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Winning IS Everything
New Products Warfare
Companies everywhere are engaged in a new products war. The battlefields are
the marketplaces around the world for everything from consumer electronics to
new engineering resins, from potato chips to computer chips.
The combatants are the many companies who vie for a better position, a better
share, or new territory on each battlefield or marketplace. They include the
large and well-known combatants-the IBMs, Procter & Gambles, GEs, Du Ponts,
and 3Ms, as well as an increasing number of foreign players-BASF, Sony, ICI,
JVC, and Siemens. More recent entrants have gained prominence in the past few
decades because of new product victories: Microsoft with computer software,
Glaxo with pharmaceuticals, Hewlett-Packard with laser printers, Nortel with
telecommunications equipment, and Intel with computer chips.
The costs of this warfare are enormous. By the 1990s, the cost of R&D in
the G-5 countries* had exceeded one billion dollars per day! That's far higher
than the cost of any recent military war.1 And as much as 5 percent of national
economies are devoted to this new products The United States, Japan, Germany,
Great Britain, and France.
warfare.* Other, not so obvious costs are the many victims of this warthe
companies that simply disappear or are gobbled up by the victors.
The weapons of this war are the thousands of new products devel- of
successfully invading chosen market- oped every year in the hope the quest is
for places. But most new product attempts fail. increasingly weapon
superiority-seeking product differentiation in order to secure a sustainable
competitive advantage. Positioning plays a key role too, as combatants deploy
their troops to secure an advantageous position on the battlefield. They use
tactics such as frontal assaults, outflankings, and even attempts to reposition
the enemy.
The combatants have their shock troops that lead the way into battlethe sales
teams, advertising people, and promotional experts. The cost of these shock
troops is enormous (it costs Procter & Gamble more than $100 million to
launch a new brand in the United States). But the battle is often decided by the
unsung heroes-the infantry-the many engineers and scientists in R&D labs and
engineering departments around the world-less glamorous and less visible, but at
the heart of almost every victory
The Generals Decide on the Strategy
As the senior executives, you are the generals. it is you who plan and chart
direction, and attempt to define a business and technology strategy for your
business. You generals speak in terms of strategic thrusts, strategic arenas,
and the need for strategic alignment. Sadly, many generals have not really
grasped the art of new product or technology strategy very well. So, as is often
the case with ill-defined strategy, the battle is won or lost tactically in the
trenches by the shock troops and infantry. As a result, you generals must also
be concerned about tactics as wellabout the details of how the battle will be
fought. This means that the generals must ensure that the right processes are in
place to make the tactics happen, namely, an effective new product process.
Finally, generals concern themselves with resources-about how many resources to
commit to product development, and about where to deploy them-to which
battlefields or arenas of strategic focus.
*For example, the United States spends about 3 percent of its GNP on R&D.
We estimate, from our studies, that about half of this R&D goes to product
development (as opposed to process development and improvements, and other
technical activities). For every dollar spent on new product R&D, about
another two dollars are required for marketing, capital, and production
expenditures.
Winners and Losers
As in any war, there are winners and losers. The winners are those firms,
such as Merck, 3M, Microsoft, and Hewlett-Packard, who have an enviable stream
of new product successes year after year. There are losers as well: General
Motors, who for the past decade or so, failed to launch new products that
captured the consumer's interest (while Chrysler, given up for dead in the
1970s, rebounded with the K-car and Minivan, and has hit the market with one
winning new product after another in recent years). Sometimes the defeat is so
great that the combatant collapses and simply disappears. Apple Computers, once
the leader in PCs, faced difficult times in the '90s. Although there are many
reasons for Apple's problems, its unsuccessful Newton, the much-heralded
handheld personal digital assistant, symbolized Apple's slide. Remember the
Newton: it could read handwriting as data entry But the product didn't work: it
was unable to read up to half the handwritten input. Users quickly became
frustrated, and the word got out. Sales never materialized, and Apple was
finally forced to withdraw the product. Fortunately, Apple's more recent
product, the I-Mac, has been a great success and has restored the company's
fortunes. New product winners and losers had profound impacts on Apple through
the '90s!
It's Wan Innovate or Die
As the twenty-first century begins, this new products war looms as the most
important and critical war the companies of the world have ever fought. The
message to senior people is this: innovate or die! Winning in this new products
war is everything. It is vital to the success, prosperity, and even survival of
your organization. Losing the war, or failing to take an active part in it,
spells disaster. The annals of business history are replete with examples of
companies who simply disappeared because they failed to innovate, failed to keep
their product portfolio current and competitive, and were surpassed by more
innovative competitors.
Profitability and Speed
In winning at new products, as in warfare or war games, the goal is victory~a
steady stream of profitable and successful new products. On this new product
battlefield, the ability to mount lightning attackswell-planned but swift
strikes-is increasingly the key to success. Speed is the new competitive weapon.
The ability to accelerate product marketing ahead of competition and within the
window of opportunity is more than ever central to success. And so this book is
about more than success.
it's about how to get successful products to
market, and in record time. There are major payoffs to speeding products to
market:
- Speed yields competitive advantage. The ability to respond to customers'
needs and changing markets faster than the competition, and to beat competitors
to market with a new product often is the key to success. But too much haste may
result in an ill-conceived product, which has no competitive advantage at all!
- Speed yields higher profitability. The revenue from the sale of the product
is realized earlier (remember: money has a time value, and deferred revenues are
worth less than revenues acquired sooner); and the revenues over the life of the
product are higher, given a fixed window of opportunity and hence limited
product life.
- Speed means fewer surprises. The ability to move quickly to market means
that the original commercial assumptions are probably still valid, and that the
product as originally conceived is more likely to meet market requirements. The
short time frame reduces the odds that market conditions will dramatically
change as development proceeds. Then consider the seven-year development effort
incurred by some U.S. auto companies: here, market requirements, market
conditions, and the competitive situation are likely to have changed
considerably from beginning to end of the project.2
So speed to market is a preoccupation throughout this book but
not at the expense of managing the project properly.
There is a dark side to speed. Our studies of hundreds of new product winners
and losers show that there is a strong and positive connection between speed and
profits; but the connection is anything but oneto-one. Many of the actions
project teams take in the interest of saving a little time often have the exact
opposite effect, and in some cases, destroyed the profitability of the venture.
So, I will never recommend cutting corners in haste or executing in a sloppy
fashion in order to save time-it just doesn't pay off. In short, speed is
important, but it is only one component of our all-important goal of profitable,
big new product winners...
