- 1. First Draft (January 2007)Chapter New Product Development
and StrategyDoes a new product succeed or fail because of its
positioning, its price, itspromotion, its availability or its
timing? Or is it because of its strong or weakcompetition, the
economic situation or even the weather or a health
scare?Entrepreneurial Success comes back to the product the venture
is the vehicle. IntroductionNew product development is one of the
most important aspects of a new enterprise start upand is the
activity that will most influence and guide the direction of the
firm throughout itslife. The process of new product development and
the success of the product in the marketwill primarily determine
how well the company will sustain itself and be the key to
developingany competitive advantage of the firm over others. The
new product development functionhas been neglected in
entrepreneurship literature, yet it is an extremely important key
tosuccess in the new venture and an extremely difficult process
considering new entrepreneursmay not as yet developed the all round
expertise, experience and resources of largecompanies. Another area
of neglect in new product development and
entrepreneurshipliterature is the actual formulation, design,
packaging and manufacturing processdevelopment of a new product,
which is the link between technology and the market in anynew
venture creation.One of the keys to successful new product and
process development is the design andproduction of a new product
with the minimal resources possible without sacrificing anyquality
of the finished and marketable article. For the entrepreneur, this
process must beundertaken in a heuristic manner (discussed later),
rather than through any strict disciplinaryapproaches, advocated
and practiced by large companies. This is one of the ways a
newventure can gain competitive advantage over larger companies, if
the product and processcan be designed and built for a fraction of
the cost that more established enterprises canachieve. Thus product
development is one of the most important processes of new
venturecreation. New product development is a discipline where the
technical aspects are learned asyou go along the process, as most
of these aspects are not in any text books, but come frompeoples
lives and experiences. This is a reality of new product development
that even MNCshave to face. New product development is both a
manifestation and extension of strategy interms of what the company
puts into the marketplace, steering the direction of the
enterpriseand at the same time, an influence upon strategy or a
restraint upon strategy becausefounder and/or team capabilities
limit the set of options available to the new venture in termsof
what can be done in the marketplace in terms of product.The new
product development process is so close to the concepts of idea,
opportunity anddecision to start up a new enterprise, as well as
where you will go in the marketplace youcannot by definition have a
start up without beginning the new product development process.One
can observe in the marketplace that some new companies almost seem
immediately tomake a high impact on the market. Others enter the
marketplace and seem to go nowhere,while others grow gradually over
a long period of time. The difference in these companiescomes back
to the initial new product development process, where some are able
to quicklydevelop a new product and make profits despite of high
costs and design flaws through
2. generating high revenues. Others do the same but fail to
generate profits and revenues tosustain their venture, while yet
others can internally sustain themselves while their ideamanifested
into a product slowly develops recognition, distribution and sales
in themarketplace, where revenues eventually flow over the
breakeven point to generate profits tosustain the venture. New
product success depends on many factors which will influence
thedestiny of the new venture. In later venture life the decisions
about future investment ofprofits and the strategic soundness of
those decisions will determine long term sustainabilityof the firm.
New product development is one of the most important aspects of
long termsustainability.In the early life of the new venture the
conventional rules of management and strategy arediscarded in a
scramble to develop a product and get it quickly into the
marketplace togenerate enough sales to survive. This is a very
haphazard time where best practices andproduction efficiencies are
almost irrelevant in the minds of any founder, particularly in
theSME. The jump is made with primarily intuition backing the
strategy and it is the faith in thisstrategy that keeps the founder
and the firm going forward. This adds great risk and pressureof
which statistics of new product failures lend support. This chapter
will look into the issuesinvolved in new product development and
the strategies underlying the process to assist thenew venture
creator develop some form of roadmap across this critical period in
the newventure and following periods of growth and development of
the enterprise. New Product Development in the Malaysian
PerspectiveThere are many estimates and statistics presented by
various authors about new productfailure rates in the marketplace.
Robert Calvin in his book Entrepreneurial Management claimsthat 80%
of new products fail after being launched1. Observing new product
launches here inMalaysia tends to confirm this, even those launched
by MNCs. Failures take slightly longer toacknowledge in Malaysia
due to the distribution driven approach to the market in
theconsumer products arena, where products are pushed to consumers
from the shelves tocustomers through the heavy use of in-store
promotions and promoters. This figure of 80%would be accurate in
the cosmetic sector, slightly less in the household product sector
andeven less in the agriculture sector, as competing products tend
to have similar functions andbenefits to what is already in the
market and market fragmentation and distribution gapsinfluence
sales very heavily. In Malaysia, the perceived risk of launching
radical new productstends to stifle innovation, where many
companies tend to prefer being product followers,allowing others to
innovate to reduce risk.This mental encapsulation prevents
companies coming out and differentiating themselvesfrom the
competition and expanding their position in the market as a trend
setter, where theyresign themselves to being trend followers. This
attitude and perception makes the Malaysianmarket less innovative
than perhaps some other countries in the region, which has to
changeif Malaysia is going to take its rightful position in the
global market as an innovative country.This situation if skilfully
studied can potentially lead to numerous new product
opportunitiesfor a new venture. If differentiation can be developed
and accepted by consumers, then thereis plenty of room for new
ventures in this country. Likewise, due to the emphasis bycompanies
on being followers, there is plenty of opportunity to develop new
brands, whichcan be protected by creating a source of competitive
advantage that has barriers developedto prevent competitors
emulating the product quickly. This is of course very easy to say,
butwith the right perspectives, it is possible to exploit the
strategy of product differentiation andenhance a position in the
market through the correct use of branding. This originates in
thenew product development process.New product development is
approached differently by firms. In Malaysia, larger firms tend
toeither develop a very bureaucratic and formal procedure or act
upon the whim of themanaging director, or more so combine the
above, which leads to a less than effectiveprocess. In a discipline
which is talking about the need for faster new product development
3. processes2, Malaysian companies still lag behind, which opens up
even more opportunities forSMEs.SMEs in Malaysia, at least those in
consumer products lack potential exit strategies orcontingencies
for failed products that SMEs in many Western countries have
available tothem; that of a channel of discontinued stock (i.e., $2
or 1 shops), where failed productscan be disposed of at a heavy
discount. The cost of new product failure in Malaysia is writingoff
inventory completely, along with the development costs, customer
ill-feeling and almostcertain closure with a deep sense of failure.
