The Philosophy of New Products
September 2003 - BEK Best Practices Newsletter
Are you thinking of boosting revenue and profits
by offering a new product, but you don’t know the
best way to create a new product or how to tell if it will
be profitable?
New products are the lifeblood of your company
and one of the primary drivers of new growth. The decisions
you make have profound impacts on the profitability of the
company as well as potential impacts to your career.
The risk of failure of new products is quite
high*:
• Six out of seven ideas for new products never become
commercial successes
• Three out of four prototyped new products never
become commercial successes
• Two out of three launched new products never become
a commercial success
However, new products that survive generally
become very successful in generating high returns for your
company. Companies that proactively embrace the philosophy
of new products are often rewarded in turn: 15% of sales
and 22-30% of profits come from new products.
Definition of new products
Successful companies spend a considerable amount of resources
defining, developing and launching new products. In some
cases, you think you have a product, but you are really
selling technology. You can take that technology and package
it into one or more products that is a new product line
or that is targeted at a new market.
Generally speaking, the definition of a new product is:
• The product is part of a new product line versus
an existing product line
• The product’s technology is new to the company
versus using existing company technology
• The product is targeted at a new market versus an
existing market
Targeting markets for new products
70% of new products are targeted at existing markets, as
opposed to new markets. Existing markets have plenty of
product choices, numerous competitors and knowledgeable
customers. Many companies believe there is a lower risk
entering an established market. This is not the case, as
existing markets are extremely competitive. Most of the
failures of new products can be directly attributed to a
poor understanding of customer requirements, competitors
and poor market segmentation and targeting.
So what do you need to know in order to plan
profitable products that beat the competition? Understanding
the market, your customers and the competition, is vital.
There are four key areas for you to focus on.
Market analysis
• What is the market opportunity?
• How is the market segmented?
• What are your target markets?
Product strategy
• Does the product fit with the company objectives?
• What is the product roadmap?
• What are the customer requirements?
• What strategic partnerships will you have?
• What is the value to your customers?
• What impact will the new product have on existing
products?
Competitive landscape
• Who are your real competitors and what are their
products?
• What are the key differentiators?
Make vs. buy
• Will you develop this in-house or leverage third
parties?
• What are your sourcing alternatives?
• What criteria will you use to determine if you make
or buy?
Case Study: New Technology for Telecommunications
Problem: A young communications company
had some terrific new technology. When they tried to sell
the technology to prospects, they left it up to the prospect
to figure out how to best apply the technology. But the
sales weren’t happening. Why? The company wasn’t
focused on specific business problems that companies were
experiencing in targeted industries.
Solution:
In working with the telecommunications company, BEK Enterprises
was able to help them package their technology into a line
of new products targeted at specific markets. The products
addressed specific business challenges that, generally speaking,
companies had allocated some amount of budget towards in
order to address.
Read the full case
study here.
Four Key Factors for New Products
If you focus on the four key areas — market analysis,
product strategy, competitive landscape, and make vs. buy
— and can answer the questions you are well on your
way to successfully introducing new products into the market
and increasing your revenues and profits.
Please feel free to send us your new product
stories and questions. We encourage you to forward this
email to others.
For more information, contact BEK Enterprises
at:
Web: www.bekteam.com
E-mail:
Phone: 650-631-2800
* According to the Economic & Social Research
Council (ESRC)
Writing and editing services provided by Ink
Communications, Corp. www.inktc.com.
Copyright
Unless otherwise attributed, all material is written
and edited by
Blair Koch, BEK Enterprises. All rights reserved. 2003
You may reprint material from this newsletter in other electronic
or print publications provided the above copyright notice
and a link to http://www.bekteam.com
is included in the credits.
Please send me a copy
of the publication.
