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Apply the four-stage New Product Development model shown in page 325 of your text book

(Concept generation, Project assessment and selection, Product development, and Product

commercialization) to Philips new product development strategies or programs identified

in this case study.

NewConceptDevelopment atPhilipsPhilips

has aproud historyof innovation and has been responsibleforlaunchingseveral ‘new tothe world’product categories, like X-raytubes inits earlydays, theCompact Cassette in the1960s followed bytheCompact Disc in the1980s, and morerecentlyAmbilight TV. These successesarelinked toPhilips’ deep understandingof innovation, enablednotablybysignificant R&D investments and strongtraditionsin design.Since2003, Philips has been engaged in a market-driven changeprogram to rejuvenateits brand and approach to newproduct innovation with expertise on end-user insights. Sixyears later, the end-user insights approach has significantlyinfluenced the wayPhilipsinnovates, in line with the new brandpromise of‘senseand simplicity’.Yetin 2000, newproduct innovation was still predominantlyshaped byR&D, particularlyin itslightingbusiness.In thatsameyear, Philips incurredanet loss of EUR 3206million. Management was focused on dissolvingthe Components business, returningthe Semiconductor business to profitability,simplifyingthe organization and makingcostsavings.Philips’ role in the globallightingindustryhadalways been dominant. PhilipsLightingwas Philips’ ‘cash cow’; it operated in amature, low-growth oligopolymarket in which findingnew approaches torealizebottom-linegrowth was themain challenge. End-userdriven innovation was anew approach to innovation, perhaps trulya‘radical’ onegiven thedivision’s history. Howwas this new approach piloted?Exploratory StagesFollowingAlbert Einstein’s notion that‘insanityis doingthe same things overand over again and expectingdifferent results’, senior managementrealized that somethinghad tochange. Consequently, inearly2001 the ChiefTechnologyOfficerof theLampsbusiness initiated aset ofcomplementaryactivities of an exploratorynaturein order tocatalyzelearningopportunities and help shapeaplatform fora futurevision. Theseactivities were:•A vision team in the CentralLightingDevelopmentLab. This involved fouremployees with an equal maleand femalerepresentation, two of thepeople werenewto the development lab, the other two werewell establishedand anchored informal leaders. The team’s role was to bring outside inspiration into thedevelopmentorganization via lectures, workshops,visits and books. Theseactivitiesresulted in thestartof two ‘out of the box’ innovationprojects in 2002, one ofwhichled to the invention ofAmbilight TV.•Anexploratoryautomotiveproject forcar headlights. This involved pilotinga combination of the DialogDecision Process (DDP)1 and aPhilips Design innovation process based on socio-cultural insights.•A PhilipsLighting‘NewBusiness Creation’(NBC)group. This involvedateam of four senior managers and onelateral thinker, whoserolewas to challengemainstream business assumptionsbyaskingsimple questions.Established as aneworganizationalunitinasixmonthperiod,theNBCgroupwassetuptoprovidetheenvironmentfor‘out ofthebox’businessdevelopment.Once theunitwascreated,themainopenquestionwas how to fill the NBC ideapipeline? ThinktheLighting FutureProjectBuildingon theexperiences of thesethreeexploratoryprojects and usingother Philips knowledgeonradical innovation, the ‘Think theLightingFuture’project (TTLF)was defined at the end of2001.It wasestablished in response to the CEO’s ambition to identifya10%top-line growth opportunity(approximatelyEUR 500 million) which could beachieved in a five to seven year time-frame. Seniormanagement was instrumental ininitiatingthe TTLFproject. Theproject had threetangibledeliverables for theend of 2002:•Clarifyalternative scopedefinitionsforPhilipsLightingthat could deliver10%top-line growth in thelonger term.•Definetwo to threeNewBusiness Creation projects.•Defineaprocess forknowledgesharingand updatingtheNBC long-list.Inaddition, therewereseveral ‘intangible’aspirations forthe project–forexample, it was envisaged that itwould:•Providea‘growingin opportunity’for theseniormanagement team, thuscreating commitment foradditional scope.•Prepareforimplementation (avoid ‘not invented heresyndrome’)forcritical mass of colleagues.•Radiate, let involved colleagues experiencethat thewholeexercise is about doing different things... and doingthem differently...•Create theconfidencetodeal with astretchingvision.‘Think theLightingFuture’was a‘presidential project’ with coreteam participation from eachLightingbusinessgroup,Philips Design and Philips Research: which was–next to its scopeof10years ahead –an innovation in itself.In addition, special attention was put on forminga diverseteam to enable different views to becaptured.Importantlythis project provided opportunities forlearningand improvement ofthecorporateinnovation process–forexample, the original three-step design process (informationsharing, ideation, ideadevelopment and concept definition) was expanded byafourth step(translationto action).Emphasiswas alsoplaced on creatingbroad ownership from the beginning bothin management via theDDPapproach and inthe executingfunctions viamultifunctional workshops. Subsequentlythedialoguedecision process was furtherexpanded to a ‘trialog’process involving the decision team, thecoreteam (i.e. the decisionpreparation team) and theimplementationteam.Vital to orchestratingcommunication was the set-up ofThink theLighting Futureasan extendedDialogue(trialog)Decision Process around threekeyinnovation dimensions:•People –understandingand servingbothend-users’ explicit current as wellas their implicit emergingneeds.