The first comprehensive forecast of technological trends and social implications by the U.S. government was published by the National Resources Committee in 1937. It focused on 13 major innovations. In their article, Steven Schnaars, Swee Chia and Cesar Maloles examine the accuracy of those forecasts and draw some conclusions based on their review of that report.
Rapid changes in manufacturing and design technologies coupled with increased competition domestically and internationally have led to shorter product life cycles and compressed lead times for product introductions in the technology sector. Traditional cost accounting systems, which assume labor to be the major cost component in the production process, have resulted in distortions in cost information. Samuel Rabino and Arnold Wright describe emerging cost accounting approaches that more adequately address the changing competitive and technological environments and facilitate an improved evaluation of product launch programs.
Rarely has a strategic managemnt option captured American industry as has the thrust of accelerated product development. When accompanied by the goals of lowered cost and increased new product equality, it seems almost ustoppable. However, industry may have been swept up in the enthusiasm. Any strategic optic so tempting (with long lists of advantages and no suggested limitations) needs to be viewed critically. Merle Crawford reveals several “hidden costs” of accelarated development. He does not oppose the new strategy, and indeed endorses it highly, but urges that it can be considered carefully before application. His analysis suggests that acceleration is far more widely applied than is good for any industrialized economic system.
In many established product categories, a large component of sales is due to the replacement of existing units. Because of the long expected lifetime of durables, replacement decisions can often be postponed by the consumer. In light of this, one marketing strategy for manufacturers of such products may be to accelerate the timing of product replacement decisions for buyers planning to replace. In this article, Barry Bayus presents the results of his investigation of the effect of marketing efforts on shortening the replacement cycle. Such information can be used by new product managers to forecast more accurately long-term sales and to help decide when to introduce new products (e.g., with enhanced features). Using data on color television purchases, he shows that the marketing variables of price, advertising, new features and styling are related to the timing of discretionary replacements. Further, these data suggest that price has the most impact in accelerating replacement purchases.
How can organizations shorten the length of the new products development process? This is undoubtedly one of the key questions facing managers today. One important goal is early market entry, maximizing competitive advantage in the process. Bela Gold draws on his experience with product and process development in a wide array of industries to identify eight approaches to accelerating development. Drawing on his field research, he briefly appraises the potentials, limitations, and risks of each and then discusses implications for a more promising strategy.
Product life-cycles are becoming shorter, leading firms to reduce the time to bring new products to market. Being early can provide a significant competitive advantage, making the acceleration of new product development (NPD) an important area for research and inquiry. Based on their review of a wide range of literatures in business strategy, marketing, new product development, manufacturing and organization management, Murray Millson, S.P. Raj and David Wilemon report a general set of techniques for reducing the developmental cycle time for new products. The article develops a hierarchy of available NPD acceleration approaches and discusses potential benefits, limitations and significant challenges to successful implementation.
This article reports the conclusions from a study of crossfunctional product development teams with emphasis on the implications for altering organizational structure to accomodate team process. A comparative study of teams in four U.S. firms, using anthropological and sociolinguistic methods, found that team work is inherently paradoxical. It poses numerous contradictions and paradoxes for individuals, teams, and organizations. At one of the research sites, tacit recognition of this reality and a conviction that teams were critical to product development led to a continuous accomodation of the organization to the requirements of team work and to impressive organizational outcomes. Conceptual and managerial lessons are drawn from this successful case and are offered here to help guide both future research and the actual implementation of team work in firms.
This study identifies factors that seem to influence a new firm's ability to accurately forecast new product sales. William Gartner and Robert Thomas present a conceptual model and develop hypothesis that specify antecedent factors prior to new product launch, such as the founder's expertise and the marketing research methods used, as well as environmental factors occuring after product launch, such as competitive factors and market volatility, that influence new product forecasting accuracy. The hypotheses were tested with data collected from a survey of 113 new U.S. software firms. Some tentative guidelines for improving sales forecast accuracy among new firms are offered. Directions for future research are discussed.
