Managing the Innovation Process. Launch and Nurture stage

Transcription

1 Managing the Innovation Process Launch and Nurture stage

2 Source: Lercher 2016, 2017 Managing the Innovation Process The Big Picture

3 Source: Lercher 2016, 2017 Launch and Nurture stage

4 Launch and Nurture stage The Front End (FEI) New Product (Service) Development Opportunity Discovery Ideas (ideation Innovative and concept Concepts Realization Invention development) Products / Services (market launch) Nurture Knowledge FEI activities are less structured and less predictable ( fuzzy ) Development activities can be structured by a formalized and prescribed set of activities Based on Wheelwright / Clark 1992 Stages of the innovation process / time

5 Launch and Nurture stage - Definitions Diffusion is the description, explanation and forecast concerning the time period for a product or technology to spread within a market until a set demand frontier Based on Wheelwright / Clark 1992

6 From development & design to launch Finalize product design Finalize marketing plan Build, test, and review regular production process Develop, test, and implement mark. mix elements Conduct beta and gamma tests Scale-up production and have product for testing Develop launch control plan Market testing Modify product/process Modify marketing mix components Di Benedetto 1999 Launch and implement

7 Top ten mistakes in launch 1. Not planning early enough 2. Poor or non-existent marketing strategy 3. Failing to define target market 4. Launching too soon 5. Poor quality product 6. A rigid, inflexible launch plan 7. Insufficient funding 8. Overestimating results 9. Not delegating (trying to do everything yourself) 10.Not having a crisis plan

8 Managing the Innovation Process Launch and Nurture stage: Diffusion and Adoption

9 A user-focused analysis of technology diffusion Technology diffusion gives insights for analyzing technology or product related market conditions User-focused analysis Diffusion is the description, explanation and forecast concerning the time period for a product or technology to spread within a market until a set demand frontier. Unit of analysis usually is the single adopter (user) and his/her decision to use the respective product for the first time. The aggregate of all user adoptions in a market represent the diffusion of the product in that market. Diffusion curves represent the cumulated adoption curve An adoption curve shows the relative or absolute amount of adoptions within a certain time frame Number of users time

10 A user-focused analysis of technology diffusion Typical shape of diffusion and adoption curves Adoption: First time usage of a new product (technology) in a given market at a given time Rate of Adoption: Percentage of all potential users that try new product (technology) for the first time. An adoption curve shows the relative (or absolute) amount of adoptions within a certain time frame. Diffusion: The cumulated adoption of a new product (technology). It describes the period for a product or technology to spread within a market until a set demand frontier. The aggregate of all user adoptions in a market represent the diffusion of the product in that market. Diffusion curves represent the cumulated adoption curve An adoption curve shows the relative or absolute amount of adoptions within a certain time frame time Number of users

11 Diffusion curves in reality: Diffusion rates for communication technologies, USA,

12 Bass Model: Forecast of Product Diffusion The Bass model (1969) is a sales growth model that predicts future product class sales for a durable good, using historical product sales levels. Managerial estimates (based on similar products) of initial probability of trial (the probability that a purchase will be made early in the introductory phase of the Product Life Cycle) and of imitation or diffusion rate (reflecting the influence of positive word-of-mouth communication) are also required. Given these estimates, the sales of the product class at time t are estimated as: s(t) = p * m + [q p] * Y(t-1) - (q/m) * [Y(t-1)] 2 where p and q are the initial trial probability (innovation) and diffusion rate parameters (imitation) m is the number of potential buyers, and Y(t) is the total (cumulative) number of purchases by time t.

13 Applying the Bass Model: Forecasts of Product Diffusion Product/ Technology Innovation parameter (p) B&W TV Color TV Room Air conditioner Clothes dryers CD Player Cell telephones Imitation (diffusion) parameter (q) Steam iron Microwave Oven Hybrid corn Home PC A study by Sultan, Farley, and Lehmann in 1990 suggests an average value of 0.03 for p and an average value of 0.38 for q.

14 Managing the Innovation Process Launch and Nurture stage Sales Forecasting: ATAR model

15 The Core Question of Sales Forecasting Example: Forecasting the Demand For Satellite Radio In 2000: Forecast for 2007: 36 million (communicated to investors) In 2001: Revised forecast: 16 million By end of 2006: Actual subscribers: 11 million What kind of information do we need to estimate the future sales volume of an innovation? Why is getting this information a challenge for many firms and what is the larger problem?

16 The ATAR model: Awareness Trial Availability Repeat A T A R Source: Crawford & Di Benedetto 2011

17 The A-T-A-R Model: Definitions & Measures Buying Unit: Number of potential customers (persons or departments / buying centers) Aware: Is the buying unit sufficiently informed to stimulate trial (i.e., are they knowledgeable enough?) Has it heard about the new product with some characteristic that differentiates it? Trial: Usually means a purchase or consumption of the product. Can be actual in-home trial, on-site trial, vicarious trial (triers share results with non-triers) depending on the product type. Usually requires some expense to get the trial supply, and enough time to decide whether the product was any good. Available: If the buyer wants to try the product, will the effort to find it will be successful? Can the buyer easily get to the new product? Can be measured in percent of outlets carrying product, or ACV ( all commodity volume ) i.e. percentage of market that has access to product in local distribution channels Repeat: The product is bought at least once more, or (for durables) recommended to others. A measure of how successful the trial was and how pleased the buying unit is. Can be the actual repeat rate, or a proxy could be a statement of satisfaction level or how likely the buying unit would recommend it to others.

18 A simple application of the A-T-A-R Model 10 million number of owners of video cellphones A T A R x 40% x 20% x 70% x 1.20 x $50 Percent awareness after one year Percent of aware owners who will try product Percent availability at electronics retailers Measure of repeat (20% of customers buy a second phone) Unit Margin (Price per unit ($200) minus trade margins and discounts ($100) minus unit cost at the intended volume ($50) = $33,600,000 Expected Profits

19 Forecasting Satellite Radio Sales Using Purchase Intentions in the ATAR model In 2000, 213 million vehicles in U.S. 95% availability, 40% awareness. Market potential = 213 million x 95% x 40% = 81 million. Assume half can afford satellite radio = 40.5 million. Percentage that will be among the first to try the new technology = 16%. Forecast for first year = 40.5 million x 16% = 6.4 million. Projected yearly growth rate = 10%. Assuming this growth rate, by end of 2006, expected total sales = about 10 million. Not too far from the attained number = 11 million! But very different from communicated numbers to investors (36 million users)