What you’ll learn to do: describe the new-product development process
We have considered the role of new products throughout this module. It is important to introduce new products in order to have a balanced portfolio containing products at the various stages of the product life cycle. We have not yet focused on ways of creating successful new products.
In this module we will discuss a standard, somewhat fixed new-product development process. The logic behind this rather rigid process is that it requires a great deal of discipline to create new products. It’s expensive to launch a successful new product—but it’s far more expensive to launch an unsuccessful products. For these reasons, organizations invest a lot in the creation and refinement of their new-product development processes. It helps them raise the odds that they’ll be successful.
Consider the following dramatic product failures that, in hindsight, should have been screened out much earlier in the product development process.
In 1998 Frito-Lay introduced WOW! chips. These snack chips contained significantly less fat and fewer calories than other snack foods thanks to the fat substitute Olestra. Initially, the product performed well, generating $347 million in 1998 and making WOW! the best-selling potato chip brand that year. The success was short lived, though. Olestra had an unpleasant side-effect: soon customers complained of cramping, incontinence, and diarrhea—in some cases requiring hospitalization—after eating the chips. Frito-Lay’s parent company, PepsiCo, spent $35 million on an advertising campaign to turn things around, but sales plummeted nonetheless.
In 2011 Hewlett Packard launched a product designed to go head-to-head with Apple’s iPad. The product boasted a higher number of performance features than the iPad, but it had none of the “cool factor” that drew customers to Apple. MarketWatch reported, “Despite large-scale press events and promotions, the HP TouchPad was a colossal failure and was discontinued almost immediately. As a result of the TouchPad’s failure, the company wrote off $885 million in assets and incurred an additional $755 million in costs to wind down its webOS operations, ending all work on the TouchPad’s failed operating system.”
To repeat: developing new products creates opportunity and risk.