Managing Product Innovation Portfolios and Timing Market Entry

Carnegie Mellon Qatar ©2011 - 2012 Robert T. Monroe Course 70-446

Managing Product Innovation Portfoliosand

Timing Market Entry

Robert MonroeInnovative Product Development

April 9, 2012

Carnegie Mellon Qatar ©2011- 2012 Robert T. Monroe Course 70-446

By The End Of Class Today, You Should:

• Understand common constraints and drivers that inform decisions on when to enter a new market (also known as timing market entry)

• Be able to explain the concept of a product innovation portfolio

• Understand why thinking of an organization's innovation efforts as a portfolio can be an effective way to:– Coordinate multiple initiatives – Manage the firm's overall risk exposure


Timing Market Entry


Timing Market Entry: Framing The Issue

• The challenge: bring your innovative product to market at just the right time, not too early, not too late

• Questions:– How could you possibly be too early to market?– What are the problems of entering the market too late?– How do you know, a priori, what the right time is to enter?

Time ofMarketEntry Too Early Too LateJust Right


Market Entry Examples: Digital Music Players

Diamond RioMP3 Player

1998

MicrosoftZune 2006

Apple iPod2001


Technology Improvement CyclesPe

rform

ance

Effort (or Time)

Source: [Sch10] Page 54

Limit of Technology


Technology / Innovative Product Adoption Cycles

• There are common, recurring patterns of technology and innovative product adoption– Understanding these cycles, and where your target market is in

that adoption process, should play an important part in your decision on when to enter a market

• The following three patterns look at technology/product adoption from different lenses – all are useful, provided that you understand what they tell you– S-Curves– The Gartner Group’s Hype Cycle™– Geoffrey Moore’s ‘Crossing the Chasm’ lifecycle


Classic S-Curve Technology Adoption Cycles

Source: Original concept from Everett Rogers in “Diffusion of Innovations” book, 1962. Image courtesy Wikipedia


Classic S-Curve Technology Adoption Cycles

Source: Stuart Staniford’s blog, http://earlywarn.blogspot.com/2010/06/technology-adoption-in-hard-times.html


Source: WSJ Classroom Edition, publication date unknown


Geoffrey Moore’s Technology Adoption Lifecycle

Source: Geoffrey Moore, Crossing the Chasm, Harper Collins, 1991. Image courtesy Wikipedia


Gartner Group’s “Hype Cycle” Curve

Source: Gartner Group via Wikipedia


Defining Hype Cycle Curve Points


Hype Cycle Example: Social Analytics in July 2011

Source: Gianluigi Cuccureddu, BusinessInsider.com, commenting on Gartner’s published hype cycle graphhttp://www.businessinsider.com/gartners-hype-cycle-2011-social-analytics-and-activity-streams-reach-the-peak-2011-8


Common Market-Entry Strategies For New Products

• First-Mover– Be first to market, build up a large lead that nobody can catch up to

• Fast Follower– Let somebody else lead, learn what works, then catch up quickly

• Foot-Dragger – Do everything you can to delay the growth of the market, adoption

of the technology/product or the entry of market participants

• Late Entry– Wait for others to clearly define the market, then improve what they

have done (or buy the company/product/technology)


Market Entry Examples Redux: Digital Music Players

• Which strategy did each of these companies take?• Who won?

Diamond RioMP3 Player

1998

MicrosoftZune 2006

Apple iPod2001


Disruptive vs. Sustaining Technological Innovation

• Sustaining innovations:– Revolutionary or discontinuous: an innovation that creates a

new market by allowing customers to solve a problem in a radically new way

– Evolutionary: an innovation that improves a product in an existing market in ways that customers are expecting

• Disruptive innovations are innovations that create a new (and unexpected) market by applying a different set of values

Source: [Chr97] – Concept of Disruptive vs. Sustaining Technologies, examples from Wikipedia


Discussion

Where on the Gartner Hype Chart and Moore’s Technology Adoption Lifecycle chart are the following technologies?• Basic mobile phones• Smartphones

– iOS– Android OS– Windows 7

• Social network games• Self-driving cars• Face recognition software


Product Innovation Portfolios


Remember: Innovation Resources Are Limited

OrganizationalResources

NPD

ResourcesAvailable forInnovativeNew ProductDevelopment


Stage-Gate Issue: Evaluating Projects In Isolation

• A common problem with gate decisions in the Stage-Gate process is that each project is evaluated on its own merits, in isolation from the rest of the company’s previous commitments

• This tends to lead to:– Too many projects being approved without really

understanding the broader implications on the organization’s resource commitments

– A myopic approach to broad product strategy and its mapping to the broader business strategy

– Poor balancing of time demand across company groups


Key Idea: Don’t Consider Innovation Projects In Isolation

• Companies should deliberately manage their mix of innovation products to reflect the organizations:– Overall business strategy– Resource constraints– Core competencies– Desired risk profile (along several dimensions)

• A product innovation portfolio allows an organziation to:– Identify and track all of the innovation projects it is working on– Understand relative investments across areas and innovation types– Manage organizational risks– Allocate resources effectively


Visualizing Innovation Portfolios: Aligned Spectra

Product Process

Radical Incremental

Competence-Enhancing Competence-Destroying

Architectural Component

Disruptive Evolutionary

High Risk Low Risk


Finding Where You Are: Capacity vs. Demand Analysis

• Option 1: Assess demand created by your active projects– Determine demand for organization resources across all projects,

go into detail for each major functional group – Determine the capacity for each of those groups over time– Look for mismatches

• Typical discoveries include:– You really do have too many projects (often by a factor of 2 or 3)– You discover which groups are the bottlenecks– You can evaluate how effectively different groups are spending

their time (both effectiveness and efficiency)

Source: [CE09] pages 268-269


Finding Where You Are: Demand Generated By NPD

• Option 2: Assess demand generated by business goals– Begin by determining your product goals for next N time periods– Translate those goals into numbers of major and minor new

products to make it through each gate review– Map those projects to work-days required– Compare that to your capacity in each area– Flag places where demand will exceed capacity

• Typical discoveries include:– You really do have too many projects (often by a factor of 2 or 3)– You should probably modify your goals to match capacity

Source: [CE09] pages 268-269


Adapting Stage-Gate For Portfolios

• Option 1: incorporate portfolio review into gate reviews

• Option 2: regular (quarterly) executive product portfolio reviews

Source: [CE09]


Wrap Up


Challenge Problem 7

• For Challenge Problem 7 you will need to write a 2-3 page, single-spaced, case analysis of one of the following three cases that we will be studying over the next three weeks:– MediSys product development project (Wednesday, April 4)– Aravind Eyecare Clinic, India (Wednesday, April 11)– Dannone in South Africa (Wednesday, April 18)

• Pick any one of these three cases to do your analysis – you only need to submit one case analysis

• Each case will have specific questions you will need to address in your analysis

• Your analysis must be submitted before the class in which we cover the case begins. No late submissions will be accepted.

• CP 7 must be done individually.


References

[CE09] Robert G. Cooper and Scott Edgett, Successful Product Innovation, Product Development Institute, 2009, ISBN: 978-1-4392-4918-5.

[Chr97] Christensen, Clayton M., The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Press, 1997, ISBN 9780875845852

[KL01] Tom Kelly with Jonathan Littman, The Art of Innovation, Doubleday, 2001, ISBN: 0-385-49984-1.

[Sch10] Melissa A. Schilling, Strategic Management of Technological Innovation, 3rd Edition, McGraw Hill, 2010, ISBN: 978-0-07-338156-5

Documents

Managing Product Innovation Portfolios and Timing Market Entry