Hello and welcome to this week's lecture, Innovation Management.
Today we are going to look into new product development.
And new product development is of course products, services, one of the core elements of innovation.
Our agenda is going to look like this.
We are going to talk about various, kind of what is actually being, what is new when we
talk about new products and we are going to talk about two different ways to perform research
and development or even three planned, unplanned and actually we are skipping a design thinking
iterative or the web planners to have a separate session on design thinking but actually I'm
not sure whether we are there yet.
So why develop new products at all?
Might sound like a stupid question, perhaps it is, but it's sometimes worth asking stupid
questions and let us think.
So what's the benefit of having new improved innovative products?
Well if you look at revenue then you can see that some studies who have looked at that
show that new products and new products being launched within the last three years take
quite a large slice of your revenue and provide quite a large slice of your profit.
And we have talked about product life cycles, so when product life cycles become increasingly
shorter it's much more important that you have new products in your pipeline and come
up with the next new product when all products become obsolete and products become obsolete
quicker than they used to do.
So mobile phones, when they are a year old, they are basically obsolete.
Even things like washing machines and borrowing stuff like that is kind of half shorter product
life cycles than they used to have.
So technological progress demands that you develop new products and also customer demand
more.
Just to give you a nice and easy slide.
So new products taking a big share or providing lots of profit and lots of revenue.
Of course K-feed statistics are only kind of as good as you make them.
It might be that your new products cannibalize your old products.
So that could be a reason why the revenue is so high.
There's one term that you need to know when it comes to developing new products.
There's lots of terms, but one is important.
And that is the time from when you start to have the idea for a product until it actually
reaches the market.
And that time to market is called exactly that.
It's the time to market.
It's an idea from conceiving the idea until it reaches the marketplace.
And time to market could be 15 years for an aircraft.
It could be six months or three months even for a mobile phone.
So it could be, differs heavily between the different industries and products.
If you remember the funnel, the closed and open innovation funnel that I've showed in
one of the earlier sessions, that is the time the idea goes from the very left end
of the funnel until the right end of the funnel when an idea, a project reaches the market.
That is the time to market.
We have learned things about product innovation strategies.
When we looked into process versus product innovation, we have asked yourself, so is
it good to be fast on the market, to be a performance maximizer, to be a sales maximizer,
kind of a fast follower, or a cost minimizer to be kind of slower with a time to market
with a new technology?
So the question is, for whom of these three strategies, for which of these three strategies
is quick time to market especially crucial?
You might tend to think, well of course the pioneer who comes up first with a leading
edge, but actually it's often that these have a bit more luxury of time.
Time to market or a quick time to market is very crucial for those fast followers, for
the sales maximizer because they have to come up with improved products very quickly after
the pioneer dared to go to the marketplace.
So for them, a quick time to market is often very, very crucial.
So when we talk about new products, what is a new product?
Is it really kind of again, is it something which has never existed before?
Well actually products have many, many dimensions that could change.
So of course we could have a product based on a new technology.
It could be a product that has a new feature, but a new product could also simply one that's
packaged in a different way or priced in a different way where we have a different level
of service coming with that product, repositioning under different brand name, different quality
of the product.
All this could up modifications and changes to a product and could lead to a kind of
a product being new in the sense of an innovative product.
Actually we could think about a different typology of newness.
So what could be a new product on the market?
Let's think about level of newness and I listed them according to increasing levels
of change things or increased levels of newness.
So repositioning of an existing product on a different market basically does not mean
we change the product at all, the product itself, but it is an innovation.
Let me give two examples.
One of my favorite examples is Glucosate.
Glucosate was developed in the 1920s and it was basically a fructose syrup that helped
sick children in hospitals after an operation to get healthy and strong very quickly after
the operation.
Their slogan was Glucosate Aids Recovery and it was basically on the market for 60 years.
In 1983 Glucosate was repositioned on the market as Glucosate and it was marketed towards
sports people who wanted to replace lost energy.
So Glucosate replaces lost energy, a new slogan, a new customer segment that it was
targeted for and it increased sales, kind of tripled sales within a short time frame.
That is a repositioning on the market.
It's basically a new product but without changing the product really.
So that's repositioning.