Secondly, if the product is successful, it will mostlikely lead to
copying by competitors, some of which will be much larger firms
with greaterresources, brand image, salesforce, larger promotional
budgets and greater distributioncapability. The advantage that
being the innovator has and incumbency in the marketplace islost
due to a wide gap in market power (based on distribution ability)
between small andlarge companies. These are central issues that the
new venture founder must consider beforestart up.While looking at
the Malaysian perspective, one other issue provides the SME or the
newventure with an opportunity. As many commentators see globalism
as one of the largestinfluences on markets in this new century,
especially with MNCs developing and launchingproducts for the
Malaysian market based on extensions of international brands with
slightmodifications, more reflective upon that MNCs history in the
Malaysian market rather thanmodifications made to suit the
Malaysian market, the Malaysian market remains very complexand
heterogeneous, often very difficult to understand. Malaysia is one
of a number of fewcountries with a significant makeup of a number
of racial groups. The complexity does notstop there, as within each
racial group there is great diversity. The Malays are far from
ahomogeneous consumer group, with different influences upon their
histories3, thus providingthem with different orientations and
consumer tastes. The Chinese are also diverse, somecoming to
Malaysia long ago, adopting Malay customs (the Babas), while others
migratedfrom various regions in China to Malaysia and primarily
maintain their Chinese culture4. Somelive partly integrated into
the Malaysian culture, while another group rarely mix from
schoolthrough their working careers with other ethnic groups. Some
are English educated, whileothers are Chinese educated, thus the
Chinese cannot be seen as one coherent group5 ormarket.. There is
also a vast difference between urban markets and rural markets6
whereconsumer tastes and preferences vary significantly. Even with
the rapid development of thenew middle class in Malaysia, it still
remains divided along ethnic lines7, thus developing intotwo
distinct markets in many product areas, ethnically segregated
shops, banking,entertainment, pop music, food, fashion, reading
materials, etc. This is reinforced by thesegregation in education
and careers of the various ethnic groups8.Thus Malaysia within the
context described above can be seen as a number of
sub-marketswithin the Malaysian market as a whole. This runs
contrary to the concept of thecosmopolitan man and agrees with
Crawfords observation that there is little markethomogeneity, even
within a nation9. Even with the increasing number of foreign
competitorslaunching into the Malaysian market, local SMEs still
have great opportunities if they are ableto understand the various
consumer needs and wants of each ethnic group and find theseniches
to be large enough to sustain a new business. The downside of this
issue however isthat targeting specific ethnic niches may not
provide a market large enough to develop anyeconomies of scale and
the firm will not be able to grow past a certain point.The Role of
Product Development in the EnterpriseAs mentioned in the
introduction, new product development is the manifestation of the
ideato exploit the chosen opportunity. It is the centre of all
strategies and the vehicle that will getthe enterprise going in the
market. New product development is the chosen basis of growthfor
companies like Siemens, Nokia, Sony, Apple and Glaxo of which they
have completelyrelied upon as a strategy. These companies are what
they are today because of new product 4. development. The place of
new product development in the web of company strategies
andoperations is shown in figure 6.1.Figure 6.1. The Relationship
of New Product Development to the Enterprise SalesFinance
ProfitsStrategic Marketing Management Process Development
StandardsSkills & LearningNew ProductResourcesDevelopment
Production Intellectual Property Regulation Product
DesignStrategySupplyChain Purchasing Management
GrowthAccountingSurvivalWhether an enterprise is a home based
industry, a manufacturing operation or a servicebusiness, the new
product development process is paramount to developing the
overalldirection of the company. In most cases, it will be the only
source of revenue for the ventureand total means of survival, as
new product development will set the whole future scenariofor the
enterprise. If the new product fails to reflect a need in the
marketplace, it is mostlikely to fail, beginning heavy consequences
to the enterprise. If the new product is notdifferentiated from
competitors products, this will lead to tough competition and
pricecutting, which will erode potential enterprise revenues and
make it very difficult for the newenterprise to survive in an
industry of stronger and larger firms. Conversely, if the product
ishighly differentiated from competitors products in the
marketplace, the new venture willhave to take enormous efforts to
establish it in the marketplace, requiring a lot of time
andresources to do so.Growth to a sustainable size and direction
are two of the early primary objectives of the newenterprise. These
early on override profitability, organisation and efficiency in the
early partof new enterprise development. Gibb and Scott developed a
strategic small business modelwhich shows the factors which
influence growth of the enterprise10. This model provides
aframework for SME development that incorporates most of the
strategic issues involved in thetop down corporate planning models
of Ansoff, Porter and Steiner, from a micro perspective.The model
has been developed on the assumption that growth is extremely
important to theSME to reach minimum economies of scale, growth is
synonymous with success and growthis regarded as economically
desirable because SMEs are regarded as the basis of future
largefirms and generators of employment11. Gibb and Scotts model
assists the enterprisedetermine how to change, accounting for the
dynamic environment the new enterprise mustface in developing its
strategic direction, with consideration of its internal
capabilities. 5. Gibb and Scotts model is broken down into five
components. The performance baserepresents a profile of the
existing business which can be broken down into sub-componentslike
market trends, which would include product and marketing mix and
competition,production trends, which would include measures of
utilisation, efficiency and quality, etc.and financial and
management trends, which would include issues like net worth,
liquidityand gearing. This would be very similar to the position
audit in the conventional strategicplanning process as is espoused
by writers like Steiner.The base potential for development is the
overall strength of the business and its capabilities.This would
include many parameters that would influence the firm to change and