•Technology–understandingand usingcurrent andemergingtechnologyoptions to enable userrelevant functionality. •Business –understanding currentand emergingmarket characteristics anddynamics;applyingappropriateandfuture-proof businessmodels.Thirty-twocolleagueswereinvited to two workshops. Theycamefrom differentinnovation backgrounds (marketing,business development, R&D)and from differentLightingbusinesses, Designand Research teams.Maximal possibleglobal presencewas established. SinceTTLFwas ahighlyvisiblepresidential project, workshop participation was seen asanhonor. Theworkshops served severaltangibleand intangiblepurposes, including:•Enrichingthecore-teamwork byexistingcorporate knowledge.•Generation ofbusiness ideas seeds.•Preparingforlaterimplementation.•Buildinga‘performing’team aroundashared vision.All workshop flows andalltools used duringtheworkshops wereespeciallydesigned such that the holisticoutcomes became highlyprobable byequallyand simultaneouslyfocusingon the different dimensions:people and theirneeds, technologyenablingnew solution spaces and business includinggeneric competition and existingnext to emergingbusiness models facilitatingvalue creation.Bythe end of 2002, TTLFwasconcludedand wasregarded asasuccessfulexploration and visioningproject.It led to the selection of a‘theme’fornew business: AtmosphereProvider, which was about ‘empoweringpeople to becometheirown light designers’.Italsoled to three new business creation projects and delivered alistof ideas forNewBusiness Creation. However, no additional turnover hadyet beengenerated. Thereal work wasabout to start...AtmosphereProviderProgramInJuly2003 senior managementlaunched the‘AtmosphereProvider’program. Theprogram lasted two and halfyearsand wasgiven someexplicit and several implicit deliverables:•Bring‘AtmosphereProvider’asathemeto life.oCreate a‘need-scape’forthe new innovation area.oEnvisagethe boundaries/solution spaceof theinnovation and growth opportunities.•Initiate thecreation ofa related patent portfolio.•Provethe business potential bypilotingthethreenew business creation projects.•Exploration towards newbusiness proposition definition includinginitial product concepts.oPrototypingand market testing.oBusiness casedevelopment and transfer to mainstream business. And implicitly–•Preparefortransfer and scalingup. •Initiate the buildingofanAtmosphereProvidernetwork(with shared vision, creativity, cross-functional and discipline perspectives, embracingthe required newwayofworking, etc.).•Pioneer theend-userdriven innovation approach.Theprogram’sarchitecturewas designed to ensurecross-fertilization between the development of thebroader business theme and the threenewbusiness creation projects; emerginginsights from creatingthenew business werecaptured viafoundation documents; general observations derived from thetheme development werefed back into NBC projects.Thecoreof theprogramcomprised ateam of fourpeople: the overall program managerwho had led theTTLFproject andthreeproject managers,ofwhom onehad been aTTLFcoreteam memberwhilstthe othertwowerenewto PhilipsLighting.Over time,asmallsupport team became involved:alightingdesigner,anexperienced market researcher, a marketingspecialist and several colleaguesfromPhilips Design. Theteam was small and flexible; additional skills andcapacitywerebroughtin on an as-needed basis, which in turn requiredgood communication skills from theproject managersand the commitment from senior management to ensurethe needed resources weremade available to the teamwhen required.Initiation:•10 July2003 in the PhilipsLightingSeniorManagement meeting.Deliverables:•Bringthe AtmosphereProviderthemeto life.•Show proofpoints viabusiness potentialin thethreeselected projects.•Investment:EUR 2.85million from August 2003toDecember2005.Context ofassignment:•Cross-functional with impact on PhilipsLightinglevel beyondasingleBusiness Group, positioned underGlobalMarketing, unclear ownership on executivelevel, no standard processes or tools =>learn asyougo.Characteristics ofassignment:•Innovation foradditionalprofitablegrowth (out ofthe box), market-led, pioneering, emphasis on results inthe form of content, highrisk and highreward,phase1 ofchange management.Coreteam:•DorotheaSeebode, Gerard Harkin,BenedictevanHoutert, Paul Brulez, followed up byStefan Verbrugh (fromApril 2004).Extendedteam:•Markus Reisinger,Liesbeth Ploeg(from Dec.04),Ronald Dalderup (fromJan.05). Mindset:•Focus on results, commitment, dialogue.By the endof2005:•Intotal over 1800 peoplehad been involvedglobally,across and beyond Philips Lighting.•Three foundation documents werepublishedwithover 1000 copies distributed.•Patents: >50IDs submitted, >25 patents filed,>10 patents in pipeline.

