* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download “experience” with the new offering, it may not need to offer as large
Customer relationship management wikipedia , lookup
Marketing channel wikipedia , lookup
Dumping (pricing policy) wikipedia , lookup
Darknet market wikipedia , lookup
Business model wikipedia , lookup
Neuromarketing wikipedia , lookup
Service parts pricing wikipedia , lookup
Resource-based view wikipedia , lookup
Sensory branding wikipedia , lookup
Pricing strategies wikipedia , lookup
Market penetration wikipedia , lookup
Global marketing wikipedia , lookup
Product lifecycle wikipedia , lookup
Predictive engineering analytics wikipedia , lookup
Segmenting-targeting-positioning wikipedia , lookup
First-mover advantage wikipedia , lookup
Perfect competition wikipedia , lookup
Product planning wikipedia , lookup
CHAPTER 6: NEW OFFERING REALIZATION 1. OVERVIEW A new market offering has the intention to fulfill the requirements and preferences of target market segments and customer better than previous offerings. Businesses create value with the new offerings by increasing the difference between what these offerings are worth to target customers and the total costs to provide them. New offering can create value by: 1. Lowering the customers’ total costs; 2. Providing superior performance in the customers’ application; 3. Meeting the customers’ changing requirements and preferences; 4. Lowering the suppliers’ own costs, which it wholly or partly passes on to customers in the form of lower prices. New offering realization is the process of developing new core products or services, augmenting them to construct market offerings, and bringing them to market. Realization encompasses all of the activities a firm does to transform an idea into a market offering that the firm commercializes. It comprises understanding and implementing the means of consistently producing the core product or service. Companies strive to commercialize new market offerings with greater speed, lower total cost, and greater market place success than they have previously or than their competitors can have. In order to reach these objectives, a realization strategy is necessary to coordinate, prioritize and guide various realization efforts. 2. REALIZATION STRATEGY New offering realization has the potential to provide significant outcomes in three areas: 1. Strengthen the firm’s market position; 2. Improve the firm’s resource utilization; 3. Being a vehicle for organizational enhancement and renewal. In order to overcome realization shortcomings, such as mistaken expectations of functional areas’ performance and unexpected technical problems firms need a realization strategy. Realization strategy embraces the following: Creating, defining, and selecting a set of development projects that will provide superior products and processes; 1 Integrating and coordinating functional tasks, technical tasks, and organizational units involved in development activities over time; Managing development efforts so they converge to achieve business purposes as effectively as possible; Creating and improving the capabilities needed to make development a competitive advantage over the long term. The firm’s technology strategy defines what knowledge and know-how resources the firm requires, how it will attain them, and how they will be translated into market advantages for the firm. Market strategy defines the target marketing segments and customers. The PostProject Learning and Improvement step feeds back to both strategies. 2.1. DEVELOPMENT GOALS AND OBJECTIVES As part of its realization strategy, a firm defines its goals and objectives for overall development efforts and for individual projects, and resolves conflicts that occur in pursuing them. 2.1.1. OVERALL DEVELOPMENT GOALS The overall goals of learning, efficiency, and speed-to-market should be of interest to management regardless of the business strategy the firm is pursuing, although the relative emphasis placed on each may vary depending on the business strategy. Learning – gain in design and process knowledge and know-how; Efficiency – get the most out of available resources; Speed-to-market – the time taken to complete a development cycle. Some firms have used the sales profits that new offerings generate as an assessment of these new offerings` performance. 2.1.2. PROJECT OBJECTIVES Individual development projects play different roles in a firm’s realization efforts. Four key objectives in managing individual development projects: Development speed or time-tomarket, product cost, product performance development program expenses. The firm may be willing to endure some cannibalization when its objective for the new offering is to blunt inroads made by a recently introduced competitor’s offering. Cannibalization is when a new offering takes a portion of its sales from an existing offering of the firm. Best practice firms do not simply rely on post-project measures to evaluate project performance. They also devise measures that can be used during a project to provide early warning signals and suggest corrective actions. 