grow, suchas the firms liquidity, technology, physical assets,
human resources, accumulated experienceof markets, customers,
product development, financial and networking, the
personalobjectives of the founder and influence of family and
peers, his or her personal capacities,visions and attitudes and the
ideas base of the new venture or existing enterprise for
thedevelopment of existing and future products, entry into what
markets and ambitions forgrowth. This would equate to the resource
audit in conventional strategic planning.The key internal and
external influences on development is very similar to the
strengths,weaknesses, opportunities and threats (SWOT) analysis
found in most strategic planning textbooks. The Gibb and Scott
model is shown in figure 6.2. below;Figure 6.2. A Model of Growth
Through Product/Market DevelopmentWhere the Business Could Go The
Outcomes (Emerging Targets) Size and Depth of ChangeKey InternalKey
ExternalInfluencesThe Process Influences TIMEOn the of On
theDevelopmentProduct/Market DevelopmentProcess Development Process
The Base for Potential Development Where the business iscurrently
(Performance)Gibb and Scott (1985)The above model was developed on
the basis of researching how 16 SMEs approached theissue of
product/market development, from where the following assumptions of
how SMEsundertake this activity were derived; 1. Planning takes
place around a specific project or number of small projects, 6. 2.
Strategic planning in any formal way is unlikely to exist, but
through the development of a specific project a certain degree of
strategic awareness will develop, without it the firm will run into
blind alleys,3. The absence of formal plans may not reflect on the
capability of the SME,4. The product/market development is highly
dynamic characterised by a great deal of learning during the
process by the founder/owner manager of the SME they will usually
take the approach of coming up against problems and solving them,5.
The development process will not necessarily reflect itself in
traditional indicators like increased revenue and employment,6.
Lack of growth in the SME may not necessarily reflect a lack of
ideas for development, growth is heavily dependent upon the
founder/owner manager having time and resources available, which is
an important factor in taking a proactive approach to
development,7. External information is more likely to be acquired
by the founder/owner manager through friends and networks rather
than from secondary data and information and how dependable this
information is will depend upon the quality and variety of the
network, and8. Strengths and weaknesses of the base will be an
important factor in the eventual success of the new development.The
Gibb and Scott model allows SMEs to fully take account of
administrative and institutionalblocks and hindrances, such as red
tape and bureaucracy and incentives and otherassistance available.
Internal factors such as capabilities and resources can be
matchedagainst constraints and opportunities in the external
environment to determine a way forwardfor the enterprise. The model
more accurately reflects the development of an SME where
theinfluence and attitudes of the founder/owner manager are
strongly reflected in the process.Fundamentally the new product
development process is very similar between large, verylarge, SMEs
and even micro-enterprises. There is very little difference in the
informationrequired to undertake the process and the steps that
need to be taken. In the new venturehowever the new product
development process is haphazard, flexible and almost
completelyinformal, while still achieving the same end result as
much larger companies. Although manyacademics and practitioners
advocate a formal new product development process, there islittle
evidence to suggest that any formal process is more effective than
the way a newventure/entrepreneur undertakes new product
development. In fact many corporateorganisations are looking for
ways to make their organisations more entrepreneurial. The
Development of New ProductsCompanies have a number of options to
grow. A company can expand its geographical area,i.e., launch its
products in new markets, acquire new businesses and their products,
ordevelop their own new products. Without new product development,
the option ofgeographical expansion is limited because in todays
international markets, companies usuallyface either the same
competitors or different competitors with similar products. Even
acompany with a product based on a new breakthrough technology
cannot maintain itscompetitive advantage forever and must continue
to develop or acquire new products inorder to keep in front of its
competitors who will eventually catch up with them.Products have a
limited life and new products must be created to replace those near
the endof their lifecycle. Markets and technologies are changing
quickly even in the most stablemarkets, which is leading to shorter
product lifecycles. If one observes the market brandshave long
lives but the products under the brand umbrella are continually
changed andupdated almost in a seasonally fashion. Thus companies
which dont continue to introducenew products run the risk of
becoming irrelevant to the marketplace. Markets and industriesare
changing so rapidly that 40% of the Fortune 500 companies that
existed in 1975 do notexist today12. 7. New product development is
an important aspect of the competitive environment. If
existingcompanies dont launch new products, it is most likely their
competitors will gain advantagein the marketplace, which will
eventually erode the companys position in the marketplaceand later
effect revenues, profitability and survival. New products are a
strategy thatcompanies use to introduce enhancements into the
market so they can claim benefits overtheir competitors. Today on
average, new products (those introduced into the market withinthe
last 5 years) represent 33% of a companys sales13. In some markets,
mobile phones,televisions, white goods, automobiles, etc., this
figure is 100%.While new product development is one of the most
important aspects of competitive strategy,it is also one of the
riskiest. New product failure rates have risen from 45.6% in 1961
to over80% today14. Coopers definition of the new product
development process underlies itsstrategic importance to a firm as
a defined product strategy for the business goals andobjectives
clearly communicated to all, there are clearly defined users of
strategy focuses togive direction of the business total new product
effort, i.e., where you want to go. The basicnew product effort has
a long term thrust and focus,15. Trotts definition the
actualdevelopment of new products is the process of transforming
business opportunities intotangible products16 links new product
development to the process of exploiting opportunitiesin the
entrepreneurial process.Finally, companies in the same industries,
