What Drives New Product Development
- Redefining the Bottom Line
- Identifying Product Opportunities: The SET Factors
- POG and SET Factor Case Studies
- Summary Points
Breakthrough products result from the appropriate combination of style and technology and help to create experiences that people find both rewarding and valuable. In this chapter, we focus on the first step in developing a breakthrough product: learning to interpret the interconnected factors of Social change, Economic trends, and Technological innovation, otherwise known as SET Factors. Interpreting these SET Factors leads to identifying Product Opportunity Gaps (POGs) in the marketplace. Converting product opportunities into breakthrough products requires a combination of vision and sound methodology. As highlighted in the case studies in this chapter, the comprehensive approach introduced in this book applies equally to the development of products, services, and product-service systems through the new integration of products, interaction, and service.
Redefining the Bottom Line
This book introduces ideas and methods for companies that want to be market leaders in developing breakthrough products. Breakthrough products create new markets or redefine existing ones, support the customer’s experience in using the product and create a lifestyle fantasy about who that customer is, and generate higher profit for the company that produces them.
We have found the process of product development to be analogous to rock climbing, a challenging, invigorating, and empowering experience. To succeed at rock climbing, you need to have a set of appropriate tools, a good plan for the climb, and an interdependent team that works together to use the tools when appropriate. The climb is constant and well thought out, but the team has the training to adapt to issues that emerge along the way. Successful product development also requires a well-planned process using tools to help you negotiate difficult terrain. Teams of engineers, designers, and market researchers must work in unison to recognize promising product directions and work through the Fuzzy Front End of the product development process to create a product that meets the needs, wants, and desires of the customer.
Managing the Fuzzy Front End is an underlying theme in this book. The Fuzzy Front End is the part of the product development process that starts with the general goals of the program and covers the early stages of new product development. Making the most of the Fuzzy Front End is essential in creating breakthrough products. Companies that see the process as a climb see every part as essential and understand that the preparation and the climb have equal importance. The process requires the skill and patience necessary to use the tools successfully to develop products that you are confident will succeed in the marketplace.
Many companies approach product development as if it were parachuting instead of rock climbing. They have a core technology (their plane) and capital (the parachute), and then they free fall through the Fuzzy Front End to quality programs for manufacturing, expecting a smooth landing. These companies think the free fall will take care of itself—or, in product terms, they quickly focus on one product concept that they think will become a marketable product if it meets manufacturing or production quality standards and is then branded by an ad agency. Product development in this way succeeds only by chance. Failing to maximize the Fuzzy Front End causes these well-produced products to fail in the market because they do not respond to customers’ needs, wants, and desires. The result is a loss of brand equity, profit, time, and investor confidence.
New product development is a climb, not a free fall. The more prepared you are for the challenges of the terrain, the better the climb will be. This book helps you climb through the Fuzzy Front End of the product development process and gives you the tools that make your product more likely to succeed in the marketplace.
A number of challenges make it difficult for companies to maintain a leading position in a particular product category. These challenges are forcing companies to redefine the bottom line and the path to get there. The goal is to increase profits while simultaneously maintaining a healthy internal structure that balances innovation and continuity. So as companies are trying to realize their stated goals in sales and profit projections, they are also trying to resolve the following issues:
- Finding the right opportunities for new products and appropriate innovation to improve existing products
- Maximizing front-end decisions to minimize downstream corrections
- Reducing cycle times without reducing innovation and quality
- Building and maintaining brand equity through a strong product
- Integrating design, marketing, and engineering by reducing “perceptual gaps” and producing products that are considered useful, usable, and desirable by the customer
- Appropriately positioning the role of technology in product development
- Recognizing the significance of industrial and interaction design in the product development process
- Attracting, preparing, and retaining the best people
To successfully meet these challenges, a shared vision must flow from top management through middle and lower management down to individual members of product development teams. Although an opportunity for new products can be identified at any level, the vision of the product potential must be shared and championed at all levels. Not only do successful products help customers create maximum experiences in their everyday lives, but the process of developing the products themselves must be an equally powerful and rewarding experience for the product team. Developing products should be a form of serious fun. If everyone on the team is enjoying the process, it usually means that everyone in the company profits from the experience.