We have similar examples when BMW came with a mini and made it kind of a fashionable car
rather than a crappy small car that's repositioning on the market or using aspirin for thinning
your blood and preventing heart infects rather than kind of killing your headache.
That is examples of repositioning on the market.
Some studies or at one study have found that 4% of all product innovations consist of repositioning.
Some innovation could be due to simply process innovations reducing costs of your products
and of course there need to be a certain level of cost reduction to actually count.
One example would be Swatch was one of the first mass manufactured watches that was invented
a process where the watches could be mounted from one side.
So you had the bottom and a machine was able to simply put all the wheels and gears on
top and then the watch was finished.
Previously watches had to kind of elements from above and elements from the bottom from
below and that was of course more expensive and more complicated to produce than simply
have the bottom and put stuff on top.
So that would be the one-sided mount would be cost reduction and process innovation and
the study found 9% of all innovations consisted of that.
Improvements and revisions to existing products are exactly that.
There are improvements and revisions which make the product somehow better in a version
1.1 or a version 2 and things are improved somewhat.
A third of all innovations fell into that line, that category.
Line editions, well a line edition would be a new model to a certain product group
which we have.
So when Hewlett Packard brings out a new printer, a new inkjet printer, that is a line edition.
It is a new printer to an existing line of products and existing printers.
Nearly around a quarter of all innovations fell into the category line editions.
We could also have a new product line.
New product line is a new group of products which is one that we did not offer before.
In that sense it's a new to the firm type of innovation.
So when Hewlett Packard produced the first color inkjet rather than black and white inkjet,
that is a new product line, a new type of products which they were not offering before.
So that is an edition.
Actually one of my favorite examples there is Samsung.
When they brought out mobile phones, Samsung has not invented mobile phones, but they are
depending on which statistic you look at, the biggest manufacturer of smartphones nowadays.
But you know what they used to produce and what they used to create?
Noodles and grocery back then in the times.
Check it out, it's pretty funny.
So Samsung adding mobile phones, that is a new product line, around 20%.
And finally new to the world products, these are really kind of innovations that have not
been existing before and the study found that 10% of all products fall into that category
and before you start criticizing that yes, whether something is really new to the world
or new to the firm or incremental is often pretty difficult to decide.
So don't quote these numbers with too much confidence, but nonetheless it's pretty interesting
to see roughly this kind of size of these innovations.
So an example of a new to the world product, well if you have the first wheel that is actually
new to the world.
But if you have the first Dyson vacuum cleaner without a bag, that is a new to the world
too I would say.
On the slide you can also see the innovations sorted by level of risk from mere product
improvements until to new to the world, that is kind of more of the level of risk that
a firm exposes itself to, not so important, but also I find it pretty interesting.
So that is all examples of innovations.
And this shows you these dimensions, what constitutes a new product and how can we create
innovations in different ways that not only the research laboratory is involved when it
comes to new product development.
Of course actually there's many departments and many functions in an organization that
need to be involved in new product development, marketing, economics, production, R&D, design,
all these functions and departments need to have their say when it comes to developing
new products, which could make developing new products seem like quite a difficult task.
And actually it is quite a difficult task.
Of course as we all know when something needs to be decided and designed by many people
by a committee, then this becomes quite tedious political process with power games and things
like that, which make that pretty pretty difficult.
So now we have looked into what constitutes a new product, what could be a new product,
what could constitute an innovation on the market.
Let us talk about the real development of that process of the new product.
So for that we are going to look into planned R&D processes and we are going to look into
very systematic so-called stage gate process, which is really oldish and famous and or frequently
used and then we are going to look in an unplanned ways to come up with new products
which also sometimes involve accident and coincidence.
We are going to finish by looking at new product development portfolios and learn a little
framework which helps us kind of to find the right bundle of product development projects
that we want to have.
Let's start with a very planned and systematic process to develop new products and bring
them to the market.
Of course one of the ideas behind that is that one of the studies has found out, actually
many studies have found out that, that often in new product development little attention
is given to the market and the financials.
So lots of energy goes into actually developing the stuff, solving technical problems, but
market assessment, market studies, customer tests and all that were not so kind of given
so much attention.
Admittedly the numbers from this are from a pretty old study, but we still have that
in many companies that the market potential and kind of the way how should we launch that
is often not given enough attention.
