Presentation to PDMA-LA

1. Presentation to PDMA-LA Creating New Product Portfolio Strategies and Screening New Products Telephone: 858-404-0200: email: Robert@RobertHaleAssociates.com

2. BackgroundRobert Hale – President • 13+ years as a marketing consultant and marketing executive related to strategy and branding • Five years experience with one of the firms that started business-to-business marketing consulting in the 70’s • Director of marketing for a high tech computer manufacturer and marketing company (Dauphin Technology). Achieved second largest market share. • MBA (Finance/Marketing) - University of Wisconsin, Madison • Masters in Electrical Engineering, University of Illinois • Post graduate in marketing and statistics, University of Texas • President, PDMA chapter of San Diego • Former FBI Special Agent

3. A Portfolio Strategy for New Products

4. New Product Process Marketing Strategy Business Analysis Concept Development and Testing Product Development Idea Generation and Screening Test Marketing New Product Strategy Commercialization Source: Kotler Areas in red are topic of presentation

5. Product Portfolio Strategy – Key Questions • Questions to help you develop a product portfolio strategy: • Do you have sufficient products within each cycle of the product lifecycle to maximize profits and sales • Do you have a good mix of new products: new to world products; product extensions; etc. • Do you have sufficient new product development efforts set aside for high value opportunities

6. Products Can be Developed to Enhance Revenue, Reduce Costs and/or Improve Positioning PRODUCT DEVELOPMENT GROWTH PRODUCTIVITY QUALTITY BRAND IMPROVEMENT MAINTENANCE • Conformance • Special Situations • Regulatory • Environmental • Specifications • Quality of Design • Leveragble • Competitive • Advantage • Line Extensions • New Products • New Packages • Reduce Cost • Formulas • Packages • Manufacturing • Procedures

7. To Maintain Strong Profitability Need a high percent of New Products in Growth and Maintenance Sales and Profits ($) Sales Profits Time Product Develop- ment Introduction Growth Maturity Decline Losses/ Investments ($)

8. A firm that is a market leader needs a higher percent of “new to market” products than other firms (at least 15%) Product Introductions from HIGH Product Extensions 700 Firms 11% 20% “New to World Products” Newness to 26% 26% Company Adding Features 7% 11% LOW LOW Newness to Market HIGH Source: Booz Allen

9. Extending Life Cycle – New Product Development Sales Importance of maintaining a balance of products in the portfolio at different stages of the PLC – The product portfolio – four products in the portfolio (1) (3) Add new features Improve value (2) Product Extensions; Reduce Costs D B C A Time

10. Recent Example – Medsystems (OTC Products) • Phase I: Refine and Improve New Product • Added a way to prevent back wash for squeeze • Improved tip for comfort • Improve the formulation of the mix to be ingested • Other • Phase II: Identify new products to leverage brand • Logically related in customer’s mind (symptom, application, or formula) • Has synergies (for retail: distribution and shelf space are key) • Enables better target marketing to specifiers (e.g. ENTs) • Phase III: Improve Value (don’t lower price) • Add number of refill packets

11. Business Strength/Competitive Position Strong Average Weak High Medium Low Long-Term Industry Attractiveness Identify Potential Areas to Invest for New Product Development (Ensure your R&D efforts are properly focused) Before you invest in new products, you need to identify high value “areas” to focus for new products, product extensions or modifications. The GE Matrix: Example of High Value Products Identified Investment Growth Selective Investment Divestment

12. Product Screening

13. Product Screening • Screen in two phases, because the cost and time of in-depth analysis is significant. • Go or No Go (First Screening) • In-depth Analysis (Second Screening) • Develop Prototype and Test New Product (Third Screening (customer perspective), but not discussed here)

14. First New Product Screening Global Strategic Fit Assessment • Strategic Objectives • Is it consistent with company’s strategic objectives • Is it consistent with Product Portfolio Strategy • If it is new to market, is it different enough • Need to be clear on why this initiative • Key Financial Objectives • Is the market opportunity large enough • Market Potential • Addressable Market (preferred Measurement) • Actual Market Size (mature product category) • Fit with Internal Capabilities • Technology Feasibility • Other Key Factors (to be discussed later)

15. A matrix to help classify Product Development Initiatives HIGH (Gain Strategic Advantage) NET PRESENT VALUE GIVEN SUCCESS LOW (Maintain Competitiveness) HIGH LOW Terminology from Strategic Decisions Group, Stanford Univ. PROBABILITY OF SUCCESS

16. Second New Product Screening (Market Analysis) • What are the financial returns of the product • What are the risk factors (use Porter Model): • Competitive Intensity • Vendors • Regulatory Issues • Suppliers • Other • Other potential Strengths, Weaknesses, Obstacles and Threats (e.g., competitors, technology, etc.) • Develop business cases of similar products/industries • Clearly define your value proposition (by target segment) otherwise you will not accurately define your competition or the competitive technologies.

17. Value Propositions: Example for High GHz Modulator • Telecommunications: High GHz (40 GHz) capability, low power consumption and low system costs as compared to current and pipeline technology. • RF applications - Military: Only single output modulator technology that meets critical requirements of Military. Excellent gain and linearity with low noise as compared to current and pipeline technology. • Sensor Networks: Low cost, low power and good linearity.

18. Porter Model: Basis for Risk Evaluation (2d Screening) Need an in-depth SWOT analysis which takes the following into account: • Entrants/Barriers • Suppliers/Channels • Customers • Competitors • Substitutes • Trends

19. Examples of Evaluation Criteria that Can be Used Source: Fuzzy Front End: Effective Methods, Tools and Techniques

20. Examples of Evaluation Criteria that Can be Used Con’t Source: Fuzzy Front End: Effective Methods, Tools and Techniques

21. Financial Analysis A financial projection should be made with a sensitivity analysis based on the risks as identified in the porter model • Bass Diffusion Model is one of the best models • Price, margins and profitability and sustainability need to be identified (need to maintain a premium price for new products for period of time) • Develop forecasts of revenue and use ROI evaluations • Prefer NPV (since companies are evaluated on hitting specific target returns). • Look at incremental cash flows and identify impact from potential synergies (business potential) • Identify early and late adopters

22. Identify Early and Late Adopters (Key Drivers of Adoption and Competition) Software Example: Command and Control Software for First Responders Source: Robert hale and Associates

23. Background Robert Hale & Associates • We offer a variety of strategic marketing consulting and marketing research services that reflect the diversity of the marketplace, with a strong focus on B to B. • Some of the specialized products include: • Marketing Strategy and Planning • Market Assessment (e.g. sizing) • Channel Strategies • New Product Development • Established in 1999 (10+ employees)