with similar products, have basically the samestrategy choices and
generic themes to pursue win similar groups of customers, thus
productdevelopment is one of the major ways a firm can
differentiate itself from the its competitors.Types of New
ProductsAmongst the large number of products coming out onto the
market each year, it issometimes very difficult to distinguish what
is really a new product. One could not claim thata new chilli sauce
or sambal balacan launched into the market to be a new product
unlessthere is some form of differentiation from what already
exists in the market. Even if therewas some differentiation, this
must be recognised by consumers. What is important accordingto
Rogers and Shoemaker is that the product is perceived to be new by
consumers17, i.e., theproduct is perceivably different, relative to
what is already on the market. The overwhelmingmajority of products
launched onto the market are usually variations of existing
products,with changes in either the brand, level of service,
technology, features, packaging, price, orquality dimensions, or a
combination of them. Only about 10% of new products introducedare
both new to the company and the market an item not sold by that
company before oran item not sold in the market before18. Thus
there are many ways of classifying newproducts, given the many
forms they can take. New to the world products are the first of
their kind in the market. They areusually something invented or
enhanced by a significant change or advance intechnology, such as a
new discovery or different method utilising modified
processes,materials or methods in producing a product. These
products would revolutionise themarket segment or even create a new
market, which may require significantconsumer learning to become
familiar with the new product. Examples of this wouldbe the new
micro-chip processors, Intel has just announced, which will
makecomputers more energy efficient, light weight and smaller19,
the progression fromland line based telephones to mobile phones and
now hand phones, the progressionfrom typewriters to electric
typewriters to word processors and personal computers,the change
from wood, to gas to electric and microwave cooking and the
Sonywalkman and Ipods. New to the world products make up only a
small proportion ofnew products and they are perceived as the
riskiest types of new products to launchas manufacturers have to
deal with consumers inexperience with the new conceptsand
incompatibilities with their prior consuming experiences, which act
as barriers toconsumer adoption20. 8. New Product Lines (New to the
Firm) are not new to the market but new to the firm launching them
into the market. This is where a company would enter a market for
the first time, where success and profitability will depend upon
the timing they entered the market, i.e., as a pioneer, early
follower, early or late majority or as a late follower. The later
the company enters the market, the less will be the concept risk
taking, but the greater will be the competitive risk. Intellectual
property value decreases as more firms enter the market with
similar competitive products, leaving little room for product
differentiation. Figure 6.3. below pictorially shows the situation
in-terms of competition, potential profitability and IP value in
relation to the time a firm enters a new market for that
company.Figure 6.3. Competition, potential profitability and IP
value in relation to the timea firm enters a new market for that
company Additions to Existing Product Lines are products that
extend a range marketed by a firm. The product is different from
existing products either in function or consumer application or as
a variant of an existing product, such as a different pack size,
flavour or fragrance, etc. Companies usually introduce additions to
existing product lines to enhance their position in the market they
are competing in, consolidate their position, to fill a perceived
gap where consumers arent served well or to react to competitors.
Improvements and Changes to Existing Products are undertaken to
improve quality or make the product more convenient to use by the
consumer. This is often a continuous process by companies, but when
the product has been overhauled substantially, companies may
undertake a relaunch or promotional campaign to inform consumers
about the change. Sometimes products are phased out with a
replacement product to maintain their competitive position in the
market. This happens continually in the mobile phone market,
sometimes a number of times each year. Product Repositioning are
products that are retargeted at new consumer groups or a larger
proportion of consumers sharing the same wants. For example, a
detergent may be repositioned in a new pack size to attract new
consumers, or aspirin was repositioned as a remedy for blood clots
and prevention of strokes and 9. heart attacks from an analgesic,
which was under attack for health reasons andheavy competition from
paracetamol based product.About 10% of new products launched are
new to the world products, which increases toaround 18% in moderate
to high tech industries. New product lines are about 26% of
newproducts, but much higher at 37.6% in moderate to high tech
industries. Additions to productlines are around 26%, but dropping
to 18% in high tech industries. Product changes andimprovements are
around 26% of new products, 19.8% in moderate to high tech
industriesand product repositionings are 7%, but almost non
existent in moderate to high techindustries21. Thus, the majority
of new products are developments and variations based onexisting
products.Products can be either goods or services. The primary goal
of a product is to fulfil a servicethat enhances human
experience22, which both goods and services can do. Both
havetangible components for example, a facsimile machine is a good
providing a service, carsmust be serviced after purchase, a haircut
provides something tangible, a written insurancepolicy is something
tangible, providing assistance in time of need, people will buy a
cup ofcoffee at the Coffee Bean, even though they could purchase a
cup of coffee much cheaper ata kedai kopi along the side of the
road and a university education produces somethingtangible. Looking
another way, just because something can be stored in a warehouse
asinventory doesnt mean that it doesnt need a distribution
system23, such as insuranceindustry. Entrepreneurial New Product
DevelopmentNo standard set of procedures or processes exist in new
product development. There aredepartment stage, activity stage,
cross functional, decision stage (stage-gate) and processmodels
espoused in the literature. Different industries take different
orientations towards newproduct development, where for example
pharmaceutical companies will be dominated byscientific,
technological and regulatory issues, while food companies are
dominated byconsumer research that leads to minor product changes.