2 2.2. THE AGGREGATE PROJECT PLAN An aggregate project plan is a mechanism used to ensure that the collective set of projects will accomplish the development goals and objectives and build the organizational capabilities needed for ongoing development success. With an aggregate project plan, the management of a supplier company will be able to think about how the firm can have a realization performance superior to the sum of the projects done. The aggregate project plan maps the mix of projects it is doing; enables it to make resource capacity decisions, and outlines how it will gain critical skills and abilities. There are three basic steps in constructing an aggregate project plan: 1st Step: Mapping the Kinds of Development Projects It consists of understanding how the firm is allocating the resources across varying kinds of development projects and looking at the mix of projects the firm is doing. The following map shows two dimensions: the extent of product change and the extent of process change. Research and advanced development (RAD) projects concentrate on inventing new science or capturing new know-how so that required knowledge will be available for application in specific development projects. They compete with Commercial Development (CD) Projects for development resources. RAD Projects stress separating invention from application and they support that an invention’s applied workability should be demonstrated earlier than its use in a CD Project. According to the extent of product change and process change, it is possible to classify the Commercial Development Projects in: Derivative projects: consist of initiatives that promote small advances in the firm’s current offerings or production process. Breakthrough projects: they generate new core products and process that are deeply different from previously generations. They can act in response to nascent markets with unique requirements or create new markets. Platform projects: these are in the middle of development spectrum and are thus harder to define. It contains product and/or process changes more than the derivatives do. However, they don’t introduce the untried new technologies/materials and other changes that occur with breakthrough projects. Platform projects represent the natural starting point for the core product part of flexible market offerings. Alliances and partnership projects are those done in conjunction with one or more outside firms. 2nd Step: Making Capacity Decisions Management must make some hard decisions about the number and mix of projects to start or complete with the resources they have because if they overextend their resources, productivity will decline, the number of projects “in process” will increase and the projects will inevitably take longer time to complete. Based on that, firms can make the following decisions: 3 1. Postpone or refuse projects in order to reduce the number of projects being done at any one time; 2. Change the sequence it will carry out the projects in order to reduce the overall time required to complete the sequenced set of projects; 3. Decide upon a preferred level of development capacity utilization, which will depend partially on the mix of projects being done and the lacking of resources that can occur. 3rd Step: Gaining Critical Skills and Capabilities In this final step, management needs to select the development projects that will enable the firm to build or acquire the critical skills and capabilities it will need for future development and marketplace success. The greatest value of an aggregate project plan over the long-term is its ability to shape and build development capabilities, both individual and organizational. In order to accomplish this, management has to consider building technical knowledge, stimulate cross-functional cooperation and project leadership capability through training on how to work in teams, for example. 2.3. CONCURRENT ENGINEERING IN REALIZATION STRATEGY Concurrent engineering is where firms work on the process for making a product while they are still in the process of designing it. Firms that practice this strategy overlap stages of their development processes that have traditionally been strictly sequential. They also form crossfunctional teams with different skills. 2.3.1. POINT-BASED APPROACH TO CONCURRENT ENGINEERING Individuals who are responsible for the design of a product generate a number of alternatives and select what appears to be the most promising design solution. After that, they and their counterparts responsible for the process of making the product go back and forth with the design, making successive improvements until both groups arrive at a mutually satisfactory solution. 2.3.2. SET-BASED APPROACH TO CONCURRENT ENGINEERING It refers to a deliberate effort to define, communicate about, and explore sets of possible solutions, rather than modifying a point solution. In some cases, these sets may be deliberately more constrained than common industry practice. 2.4. OUTSIDE DEVELOPMENT REALIZATIONS STRATEGY RELATIONSHIPS AND NETWORKS IN As a final part of realization strategy, we see that understand outside development relationship and networks play a crucial part of the realization strategy. It means, decide on develop inhouse sources or to seek it from outside. 2.4.1. ALTERNATIVE DEVELOPMENT STRUCTURE A firm can pursue different number of development structure to gain resources: 4 Outsource technical resource – supplier that develops it for sale; License the technology – gaining intellectual property rights; Co develops a technical resource – with customer or supplier; with another business unit or division. Comprising the network can be suppliers, competitors, or customers to one another. In other words, the firm may have multiplex relations. 2.4.2. AIMS OF DEVELOPMENT RELATIONSHIPS AND NETWORKS To reduce development costs; To pool resources, two or more firms leverage their respective technical capabilities; To improve efficiency; To have a number of firms commit to developing and using a particular technology – see page 242 Adobe Systems; To persuade industry associations, regulatory agencies, or government to adopt standards that favor their developed technology over rival technology. 