Question: Apply the four-stage New Product Development model shown in page 325 of your text book (Concept generation, Project assessment and selection, Product development, and Product commercialization) to Philips new product development strategies or programs identified in this case study.

                                                                 Page 325 of the book

Figure 11.2 Product development funnel

Source: Derived from Wheelwright, S.C. and K.B. Clark (1992) Revolutionizing Product Development, New York: Free Press.

There are numerous other models in the literature, incorporating various stages ranging from three to 13. Such models are essentially linear and unidirectional, beginning with concept development and ending with commercialization. Such models suggest a simple, linear process of development and elimination. However, in practice the development of new products and services is inherently a complex and iterative process, and this makes it difficult to model for practical purposes. For ease of discussion and analysis, we adopt a simplified four-stage model which we believe is sufficient to discriminate between the various factors that must be managed at different stages:3

  1. Concept generation. Identifying the opportunities for new products and services.
  2. Project assessment and selection. Screening and choosing projects which satisfy certain criteria.
  3. Product development. Translating the selected concepts into a physical product (we'll discuss services later).
  4. Product commercialization. Testing, launching and marketing the new product.

Concept Generation

Much of the marketing and product development literature concentrates on monitoring market trends and customer needs to identify new product concepts. However, there is a well-established debate in the literature about the relative merits of ‘market-pull’ versus ‘technology-push’ strategies for new product development. A review of the relevant research suggests that the best strategy to adopt is dependent on the relative novelty of the new product. For incremental adaptations or product line extensions, ‘market pull’ is likely to be the preferred route, as customers are familiar with the product type and will be able to express preferences easily. However, there are many ‘needs’ the customer may be unaware of, or unable to articulate, and in these cases the balance shifts to a ‘technology-push’ strategy. Nevertheless, in most cases customers do not buy a technology: they buy products for the benefits they can receive from them; the ‘technology push’ must provide a solution for their needs. Thus, some customer or market analysis is also important for more novel technology. This stage is sometimes referred to as the ‘fuzzy front end’ (see Entrepreneurship in Action 8.1) because it often lacks structure and order, but a number of tools are available to help systematically identify new product concepts, and these are described below.

Innovation in Action 11.1

Samsung and the Rise of the Smartphone

Smartphones are a good example of continuous product development and innovation, often with lifecycles measured in months rather than years. Apple's entry into the mobile phone market with its various iPhone generations has received most attention, but Samsung is an equally interesting example of a product-development-led success strategy.

There is no accepted definition of a smartphone, or distinction between these and feature-rich phones. However, many accept that Samsung entered the global smartphone market in October 2006 with its BlackJack phone, which at that time was similar in name, appearance and features to the RIM BlackBerry (and indeed resulted in a legal challenge from RIM, similar to the legal disputes between Apple and Samsung in 2012). The BlackJack smartphone was launched first in the USA, via the operator AT&T, and ran Windows Mobile, and in 2007 won the Best Smart Phone award at CTIA in the USA. Just over a year later, the imaginatively named BlackJack II was launched in December 2008, followed by the third-generation Samsung Jack in May 2009, which became the highest-selling Windows Mobile phone series to date.

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