And that oldish but interesting study which looked at successful and non-successful product
development projects twice as much was spent on market oriented than on technical activities.
And think about startups today.
It's not always the technical best things that succeed, but those that have a good marketing
or a good partner or other advantages beyond being technologically advanced.
That is one problem that a new product development often has.
There's little attention to markets and market orientation.
The second problem is that if you don't have a systematic process, there's lots of ideas
and projects going on and it's always easy to kind of start a new project, but it's pretty
tricky to kill a new innovation project because it involves making difficult decisions, taking
resources away from people, telling engineers to stop working on something that they find
interesting and telling your colleagues that perhaps you did have a stupid idea and that
is not so easy.
So if you don't have a formalized criteria to have a go or kill decision for certain
projects, well, then it might actually easier to start a project than to kill it.
College bads law.
The quote that I liked and which gave me the inspiration for the figures in this session
is that projects were initiated on the basis of relatively little information, no formal
criteria.
They became express trains.
Once the project got ahead of steam, very little could stop it.
Of course, you needed to step on somebody's toes and tell them your idea was stupid, stop
working on that project and then so that lots of projects were going ahead that probably
should not go ahead.
The solution to that is a systematic process which has specific gates through which a project
has to go and at each of these gates, there are some criteria which allow management or
colleagues to give formal reasoning why a project should go ahead or should not go ahead.
And that is exactly what stage gates do.
It consists out of predefined tests and criteria, which are somewhat vague and fuzzy.
But nonetheless, there are criteria that let project ideas proceed into the next stage
or to say, sorry, but this is where you need to stop.
And the four-fledged stage gate process, as it is called, is divided among in five
gates and stages.
And I'm going through these gates and stages a little basically to tell you what these
are all about.
But essentially, they are the time from until you have an idea for a new project until you
launch a product and you do a debriefing afterwards.
So all these gates are possibilities where you could stop a project.
And then when it is not stopped, it proceeds to the next stage where it kind of the next
stage of development happens until the next gate where a project could be stopped again.
Only enough you find the term front-end innovation or the front-end of innovation or fuzzy front-end
of innovation quite often in the literature.
And the front-end innovation is basically from the idea or the fuzzy front-end from
where the ideas basically are formed until the business case decision is being made.
That is the front-end innovation.
And you see that sometimes in the literature.
So let's go through these gates and stages and I'm going to explain them a little and
we can discuss the advantages and disadvantages of having such a systematic process.
Essentially the first gate is the initialing screening and that is when we form a new project
to develop a product.
And there we check is this something that our company would actually want to do?
So isn't there strategic alignment?
Is it something that is basically feasible that seems like a good opportunity?
Is it something where we actually have already strength perhaps?
Does it fit with our core business?
Could there be synergies?
Does it seem like an attractive market but you do that on a very rough and preliminary
basis?
You don't really look into financial criteria yet but kind of well does it seem like a good
idea basically and does it seem to fit to us?
When that gate is passed you enter the stage one which is the preliminary assessment and
there you actually start to determine well how big does the market seem to be?
Can we assess the market size, the market potential, whether the market would like that?
Can we assess whether we could actually develop and manufacture it?
And perhaps the time and costs?
So that is something that happens rather kind of quickly and with not kind of inexpensive
stage.
And then you enter the second gate.
And now basically we repeat the gate one and stage one nearly in the second gate and stage
but with more attention and more focus.
The second gate is basically a repeat of one with the additional information that we
have gathered in stage one.
So then also we look at what are kind of criteria that should be met so that this actually makes
sense and so essentially it's another yes let's go ahead.
In stage two we start to prepare the business case.
We actually start to look into some investment calculations, start to do discounted cash
flow approach to see whether it could be a good assessment.
We do some market research to see whether customers would like that, do a market study
to identify user needs.
So that is what would happen.
Not so much the focus on technology there but this is actually the focus on business
and the market orientation or where we have kind of found the lack of that is often kind
of the death of a project or leads unsuccessful projects.
Though stage two ensures that we have given enough attention to the market in the business
case.
From gate three we actually make the decision for the business case.
So there we kind of agree on the items and this is when we do the go ahead for actually
developing something.