2.4.3. DECISIONS CONSIDERATIONS Senior management will find that it must consider social as well as strategic factors. It also must understand the technology cycle and the resource demands of different kinds of development projects. Firms that benefit most from outside relationships put in place practices and mechanisms to learn as much as possible from the partner, even in areas outside the formal agreement. 3. REALIZATION PROCESS MODELS The authors present a general realization process model that has common characteristics with different business markets, as well as the market oriented model. 3.1. A VARIETY OF REALIZATION PROCESS MODELS 3.1.1. SMALLFRY INDUSTRIAL DESIN The aims are to increase added value, improve product quality, and reduce manufacturing costs for its clients by carefully interpreting marketing, customer, and technical requirements into effective manufacturing solutions. 5 3.1.2. AKZO NOBEL COATINGS Figure 3 – The Realization Process at Akzo Nobel Coatings 3.1.3. KLEINWORT BENSON INVESTMENT MANAGEMENT It is a unit of London-based Dresdner Kleinwort Benson, an investment bank. Drawing on its own experience as well as those banks, KBIM constructed the product development process to ensure that individuals sponsoring a new product idea would consider the necessary elements of a new product’s development in time scales appropriate to allow others to carry out other necessary work, while controlling the overall cost and risk to KBIM. 3.1.4. ABB ASEA BROWN BOVERI LARGE-SYSTEM PROJECTS ABB Asea Brown Boveri (ABB) defines large-system projects as those priced greater than $15 million. Large-system projects account for about one-third of ABB’s annual turnover. ABB has constructed a realization process model to understand which projects to pursue, to capture the project it wants, to manage risk, and to lower the costs of executing the projects for customers. Development Opportunity Tracking Relationship Building Customer Need Assessment Probability Assessment Project Screening Pursue/ No Pursue Decision Technical Positioning Pre-studies Pre-acquisition Customer Needs Identification Networking Preliminary Strategy Competitive Assessment Risk Assessment Go/ No Go Decision Specification Shaping Capture Plan Acquisition Request For Proposal Project Kick-off Meeting Bid/No Bid Decision Competitive Differentiation Strategy ABB Matrix Risk Management Pricing Management Review Tender Submission Negotiation Execution Award Project Plan Reviewed Implementation Team Customer Service and Follow-Up Figura 4 – ABB- How to Pursue the Busines 6 s Opportunity 3.1.5. ABN-AMRO BANK GLOBAL TRANSACTION SERVICES The Global Transaction Services (GTS) Unit of ABN AMRO Bank (AA) has embedded its new offering realization process within its overall process for product management. The new offering realization process has four phases: 1. Idea Filtering: It’s the stage in which there is an investigation about the consequences of pursuing an idea. There is a proposal sub phase (the product manager must delineate the opportunity and convince the business that it is worth performing a fuller investigation of the viability of the idea) and a justification sub phase (convincing the business that the idea is worth committing the major resources required to develop the product). 2. Product Development: This stage’s purpose is to turn the idea into reality and develop the product up to its market launch. 3. Performance Management: The purpose of this phase is to realize the return on the initial and ongoing investment, and it encompasses the launch, growth, maturity and decline of the product. 4. Close Down: This stage is a delicate operation, where the purpose is to make an orderly withdrawal from an unsustainable market position. 3.2. A General Realization Process Model Given the diversity in the realization process models we have reviewed, we present the Wheelwright and Clark’s model as a general model that pulls together their common characteristics. This model emphasizes cross-functional integration and provides the primary activities of engineering, marketing and manufacturing for each development phase. Wheelwright and Clark maintain that new offering realization requires more than crossfunctional coordination; it requires cross-functional integration, which means that management add specific activities that support cross-functional work. They recognize that cross-functional integration truly occurs when individuals from different functional areas work together to accomplish interdependent tasks. Another aspect of the model is the inclusion of market introduction phase, which encompasses all activities that are part of the market launch and concludes with its demonstrated commercial viability. 3.2.1. AUGMENTING SERVICES IN REALIZATION PROCESS MODELS We elaborate on this model by considering the planning, design, development, and delivery of the augmenting services, programs, and systems that enhance the new core product’s or service’s value. Planning for the augmenting services should begin in the product planning phase. Devising, designing, and prototyping these augmenting services should occur in the 7 second phase of detailed design and development. The firm also should estimate the resource requirements and costs of providing the augmenting services. The firm should run pilot programs for the augmenting services during the commercial preparation phase with customers that are testing the new product, and make final refinements in the services, estimates of resource requirements and costs, and customer feedback mechanisms. At the market introduction phase, the firm is able to deliver the augmenting services at the requisite levels to support the market launch of the new offering. 