Positioning Breakthrough Products
Consumer demand for better products has been continually increasing during the last few decades. During the 1980s and early 1990s, quality development programs, reengineering, and concurrent design were the initiatives that drove companies worldwide to constantly improve their products. At the beginning of a new century, the emphasis shifted from the back end to the front of the product development process. It is increasingly harder to find the right product concept and the time and processes needed to bring that concept to market. Technological innovation and maintenance of manufacturing standards are still intrinsic parts of developing successful products. However, if a product does not connect with the values of consumers, it will fail.
People use products to improve their experience while doing tasks. They relate these experiences to their fantasies and dreams. Successful products fulfill a higher emotional value state, whether it is the security of a child relaxing during an MRI experience, the comfort and effectiveness of cooking in the kitchen, the relaxation and escapism of sipping coffee in a coffeehouse, or the empowerment of a person taking control of the weight loss experience using a body-monitoring device. The mantra that form follows function is no longer relevant; we are now in a period where form and function must fulfill fantasy.
What makes some product programs fail and others succeed? How did Kennametal reinvent the machining of titanium to support the manufacture of Boeing’s Dreamliner while making the process more economical and better for the environment? How could GE Healthcare make the frightening MRI experience fun and calm for kids? How could Jarden introduce the Margaritaville brand to bring Jimmy Buffett’s Key West lifestyle fantasy to Baby Boomer consumers for less than $300? How could BodyMedia, a small upstart company, pioneer the industry for consumer self-care through technology? How does Starbucks, initially a small coffeehouse in Seattle, continue to remain innovative, building on its ability to reinvent how Americans drink coffee while refining its process and products and even experimenting with new nonbranded stores? How could Navistar’s International Truck Division rejuvenate its brand and redefine the long-haul truck industry with the introduction of a big rig that pays as much attention to the driver when he is not working as when he is? How could UPS redefine the package delivery industry to one of logistics positioned for the Internet age?
In evaluating the value impact of all these products, we found that they were all highly successful in communicating value in the key categories that connected them to their customers and moved them ahead of their competition. If you look at most positioning maps, the optimum quadrant is usually the upper right, where each positioning attribute is maximized. In this book we introduce a Positioning Map (see Figure 1.1) that charts style against technology through added value. The Upper Right, with integrated style and technology, and the only place with significant value, is where a company must move and be positioned to best differentiate itself from the competition and to succeed. All of the breakthrough products just mentioned are positioned in that quadrant. Getting there is not easy because of the third dimension, which acts as a cliff that needs to be climbed. As mentioned previously, product development is akin to rock climbing. This Sheer Cliff of Value is the rock that the product development team must climb to succeed. Every progressive company sets its strategy to move there, but it often fails to find the methods to achieve the goal. This book helps you get there. We call this approach moving to the Upper Right.
Figure 1.1. Positioning Map of style versus technology; great products are value driven and found in the Upper Right.
Products, Services, and Product-Service Ecosystems
This book focuses on products in a general sense; physical products, services, software, and integrated systems are all products. All of the tools and methods introduced in this book apply equally, and have been successfully been applied, to each of these types of products. Products succeed when they play a major role in creating optimal experiences for customers. This is true for physical products and service companies as well. We recognize that the development and realization of products and services require similar approaches. To succeed, both approaches must integrate a number of areas of expertise and have a solid understanding of customers and their desired experience.
In this new edition of Creating Breakthrough Products, we specifically address service design. Chapter 8, “Service Innovation: Breakthrough Innovation on the Product-Service Ecosystem Continuum,” directly maps the tools for innovation to the service industry. However, products and services are intertwined. Even physical products alone directly provide a service that enhances human experience; it is always part of a company that provides a service to its customers. That is why Xerox became “the document company” (and then the technology/document management/consulting company). The service it provides is the production of documents, which it does by producing printing and copying equipment. A service is an activity that enhances an experience; it often requires an array of products to deliver its core activity. If your company is a Web service provider, you use and produce products to provide that service. If your company produces automobiles, the service you provide is transporting people and things. The auto industry produces automobiles; however, one of the highest-profit areas for GM is financing automobile purchases, which is a service. Where would UPS, a delivery service, be without its brown trucks, jets, and information-management products?