At gate three is the last chance in which we can kill the project before really starting
to develop it.
And to take one of the criticisms beforehand and to talk about that now, of course assessing
the business case before you have even started to develop a product or service could be a
tricky thing.
Of course you know that saying predictions are pretty difficult especially when they
concern the future.
You don't really know how big the market might be if it's an unknown market for example.
And you don't really know how expensive the product might be in the end because you don't
know the development costs yet.
So you have to live with a lot of unknowns in that business case decision especially
when the market is not really known yet.
Let me give you an example that I like a lot.
When in 1993 Pfizer developed a drug which was supposed to cure angina pectoris.
So it basically not enough oxygen enters the heart and this causes chest and heart pain.
And Pfizer wanted to cure that and developed a drug based on sildenafil and that opened
the artery so that enough oxygen could enter the heart and kind of cure that chest pain.
So it was a disaster, it didn't really work well, patients would have to take it three
times a day, the lab test kind of showed it's not going to be a success for that.
But laboratory tests also showed some side effects of that drug and these side effects
led to male patients often experience, well, hard times.
Then Pfizer considered should we actually repositioning our drug and use it to help
people with erectile dysfunctions.
So let's do a market study, gate three, right?
So let's do a business case in a market study and they went out and asked people, so do
you suffer from penile dysfunction?
Would you take a pill that cures that and they found out, imagine you being asked on
the street as a man, they found out barely, nobody suffers from that problem and nobody
would buy such a pill, which helps you with that.
So they found out the market is really, really, really small, it turned out, well, they went
ahead, they nearly killed, they nearly killed that project, they nearly killed the whole
thing, but they went ahead and it was patented in 1996, it went on the market in 1998 and
it basically became a hit and Viagra, as we know it, in 2014 had a market size, a market
volume of 4.4 billion US dollar and Viagra captured 1.9 billion of the whole market.
So the market was huge, but the business case study, the market study did not really
find that.
Viagra is an interesting case because actually in April 2020, the patents on Viagra expired.
So interesting times for the imitators and generics firms to produce stuff, which can
legally produce generics for Viagra.
So that's one of the things, making a business case on lots of unknowns can be a very, very
tricky thing.
One of the dangers of this process, the systematic processes that you kill a product, a project,
which could be a great, great hit, sometimes perhaps for still unknown purposes or other
purposes than you might seem to think about now.
Okay, let's enough about gate three, once we have made the business case decision.
So let's develop this thing, then we actually start to develop the product and the marketing
plan simultaneously.
We update the financial stuff, we take care of legal issues, patents and all that.
So once we have developed something, we have a post development review.
We check, is it still attractive to bring on the market or have the times changed so
much that basically it's obsolete now or other things have changed?
If not, well, then we test the product, the production process, we test, do customers
like it, do their economics make sense?
And then gate five, this is the last point when we can kill a project before it enters
the market.
If everything goes right and the finances look all right, we go ahead and commercialize.
That's stage five.
That's basically it until the post implementation review, which is you disband the team, kind
of the project has ended, but firms are pretty bad at incorporating the lessons learned into
the next projects.
So there's a post implementation or there should be a post implementation review, a
post audit that looks at what have we learned?
What could we do better next time?
So basically lessons learned.
This is really kind of a very systematic process with lots of these fine gates and stages five
where you can kill or have a project or have it proceed to the next stage.
Of course, this is what are the advantages and disadvantages of that.
It's a very long and linear process.
So it perhaps does not really fit quick and agile development of products, which are improved
as we go.
So if you know a little about design thinking, this is not design thinking where you bring
out basically prototypes on the market and say fail quickly, but fail on the market,
improve the product when it is with the customer.
This is a very linear thing where we do everything in advance and there's not no going back to
an earlier stage basically.
There are some products and services where this is a very good way to proceed.
Pharmaceutical companies, there are newsnet other kind of companies where you have plannable
things, there are new stage gate processes and it works best for products where you have
very little uncertainty in terms of how big is the market.
Is it possible to develop that product at all?
Could the specifications change a lot or the underlying technologies change a lot while
we develop the whole thing?
Or could the market basically change a lot while we develop the thing?
