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19
The Management
of New Product
Development, and
Entrepreneurship
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Innovation, Technological Change and
Competition
Technology refers to the skills, knowledge,
experience, body of scientific knowledge,
tools, computers, machines used in the design
and production of goods and services.
Quantum technological change: fundamental
shift in technology that results in innovation.
 The
Internet and genetic engineering are examples.
 Incremental technological change: refinements of
current technology over time.
 Most firms seek incremental product innovations which
allows constant, but small, improvements.
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Effect of Technological Change
Many products undergo constant change and
improvement.

 Electronic
products provide a great example.
 This change can be a threat to firms that are slow to
improve but provides benefits to firms that adjust.
 Technological change is both a threat and an
opportunity.


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Smith Corona typewriter company missed out on word
processing and is now out of business.
Microsoft was quick to embrace graphic user interface
programs and now is dominant in the software business.
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Product Life Cycles

Refers to demand changes for a product over time.
 Embryonic stage: product is not widely accepted and
has minimal demand.
 Growth
stage: many consumers seek out the product
and buy it for the first time.
 Mature
stage: demand peaks since most buyers already
have the product and only buy replacements.
 Decline
stage: demand falls off perhaps since the
product is obsolete.
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Product Life Cycles
Figure 19.1
Demand
Embryonic
Stage
Growth
Stage
Mature
Stage
Decline
Stage
Time
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Relationship Between Technological
Change and Life Cycle Duration
Figure 19.2
Rate of Technological
Change
Length of Product Life Cycles
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Rate of Technological Change
The rate of change determines the length of the product
life cycle demand curve.
 The computer industry, life cycle is about 18 months; in
the steel industry, it is many years.
 Fads and fashions also impact the life cycle duration.
 Style changes alter the demand for goods.
 Usually, goods subject to fads and fashion changes will
experience shorter life cycles.
 In general, life cycles are getting shorter, forcing
managers to be more responsive to customers.

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The Four Goals of New Product
Development
Figure 19.3
Reduce Product
Cycle Time
Maximize
Product Quality
New Product
Development
Goals
Maximize Fit with
Customer needs
Maximize
Manufacturability
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The Four Goals of New Product
Development
1) Reduce Product Cycle Time: reduce time needed to
develop a product from conception to market
introduction.


Early to market products can command premium prices
and will have a longer life cycle.
Can add new features before competitors
2) Maximize fit with Customer Needs: most products
fail because they were not designed to fit customer
needs.

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Ensure customers want the product features before adding
them to the product.
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The Four Goals of New Product
Development
3) Maximize Product Quality: be sure new products
are of superior quality.


Poor quality in a new product can doom its acceptance
even if quality is fixed later on.
Quality problems usually result from rushing product to
market.
4) Maximize Manufacturability: the efficiency with
which the product is built impacts its time to market.


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Ease of production can shorten development time.
Efficient production can also avoid production
problems and improve quality.
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Stage-Gate Development Funnel
Principles

Principle 1: Use a Stage-Gate Development Funnel;
managers often try to fund too many projects at once.
 Stage 1 considers all new ideas. Those that are feasible
and meet the strategic goals of the firm go through Gate
1.
 Stage 2 focuses on the product development plan and
then evaluated at Gate 2. Only the best continue.
 Stage 3 issues a contract book and focuses on
responsibilities, budgets, resources, etc. This is the
symbolic launch of the formal development.
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Stage-Gate Development Funnel
Figure 19.4
Gate 1
Gate 2
Ideas
Ship
Stage 1
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Stage 2
Stage 3
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Cross Functional Teams Principles

Principle 2: Cross functional teams seem to be a crucial
part of effective product development.
 Core members of the team are the 3 to 6 people
primarily responsible for the development effort.
 Must ensure there is coordination and communications
between team members.
 Often are located physically together
 Successful teams will develop a clear sense of their
objectives and share a common mission.
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Members of a Cross-Functional New
Product Development Team
Figure 19.5
Team
Leader
Core
Members
Peripheral
Members
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Concurrent Engineering Principles

Principle 3: Concurrent Engineering: Traditional
approach follows a sequential flow between steps.
 This results in long development times and poor quality
when managers do not communicate between
departments.

Development managers may design the product without
talking with manufacturing, resulting in problems.
 By
working concurrently, design and production issues
are considered together.
 Production concerns are addressed while the product is
designed and can still be changed.
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Sequential v. Parallel Development
Processes
Figure 19.6
Opportunity
Identification
Concept
Development
Product
Design
Opportunity
Identification
Concept
Development
Product
Design
A Sequential Process
Process
Design
Commercial
Production
A Partly
Process
Design
Commercial
Production
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Parallel Process
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Bring in Customers & Suppliers
A key reason the products fail is that they do not meet
the needs of the customers.
 Customer ideas and needs should be included in the
design process.
 Solicit customer input from many sources.
 Suppliers are also critical to the success of a product.
 Embrace them during concurrent engineering.
 Seek their ideas and input early in the process.

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Product Development Problems

Successful product development is a critical component
of a successful firm.
 While most managers know this, it can be difficult to
actually carry out good development strategies.
 Many managers have difficulty in releasing control of
their part of the process and allowing groups to take
part.


Conflict management skills can address this.
Product development often requires a break in the
traditional organizational culture to be highly successful.
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Entrepreneurship
Entrepreneurs
are people that notice
opportunities and take the initiative to
mobilize resources to make new goods and
services.
Many entrepreneurs work for themselves and start new
firms.
 Intrapreneurs: work in large companies and contribute
to innovation in the firm.
 Intrapreneurs that become frustrated with the lack of
opportunity at some large firms often leave and form
their own business called a new venture.

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Entrepreneurship and New Ventures

Characteristics of entrepreneurs--most share these
common traits:
 Open to experience: they are original thinkers and take
risks.
 Internal locus of control: they take responsibility for
their own actions.
 High self-esteem: they feel competent and capable.
 High need for achievement: they set high goals and
enjoy working toward them.
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Entrepreneurship and Management

To become involved in an entrepreneurial firm:
 Start your own business as an entrepreneur.
 Work for a growing entrepreneur in their firm.


Many entrepreneurs enjoy starting a business, but not
running it.
Develop a plan for the new business
 Design a plan to guide the business similar to a product
development plan.

The Stage-funnel concept can work well here.
 Firms
with no plan usually fail
 Franchising allows you to purchase a plan and
experience of existing firm to reduce risk.
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Steps in Developing a Business Plan
Table 19.1
Step 1
Notice Product opportunity and develop a basic
business idea: What Goods/services to produce
and who are the Customers/Markets?
Step 2
Conduct Strategic Analysis (SWOT) to identify:
Strengths, weakness, opportunities, threats.
Step 3
Is the Business opportunity feasible?
Step 4
Prepare a detailed Business Plan including
Mission, goals, strategic and financial objectives,
resources required, and a timeline of events.
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Intrapreneurship

A learning organization encourages employees to act as
intrapreneurs. To help, form:
 Product Champions: person that takes ownership of a
product from concept to market.
 Skunkworks: group of intrapreneurs kept separate from
the rest of the firm.

Allows workers total flexibility and innovation.
 New
Venture Division: allows a division to act as its
own smaller company.
 Rewards for Innovation: link innovation by workers to
valued rewards.
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