Most companies' product development process (PDP) is inefficient and slow. Consequently, products are often late-to-market, over cost and not well-aligned with customer's needs. Because it involves all levels of the organization and crosses all functional boundaries, the PDP is very difficult to control. Unbalanced control is at the root of many of the symptoms of a troubled PDP. Michael T. Anthony and Jonathan McKay investigate the four primary unbalanced PDP behaviors exhibited by organizations and present four balancing mechanisms to correct these flaws. In their view, a balanced PDP contains a structured development methodology and project reviews at specific, high-impact points that involves top management appropriately while still allowing empowerment of the project teams.
Many firms acquire other firms with well-known and proven brands to hedge against the high costs and risks of new product development. A critical question in these acquisition decisions involves the assessment of the importance of brand equity to the acquiring firm. Since the brand equity benefits can vary by firm (and also by the decision maker within a firm) a critical question is how can one systematically decipher the effect of brand equity in acquisition decisions. Using the balance model [8,15], Vijay Mahajan, Vithala Rao, and Rajendra Srivastava present a methodology to determine the importance of brand equity in acquisition decisions. By capturing the idiosyncratic perceived importance of brand equity of every decision maker involved in acquisition decisions, the methodology enables members of a committee within a firm to understand and reconcile their differences in evaluating potential acquisitions. This methodology is applied in a pilot study for the all-suites segment of the hotel industry with data collected from senior executives of five major hotel chains. The authors also discuss benefits, limitations, and further extensions of the suggested approach.
In a previous article, Norman McGuinness developed a model of idea generation processes used by small firms. Here he reports similar patterns for larger firms but adds a stage he labels problem definition. Since his model describes the progress of ideas through various predevelopment stages, this article yields additional insight into better management practices. It emphasizes that search involves a system of social activities within the organization and also distinguishes between planned and unplanned search, structured versus unstructured procedures and top-down versus bottom-up orientation.
Recent trends in industrial distribution suggest that distributors may perform an important role in various stages of product innovation from idea generation, through product design, to product launch and subsequent marketing. In this article, Eunsang Yoon and Gary Lilien review the literature and discuss the potential role of the industrial distributor as an innovation participant. An exploratory study with an Australian data base suggests that the industrial distributor performs tasks associated with market-driven product innovation (reformulation and imitative new products in particular) as effectively as the industrial manufacturer.
Sales for radically new products often depend on the development of an associated infrastructure. This is particularly true in the case of high- technology innovations. This infrastructure reflects society's and/or industry's adaptation to the new product's potential or capability. Supportive infrastructure developments can hasten product growth in early stages of the product life cycle or retard growth in their absence. Shelby McIntyre shares his thoughts about the role of infrastructure in this perspective and presents useful guidelines for evaluating its impact. A radical innovation lives or dies, in part, by a company's vision and commitment to developing its long term potential. It is in this sense that a product or innovation can be “ahead of its time” (i.e., ahead of its infrastructure).
In a dynamic marketplace, managers need more than tactical demand analysis techniques and capital budgeting models to fully evaluate proposed product line additions. In this article, Joseph Guiltinan offers a descriptive framework to guide strategic thinking about the length of a product line. Specifically, his framework allows managers to identify the situations in which variety is an important competitive variable, examine the relationship between variety and cost, understand the underlying determinants of cannibalization and complementarity, and assess the consequences of not responding to competitive innovations. The article also shows how the relative importance of the various elements in the framework depends on the expectations that top management has established for the business unit or product line in question.
