cessful new idea it hopes to find. If top management wants four successful new prod-
ucts in the next few years, it will have to budget at least $56 million (414 million)
for new-product development.
ORGANIZING NEW-PRODUCT DEVELOPMENT
Companies handle the organizational aspect of new-product development in several
ways.^8 The most common are:
■ Product managers:Many companies assign responsibility for new-product ideas to
product managers. In practice, this system has several faults. Product managers
are so busy managing existing lines that they give little thought to new products
other than line extensions. They also lack the specific skills and knowledge
needed to develop and critique new products.
■ New-product managers:Kraft and Johnson & Johnson have new-product managers
who report to category managers. This position professionalizes the new-product
function. However, like product managers, new-product managers tend to think
in terms of modifications and line extensions limited to their product market.
■ New-product committees:Many companies have a high-level management commit-
tee charged with reviewing and approving proposals.
■ New-product departments: Large companies often establish a department headed
by a manager who has substantial authority and access to top management. The
department’s major responsibilities include generating and screening new ideas,
working with the R&D department, and carrying out field testing and commer-
cialization.
■ New-product venture teams:3M, Dow, Westinghouse, and General Mills often as-
sign new-product development work to venture teams. A venture teamis a group
brought together from various operating departments and charged with develop-
ing a specific product or business. They are “intrapreneurs” relieved of their
other duties and given a budget, a time frame, and a “skunkworks” setting.
Skunkworksare informal workplaces, sometimes garages, where intrapreneurial
teams attempt to develop new products. See the Marketing Insight box, “New-
Product Development Not Just for Engineers: The Wisdom of Cross-Functional
Teams,” for more information on how companies benefit from cross-functional
teamwork when developing new products.
The most sophisticated tool for managing the innovation process is the stage-gate
systemused by 3M and a number of other companies.^9 The innovation process is di-
vided into several stages. At the end of each stage is a gate or checkpoint. The proj-
ect leader, working with a cross-functional team, must bring a set of known deliverables
to each gate before the project can pass to the next stage. To move from the business
plan stage into product development requires a convincing market research study of
consumer needs and interest, a competitive analysis, and a technical appraisal. Senior
chapter 11
Developing
New Market
Offerings^333Estimated Cost of Finding One
Successful New Product (Starting
with 64 New Ideas)TABLE 2. 1
Cost per
Number Pass Product Total
Stage of Ideas Ratio Idea Cost