As companies become more global, they are carefully considering how best to expand their product and service offerings. Therefore, the product development strategy is crucial to their success. Nevertheless, many companies are on the defensive and just want to maintain their market position.
However, staying on hold is definitely a way for companies to fall behind. Innovative thinking that enables product/service growth is too sure a path to sustained success. In today’s discussion, we will explore the importance of product development in growing businesses, especially in a competitive marketplace.
Getting started with new product offerings is not easy. According to market research, about 75% of consumer and retail products don’t even make $7.5 million in their first year. Clayton Christensen, a professor at Harvard Business School and the world’s leading expert on disruptive innovations, assumes that the failure rate of new products could actually be as high as 95%. Product failure rates refer to the number of products that are launched commercially but fail.
Geoffrey A. Moore, author of “Crossing the Chasm” , maintains on the challenges of product deployment: “…the less successful product is often arguably superior. There ‘s no point in this grumpy and disgruntled squad disappearing off the stage without vengeance among themselves to find a scapegoat, and who are they toasting to? With unfailing consistency and unfailing accuracy, all fingers point to the Vice President of Marketing. It’s marketing’s fault!” As such, new product development is a risky endeavor for executives in these critical positions, as well as for the company as a whole.
Companies striving for sustainable growth must frequently and consistently develop new products and services. Philip Kotler and Kevin Keller, authors of Marketing Management : “In an economy of rapid change, continuous innovation is a necessity. Highly innovative companies are able to identify new market opportunities and seize them quickly.”
With all measures to develop new products, companies should think strategically about their product development. Alexander Chernev , the author of Strategic Marketing Management , goes on to argue that managing growth is the most preferred path to profitability over simply cutting costs.
market tests
He outlines four key issues in managing growth, including: (a) acquiring and maintaining a market position, (b) managing sales growth, (c) new product Businessacademy1 development, and (d) product line management. Chernev claims: “New products and services are the key to sustainable growth. They enable companies to gain and maintain their market position by using the changes in the market to create superior customer value.”
With this in mind, new product development means the ability to turn a product or service idea into a tangible offering that customers want. More products go through the following steps for market consumption: (a) idea generation, (b) concept development, (c) business analysis, (d) product development, (e) market testing, and (f) business deployment.
The Ansoff Matrix is a strategic tool for product development, consisting of market penetration, market development, product development and diversification. In market penetration strategy, companies seek to grow in existing markets using their existing product offerings. With this strategy in mind, companies are trying to increase their market share. In a market development strategy, companies try to expand their existing offerings into new markets and attract new buyers. In product development strategy, companies try to create new products and services that target their existing buyers.
In a diversification strategy, a company seeks to increase its market share by introducing new product offerings while entering a new market. Diversification is the riskiest approach due to the simultaneous implementation of new changes (new product, new market). Kotler and Keller continue to emphasize the difficulty of sustained product success: “It’s becoming increasingly difficult to identify blockbuster products that will transform a market, but continuous innovation can force competitors to catch up.” The concept sounds simple. However, it is fraught with problems.
Undoubtedly, many companies know that product development is a risky business. Although many consumers proudly proclaim the success of many innovative products like Apple and Google, the same buyers are unaware of the numerous failed product launches in this country. In our discussion, I highlighted the importance of product development for business growth, especially in a competitive market. Failure often leads to innovation.
The great American inventor Thomas Edison had many failures himself, but learned from them how to innovate: “I didn’t fail. I’ve only found 10,000 ways that don’t work.” Similarly, today’s businesses can thrive when they understand how to strategically deploy their products and services in the marketplace. Although failure carries tremendous danger, it also carries the possibility of unanticipated growth. Don’t wait until it’s too late.