3.2.2. “NEXT-GENERATION” REALIZATION PROCESS MODELS Cooper has proposed a next-generation product development process that he contends is fundamentally different from stage-gate models of the realization process in four ways: 1. Fluidity 2. Fuzzy gates 3. Focused 4. Flexible Supplier firms that compete in dynamic marketplaces, such as high-technology markets, take advantage of the greater agility that next-generation processes provide. By overlapping concept development and implementation phases, a firm can incorporate late-breaking changes into its product market introduction. Another “next-generation” variation is to take a short hiatus in the middles of the development phase for a new platform product. This way, firm improves the speed-to-make of its derivative products and thwarts rapid-response competitors from beating them to market niches. 4. MARKET-ORIENTED REALIZATION Firms in business markets should have the intent of being market oriented and customer focused in their realization efforts. 4.1. MARKET-ORIENTED RESEARCH Research and advanced development is responsible for generating new scientific and technical knowledge. It seeks to push back the knowledge frontiers in science and technology in ways that create value over the long term. So, this will be translated into technology that firms can commercialize in new offerings. In contrast, Commercial Development uses, adapts, or further develop known technologies to produce new core products or services for the firm to offer to the market. Thus, R&D must work together to translate generated knowledge resources into products for commercialization, and marketplace understanding into direction for future Research efforts. Businesses are placing greater demands on Research to be market oriented. So, firms appear to be placing more emphasis and spending more on research than in past years, restoring the 8 balance compared with the proportion spent on development. To excel with limited resources, Research needs to focus its efforts, leverage its resources with outside relationship and connect itself with the market. 4.1.1. CREATING FOCUSED RESEARCH CENTERS Research management in consultation with senior management needs to make choices about which basic areas of science and technology research the firm will pursue actively. An organizational mechanism that a firm can use to focus its scientists and other resources on particular areas is the research center. Scientists in focused research center need to make decisions about how they can best leverage their allocated resources. One concept that should influence these decisions is sticky information: that is, the extent to which it is costly to transfer knowledge or information from the place where it resides to another location and have it in a form the information seeker can use. Information might be stick because of its nature, such as be tacit rather than explicit, or because of the amount a provider needs to send to seeker. A focused research center can pursue collaborative relationships with universities, government-funded laboratories, research institutes, or other firms’ research units. As part of its activities, a research center should actively monitor science and technology developments both within and outside its industry. Firms should engage in collaborative research with a variety of firms across many different industries. In doing so, the firms can gather intelligence on how existing technologies might be combined to create hybrid technologies. Finally, a research center should not overlook the potential benefits of having its scientists participate in social network with academic scientists. Rather than having the commercial intent of a business network, a social network is a collectivity of individuals among who exchanges takes place that are supported only by shared norms of trustworthy behavior. 4.1.2. CONNECTING RESEARCH WITH THE MARKET All the research must be connected with the market, since the role of Research is to add value in the marketplace. In order to make this possible some companies promote regular, scheduled interactions with other areas inside and outside the firm. These interactions should include a mix of one-on-one information exchanges and more structure group-to-group exchanges. The authors recommended an alternating “home and away” schedule for these interactions, where participants take turns visiting and spending time at each other’s location. In one-on-one meetings, field engineers and marketers can relate to research to scientists changes in customers’ requirements and advances in competitors’ offering. It is especially important to communicate to Research (and to Development) as early as possible new or anticipated entrants whose offerings use different technology. Also, as a more structured meetings, a Research should periodically put on research symposia or innovation fairs, where it presents recent research advances to design engineering, manufacturing engineering, field engineering, and advanced marketing groups. 9 Finally, Research can participate in “home and way” research overviews with research units of strategic customers, where supplier development groups facilitate and also attend these meetings. 