technology assessments) Developing differentiated, superior products that meet customer needs better than competing products High quality execution of all cross-functional activities from idea through to launch Go/Kill decision points in the form of gates in the process (where mediocre projects really do get eliminated) Performance metrics to gauge project success A process manager in place to champion the process and its proper use and implementation.

4. Positive Climate and Environment for Product Innovation

People, culture and leadership make up the fourth driver of performance of the Innovation Diamond. Senior managers in best performing businesses lead the innovation effort and they are strongly committed to new product development. They make it clear that innovation is a prerequisite for sustained growth.

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In the best performing businesses, senior management also creates a positive climate and culture for innovation and entrepreneurship; they foster effective cross-functional teams and provide strong support and empowerment to these teams; in return, project teams are held accountable for project results.

Stage-Gate Process
A Stage-Gate Process is a conceptual and operational roadmap for moving a new-product project from idea to launch. Stage-Gate divides the effort into distinct stages separated by management decision gates. Cross-functional teams must successfully complete a prescribed set of related crossfunctional tasks in each stage prior to obtaining management approval to proceed to the next stage of product development.

How Does the Stage-Gate Process Work?

Product innovation begins with an idea and ends with the successful launch of a new product. The steps between these points can be viewed as a dynamic process. Stage-Gate divides this process into a series of activities (stages) and decision points (gates).

Stages are:
Where the action occurs - the project team completes key activities to advance the project to the next gate cross-functional (there is no R&D or marketing stage) and each activity is undertaken in parallel to accelerate speed where risk is managed - vital information is gathered - technical, market, financial, operations - to manage risk incremental - each stage costs more than the preceding one resulting in incremental commitments. As uncertainties decrease, expenditures are allowed to rise and risk is managed

Gates are:
Where the Go/Kill and prioritization decisions are made where mediocre projects are culled out and resources are allocated to the best projects focused on three key issues: quality of execution; business rationale; and the quality of the action plan where scorecards and criteria are used to evaluate the projects potential for success

What are the benefits of using the Stage-Gate Process?

The Stage-Gate Product Innovation process has been referred to as the single most important discovery in product innovation empowering almost 80% of all North American companies to achieve improved returns on their product development dollars and to achieve new growth.

When implemented properly, Stage-Gate delivers tremendous impact::

Accelerates speed-to-market Increases likelihood of product success Introduces discipline into an ordinarily chaotic process Reduces re-work and other forms of waste Improves focus via gates where poor projects are killed Achieves efficient and effective allocation of scarce resources Ensures a complete process no critical steps are omitted

Successful Product Innovation

New product success is vital to the growth and prosperity of the modern corporation. Product innovation is king! CEOs continue to rate innovation capability as a critical driver for their future business success as they focus on increasing profitability and growth.

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The following companies are developing and launching a steady stream of successful new products. Apple, Procter & Gamble, Johnson & Johnson, Kelloggs, Microsoft, Hewlett Packard, Toyota, Sony and Pfizer, do make product innovation etc.