With the aftermath of globalization, companies are thinking carefully about the best ways to expand their product and service offerings. Therefore, your product development strategy is critical to your success. However, many companies are in defensive mode and simply want to maintain position in the market.
However, remaining in a holding position is a definite way for companies to fall behind. Innovative thinking that enables product/service growth is too sure a path to sustainable success. In today’s discussion, we will explore the importance of product development for business growth, especially in a competitive market.
Jumping into new product offerings is not easy. According to market research, approximately 75% of consumer packaged goods and retail products fail to earn even $7.5 million in their first year. Harvard Business School professor Clayton Christensen, who is the world’s leading authority on disruptive innovation, suggests that the failure rate of new products can be as high as 95%. Product failure rates relate to the number of products that are released commercially but fail.
Geoffrey A. Moore, the author of crossing the abyss, maintains the challenges of product implementation: “…the less successful product is often arguably the superior. Not content to slink off the stage without some revenge, this surly and bitter team looks to each other for a scapegoat, and what?” Who do they want? All fingers point to the VP of Marketing. It’s marketing’s fault!” Therefore, developing new products is a risky proposition for the senior executives who fill these critical positions, as well as for the organization as a whole.
Companies that want sustainable growth must develop new products and services frequently and constantly. Philip Kotler and Kevin Keller, authors of MarketingManagement“In a rapidly changing economy, continuous innovation is a must. Highly innovative companies are able to quickly identify sixteen new market opportunities.”
When taking any action on new product development, companies must think strategically about their product development. Alexander Chernev, the author of Strategic Marketing Managementfurther argues that managing growth is the preferred route to profitability compared to simply cutting costs.
Describes four key issues in managing growth, including: (a) gaining and defending market position, (b) managing sales growth, (c) new product development, and (d) line management of products. Chernev maintains: “New products and services are the key to sustainable growth; they enable companies to gain and maintain market position by taking advantage of market changes to create superior customer value.”
That said, new product development means having the ability to take a product or service idea and turn it into a tangible offering that customers want. The following are the steps most consumer products go through: (a) idea generation, (b) concept development, (c) business analysis, (d) product development, (e) market testing and (f) commercial implementation.
Tea Ansoff matrix it is a strategic tool for product development, consisting of market penetration, market development, product development and diversification. In the go-to-market strategy, organizations seek to grow by using their existing product offerings in existing markets. With this strategy in mind, organizations try to increase their market share. In a market development strategy, companies try to expand into new markets as new buyers using their existing offerings. In product development strategy, companies seek to create new products and services targeted at their existing buyers.
In a diversification strategy, an organization tries to increase its market share by introducing new product offerings while also entering a new market. Diversification is the riskiest approach due to the simultaneous realization of new changes (new product, new market). Kotler and Keller further maintain the difficulty of sustainable product success: “It’s getting harder to identify blockbuster products that will transform a market, but continued innovation can force competitors to catch up.” The concept sounds easy. However, it is plagued with problems.
To be sure, many companies know that product development is a risky business. Although many consumers will proudly proclaim the success of many innovative products like Apple and Google, these same buyers are not aware of the many product launch failures in this country. In our discussion, I demonstrated the importance of product development for business growth, especially in a competitive market. Failures often lead to innovation.
The great American inventor, Thomas Edison, had his share of failures, but he learned to innovate from them: “I haven’t failed. I just found 10,000 ways that won’t work.” Similarly, companies today can also achieve success if they know how to strategically implement their products and services in the market. Although there is enormous danger in failure, there is also the opportunity for unforeseen growth. Don’t wait until it’s too late.
© 2017 by DD Green