This research uses innovation characteristics to assess product potential at two points in time. The two phases of the study consist of: (1) proposing and estimating purchase intention models and (2) reconciling predicted success with actual product performance. The investigation focuses on the impact of perceived product attributes, environmental variables, and consumer traits on the purchase intention of actual innovations within several technologically intensive product categories. Differences in model specification and parameter values are noted across product types. Results indicate consistency in the impact of product attributes across categories on an innovation's acceptability, but suggest differences in model specification with respect to environmental variables and consumer traits. The existence of a generic-to-specialized innovation continuum is a possible cause of the heterogeneity in results across products. An ex post analysis of the innovations indicates that, while success can be predicted quite accurately using perceived product attribute ratings, consumer and environmental variables should not be ignored for particular categories. The study has implications for the early screening of innovative durables, specifically with respect to forecasting model potential, determining product design and positioning, and developing promotional messages.
The diffusion of a technological innovation often follows the pattern of the familiar ‘S’-curve—the classic smooth, cumulative adoption curve. Yet, an individual firm's decision to adopt or reject an innovation may be filled with discontinuous events, represented by familiar concepts like diffusion thresholds, bandwagon effects and the sudden rejection or displacement of an existing innovation. Paul Herbig reports how catastrophe theory can be used to describe many of these sudden changes and discontinuities. His article describes a model for a firm's adoption or rejection of an innovation via the cusp catastrophe, which he illustrates with a number of possible examples.
The financial services sector is becoming increasingly competitive. Deregulation allows formerly nonoverlapping financial institutions to compete. To survive and succeed, financial institutions must develop strong positions. A position summarizes the distinctive competence that a company seeks to convey to the marketplace to establish its competitive advantage. In this article, Christopher Easingwood and Vijay Mahajan describe a number of positioning attempts in the financial services sector. They are guided by two central objectives.
The first is to show how the special characteristics of services give rise to eight different positioning possibilities for financial services organizations. These positions present a range of potential options from which the manager may choose. For instance, an “extra service” position is one option, a “performance” position is another.
The second objective is to demonstrate the use of the positioning framework, with examples taken from the insurance sector to provide illustrations rather than a complete picture of insurance positioning.
The article concludes with a number of recommendations. For instance, financial institutions should avoid overcrowded positions and occupy underexploited positions. If accepted, these recommendations should help the financial services executive develop a competitive positioning strategy.
In this article, Michael Lawless and Robert Fisher propose a conceptual framework for analyzing durable sources of competitive advantage for new products. They assess various components of new product introduction strategies in terms of their degrees of competitive “imitability” (i.e., the ease with which competitors can imitate). The less imitable the component, the more durable the profits it generates. The authors identify seven strategic components based on bodies of research in strategy and promotion, distribution and firm characteristics. By selectively managing these components, an innovating firm can affect a new product's imitability and the duration of returns. Using a “resource mobility” perspective, the authors develop propositions that should lead to a more systematic focus on long-term profits in new product introductions.
In spite of the fact that product appearance would not seem to bear upon performance, this article provides evidence that the appearance of an industrial product may have an impact on its evaluation. Utilizing a conjoint scaling approach, Mel Yamamoto and David R. Lambert find that industrial product appearance exerts an influence, which in some circumstances exceeds the influence of certain product performance or price attributes. They suggest that attention paid to product aesthetics may have a payoff in terms of sales performance. And further, the impact of product appearance affects people in different organizational functions, across a range of technical orientations.
Conventional concept testing methodologies are based on the simple assumption that respondents understand the concept when they offer their evaluation of it. Obviously it's an assumption that often will not hold. What happens to the quality of the evaluation at different levels of concept knowledge is the issue addressed in this article by Eric Reidenbach and Sharon Grimes. Their research shows that the level of concept knowledge affects certain elements of the evaluation more than others, and that the evaluation is moderated by the type of innovation and the way it is presented.
One of the most critical steps in the development of a professional field is the development of a research tradition. The Product Development and Management Association has long been committed to the stimulation of quality research efforts in the field of new products management. Accordingly, to begin the development of a research agenda, PDMA sponsored a colloquium of academic and practitioner researchers. Philip C. Burger, then serving as PDMA's Vice President of Research, organized the meeting and reports on the results of a two and a half day discussion. Some of the topics emphasized include organizational behavior and leadership, dissemination of good practice and the importance of a benchmark study of new product success and failure as starting points.
