Hubert Gatignon

New Product Teams

The development of a new product is a complex task that requires the integration of many different fields of expertise: the product must be designed and manufactured to meet the expectations of potential customers and to do so while being profitable. This implies that many different aspects pertaining to, among others, technology, production, demand, and competition must be considered throughout the development process. Because of the complexity of current technologies and markets, it is highly unlikely that isolated individuals can effectively master all the ins and outs of the development of a new product. Consequently, firms are under pressure and must develop new products at a faster pace because of the increased turbulence of markets that are characterized by shorter product life cycles and increased global competition. This situation leads most firms to make extensive use of cross-functional teams to develop their new products. This way of organizing the new product development process has been frequently highlighted in the literature (Cooper and Kleinschmidt 1994, Griffin 1997b, McDonough 2000).

Predicting New Product Acceptance

Understanding the adoption process leading to acceptance and use of a new product or service is fundamental to assessing its potential, not only as the brand gets introduced but also in the long term. The distinction between the short term and the long term is especially critical for radical innovations that create a completely new product category, as it takes time before these innovations get accepted by the majority of the market. It also has many implications for the dynamic marketing mix strategies, whether pricing or communication strategies. We consider the determinants of the acceptance of new products in this chapter and we discuss how this acceptance gets realized over time in the next chapter. Therefore, in this chapter, we discuss the methods for estimating the market potential. In the next chapter, we focus on the prediction of the speed and shape of diffusion.

When to Forge Alliances

The traditional approach to the development of new products and services is to perform research and development (R&D) internally to the firm (Doz and Hamel 1998, Chesbrough 2003). However, in the face of rapid evolution of consumers’ needs as well as the uncertainty of technological change, R&D activities are an area where alliances have been increasingly sought and have even played a dominant role (Shan 1990, Kogut 1991, Hagedoorn and Schakenraad 1994, Raassens, Wuyts and Geyskens 2012). According to Capron and Mitchell (2012), firms choose from among three alternatives, based on the firm’s existing capabilities and partnership characteristics: build, borrow, or buy.1 Indeed, firms do not always have or cannot necessarily acquire the competencies and know-how required for new product development (NPD) (see the discussion on innovation characteristics in Chapter 2). Such competencies may include (Capron and Mitchell 2012): n n1. n nSkills n n n n n2. n nKnow-how n n n n n3. n nTechnologies n n n n n4. n nMethods n n n n n5. n nBroad competencies n n n n n6. n nOther assets

Fostering Creativity in the Organization

The first step in the new product and service development process is to generate ideas. It is unlikely that a single genial idea comes up by itself. Hundreds of ideas must be generated to allow the best ones to be selected. Methods for screening ideas constitute an important second step. We present these methods, including the recent improvements that have been proposed (e.g., Toubia and Flores 2007) in Chapter 10. In this chapter, we now focus on how to make the firm as a whole more creative for the purpose of developing new products or services in a sustainable fashion over time.

Branding New Products and Services

The choice of a brand name for a new product or service may at first appear more tactical than strategic. However, once the launch is made under a given name, it is difficult to change that name. Therefore, the choice of a brand name has long-term impact. Furthermore, a wise choice may bring opportunities for brand name extensions or alliances with other brands. These are important implications to take into consideration when launching new products and services with critical strategic dimensions.

Strategic and Market Orientations

The ability of an organization to systematically deliver successful innovations is not the result of luck but, rather, of providing a strong impetus for strategic directions that lead the organization to produce high-performing innovations, even given that some uncertainty does remain inherent in the innovation process. This means that the culture of an organization must reflect the values that will foster innovativeness throughout the organization. The second part of this book examines the nature of a culture of innovation and how to establish it throughout an organization in order to build the capacity for sustained delivery of high-performance innovations.

Assessing Innovations from the Technology Perspective

Technological change can have a major impact on organizations and their performance. It is also a key factor in understanding dynamic organizational capabilities. It is therefore critical to have a clear understanding of the nature of innovations. Assessing innovations in terms of technology means that we consider a product or service as the practical application of knowledge, especially because it uses technical processes or methods. This corresponds to the standard definition of “technology” found in today’s dictionaries. Since this definition applies to knowledge in general, the technological perspective is not exclusively reserved for products but can apply equally to services. Indeed, services are often the result of the application of science of a technical nature. This is clearly illustrated by web-based services such as web-shopping. But this is also the case with more traditional services; for example, a hair salon can be considered from the technical point of view as the use of tools, machines, techniques, and, more generally, know-how for delivering an applied benefit.

Conclusion and Challenges

In this book, we have reviewed our scientific knowledge on how a firm can sustain its growth over time with new products or services. In this last chapter of the book, our objective is to provide a general summary of (1) what we know and (2) what needs to be known.

Looking Ahead to New Product Diffusion

In the previous chapter, we reviewed models that can be used to estimate the market acceptance for new products. This market acceptance is measured in terms of eventual adopters and also for the product categories where the purchasing cycles are shorter, in terms of early adopters and repeat purchasers. Clearly, knowing the repeat purchase rate for frequently purchased items is essential and must be integrated into the early sales forecasts. For durable goods, this is useful for the long-term strategy of the firm, but the more critical elements at launch time are the forecast of the first purchases and the penetration in the target population. However, because this penetration is not instantaneous or even observable during a test market, we need to understand what drives the diffusion process, and specific models have been developed to forecast this diffusion. In the next section, we develop the theory of diffusion of innovations as a social contagion process. Then, we review models of diffusion forecasts.

Assessing Innovations from the Market Point of View

In the previous chapter, we discussed the nature of innovation and its characteristics from the technological point of view. Now we consider the perspective of the market, and especially how the innovation is perceived by its customers. Several theories that have been developed around the notion of the perceptions of an innovation by consumers can be useful to analyze innovations from the market point of view. These perceptions can then explain behavior, especially adoption. In particular, three different behavioral models have been compared: the theory of reasoned action (TRA) (Fishbein and Ajzen 1975, Ajzen and Fishbein 1980), innovation diffusion theory (IDT; Rogers 1962), and the technology adoption model (TAM; Davis 1989). Davis, Bagozzi and Warshaw (1989) compare the TAM and TRA models conceptually and empirically. The most general model that applies to any behavior is the TRA, which has received much attention in the marketing literature over the last four decades. Behavioral intentions and consequently behaviors toward an object are the result of attitudes toward this object and of subjective norms. The attitude component is itself made up of the composite of beliefs about the consequences of performing the behavior. These beliefs are weighted according to the evaluation (good-bad) of these consequences.