Yet some industries still take acraftsman approach in the joinery,
furniture, dcor and kitchen refurbishing industries. Eventhe
moderately high tech fragrance business creates products through
more an artisticapproach, rather than a scientific approach, which
has as much to do with psychology,consumer tastes, blending just as
an artist on canvass would do as it does with chemistry24.In
reality, new product development has as much to do with making
assumptions, shortcutting the logic process through the use of
heuristics, which are little rules of thumb thatfirms with
experience in the industry have grown to believe in25, such as 30%
of people whohear about a new brand will try it. Hunches, gut
feeling and intuition are heavily relied uponto progress products,
contrary to what most of the literature about new product
developmentadvocates.Successful new product development comes from
experience and with it, the individualdiscipline and maturity to
know when they are biased in their thinking of potential success
orfailure of a product. Industry knowledge is very important, but
it must be used objectivelywithout emotional baggage, i.e., we have
a long history in that market and it is ours, or wehave always been
successful with new products in this market, etc. These are
cognitivebiases that can lead to failure, that some would call
market arrogance. As MNCs employ moregraduate executives to fulfil
managerial roles in companies without climbing the corporateladder
so as to speak, the insider industry advantage is getting less and
less. Marketingexecutives without grass root industry experience,
passion for the industry and a tangiblefeel of it, relying
primarily on data for decisions, potentially lay open some
opportunity forthe entrepreneur who has passion, diligence and
sound intuition. The new executives, oftensurrounded with market
research and advertising consultants with the power to sign
checkbooks, so often get things wrong and wonder why a champaka
fragrance as beautiful as itis, is not accepted by consumers who
associate the fragrance with grave yards and jasmine is 10.
rejected by 80% of the consumers. The facts are, agreed by the
majority of all literature innew product development is that; Less
than 5% of new products launched on the market are successful, Out
of 100 new ideas, less than 2 become a commercial reality, Most
companies are followers in the market and not innovators, Very few
really novel innovations are ever launched commercially, and Most
new products are actually only incremental steps in enhancement of
products, rather than something completely new.Although new product
development is one of the most important strategies for
sustainabilityof a company, too many companies turn away from
innovation and cut costs and expenses asa reaction to declining
performance, without looking into the root causes, which may
beproduct life-cycle based or competitive based, which require a
new product developmentsolution. Usually a panic response further
stifling innovation of the company. The newproduct development
option is often seen as a more difficult alternative, as under
pressure,the following problems arise;Finding the right
opportunities and appropriate innovation necessary to develop
them,Reducing development times without reducing quality and
innovation,Building and maintaining brand equity through a strong
product,Integrating market, design engineering and production
processes to produce, and products that are considered useful and
desirable by consumers.The above is the trap for those who do not
view new product development as a continuousprocess, even if it is
an implicit and background process, within the company and the
mindsof those who manage it.The entrepreneur, especially after
start up and turning into an SME can be trapped by thescenario
above, lending support to Druckers postulation that
entrepreneurship is only a stagein the development of a firm and
the entrepreneurial state can be grown out of26. This iscompounded
by the small firms lack of resources, time, technology and
expertise to researchnew ideas and innovations to develop the
business27. SMEs are even more limited in theirstrategic options
because of their inability to influence the environment and
marketplace, dueto their size like larger companies28. Cupelled
with lack of knowledge29, the entrepreneurrequires specific
strategies and processes to take account of these weaknesses and
navigateits birth and growth in a very focused way, that adapt to
rather than change the environmentand marketplace.Strategy is the
action a company takes to achieve one or more of its goals and the
strategicmanagement process is the way in which managers develop
these strategies30. New productdevelopment as discussed in the
introduction is the manifestation of strategy and will dictatehow
the company interacts with its environment and how successful and
sustainable thecompany will be in the future. Due to size and age
of a start-up or SME, the developmentprocess will differ greatly
from large firms and will take place bottom up or by the founderhim
or herself31 and primarily involve the skilful utilisation of
assets, skills and resources, totake advantage of their best
competences in developing new products and entering themarketplace.
