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Epidemiology and Health Promotion Presentation

Discussion Questions:

1.How does Skullcandy’s new product development activities affect its ability to (a) maximize the fit with customer needs, (b) minimize development cycle time, and (c) control development costs?

2.What are some of the ways that Skullcandy’s size and growth rate influence its development process?

3.What are the advantages of using Computer Aided Design (CAD) and stereolithography to create prototypes of Skullcandy’s headphones?

4.If you were advising the top management of Skullcandy about new product development processes, what recommendations would you make?

•In many industries, the ability to develop new products quickly, effectively, and efficiently is the single most important factor driving firm success.

•Despite the intense attention paid to innovation, failure rates are still very high.

More than 95% of new product development projects fail to earn an economic return.

•This chapter summarizes research on how to make new product development more effective and efficient.

•For new product development to be successful, it must achieve 3 sometimes conflicting goals.

•1. Maximizing the product fit with customer requirements.

•The product must offer more compelling features, greater quality, or more attractive pricing than competing products.

•Failure to achieve this imperative may occur:

•Because the firm may not have a clear idea of which features customers value most.

Because firms may overestimate a customer’s willingness to pay for particular features

•Because firms may have difficulty resolving heterogeneity in customer demands

•2. Minimizing the development cycle time.

•Products may fail if they take too long to bring to market.

•Customers may be otherwise committed.

•Early market arrival provides more time to develop complementary goods [CG]

•Early arrivals have an installed base and CG advantage over later offerings

•Impacts cost of development:

•Many development costs relate to time.

Paying employees and the cost of capital

•A slow to market firm is unlikely to fully amortize thefixed costs of development.

•By the time products are introduced, demand has shifted.

•With a short development cycle, a firm can quickly upgrade its offering if design flaws are revealed.

•3. Controlling development costs.

Ballooning costs can make it impossible to recoup development expenses even if the product is a great success in the marketplace

•68% of North American firms, 58% of European firms, and 48% of Japanese firms report using senior executives to champion their NPD projects.

•Benefits of Championing:

•Senior execs have the power and authority to fight for project.

•They can facilitate the allocation of human and capital resources.

•They can gain access to resources.

•They can facilitate communication and cooperation among different functional groups of a firm.

Executive sponsors can improve the effectiveness of the development process

•Risks of Championing:

•The role as champion may cloud judgment about true value of a project.

•May suffer from escalating commitment and be unable to admita project should be killed.

•Concerned about their reputations, some may not cut their losses.

•Others may fear challenging senior executive.

•May benefit firms to develop “antichampions” and encourage expression of dissenting opinion.

•Champions should justify their projects on the basis of objective criteria.

The Development of Zantac

§In the 1970s, David Jack of Glaxo Holdings began working on an ulcer drug. Unfortunately, SmithKline Beecham beat Glaxo to market, introducing Tagamet in 1977.

§Jack decided to introduce an improved product, and implemented the first parallel process in pharmaceuticals to beat Merck and Eli Lilly to market. The compressed development process would shorten development time, but was also expensive and risky.

§Fortunately, Paul Girolami, Glaxo’s director of finance, chose to champion the project, and encouraged Jack to develop improvements to the product which would differentiate it.

By 1987, Glaxo’s Zantac was outselling Tagamet. Jack and Girolami were knighted, and Girolami became Glaxo’s chairman

Five Myths About Product Champions

•Markham and Aiman-Smith argue that a number of myths have become widely accepted about champions.

•Myth 1: Projects with champions are more likely to be successful in the market (many factors determining market success are typically beyond champion’s control)

•In actuality, many factors

•Myth 2: Champions get involved because they are excited about project rather than from self-interest (results suggest that champions more likely to support projects that benefit their own departments)


Epidemiology and Health Promotion Presentation
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