New Product Development Strategy

An effective new product development strategy must go beyond efforts to achieve core market growth. A robust strategy must consider all possibilities and generate growth and revenue along several potential avenues of innovation.

When it comes to formulating a new product development strategy, there are four potential avenues of innovation: (1) core market growth, which consists of making improvements to products and services that already exist in order to help customers get a job done better, (2) adjacent or related market growth, which is improving existing products and services to help customers get related or ancillary jobs done (for example, by adding a tongue cleaner to a tooth brush), (3) new market creation, which involves creating a new product or service for customers who are trying to get a job done but cannot because no solutions or only ad hoc solutions exist, and (4) disruption, which is defined as the creation of a technology that enables a new set of customers to perform a job that only specialists could previously perform. Crest Whitestripes, for example, made it possible for people to whiten their teeth on their own, eliminating the specialist – the dentist.

While core market growth is nearly always an important part of the new product development strategy, most companies hesitate to pursue the other three avenues of growth – even though they may offer higher returns. A success in the area of new market creation, for example, is said to deliver ten times more profit that a success in that core market.

A well balanced new product development strategy often allocates resources as follows:

65% core market growth

15% adjacent or related market growth

15% new market creation

5% disruption

To implement such a new product development strategy means that a company must hire and train people to be responsible for areas of growth outside the core market. Addressing this issue is a stumbling block in many firms.

Once a company has defined its new product development strategy, it commences the innovation process – which is the process of devising solutions that address the customer's unmet needs in the areas chosen for pursuit. The outcome-driven innovation methodology enables companies to successfully execute all four of these new product development strategies. In each of these contexts, the organization is trying to devise a solution that addresses the customer’s unmet needs. The outcome-driven methodology is designed to uncover the unmet needs and address them, regardless of context.

Once a concept has been defined and approved by management the concept enters the product development process – the process by which the concept gets transformed into product specifications, designed, tested and ultimately released into manufacturing.