So how dynamic is the environment and how many uncertainties, ambiguities do we have
to deal with?
If ambiguities are very high, this longish linear and planned thing might be bad.
But in many situations that is not the case for some products which are plannable, where
the environment is pretty stable, that is a good way to proceed and gives you the chance
to kill plants.
Of course, nowadays this is not a new model and Cooper who has come up with that was asked,
so in the times of design thinking, so does it still make sense?
And he said, yes, it does still make sense, but for some moderate risk projects or minor
projects, you can actually compress a few stages and conduct them simultaneously or
iterate between those, but essentially stage gates still make lots of sense.
That's what Cooper said.
Let me give you an example of a product of the industry where this makes a lot of sense
because being able to kill projects at some point in time is a very important thing to
save costs.
Take drug development, for example.
To develop a drug, you typically need to test 10,000 chemical components.
This you often use computer simulation previously and that all had to happen physically, but
still an awful lot of components have to be kind of evaluated.
Of this, these 10,250 are tested on animals and 10 on humans.
So you need to eliminate a lot of your potential components.
You need to eliminate lots of candidates while you go.
And if you don't have any criteria or any systematic way of eliminating that, basically
then you have a very hard time and will offend a lot of people and researchers.
And the whole thing takes around 10 years and it takes a lot of cash to develop one
drug.
How much cash?
Well, there's a lot of research on that and the numbers vary wildly depending on what
you take into account.
So some studies have found it's around one billion US dollar.
Some studies have found it's two, two and a half billion US dollar to just develop one
drug that is being approved on the market.
And if you have a very rough way of measuring by looking at how much do you invest in R&D
over 10 years?
How many approved drugs do you get?
Then you can roughly find a number of how much R&D cost did you have per approved drug?
Some guy on Forbes did it a few years back and it's really a rough rule of thumb, but
it shows you that around 6 to 13 billion US dollar per approved drug could actually be
not out of the order.
That is a very systematic stage gate process.
Let's talk about departments because we have said there are lots of perspectives are needed
for R&D beyond simply the R&D department.
So we need a marketing, we need a manufacturing, we need all these different departments to
collaborate.
So if we look at departmental stage linear models, then we could also say, well, depending
on which function, which department gets involved at what point in time, we can differentiate
between two basic models.
One is a technology push model.
The technology push model was basically the dominant model after World War II and the
50s and 60s when customers had money and would buy anything.
So basically R&D would come up with something new, manufacturing would build it, and marketing
would simply find a way to sell it.
The slogan built it and they will buy it.
That's that.
It's a seller's market.
It's basically anything you can come up with, you can buy.
Since the 1970s, when kind of lots of requirements were satisfied, and the competition became
harder, a different way of thinking set in, and nowadays, still nowadays, it's often
the marketing department that said, hey, this is where we need something new.
R&D, please come up with a solution for this.
And you are only allowed, it's only allowed to cost this and that much.
So it's marketing, basically, that looks at the market and the market, the demand pull
basically initiates new product developments.
And then kind of it's researched and built and goes to the user.
So whether we have a technology push model where basically what is possible by the current
by technological progress is being built, we have a market pull model where market demand,
where market requirement actually initiate new product development.
And all these different departments that have to interact and then have to collaborate on
a single product development project, that is really a challenge to manage.
All of these departments, all of these different functions in a company see things very differently.
And I really like the poem with a blind man and the elephant.
I'm not going to cite it here, look it up if you're interested.
Essentially we're six blind men overlaid and look at an elephant and one runs against it
and says, oh, it's like a wall and one touches the tooth and says, oh, it's like a spare.
And one touches the nose and says, oh, it's like an elephant, it's like a snake.
And one gets the trunk and says like, oh, it's like an elephant, it's like a tree.
So everybody has their own perspective and they experience things in very different ways.
So collaborating on the same thing and having the same idea of what should be or what is
the outcome is really something that is really, really tricky.
Often what happens in this departmental stage models that I've shown is that people are
not really collaborating really, but these linear models that we have to think, for example,
the technology push model, that engineering comes up with something and says, hey, we've
done our part, marketing sell it.
And then marketing takes it and works with it and puts it out to kind of, some as manufacturing
says, hey, we've come up with that concept, sell it for this price and then this color
and then our work is done here.