Thus the entrepreneur or SME will have a set of competences that
are relativelyunique to him or her32, which will provide the basis
of future action. This is the nexus ofcreativity, innovation and
selected strategy, discussed in chapter 2 that the entrepreneur
usesto create a market niche or position with some form of
competitive advantage, utilising whathe or she has in terms of
ideas, competences and resources. How these factors areintegrated
together will determine the entrepreneurs capability and
performance in themarketplace. To achieve this, the most important
resource is skill and knowledge possessedby the entrepreneur. To a
great degree this skill can only be learned through experience
anddifficult to imitate from other firms33. This is not different
from large firms which learn as they 11. go in the new product
development process, as each product/market is unique, how
toexploit opportunities and neutralise threats. Though intangible,
this is a core aspect ofcompetitive advantage, unmeasurable in any
conventional sense, but written about heavily byPeter Senge and
Chris Argyris, outlined previously in chapter 1.Following the above
arguments and problems firms face in new product development,
themost important aspects of entrepreneurial new product
development is a continual strategicawareness of the environment by
the entrepreneur and his or her capabilities in
innovation,production and management to see through the selected
opportunity into an operationalreality. From the point of view of a
start-up or small firm, these activities do not require
thespecialist skills advocated in many strategic planning34 and new
product developmentprocesses. There is little evidence to suggest
that these processes create more success thanthe way a new
entrepreneur does things. Figure 6.4. Entrepreneurial New Product
Development, Competencies andCompetitive
AdvantageIdeasOpportunities SolutionsRealisation Performance
ManagementCapabilitySpots EvaluatesSelectsTargets Creativity
InnovationStrategicThinkingDifferentiation Competitive Advantage
Capabilities Governing Competitive Costs: to customers
ScopeKnowledge:Industry/market/technical/processCompetenciesRelationships:Customers/suppliers/
Entrepreneurial, Opportunitydistri butors/relative
powerIdentification, Network, Conceptual,Structure: Ability
Organisational, Strategic, Technology, Commitment, ResourcesFigure
6.4 above shows the importance of personal competencies in the
entrepreneurialprocess, where product development is the key to
developing the strategy to realiseopportunities. Performance and
growth depends upon a number of factors, which aregoverned by the
core competencies of the entrepreneur or organisation35. This would
suggestthat success and growth has a lot to do with these
competencies and investment in thedevelopment of these competencies
is important in establishing, maintaining or increasing thelead
over competitors, as it is competencies that enable one to exploit
opportunities.Competencies influence the ability to develop ideas
and screen them for opportunities andselect the ones that can be
best realised. Competencies also influence the ability to
developcompetitive advantage, which ultimately differentiates the
product and venture from others inthe market. Selection of the
correct solution to identified opportunities, the ability
tounderstand and create some form of competitive advantage and the
ability to manage or 12. organise the enterprise efforts are the
factors that influence performance. Throughcompetencies local
companies are able to fight international companies entering the
market36due to their better knowledge of the local situation.
Creativity, Innovation and Strategic Thinking in the New Product
Development ProcessThe initial process of contemplating the
development of a new product is perhaps the mostimportant aspect of
the whole process. It is here where new ideas are spotted,
evaluated asto their opportunity potential, the technology and
competencies required considered, variousstrategy scenarios
mentally extrapolated out to evaluate their effect and benefit to
theenterprise, so that the best strategy solution can be realised.
This is the most fluid andunstructured part of the process where
all these possibilities are sorted and evaluated in away that does
not resemble real and tangible work37. The quality of information
used (marketdata, knowledge of customers, technology costs, etc)
has great bearing on the outcome andfinal result of the product
development process.This is a creative process (explained
previously in chapter 3) to seek some type of innovationto warrant
the effort to launch a new product onto the market that will have
somecompetitive advantage over potential competition, whether it be
through lower costs,utilisation of better knowledge of the
marketplace, better relationships and ability to utilise achannel
of distribution, a better ability to organize the delivery of
product or service oroperation in the market, which will lead to
product differentiation from those competitors toprovide some
market advantage. Innovation is thus the source of new products,
strategy andcompetitive advantage of which Drucker postulates there
are seven primary sources38,outlined in table 6.1. below;Table 6.1.
Druckers Sources of InnovationSource Explanation ExamplesThe
Success of a revolutionary product or the Apple computer unexpected
application of technology from one Rapid decline of Protons
success, industry to another, sudden or unnoticedmarket
sharefailure ordemographic changes caused by wars, external
insurgencies, migration, etc. occurrenceAn incongruityA change that
is already occurring or can Sugar free products and betweenbe made
to occur within an industry. It sugar replacements due reality as
itmay be visible to those inside theto concern for healthactually
is and industry, often overlooked or taken for Increasing demand
forwhat it ought granted.travel and holidays due to beto increasing
incomesand leisure timeInadequacy of An improvement in process that
makes Caffeine free productsan existing consumers more satisfied
based on an Microwave ovenstechnology or improvement or change in
technology. Mobile phones businessprocessChanges inNew ways and
means of undertaking Health care industryindustry or business based
on identified opportunities Education industry market or gradual
shifting of the nature of theprivate education
structureindustry.PerceptualChanges in peoples awareness founded
Leisure and exercisechanges on new knowledge and/or values or
industry aerobics & gymsgrowing affluence leading to new
fashionsand tastes 13. DemographicGradual shift of demographics in
Establishment of morechangespopulation by age, income groups
orretirement homes ethnic groups, etc New New knowledge or
application of existing Video and VCD industryknowledgetheoretical
knowledge into an existing Robotics industry that can create new
products not Biotechnology previously in existenceDrucker further
postulates that the seven sources of innovation can be manifested
into fourtypes of product/strategy development as summarised39 in
table 6.2. below;Table 6.2. Druckers Four Types of Innovation for
Product/Strategy Development Type Description Examples Invention
Totally new productWright Brothers airplaneEdison light bulb Bell
telephoneExtensionNew use or different application of an Kroc
McDonalds already existing productWilson Holiday
InnDuplicationCreative replication of an existing conceptWal Mart
Dept. Stores Pizza Hut Pizza Restaurant Synthesis Combination of
existing concepts and Smith FedEX factors into new useMerryil Lynch
Home equity financingProduct and strategy innovation is the means
by which markets develop. Schumpeter termedthis process creative
destruction, where the market evolves through a process of
newproducts being launched by firms which supersede those already
in the marketplace40.Outdated products will disappear and overtime
the market will be represented by a range ofcompletely new
products. This can be very easily seen in the automobile and mobile
phoneindustries very quickly. This happens in all markets, which
can be seen in Figure 6.5. showingthe product evolution of the
laundry detergent.Figure 6.5. The Evolution of the Laundry
Detergent 14. The Evolution of the Laundry Detergent Pre
1900sLaundry Blue Up to Late 1940sSolid Soaps &Powders Laundry
Detergent Bars 1950s until presentLaundry Detergents PowdersLaundry
Detergents with Liquids Special Detergents AdditivesConcentrated
1980s until present Laundry PowdersLaundryDetergentTabletsProduct
evolution occurs primarily through incremental product benefit
improvements byfirms launching products into the market to gain
advantage over competitors. This is mostlypredictable following
changing consumer tastes and lifestyles. Most new products come
outof this process and firms introduce these products in other
international markets, thusintensifying competition across the
globe. Then from time to time a firm develops a newinnovation based
either upon a new technology or by picking up some technology from
onearea and transferring it to their target market to create a
completely new form of product inthat market. In the evolution of
the laundry detergent the development of the liquid
laundrydetergent in the late 1970s is an example of later and the
switch from soaps to syntheticsurfactants is an example of a
completely new technology influencing the form of theproduct. The
key factors influencing the process of product evolution in a
market segmentcan be best illustrated by the SET diagram developed
by Cagan and Vogel41.Figure 6.6. The Product Opportunity Gap 15.
