Chapter 6 NPD and Service Innovation

Chapter 6
New product development and Service innovation

Learning Objectives
● recognise that a new product is a multi-dimensional concept;
● identify the different types of models of NPD;
● provide an understanding of the importance of external linkages in the new
product development process
● recognise the reasons for the growth in services;
● recognise the wide range of different types of services;
● explain how new services have led to the creation of new business models;
● examine the pivotal role technology plays in new service innovation;
● explain the role of a classification of service innovations; and
● explain the role of the consumer in the new service development process.
When developing an NPD strategy?
NPD as a strategy for growth
NPD as a strategy for growth
Market penetration Increasing volume of sales, market share of current market and existing
products by exploiting the full range of marketing-mix activities is the
common approach adopted by many companies.
Market development existing business’s products through making them available to new
markets; opening up new segments
Product development ensure that their products are able to compete with the
competition by regularly improving and updating their existing products
Diversification diversified growth exist through forward, backward and horizontal

diversification
What is a new product?
Classification of new products
• New-to-the-world products
• New product lines (new to the firm)
• Additions to existing lines (line additions)
• Improvements and revisions to existing products
• Cost reductions
• Repositioning
Classification of new products
Repositioning and brand extensions
Overview of NPD theories
The fuzzy front end
• The messy getting started period of new product development processes.
• It is at the beginning of the process, or the front end, where the organisation
develops a concept of the product to be developed and decides whether or not
to invest resources in the further development of an idea.
• Although the fuzzy front end may not require expensive capital investment, it
can consume 50 per cent of development time and it is where major
commitments typically are made involving time, money and the product’s nature
Customer roles in NPD
Models of new product development
• Departmental-stage models;
• Activity-stage models and concurrent engineering;
• Cross-functional models (teams);
• Decision-stage models;
• Conversion-process models;
• Response models;
• Network models; and
• Outsourced
Departmental-stage models
• Based around the linear model of innovation, where each department
is responsible for certain tasks
• ‘over-the-wall’ models
Departmental-stage models
• Departmental-stage models do not pay much attention to the actual
activities, but merely provide insight in the departments that are usually
involved in the NPD process.
Activity-stage models and concurrent
engineering
• Similar to departmental-stage models but emphasise activities conducted,
provide a better representation of reality.
• Facilitate iteration of the activities through the use of feedback loops
(departmental-stage models do not)
• Concurrent engineering or simultaneous engineering approach: focus
attention on the project as a whole, rather than the individual stages,
primarily by involving all functions from the outset of the project
Activity-stage models and concurrent
engineering
Cross-functional models (teams)
• The cross-functional teams (CFT) approach removes many of limitations:

communications between different departments; projects frequently
would be passed back and forth between functions.
• Having a dedicated project team representing people from a variety of
functions
• Requires a fundamental modification to an organisation’s structure
Decision-stage models
• Considering the new product development process as a series of decisions
that need to be taken in order to progress the project (Cooper and Edgett,
2008)
• Facilitate iteration through the use of feedback loops
• A criticism of these models is implicit rather than explicit
Network models
NEW SERVICE INNOVATION
• Knowledge-intensive business services (KIBS)
New services and new business models
Characteristics of services
New service development models
•Stage-Gate® models:
•Besides different stages of the product development process, the model also includes certain
gates where decisions are given on the basis of the information generated in the previous
groups of activities.
•These gates represent the review points for the preceding stages
•More comprehensive and action-oriented process compared to their predecessor –sequential
new product development models
•Limitations: costly, time-consuming and overly bureaucratic processes. Each stage of the process
is needed to be completed before proceeding to the subsequent stage; increase the
communication problems across different departments
Concurrent service development models
• The objective of this approach is to consider the whole service

development processes rather than individual stages.
• Communication is improved and expertise of all departments is employed
• Relatively faster and less costly compared to sequential service
development models
• Avoids potential design errors that may arise in the future stages
• Limitations: different people from different departments create problems
during collaborative working; increase in time to market and costs
Service innovation and the consumer
• The role customers play in services is more crucial relative to
manufacturing products
• Customer as resource, customer as co-producer and customer as user
• The co-creation of e-service innovations is being used by many firms to
improve their performance
• ‘user toolkits’ can facilitate firms to understand better the precise needs
and desires of customers.
• Consumer communities that enable consumer-to-consumer interaction
can facilitate problem solving concerning the usage of toolkits in the
consumer domain, thereby reducing operational costs

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Chapter 6

New product development and Service innovation

Diversification diversified growth exist through forward, backward and horizontal

• New product lines (new to the firm)

• Additions to existing lines (line additions)

• Improvements and revisions to existing products

• The messy getting started period of new product development processes.

• The cross-functional teams (CFT) approach removes many of limitations:

• The objective of this approach is to consider the whole service

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