Chapter Four

Product – Design & Development

Product is the most important ingredient in the Marketing mix. You promote, distribute, service and apply price to the product. Without a product to sell you are just a story.
Companies have several strategic product options. They can innovate and focus on creating new products or improve and reposition the products they currently provide to the customer.
Henry Ford has been quoted saying, “If I had asked people what they wanted, they would have said faster horses.” When Steve Jobs was asked how much market research was conducted to guide Apple in its incredible string of new product successes, he responded, “None. It isn't the consumers' job to know what they want.” This tack produces innovative products that the consumer didn't know they needed. It is a high risk strategy. When the iPhone was still in its conceptual stage, established representations in the consumer mind would have biased their reactions toward comparisons with existing cell phones. However, the essence of the iPhone is not its ‘cell phone-ness.’ The iPhone product experience is derived from the imaginative integration of digital technology. Consumer satisfaction with the iPhone has little to do with making phone calls.
“Support for Jobs' belief that consumers are not capable of understanding their response to products based on new technology is found in the book When Old Technologies Were New written by Carolyn Marvin, Professor of Communication at the University of Pennsylvania's Annenberg School. Marvin points out that throughout history people have conceptualized the technological future only as “a fancier version of the present.” If our ability to imagine the future is limited by the mental representations of technologies and products that currently exist in our minds, how did Steve Jobs do it?
“First, his mind did not have these constraints because of his experience with and knowledge of the technologies. Unlike you and me, Jobs was an expert. The representations of these new technologies and their potential applications were firmly established in his mind, with the associations that enabled creative thinking. Studies of 'expert' minds in fields ranging from mathematics and chess to the interpretation of x-rays by radiologists reveal that the difference in these minds from the average person is a breadth and depth of mental representations of relevant information and associated patterns and relationships.”
“The second factor is an intangible. Even among experts, some are more creative than others. They can look at the same information as the rest of us, but see concepts and solutions that use this information in unique and novel ways. This YouTube video of Steve introducing the iPhone demonstrates his vision. Obviously, Steve Jobs was very creative and could see things that the rest of us could not.” From reference "How Steve Jobs Knew What You Wanted" Psychology Today – authored by Peter Noel Murray Ph.D.
Steve Jobs introduces the iPhone
How does one come up with innovative ideas? America's most prolific inventor Lowell Wood with 1,085 patents was asked that question by Bloomberg Business Week. Wood attributes his ability to hop from subject to subject, making associations that sometimes lead to inventions, to “reading a lot,” which provides him with opportunities to have serendipitous encounters. He also believes that “if you make a mistake, you should not only not make that mistake again but also don't make that class of mistake again.”
This discussion should leave the reader with the thought that being a market leader by producing new innovative products is difficult and requires special talented people that are available at the right time and place. In some cases the new innovative product requires the company to take a huge risk by eliminating or marginalizing a current product. One of the classic examples is Kodak. They were the leader in almost every aspect of photography. They also held many of the patents behind digital imaging. It should have embraced uncertainty and be prepared to be driven in unforeseen directions—a far cry from how the company had spent its life. The challenges Kodak faced were not unique to Kodak. “The important things were to avoid the attachment and weight of legacy assets onto new ventures; refrain from prolonging the life of existing product lines while trying to create false synergies between the old and the new; and, most of all, to base strategy around users, rather than the existing business model.” Retrieved from The Demise of Kodak: Five Reasons by Kamal Munir
“By injecting a radical, new, disruptive technology and then masterfully exploiting the strategic opening thus created, Procter & Gamble built a brand bigger than anything it had created before. Tide was not just a new product, but a new kind of product, based on synthetic compounds rather than soap chemicals. Neil McElroy was scarcely exaggerating when he called synthetic detergents "the first big change in soap making in 2,000 years." Indeed, it proved bigger than what P&G had initially planned: Tide quickly spilled over the boundaries that company strategists had drawn for the product and ripped through P&G's core markets. Within a handful of years, Tide displaced P&G's most profitable brands and its best-selling ones and sharply repositioned the company against its competitors." reference: How Tide Cleaned Up the Competition
An obvious source of growth consists of new products or extensions to existing products. “Product Performance innovations or sustaining innovations maintain a steady rate of product improvements, address the value, features, and quality of a company’s offering. This type of innovation involves both entirely new products as well as updates and line extensions that add substantial value. Products and services connect or bundle together to create a robust and scalable system. This is fostered through interoperability, modularity, integration, and other ways of creating valuable connections between otherwise distinct and disparate offerings.” Product System innovations help you build ecosystems that captivate and delight customers and defend against competitors. For example review the Walt Disney strategy for growth using film assets to infuse value into other companies assets. Some of these ideas are presented at the Doblin "Ten Types" website.
The concept of bringing the current product to new customers, and the concept of developing new and different products come across as fairly distinct sources for growth. Moreover, the tactics associated with each of them, as well as their corporate expertise, upholds their differences. When viewed strategically, both of them actually have a lot in common.

The Product Life Cycle

Product Life Cycle

The Product Live Cycle; reference HBR article by Theodore Levit

Stage 1. Market Development is when a new product is first brought to market, before there is a proven demand for it, and often before it has been fully proved out technically in all respects. Sales are low and creep along slowly.
Stage 2. Market Growth, in this stage demand begins to accelerate and the size of the total market expands rapidly. It might also be called the “Takeoff Stage.”
Stage 3. Market Maturity in this stage demand levels off and grows, for the most part, only at the replacement and new family formation rate.
Stage 4. Market Decline in this stage the product begins to lose consumer appeal and sales drift downward, such as when buggy whips lost out with the advent of automobiles and when silk lost out to nylon.
Three operating questions will quickly occur to the alert executive: Given a proposed new product or service, how and to what extent can the shape and duration of each stage be predicted? Given an existing product, how can one determine what stage it is in? Given all this knowledge, how can it be effectively used?
The product life cycle and definitions are based on an article in the 1965 Harvard Business Review, “Exploit the Product Life Cycle by Theodore Levitt.” Not all product life cycles fit the shape of the curve shown. And the relative time for each phase will differ. For the products that do have a curve that is predictable it behooves management to plan for an eventual maturity stage. The typical response is added features, pricing changes, design enhancements, and cost reductions to maintain profitability as sales decline.
In the auto industry the manufacturers refresh the product with “face lifts” and new “badging and colors” along with a burst of promotional activities. At the next maturity cycle they prepare an all new replacement; new look, new features and new pricing.
Product expertise involves going to new markets and developing new products and services that will enable the company to remain a step ahead. Product centricity is an operating mode most businesses employ. In the past we didn't need a special label for it because for most companies this was their business. Consider your experience as a consumer or through your own work experience you'll realize that that's the way that most businesses operate.

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