Lecture 1: Introduction
Peter Drucker (1909-2005): “Any business enterprise has two, and only these two, basic functions:
marketing and innovation”
Market orientation – innovation
“[…] innovations facilitate the conversion of market-oriented business philosophy into superior
corporate performance”
Competing on..
• Differentiation
- On the product itself
- On additional services
- On brand/image
• Price
Are A-brands in trouble?
“They should innovate more. There are too many me-too products”
Inovation for survival
→ most of the sales / profit is
coming from existing products.
That is why innovation is needed!
Because if your not doing it, your
competitors will do it. So
innovation is important.
New products and sales promotion in the automobile industry
Procter & Gamble: $2 billion a year on R&D
“Promotions may win quarters, innovation wins decades” – Bob McDonald (CEO P&G)
,Importance of new products
• Facilitates implementation market orientation
• Needed for differentiating from competitors
• Needed for long term performance/survival
Inertia
• = keep on doing the same thing, absence of change
• But, by definition, innovation is change
- For the customer
- For the firm
- For the firm’s context
Aim of the course
• Obtain insight in the role of marketing in NPD/NSD
- A course on innovation (NPD/NSD) with..
- A marketing perspective (not an engineering or design
perspective), i.e. focused on creating customer value through
new products/services
Customer intimacy
“True customer intimacy (…) requires a deep understanding of the
context in which our products and services are used in the course of our
customers day-to-day lives” – Fournier et al. 1998
Aim of the course
• Obtain insight in the role of marketing in NPD/NSD
- A course on innovation (NPD/NSD) with..
- A marketing perspective (not an engineering or design perspective), i.e. focused on creating
customer value through new products/services
• Learn theories and tools that may help you in the various aspects of NPD/NSD
• Obtain insight in NPD/NSD in practice
• Further your research skills
Structure of the course
,Lecture 2: Product strategy (= the firm side of innovation)
Previous session
• Importace of innovation
• The structure and philosophy of the course
• Assignment
→ Even firms that are very successfull sometimea fail duet o
innvation. How can we explain that? = critical question and
fundamental in this course and in business administration in general.
In a lot of cases they suggest that it might be a lack of creativity. But that is not always the case:
→ In many firms there is a lot of creativity but
it is just not recognized.
Another example → If you have a firm with an
R&D department whether someone is bright
enough to come up with anti-gravity, then there
is no lack of creativity. But that does not mean
that it is also turned into commercial innovations.
The question is: how come?
Who is this? (and what is he carrying?)
→ It is not only about cartoons, its also happening in real life. Here you
see the first digital camera. This is a bright intellectual engineer that
came up with a good idea (digital camera), but that was not recognized
by the firm. In the end Kodak missed the boat. They did not see the
digital camera as the ‘new thing’ in their industry eventhough it was
invented in their own firm. Digital camera’s really changed the whole
industry.
, Another example..
The case of Digital Equipment (DEC) (Digital Equipment = a company of mini-computers)
• From 1960 to 1980 very successful manufacturer of mini-computers
- Plenty of cash
- A great brand
- Good technology
- Great R&D capabilities
• Until +- 1980…
Around that time the PC (personal computer) came in. These were two different markets..
DEC and the pc market
DEC PC market
• Developing everything (> computers) internally • Outsources development, assembles parts
• NPD takes 2-3 years • NPD takes 6-12 months → quicker!
• Sells directly and solely to organizations • Sells through retailers to consumers and organizations
• Expects high magins • Used to low margins
→ DEC did not make it! They could not make the change. It was
in their DNA to develop & sell mini-computers in their own
particular way. Their organization was structured in that way.
And it is very difficult to adapt to that. They should need to change the whole organization to do and
sell it in the way of the PC market.
DEC’s fate
• DEC failed on the pc market
• … and was bought by Compac and later by Hewlett-Packerd
→ The question is basically: if you not fit for the
personal computer market (PC), why not stick to
the mini-computer market? Because they were
good in doing that.
How technologies evolve
→ red line: beginning of a
technology it goes relatively slow,
you have some problems to work
on but it is improving. At a certain
moment it really kicks of and
there is a lot of improvement
there and then a certain moment
it levels off (the technology is
more or less finished). That is
what the evolution of a
technology looks like.
Lets have a look what happens if there is a new technology. The dotted line is the moment that the
new technology comes along. The new technology (blue line) has the same pattern is the other one.
