n this fast changing economy manufacturers are having trouble just keeping up with both competitors and the changing needs of customers. This represents an opportunity because it suggests a very big need for line extension and modification to old products.
If innovation and new products are going to be America’s leading competitive advantage in the future then it is not enough to just become more innovative and do produce more products; the answer is to produce more successful new products that sell enough to justify their costs.
I define innovation as something that has been successfully brought into the world that has been justified by enough sales, while invention can be defined as a clever idea that is not necessarily successfully commercialized. A good analogy lies in the sport of mountaineering. It is not enough to suffer through all of the hazards and dangers of reaching the summit, you must get back down alive or it is not a successful climb. It is the same with new products. It is not enough to invent a clever product and to develop it through a complex stage-gate process; if you don’t sell enough new products it is a failure.
In this fast changing economy manufacturers are having trouble just keeping up with both competitors and the changing needs of customers. This represents an opportunity because it suggests a very big need for line extension and modification to old products. The starting point for most manufacturers in the new product process is to carefully assess their product lines to determine if they have (or don’t have) a competitive advantage – model by model.
While there is great potential in leading edge products like Apple’s I-Pod, or using brand new technologies for new products such as nano-technology where markets are not yet defined, however these types of new products require huge investments and are very risky.
From my experience with small and midsize manufacturers I think the most popular process of developing new products is still to invent a clever product and then go look for buyers. I call this the mousetrap approach because it is based on the assumption that if you build a better mousetrap, the market will beat a path to your door. Even though the failure rate is 6 out of 7 ideas it is still the method most manufacturers, particularly small manufacturers, use. Why, because it is much easier to devote your time to the joy of inventing something then to spend a lot of time finding out if prospects really want to buy it. Second, the mouse trap approach does not require leaving the factory and going into the market place to find out whether there are enough buyers to justify the costs of developing it. The fact remains that regardless of how unique or clever the product is, if customers don’t buy enough of the new product the project will be a failure.
The alternative to “the mouse trap approach” is get input from the external market place. This is really an old idea that has been re-packaged under the banner of open innovation. This approach is about doing interviews with customers and prospects, but it is also about defining changes and trends in the market, using new technologies in your products, or licensing technologies from partners. This also includes collaborating with customers to develop a product for them as well as interviewing industry gurus and doing competitive intelligence.
The following are some examples that will explain different approaches to developing new products using open innovation techniques.