SocialSocial and cultural trendsand drivers.Reviving historical
trendsProduct OpportunityGapEconomic State of the economyTechnology
Shift in focus on whereState of the art and to spend moneyemerging
technologyLevel of disposableRe-evaluatingincomeexisting
technologyThe rapidly rising levels of affluence in Malaysian
consumers, along with most of the rest ofthe world, the opening up
of the ASEAN economies to open foreign competition andexponential
improvements in technology are rapidly decreasing the life cycle of
products inthe market place. Malaysian consumer tastes are very
different from a decade ago and overthe next decade will undergo
further change as consumers respond to health, leisure andlifestyle
issues. Coupled with the improvements in products that technology,
it will no longerbe able to be assumed that product lifecycles will
last more than five years as products willquickly be superseded
with new models, versions and complete new designs based on
newertechnologies. Advances in ICT and biotechnology will bring
many new products and evenallow for the development of whole new
industries, as we have seen with the development ofipods, mobile
phones, new medicines based on biotechnology and the likeInnovation
will also affect the ways products and services are presented to
consumers bymaking products more accessible and more convenient to
use like the development ofprepaid mobile phone services where
accounts can be topped up at provision stores,convenience stores
and petrol kiosks. Re-organising how existing businesses are run
hasbrought low cost air travel to the region through Air
Asia.Products and services will be also greatly affected by
Government regulation. Carbon creditswill force the development of
green engines and the increased use of bio-fuels in thetransport
industry. Materials used in the manufacture of products will be
more heavilyscrutinized like cosmetics forcing in some cases the
reformulation and even completerethinking of products and their
redevelopment. Occupational health and safety issues willforce more
consideration about safety issues. Technology development will also
create newmaterials that will perform better and be more cost
effective than existing ones. All the abovescenarios are factors
for product evolution, which will be driven through innovation.
Thetrends towards shorter product lifecycles over the last 50
years42 is shown in figure 6.7.below; 16. Figure 6.7. The Product
Life Cycle Has Shortened Dramatically Over the Last 50 Years
Pharmaceuticals Food ItemsToolsFifty Years AgoToys Today
Cosmetics01020 30Length of Life Cycle (Years)Rapid technology
development, the ability of strong firms to exercise some degree of
controlover the channels of distribution and increasing
internationalization of the market is creatinggreater market
concentration. This can be clearly seen in the Malaysian retail
sector wherechains like Giant, Carrefour and Tesco are quickly
increasing their market share over moretraditional retail outlets.
The effect of market concentration on manufacturers and suppliers
isto reduce their numbers and force some product rationalization
where products cater for thelarge consumer groups. Increasing
market concentration defines the market into more rigidityand
initially creates focus on the major market segments.At some stage
market concentration will reach a point where smaller market
segments arefailed to be satisfied by the smaller number of firms
operating in the market. If theseunsatisfied market segments are
large enough, opportunities develop for smaller firms tomove in and
exploit these segments. The market will eventually see a
renaissance of smallerfirms offering niche products to unsatisfied
consumers sometimes through alternativechannels of distribution. An
example of this is the growing number of herbal products
andcosmetics marketed through direct marketing channels.New
opportunities occur when a market becomes concentrated, as further
growth in sales bylarger firms doesnt correlate with increased
profits as the cost to service small segments ishigh. Smaller firms
are able to achieve better profits without direct competition in
theseunmet segments by focusing on the most profitable customer
niches and keeping costs low.Companies who are able to scale down
the size and capital costs of routine technology usedin the
industry, may be able to develop new sources of competitive
advantage43. Figure 6.8.shows diagrammatically the relationship
between market concentration and level ofopportunities in a market.
17. Figure 6.8. The Relationship Between Opportunities and Market
Concentration OpportunitiesFirmsMarket Concentration Invention
Verses InnovationMany people relate new product development to
invention. However invention only makes upa small part of new
products and less than 2% of all patents are actually
commercialized.Inventors are usually good at developing ideas into
concepts and tangible items, but not allinventions satisfy consumer
wants and needs. It is particularly difficult for an inventor
tosuccessfully develop a product in the market by themselves
because of the tremendousresources needed to develop the market to
make consumers aware and educate them aboutthe new product. Many
inventions, although novel, fail to solve any real consumer needs,
orfail to satisfy them effectively and thus fail to gain much
interest from consumers.An invention will remain a conceptual idea
without innovation. It is only really a starting pointin the
innovation process which is concerned about turning the idea into a
practical andcommercial application. Inventions involve creativity,
which is only part of the whole productdevelopment process as
explained by Myers and Marquis44 .Innovation is not a singleaction
but a total process of interrelated sub processes. It is not just
the conception of a newidea, nor the invention of a new device, nor
the development of a new market. The processis all these things
acting in an integrated fashion.Some innovations are radical and
lead to great changes in the lives we lead as did theproducts45
listed in table 6.3. to our society. But many inventions have come
by accident46and it took innovation to determine potential
commercial applications. These examples showthat the majority of
these innovations are developed by organizations rather than
individualsdue to the need of large resources and technical
knowledge. Technical and productinnovation often leads to other
forms of innovation such as organizational change toeffectively
implement the firms strategies based on new products developed into
the marketplace, as can be seen in the communications and air
transport industries.Table 6.3. Breakthrough Innovations That
Changed Our Lives1. Personal Computers2. Microwave oven3.