And if it goes like this from department to department without really collaboration or
interaction or iteration, then this is a bit like Chinese whispers or still a post
if you're German, where kind of what ends, what you end up with might be very different
from what you have imagined in the beginning.
One half series cartoon that illustrates that is if you ask a customer of how to design
a swing or if you design a swing, marketing might come up with something really fancy
and management is very cost conscious and kind of that's not so fancy, but rather kind
of down lets all these bells and whistles, but kind of this is what we approve.
And then the concept Wednesday engine goes to engineering and engineering is supposed
to design something and it goes to manufacturing and manufacturing designs some something.
And then the poor service engineers go to the customer side, need to install it and
they need to come up with some solution that somehow kind of makes it to somehow fit.
If you had asked the customer what he wants, perhaps this is what he would have come up
with.
So this is one of the problems when we talk about these linear stages when one department
after the other basically is concerned with a sub product development.
These are very systematic ways to develop a product.
Then and that's not an opposite, beside official new product developments, we sometimes have
unofficial or even illegal new product developments.
And I want to give you kind of a few terms that you should know and a few examples.
So if as an engineer, you have kind of a good idea, but your manager says, oh, we actually
don't think that's that's there's a market for that or that's a good idea.
But you're really convinced that this is going to be a big hit.
And this is going to be the future.
You might continue to develop stuff secretly without being endorsed by management.
And this is called bootlegging.
Bootlegging, well, if you do that as an engineer, for example, then you misuse, you abuse resources,
you put bill a customer for time where you in reality start developing some something
else, you use the lab and the resources for the four different experiments and things.
So bootlegging is not endorsed or condoned.
And in a way, it's abusing resources.
But there's interesting examples of very successful innovations.
BMW is 12 cylinder engine where one engineer, Paul Roche, was so convinced that this is going to be
good that he kind of illegally when BMW abandoned the project, he simply silently and secretly
continued to develop it until it was successful.
So and that actually convinced BMW in 1995 to re-enter the motorsports with a 12 cylinder engine.
Or another famous example is the first Toshiba laptop, where an engineer was so convinced
that he could come up with a computer that was actually portable and management told
him stop doing that.
It's not nobody wants a big computer on the lab.
So and Misogushi, the engineer, secretly continued to develop it until it actually worked and
was a big success.
That causes problem for management, because should we allow bootlegging?
It's abusing resources.
It's working against management orders.
Should we not allow bootlegging?
Because it's abusing things.
So but we might lose very good ideas where engineers who have kind of a good hunch of
what will be successful, we could lose that.
So for a manager, how strict and serious should we be about bootlegging?
Should we punish it?
Should we allow it?
Should we give channel it into something which is less illegal by like Google having
the 20% time slot where engineers can play with their favorite project when they think
oh, they have the next big thing.
So you could as a manager, you could try to channel it into something which is more legitimate
and where you can kind of see and control what's going to happen a bit better.
So bootlegging, big problem for management.
Another important term is skunk works.
So called skunk works is also secret product development.
But top management knows about that.
And it's officially endorsed.
It's kind of that they want that to happen.
But perhaps they don't want even other employees in the in the company to know about that,
because they're afraid of leaks.
A very famous example of skunk works is when Lockheed Martin developed the fighter jet.
And that was a super top secret project.
And they did not want to leak anything about that until it was done.
They did that by putting up a tent where all the work was done, right next to an overcrowded
factory.
And nobody cared about that.
If they had done it in some secret lab with lots of purpose, people would have gotten
really interested.
And they've done it more or less in the open, but secretly, and nobody cared about that.
It's a fun example, skunk works.
And last, just for completeness, completeness.
If an engineer or somebody else does a project abusing resources for their own personal gain,
so not to do it as a company project, but to enrich myself, that sometimes called moonlightening.
So as I said, it's really a big problem.
Should we allow bootlegging?
Or should we punish it very hardly because it is abusing resources?
Does it stifle innovation?
But on the other hand, can we allow anything basically?
That is really, really tricky.
Be too strict and you stifle innovation of the people who know what's going to be successful.
If you allow too much employee initiative, you might end up with really stupid ideas
that you better should not publish out in the world.