4.2. MARKET-ORIENTED DEVELOPMENT There are four ways for the firm to be market oriented in its development of new offerings: Use positioning statements as a market-focusing mechanism; Research customer requirements and preferences and translate them into design specifications; Guide realization efforts with customer value assessment; tailor market introductions of new offerings. 4.2.1. POSITIONING STATEMENTS AS A MARKET-FOCUSING MECHANISM At each phase of the realization process, the senior manager should require the project team to provide a positioning statement as part of its review materials. Each positioning statement should contain three elements: target, offering concept, and value proposition. These statements should be very specific, in order to push the team to think about the characteristics of target customers, the essential attributes of the offering for customers, and the worth of the new offering to the customer. 4.2.2. RESEARCHING MARKET REQUIREMENTS AND TRANSLATING THEM INTO DESIGN SPECIFICATIONS There is no substitute for market research on the requirements and preferences of target customers to inform and guide realization efforts. Market research complements reports from the sales force and field engineering, which are also valuable sources of information about customer requirements and preferences, and how they are changing. It´s especially interesting to research that customers whose have knowledge or experience that can significantly contribute to a firm’s realization efforts. Evidences show that lead-user customers are often sources of innovation to supplier firms. Lead-users are current or prospective customers who are experiencing problems or needs that will become widespread in the market in the foreseeable future. They would derive significant value immediately from an innovative solution. Also, theses customers can teach firms about possible user-defined and new-to-the-firm uses or applications of the product. Another kind of customer that is of interest to research is the leap-frog customer, which is a small aggressive firm, possibly newer entrant that is pursuing a riskier development strategy to gain market share. According to Ulwick, in these researches firms should solicit from them changes in the outcomes that they seek from an offering. Translating target customer requirements and preferences into design specifications is a crucial step in connecting the marketplace with realization efforts. Often gaps occur between the way a customer expresses the performance it is seeking and the way a supplier specifies how it makes products. Some methods and tools are using for translating target customer requirements and preferences into internally understood engineering and manufacturing parameters, these methods and tools are called quality function deployment. Also, the project team should attempt to gain feedback on its translation as early as possible in the realization process; prototypes could be a tool for it. Firms are looking for ways to lower 10 the cost of prototypes, and some have turned to computer simulations rather than constructing physical prototypes. Not only do computer-simulated prototypes reduce realization costs, they also speed up the realization process. In certain cases, it is extraordinarily difficult to know the customer’s application of a new offering. In such cases, a firm can respond with a product that provides flexibility through two components: one component that is standard across all applications, and a user-friendly component that enables customers to tailor the standard component to their own requirements. 4.2.3. GUIDING REALIZATION EFFORTS WITH CUSTOMER VALUE ASSESSMENT It’s important to firms to know whether the customer is willing to pay for the new product. So, value assessment provides this essential information to guide realization efforts. In realization projects that are technology push, where the firm’s new offering will introduce new technology into the market, it can use value assessment to persuasively demonstrate to prospective customers how the new technology provides greater value or lower cost to them. In realization projects that are market pull, where the firm is developing its new offering in response to customer requests or demand, it can use value assessment to provide guidance on what improvements are worthwhile for it to pursue, and the priority it should give to potential advances. 4.2.4. TAILORING MARKET INTRODUCTIONS OF NEW OFFERINGS A firm should tailor its market introductions of new offerings, striving for commonality and consistency where it can, yet recognizing where it needs to remain flexible. The firms should focus on three critical activities, which are: 1. Knowing the local market 2. Internal selling – it’s essential to gain the commitment of local country managers. 3. Motivating channel partners Another point to observe is the price of new offerings, as discussed previously in Chapter 5. Firms typically need to provide prospective customers with a larger incentive to change: that is, initially give an additional part of the offering’s incremental value as monetary motivation to try something different. It is critical for the firms to think about this pricing tactic and manage it separately from the pricing strategy for the new offering. Marketing communication tools can influence the size of the incentive to change a firm need to provide. When a firm can give prospective customers a low-cost, low-risk “experience” with the new offering, it may not need to offer as large an incentive to change. 11 5. REFERENCES Anderson, James C. et al. – Business Market Management: Understanding, Creating, and Delivering Value – 3rd ed. – Pearson Education, Inc. – New Jersey – 2009 12