Developing new products today involves a chain of daunting new challenges. They include shorter product cycles, unforeseen competition, mass standardization and more narrowly focused customization. This is disrupting business models across industries, says G. K. Prasanna, a senior vice president at Wipro Ltd. To thrive in this new world, companies must build “innovation prowess,” says George Day, a Wharton marketing professor. The two suggest solutions to innovation challenges in this white paper, part of a Future of Industry series produced by Knowledge@Wharton and sponsored by Wipro.
New product development today thrusts companies into a “white-water” world of market turbulence wrought by shorter product cycles, competition from out of the blue, and the need for both narrowly focused customization and mass standardization, says G. K. Prasanna, a senior vice president at Wipro Ltd.
“When the number one camera company is a mobile phone company, what does it mean for the camera industry? Should carmakers like Ford and Toyota be worried more about competition among themselves or from Google’s driverless car project? And how might Calico, another Google project aimed at life extension, impact hospitals, insurers and others in the life sciences industry?”, asks Prasanna, who is also head of global infrastructure and engineeringNXT services for the technology services provider based in Bangalore, India.
George Day, a marketing professor at Wharton and codirector of its Mack Institute for Innovation Management, believes companies that want to innovate successfully today must build “innovation prowess.” That means taking a disciplined “outside-in” approach to setting strategy, or looking at customer needs in the outside market first. Put another way, it means looking at the world through customers’ eyes rather than first looking within the company to decide which product – or product extension – should be built in order to best use existing resources. The latter approach – an “inside out” view – leaves companies flatfooted in responding to fastchanging market needs, according to Day.
A key part of understanding those customer needs is to develop the ability to spot early warning signals about new competition or technologies aimed at meeting those needs. Day’s advice for new product developers: “Be continuously on red alert. The problems arise when you are surprised.”
Spotting Early Warning Signals
Companies need not grope in the dark about impending competition. “The reality is we always have early warning signals of changes in technology and emerging competitors the question is: Do we act on them?” asks Day. Often companies don’t, sometimes because the signals simply are “weak.” They tend to be “a little ambiguous and come with a lot of noise” or information clutter.
Day says companies must be “vigilant about the weak signals of new competitors, changes in technology and new markets opening up, and must share them widely through the company.” That last point is particularly important. Even when weak signals do end up getting picked up, too often the word does not get out. In research covering several companies, Day found that every time a company failed to see a competitor coming from an adjacent market or a new technology, many people within the company already knew about it as a threat. “But the senior officers, the decision makers, did not know about it and people down below didn’t know the senior people didn’t know about it.” He found that “there are a lot of organizational impediments to staying vigilant" and that companies with an ability to pick up the signals on time “have lots of degrees of freedom in dealing with them.”
Day offers the example of a prominent medical device maker. The company, is “very concerned” about the possibility of a drug that may replace its pacemaker (an electrical component that regulates heart beats) and is closely watching that space. Once that threat gets closer to reality, it could respond in several ways: Make investments in related areas, formulate competing products or simply monitor the situation.
Major Product Development Trends
Prasanna sees five major trends defining new product development strategies today.
First, relatively inexpensive technology now allows powerful processing and ubiquitous computing.
Second, companies and investors with deep pockets are willing to finance big, long-term bets on new products. “Companies like Apple, Google or Samsung can take moon-shots. But smaller companies do not have that luxury and must find other ways to innovate.
Third, companies approach markets from both ends a global market with standardized products and a market of even one individual with highly customized products. So, a new smartphone launch now is very different than in the recent past. It is now typically a global event versus the regional market-by-market release of recent years. In another example, “emission norms are different across countries. A car that works in China cannot be released in Europe, India or Japan.”
Fourth, companies often must design products with varying specifications that suit the needs of different markets. “The Indian customer doesn’t expect a trimmed down version or a less powerful version than the rest of the world, but twice the features at half the cost,” says Prasanna. One favorite example of a product designed for emerging markets is Procter & Gamble’s Gillette Guard brand of razors, launched in India in 2010. The Associated Press reported that Gillette found that many Indian men used low-tech, double-edged, T-shaped razors that caused many skin cuts. Indian men also had thicker hair with higher density than Americans. While American men wanted smoother shaves, Indian men were more concerned about avoiding cuts. Gillette’s Guard razor had one blade to emphasize safety over smoothness, compared with two to five blades found on many U.S. razors. It also designed the Guard for easy gripping, provided a hole at its base so that users could hang it, and a small comb by the blade to deal with thicker hair. It lowered manufacturing costs by reducing the number of parts from 25 in the Mach3 to just four in the Guard. The result: Gillette’s market share for razors and blades in India rose from 39.3% in 2007 to more than 49% in 2013, according to research firm Euromonitor.
Finally, companies today must rethink what is core to their organizations and outsource the rest. Shorter product life cycles and the need to ship products faster to the market means they have to do “product development which is rapid, iterative and close-to-consumer -- it is almost continuous R&D,” says Prasanna.