Alliance formation is often described as a mechanism used by firms to increase voluntary knowledge transfers. Access to external knowledge has been increasingly recognized as a main source of a firm's innovativeness. A phenomenon that has recently emerged is alliance portfolio complexity. In line with recent studies this article develops a measure of portfolio complexity in technology partnerships in terms of diversity of elements of the alliance portfolio with which a firm must interact. The analysis considers an alliance portfolio that includes different partnership types (competitor, customer, supplier, and university and research center). So far factors that determine portfolio complexity and its impact on technological performance of firms have remained largely unexplored. This article examines firms' decisions to form alliance portfolios of foreign and domestic partners by two groups of firms: innovators (firms that are successful in introducing new products to the market), and imitators (firms that are successful at introducing products which are not new to the market). This study also assesses a nonlinear impact of the portfolio complexity measure on firms' innovative performance.
The empirical models are estimated using data on more than 1800 firms from two consecutive Community Innovation Surveys conducted in 1998 and 2000 in the Netherlands. The results suggest that alliance portfolios of innovators are broader in terms of the different types of alliance partners as compared to those of imitators. This finding underlines the importance of establishing a “radar function” of links to various different partners in accessing novel information. Specifically, the results indicate that foremost innovators have a strong propensity to form portfolios consisting of international alliances. This underlines the importance of this type of partnership in the face of the growing internationalization of R&D and global technology sourcing. Being an innovator or imitator also increases the propensity to form a portfolio of domestic alliances, relative to non-innovators; but this propensity is not stronger for innovators. Innovators appear to derive benefit from both intensive (exploitative) and broad (explorative) use of external information sources. The former type of sourcing is more important for innovators, while the latter is more important for imitators. Finally, alliance complexity is found to have an inverse U-shape relationship to innovative performance. On the one hand, complexity facilitates learning and innovativeness; on the other hand, each organization has a certain management capacity to deal with complexity which sets limits on the amount of alliance portfolio complexity that can be managed within the firm. This clearly suggests that firms face a certain cognitive limit in terms of the degree of complexity they can handle. Despite the noted advantages of an increasing level of alliance portfolio complexity firms will at a certain stage reach a specific inflection point after which marginal costs of managing complexity are higher than the expected benefits from this increased complexity.
Proper allocation of R&D resources across strategic business units is a challenge that has long been faced by executives of diversified business enterprises. Igal Ayal and Robert Rothberg have chosen to address this issue, applying a distinction between effectiveness and efficiency of R&D spending. Most companies seem to overcontrol such allocations in terms of tactical detail or efficiency considerations, and undercontrol in terms of strategic significance or effectiveness. Attention to the effectiveness of allocations requires that management assess the linkage between R&D spending and the attainment of overall corporate goals. The article draws conclusions about the design of appropriate R&D proposal generation and evaluation procedures and project control systems in strategically decentralized companies.
The life cycle model has become part of the everyday vocabulary of management and is used as a rough simplification of rather complex phenomena. Chris DeBresson and Joseph Lampel have undertaken a thorough re-examination of the underlying assumptions of the model and propose a reformulation that they believe gives a better approximation of the dynamics of technological and organizational change. The basis for their reformulation is a survey of 4000 British and Canadian innovations in many industries over some 30 years.
In a companion article immediately following this one, the authors illustrate their reformulation by a detailed analysis of one firm in one industry.
This article addresses issues linked to the sales of manufacturing technology and know-how through licensing by British companies to unaffiliated firms located overseas. It identifies a number of characteristics that make these companies more likely to license abroad. The authors test a model of foreign licensing on data gathered from 145 firms based in the United Kingdom. Many companies do evaluate licensing to unaffiliated firms as an alternative to foreign direct investment when they consider manufacturing in foreign markets. These firms tend to be relatively large in their industry, highly diversified, spend a relatively higher proportion of their value-added on research and development, and have less foreign experience.