Product Portfolio Management (PPM) & New Product Introduction (NPI)

1. Product Portfolio Management (PPM) & New Product Introduction (NPI) • Presenter: Pat.Scanlan@ericsson.com • Purpose: In-company Improvement Progamme PPM final year project for MSc Technology Mgt (UCD) • Material Based on: works of Cooper, Edgett & Kleinschmidt; AD Little, Urban & Hauser.

2. New Products Challenges • Cooper’s studies with 35 leading firms in various industries... • In last 10 Years New Products’ Slice of Companies SALES revenues have increased from 33% -> 50% and PROFIT from 22% -> 40% • EXPECT to increase rate of product introductions by 21% over next 5 years. • Innovation drives companies’ investment value….

3. Some Bad News too ! New product management is in trouble !! • 46% of product development resources goes on “losers” and “no-brainers” projects • 1/7 Concepts are Winners • 1/3 of new products fail at launch (e.g. Iridium, Edsel) • 66% of CEOs “somewhat” or “very disappointed” with their firms new product performance.

4. 8 Critical Success Factors(CSF) (Measurement Criteria) in product development life-cycle • 1. Product (uniqueness & superiority)-> 7 ingredients in recipe • 2. Strong Market Orientation • 3. More Spending Pre-development work - “Up front Homework” • 4. Sharp & Early Product Definition (Voice of Customer) • 5. Appropriate Organisational Structure (X Functional Teams) • 6. Sharper Project Selections Decisions ( Hi Focus ) • 7. Speed => competitive advantage (Reduce cycle time) • 8. Hi Q, Disciplined & Systematic New Product Process.

5. PRODUCT CSF#1the 4 peas ! • list price • discounts • allowances • payment period • credit terms • promotion • advertising • sales force • public relations • direct marketing Price Promotion Place Product • channels • coverage • locations • inventory • logistics • Features • Design • Variety • Packaging • Services • Warranties

6. PRODUCT Doughnut (CSF#1) Standards & Procedures Additional Software Training & Support Additional Hardware GENERIC PRODUCT Cables & Equipment System Integration Installation & Debugging

7. PRODUCT Differentiation CSF#1 & MARKET Studies CSF#2 • What is customer doing when using product ? • How ? • Where ? • Who ? • What ? • When ?

8. CSF#1 Product Superiority (7 Ingredients) • 1. Meets customer needs better than competitors • 2. Is better quality than competitor’s ( from customer view ) • 3. Has Unique benefits/feature for the customer (Differentiated) • 4. Solves customers problems • 5. Reduces customers costs ( better value in use ) • 6. Has highly visible benefits • 7. Is innovative or novel Concept Tests Rapid Prototype competitive analysis needs & wants study Customer Trials & Test Market

9. PRODUCT CSF#1 & MARKET CSF#2 Technical Products : Adoption Life Cycle Early majority Pragmatists Stick with the herd Late Majority Conservatives Visionaries ! Get ahead of the herd Laggards Sceptics No Way ! CHASM 33% Techy’s Innovators try it ! 13.5% 33% 17% 3.5% In the chasm => (OS/2, NeXT, AI, OCR, CASE Tools, ISDN, Video Conferencing )

10. Market Orientation CSF#2 • Increased Market Knowledge, Research & Contact • user needs and market need satisfaction • Key FAILURES Reasons : “poor market research & analysis” • Idea generation : 75% of success products come from customer generated ideas • Product design : Market Research is input into Product Design • Development : constant customer contact • Post Development : trials, test markets to verify/tweak market acceptance • Launch : well designed, targeted, resourced guided by good marketing plans based on solid market information.

11. CSF#3 More “Up front Pre Development Work” • Screening • Market Studies • Technical feasibility • Business Case Development • Economically Attractive ? • Target Customer • Positioning • Features, attributes, performance • Can it be done ? Cost ? • HOW ? Better Project Definition Better Speed of Development

12. CSF#3 Typical role of CEOs in new product programmes (Ed Roberts. Technology Review 1977) Study Design Develop Production Marketing Ability to influence product outcome Activity profile of typical CEO

13. CSF#4 Sharp & Early Product Definition • Target Market Definition • Product Concept & Benefits to be delivered (in language of customer) • Positioning Strategy ( including Price ) • Features, Attributes, requirements & specifications…(what’s new ?)

14. CSF#5 Organisational Structure • Cross Functional Teams • Team Empowerment • A defined and accountable Team Leader

15. CSF#5 Leverage of Resources/Skills (Assess Position)

16. CSF#6 Predictable New Product Success ! • Sharper Project Selection Decisions : SCORECARD to yield better focus. • Classic Problem : Too Many Projects and Too few resources • Why ? A Failure to Focus • We need “Funnels” not “Tunnels” Idea Pre-study Feasibility Develop Launch

17. CSF#6 Focus on Successful Projects • Use Score Card Technique with round table assessment & agreement ( e.g. business, r&d, market, finance ) • Apply a standard criteria at all decision gates using scorecard • Include more quantifiable financial criteria e.g. forecasted sales, ROI, payback period, NPV, IRR, DCF as a judgement criteria. • Assess Risk e.g. probabilities of technical, commercial success

18. R&D Portfolio CSF#6 Technical Competitive Position Dominant Strong Favourable Tenable Weak Probability of Technical Success Embryonic Growth Mature Aging Technological Uncertainty & Uniqueness Increases

19. Scoring & Ranking CSF#6 Example Scoring Template Ranking of Projects on Financials & Non Financial Indicators

20. CSF#6 R&D Portfolio for Ericsson A Personal View of How we can view our products ! DATA Where we want to be New Telecoms World More products & combined solutions for mobility, voice and data communication Where we are, maybe ! TELECOM / VOICE MOBILITY

21. CSF#7 Speed ! • But not at the expense of quality of execution ! • Speed yields Competitive Advantage : beat competitors to market • Speed yields higher profitability: • revenues are realised earlier ( time value of money ) • more revenues are realised • Speed means fewer surprises • reduces odds that the market environment has changed

22. Use PROPS = CSF#8Overlay Stage Gates (Go/Kill) Decision Points • R&D + Marketing + Finance participants at each decision meeting • Senior Management buy-in • “non subjective criteria” SCORING MODEL at Gates • Financial => Estimate Commercial Value of Projects • ECV = { [ (NPV x Pcs x SI) - C ] x Pts} - D • Non financial ( 5 dimensions ) • 1. Probability of Technical Success • 2. Probability of Commercial Success (product c.a & market attractive?) • 3. Reward (NPV,return,payback time,certainty,cost+TTM) • 4. Business Strategy Fit • 5. Leverage of company’s resources & skills • (Idea Selection)Index Attractiveness= (PROBtechsxs x PROBcommsxs x Profit )/Devcost

23. BEFORE The Project Plan of Action • Interview / Survey analysis of current/past methods (8 CSFs) • Propose agreed changes/improvement on specific CSF • implementation plan (extent which are priority factors ? what CSF needs fixing ?) • Make fixes and implement a specific scoring technique for problem CSF areas • Record changes • Note changes/improvements • Post interview/survey (relevent CSF’s) AFTER