But a stange this is what happens at the point of the errow? At that particular moment the new
technology is underperforming. VB = the computers of DEC were much better in terms of the number
of calculations that you can do per second. The personal computers (PC) were slow. That raises the
Peter Drucker (1909-2005): “Any business enterprise has two, and only these two, basic functions:
marketing and innovation”
Market orientation – innovation
“[…] innovations facilitate the conversion of market-oriented business philosophy into superior
corporate performance”
Competing on..
• Differentiation
- On the product itself
- On additional services
- On brand/image
• Price
Are A-brands in trouble?
“They should innovate more. There are too many me-too products”
Inovation for survival
→ most of the sales / profit is
coming from existing products.
That is why innovation is needed!
Because if your not doing it, your
competitors will do it. So
innovation is important.
New products and sales promotion in the automobile industry
Procter & Gamble: $2 billion a year on R&D
“Promotions may win quarters, innovation wins decades” – Bob McDonald (CEO P&G)
,Importance of new products
• Facilitates implementation market orientation
• Needed for differentiating from competitors
• Needed for long term performance/survival
Inertia
• = keep on doing the same thing, absence of change
• But, by definition, innovation is change
- For the customer
- For the firm
- For the firm’s context
Aim of the course
• Obtain insight in the role of marketing in NPD/NSD
- A course on innovation (NPD/NSD) with..
- A marketing perspective (not an engineering or design
perspective), i.e. focused on creating customer value through
new products/services
Customer intimacy
“True customer intimacy (…) requires a deep understanding of the
context in which our products and services are used in the course of our
customers day-to-day lives” – Fournier et al. 1998
Aim of the course
• Obtain insight in the role of marketing in NPD/NSD
- A course on innovation (NPD/NSD) with..
- A marketing perspective (not an engineering or design perspective), i.e. focused on creating
customer value through new products/services
• Learn theories and tools that may help you in the various aspects of NPD/NSD
• Obtain insight in NPD/NSD in practice
• Further your research skills
Structure of the course
,Lecture 2: Product strategy (= the firm side of innovation)
Previous session
• Importace of innovation
• The structure and philosophy of the course
• Assignment
→ Even firms that are very successfull sometimea fail duet o
innvation. How can we explain that? = critical question and
fundamental in this course and in business administration in general.
In a lot of cases they suggest that it might be a lack of creativity. But that is not always the case:
→ In many firms there is a lot of creativity but
it is just not recognized.
Another example → If you have a firm with an
R&D department whether someone is bright
enough to come up with anti-gravity, then there
is no lack of creativity. But that does not mean
that it is also turned into commercial innovations.
The question is: how come?
Who is this? (and what is he carrying?)
→ It is not only about cartoons, its also happening in real life. Here you
see the first digital camera. This is a bright intellectual engineer that
came up with a good idea (digital camera), but that was not recognized
by the firm. In the end Kodak missed the boat. They did not see the
digital camera as the ‘new thing’ in their industry eventhough it was
invented in their own firm. Digital camera’s really changed the whole
industry.
, Another example..
The case of Digital Equipment (DEC) (Digital Equipment = a company of mini-computers)
• From 1960 to 1980 very successful manufacturer of mini-computers
- Plenty of cash
- A great brand
- Good technology
- Great R&D capabilities
• Until +- 1980…
Around that time the PC (personal computer) came in. These were two different markets..
DEC and the pc market
DEC PC market
• Developing everything (> computers) internally • Outsources development, assembles parts
• NPD takes 2-3 years • NPD takes 6-12 months → quicker!
• Sells directly and solely to organizations • Sells through retailers to consumers and organizations
• Expects high magins • Used to low margins
→ DEC did not make it! They could not make the change. It was
in their DNA to develop & sell mini-computers in their own
particular way. Their organization was structured in that way.
And it is very difficult to adapt to that. They should need to change the whole organization to do and
sell it in the way of the PC market.
DEC’s fate
• DEC failed on the pc market
• … and was bought by Compac and later by Hewlett-Packerd
→ The question is basically: if you not fit for the
personal computer market (PC), why not stick to
the mini-computer market? Because they were
good in doing that.
How technologies evolve
→ red line: beginning of a
technology it goes relatively slow,
you have some problems to work
on but it is improving. At a certain
moment it really kicks of and
there is a lot of improvement
there and then a certain moment
it levels off (the technology is
more or less finished). That is
what the evolution of a
technology looks like.
Lets have a look what happens if there is a new technology. The dotted line is the moment that the
new technology comes along. The new technology (blue line) has the same pattern is the other one.
But a stange this is what happens at the point of the errow? At that particular moment the new
technology is underperforming. VB = the computers of DEC were much better in terms of the number
of calculations that you can do per second. The personal computers (PC) were slow. That raises the