And then you might have innovation, product innovations, new product innovations that
are the result of serendipity and chaos.
Earlier, we've talked about serendipity when I gave you the example of Post-it notes or
penicillin as examples for serendipious innovations.
So unplanned innovation could also be a way to develop new products.
And some companies are very formal and strict about that and would not recognize new serendipitous
in innovation when it came.
Some companies have an organization culture and processes and systems which are very good
at recognizing and exploiting these serendipitous innovations.
So 3M, basically an example of a company that's very good at taking advantage of a bit of
chaos and serendipity and looking and exploiting resources.
Basically when we look at serendipity, we can classify innovations even a bit more.
And serendipity being the faculty or phenomenon of finding valuable, agreeable things that
we have and that we have not sought for, we could say it's an invention that we did not
even pursue.
It's a total coincidence.
Metro is a very famous example of an innovation that happened that was not even pursued.
In 1948, Swiss engineer George de Mistral went for a walk with his dog.
When he came home, he discovered that dog had lots of burrs, klettons in his fur.
And then he discovered that he himself had lots of these burrs sticking on his trousers
and are really hard to remove.
And he took out the microscope and looked at these little hooks that burrs have and
that basically let burrs stick enormously to anything and a flash of thought popped
in and the idea for Velcro was born.
The microwave is another very famous example for a serendipitous innovation.
Then Percy Spencer in 1948 was working with magnetotrons which were used for radar which
was just invented and he wanted to improve the magnetotron electronic waves and he turned
it on.
He noticed that something very sticky in his trouser pocket and that thing which was very
sticky was a peanut cluster bar which was his lunch snack and it had melted because
he stood in front of that magnetotron.
And there the technological base for microwave was born out of an engineer who did stuff
to improve the radar.
Then basically actually an interesting footnote of history, then he said like something was
going on and the second thing that he put in front of that magnetotron was an egg and
he started it and seconds later egg had exploded in his face.
So the second time the microwave was used was to have eggs explode on your face.
Then sometimes you have innovations that are pursued but discovered in very unexpected
ways.
So rubber vulcanization is an example for that.
Goodyear wanted to make rubber more stable and more robust and with that he experimented
with lots and lots of things and in the end it was some sulfur which acts by accident
dropped on the heat on his stuff that he vulcanized rubber and he had not planned to
discover it this way but essentially discovered vulcanization by accident in a very different
way than he was planning to do.
And sometimes we have innovations that you use for a different purpose than you initially
plan for.
Another example of post-it note which I gave you post-it was a failure as a glue but if
you think about let's make a sticky bookmark out of that well then it could be a big commercial
success.
And being able to apply and to pursue and recognize and exploit these serendipitous
innovations is one thing that's very valuable for companies and to allow for the openness
to see these and exploit these things.
So the last thing I want to do today is not look at a single project, a new product development
project but to have companies think about so what bundle of new product development
project should we have at the same time.
And the very simple framework that helps companies with doing that is by putting all their NPD
projects in a matrix which basically charts the time to market so how long will it take
to develop this thing to market your matureness and how big could be the impact of the thing.
And when you have only low impact projects you might have a bit of a problem.
If you have only high impact projects with a high risk perhaps which have a very long
time until market you might have a liquidity problem until it reaches market.
So this easy framework NPD portfolio impact market matrix helps a company to assess whether
the NPD projects that we have are actually matching the risk time profile that we want
to have as an organization and that we can actually finance.
This is what I wanted to say about NPD as I said the sign thinking is not something
that actually fitted in this one.
So NPD new product development is something that is concerning many firm functions and
departments at the same time and needs collaboration at the same time.
Each gate process allow for very systematic decision making and allow for formal kill
criteria of projects but if you have high ambiguity high uncertainty they might work
very badly because you can't plan that.
If you have unplanned or iterative short term planning actually that is which design thinking
goes into or if you have compressed stage gate processes as Cooper would say that that
could be an alternative approach.
NPD could be top down directed, a regular or it could be bottom up a bootlegging project
it could be with or without management knowledge.
We've talked about bootlegging, we talked about skunkworks and finally a portfolio can
be used to balance your firm's risks strategy to balance your products according to firm's
risk innovation strategy.
Thank you very much and see you next week.