We discuss both products and services in this book, for the issues that make a product or service successful are the same. However, the intertwining of products and services is a still-emerging opportunity for companies. In Chapter 8, we bring together the methods in this book to address what we call product-service ecosystems: The products produced and the systems that deliver intangible benefits work in concert. The interaction between the physical products and services is delivered through interfaces—Web-based, human-based, artificial intelligence-based. Both products and services and their ecosystem are connected through understanding the experience that the end customer wants and then translating that understanding into a product or service that enhances a particular interaction with objects, environments, and/or other people.
It sounds simple, but understanding customers and then translating customer understanding into products and services is extremely difficult. In general in this book, when we refer to a “product,” we refer to both the physical product and the service, and the system that delivers both. An enormous number of people and resources must be brought together to produce a successful product. The complexity of this task explains why so many product attempts fail. In larger companies, by the time a customer buys a product, hundreds or thousands of people and thousands of person-hours have gone into the identification, planning, development, production, distribution, and sales. A large company can easily lose understanding of the customer in the product development programs as secondary factors come to dominate decisions about cost, features, and form. Small companies have a better chance of keeping the customer in the loop throughout the process, but they often lack the balance of disciplines necessary to generate the research and development of product characteristics for the market. No matter what the size of the company, all of the people involved are stakeholders in the product development process, and the success of the product depends on the coordinated involvement of all of them.
We also see products and services as the core element of a company’s brand (discussed in detail in Chapter 4, “The Core of a Successful Brand Strategy: Breakthrough Products and Services”). If all elements of a brand are effective, they all play a roughly equal role. The interaction of a customer with the product or service is the heart of the brand delivery. Corporate mission, strategic planning, advertising, and identity programs are all essential, but they cannot offset weak, noncompetitive products or services.
We have found that four key factors must be present to guarantee the highest potential of success:
- First is the ability to identify product opportunities. As cultures continue to change, opportunities emerge for new products. These products do not just solve existing problems; they also create possibilities for new experiences.
- Second is a heightened understanding of customer needs translated into actionable insights that define attributes. These attributes serve as a guide in developing the product’s form and features. For products to succeed, they must have features and forms that consumers quickly recognize as useful, usable, and desirable.
- Third is a true integration of engineering, industrial and communication design, and marketing. Merely putting teams together in a multidisciplinary context is not sufficient. They must be supported and managed effectively in an atmosphere where each discipline respects and appreciates the perspective of the others.
- The fourth factor involves understanding the connection between products and services and the role that interaction touch points play in that relationship.
Failure to achieve success in any one of these areas can significantly jeopardize the success of a product, yet most companies are fortunate to be good in even one area. The successful companies have found ways to incorporate the product development quality trends of the 1980s and ’90s into new ways of developing products by including deeper consumer insight and better integration of teams. These companies have strategically “moved to the Upper Right.”
Many companies claim to use a customer-centered interdisciplinary approach, but they have failed to make a total company commitment to this approach. Their management structure encourages a turf mentality through a vertical, or “silo,” reporting structure. Customer characteristics are often generated by mass-marketing methods that provide limited insight because they are based solely on highly quantitative surveys. These companies are often hammers looking for nails as they seek new ways to package or repackage impressive but inaccessible technologies. For companies to succeed, they can no longer afford to be either marketing, technology, or design driven. To stay competitive, they must integrate the way designers, engineers, market researchers, and market strategists work. Corporations can no longer rely on large statistical surveys, search for applications for promising technologies, or create products that are attractive but not meaningful. Instead, qualitative research tools have proven to be an excellent source for deeply understanding the potential customer and product opportunities. This approach means that companies should plan technological innovation around an insightful understanding of consumer trends and the constant changes in the needs, wants, and desires of the customer. Companies must learn to identify opportunities for the potential of products before they think in terms of concrete product concepts.