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Innovation Management

Innovation Management. Kevin O’Brien. Product and Brand Strategy. Learning Objectives. Appreciate the importance of product and brand strategy in competitive markets Identify alternative product strategies Examine the concept of product platforms

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Innovation Management

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  1. Innovation Management Kevin O’Brien Product and Brand Strategy

  2. Learning Objectives • Appreciate the importance of product and brand strategy in competitive markets • Identify alternative product strategies • Examine the concept of product platforms • Introduce issues of product portfolio management

  3. Marketing Strategies

  4. Product-Based Competition Five basic strategies: • Product proliferation (e.g. Sony, Honda) • Many new products simultaneously or in close succession • Market response determines support • Cover all segments & block new entrants • Value (e.g. Toyota/Lexus) • New quality/cost trade-off curves • Continuous improvement/re-engineering • Re-thinking the business system (Deschamps & Nayak, 1995)

  5. Product-Based Competition • Design (e.g. Braun, Harley-Davidson) • Aesthetics, touch, ease of use etc. • Engineering design + aesthetic design • Innovation (e.g. Canon, 3M, Merck) • Technological & marketing innovation • Market pioneers/fast-followers • Radical/incremental innovation • Service (e.g. Otis Elevators, SAS) • Customer relations, physical distribution, after-sales service (Deschamps & Nayak, 1995)

  6. Form size, shape, physical structure Features supplements basic function e.g. car CD player, trim level, child seats Performance quality appropriate to target market and competitor performance levels Conformance quality each product identical, meets the promised specification & performance Durability expected operating life balanced with technological obsolescence Reliability probability of malfunction/failure Repairability ease of repair, cost, technical support Style aesthetics – look and feel distinctive and difficult to copy Product Differentiation (Garvin, 1987)

  7. Product Planning • What are the strategic goals for new products? • What product development projects will be undertaken? • What will be the portfolio of projects? • New product platforms • Derivatives of existing platforms • Incremental improvements to existing products • Fundamentally new products (discontinous) • What will be the timing and sequence of projects? • What will be the balance of risk? • Considers opportunities from marketing, R&D, customers, project teams, competitor analysis etc….. • Regularly updated to reflect competitive environment

  8. Differentiation vs Standardisation • Key questions: • How to deliver distinctive products to market whilst building on core capabilities and conserving development, production and marketing resources? • How to balance the needs of high volume manufacturing/service delivery with the needs of individual customers? • Product platforms: • Shared components, production processes, knowledge, people & relationships • Brand platforms: • Brand extensions, products conform to brand strategy (Robertson & Ulrich, 1998)

  9. Competitor product Research & technology activities Platform A Competitor product B1 Product positioning Platform B B2 Competitor product B3 Competitor product Time Product Platforms External market Internal organisational activities Development of Product platforms Derivative product development (Trott, 2005, p358)

  10. VAG Inter-firm Product Platform Development High Audi TT Audi A3 Product Price VW Golf Seat Leon Skoda Oktavia Low Overall cost leadership Differentiation Generic Strategy Product Platforms

  11. Product Platforms • The benefits of product platforms include: • Increased product variety and ability to serve multiple market segments (mass customisation) • Greater speed to market • Improved management of demand and uncertainty • Accommodating differential technology change • Reducing production costs • Supports late-stage differentiation of products • Reduces service infrastructure requirements • Greater speed and efficiency in technological learning and knowledge creation (Sanchez, 1999)

  12. Brands and Products The Lynx brand Fragrance

  13. Portfolio Management Strategic portfolio model for one SBU in Exxon Chemical: (Adapted from Cooper et al., 1997)

  14. Extent of Product Change Large Small Large Next generation/ platform K L H Extent of Process Change A F G E I B Enhancements J Breakthrough C D Small Portfolio Management Portfolio diagram used by a division of Hewlett-Packard: Size of bubble = size of project (Englund & Graham, 1999)

  15. Product No change Facelift Inconspicuous technological substitution No change Modified Technology change Remerchandising Relaunch Conspicuous technological substitution No change Intangible repositioning Tangible repositioning Neo-innovation Marketing Remix New/market segment Product Replacement Strategies (Saunders & Jobber, 1994)

  16. Product Turnover • Evidence from innovative industry (laser printers): • High levels of competition speed product exit and delay product entry • Firms with high market share keep products on the market for longer than those with lower share • Innovative firms bring products to market more frequently but withdraw products at average rates • Firms with strong brands tend to introduce few products and withdraw their products slowly (Figueiredo & Kyle, 2006)

  17. Firm with strong brand? No Yes Entry: Average Exit: Average STAGNATOR Entry: Low Exit: Slow MARKETER No Innovative firm? Entry: High Exit: Average INNOVATOR Entry: High Exit: Slow PRODUCT PROLIFERATOR Yes Product Turnover (Figueiredo & Kyle, 2006)

  18. References Cooper, R.G., Edgett, S.J. and Kleinschmidt, E.J. (1997) Portfolio management for new products, Hamilton Ontario: McMaster University. Deschamps, J-P. and Nayak, P.R. (1995) Product Juggernauts, Boston: Harvard Business School Press. Englund, R.L. and Graham, R.J. (1999) From experience: linking projects to strategy, Journal of Product Innovation Management, 16(1), 52-64. Figueiredo, J.M de and Kyle, M.K. (2006) Surviving the gales of creative destruction: the determinants of product turnover, Strategic Management Journal, 27, 241-264. Garvin, D.A. (1987) Competing on the eight dimensions of quality, Harvard Business Review, Nov-Dec, 101-109. Robertson, D. and Ulrich, K. (1998) Planning for product platforms, Sloan Management Review, Summer, 19-31. Sanchez, R. (1999) Modular architectures in the marketing process, Journal of Marketing, 63 (Special Issue), 92-111. Saunders, J. and Jobber, D. (1994) Product replacement strategies: occurrence and concurrence, Journal of Product Innovation Management, 11(5), 433-450. Trott, P. (2005) Innovation management and new product development, Harlow: FT Prentice Hall.

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