Photocopier 18. 4. Pocket Calculator 5. Fax machine 6. Birth
Control Pill7. Home VCR8. Communication 9. Bar CodingSatellite10.
Integrated Circuit 11. Automatic Teller 12. Answering Machine13.
Velcro Fastener14. Touch-Tone 15. Laser Surgery Telephone16. Apollo
Lunar 17. Computer Disk Drive18. Organ TransplantingSpacecraft19.
Fiber-Optic Systems20. Disposable Diaper21. MS-DOS22. Magnetic
Resonance 23. Gene-Splicing24. MicrosurgeryImagingTechnique25.
Camcorder26. Space Shuttle27. Home Smoke Alarm28. CAT Scan 29.
Liquid Crystal Display 30. CAD/CAMTable 6.4. Accidents That
Innovation Turned Into Successful ProductsA Raytheon engineer
working on experimental radar noticed that a chocolate bar in
hisshirt pocket melted. He then cooked some popcorn. The firm
developed the firstcommercial microwave oven.A chemist at G. D.
Searle licked his finger to turn a page of a book and got a
sweettaste. Remembering that he had spilled some experimental
fluid, he checked it out andproduced aspartame (Nutrasweet).A 3M
researcher dropped a beaker of industrial compound and later
noticed that whereher beakers had been splashed, they stayed clean.
ScotchGard fabric protectorresulted.A Dupont chemist was bothered
by an experimental refrigerant that didnt dissolve inconventional
solvents or react to extreme temperatures. So the firm took time
toidentify what later became Teflon.Another scientist couldnt get
plastic to mix evenly when cast into automobile parts.Disgusted, he
threw a steel wool scouring pad into one batch as he quit for the
night.Later, he noticed that the steel fibers conducted the heat
out of the liquid quickly,letting it cool more evenly and stay
mixed better. Bendix made many things from thenew material,
including brake linings.Product Life CyclesAs mentioned throughout
this chapter, products have a life cycle. The product lifecycle
ofproducts is a reason why companies must continue to develop new
products to replace thosein the market place that have come to the
end of their useful life. It is extremely difficult todevelop
strategy according to the product lifecycle because identifying its
various stages iscomplex47. Strategy can be both a cause and effect
of each stage and thus it is difficult toforecast sales for each
stage in the cycle. However, understanding a products position in
thecycle and the factors that can influence stage, consumer tastes,
technology and competitioncan greatly assist in strategy
development.Products take a predictable sales and profit path over
a limited lifetime, which five stages areclearly defines48, as
shown in figure 6.9. 19. Figure 6.9. The Product LifecycleSales
& ProfitsSales ProfitsTime0The ProductDevelopment
IntroductionGrowthMaturity Decline StageLosses & Investment 1.
The product development stage where an idea is evaluated and
developed into acommercial product. This is where time is spent on
developing the product withoutany sales revenue at all with
increasing costs as time goes on. For an entrepreneur,especially
during start up this can be a very straining upon personal
resources,especially if full time is being devoted to the project
without any other source ofincome. 2. The introduction stage is
where the product is first introduced into the market.Usually this
period takes time, especially during a new enterprise start up as
gainingaccess to distribution channels is also a learning
experience with much trial and errorbeing undertaken with potential
buyers. Established companies with strongrelationships with
customers may be able to gain much quicker distribution.
Howeveronce distribution is established there is a period where the
product moves very slowlyand sales growth is slow while potential
customers evaluate the product for potentialpurchase and use. The
length of this period depends upon many factors, for examplehow
brand conscious consumers are if the product is similar to others,
etc. Table 6.4.Below shows the expected slow sales growth time for
various types of new products.Profits will be negative or very low
during this period because of the high costs ofintroduction and
necessary promotion required. In the introduction stage apercentage
of sales cannot be used through fund accrual, and thus must be part
ofthe initial investment. Many products fail due to firms not
reserving funds for thispurpose. In most Malaysian cases,
especially through retail channels, the firm willhave to finance
the movement of stock into the channel for a long period of
time,30-180 days. Table 6.4. Expected Sales Growth Time Scenarios
for New ProductsType of New Product Situation/ScenarioExpected
Sales growthTimeNew concept products likeConsumers will take time
to Products will for a period ofultra concentrated become exposed
to the time move very slowly off thedishwashing liquid, coffee
concept and benefit of usingshelf before rapid sales 20. creamer
and instant coffee. the products. Distribution will growth will
occur. This couldtake time to gain into thetake up to a year in
somemore conservative channels. circumstances. Industrial Products
andBusiness to BusinessProducts The introduction stage is the time
when focus must be put into persuading consumers to switch brands
or in the case of a new to the world product or a significant
innovation from existing products invest in educational promotional
activities. Pioneering products although have the first to the
market advantage as an incumbent product are very susceptible to
followers who gain some advantage through learning from the
pioneers mistakes, especially if they can exercise stronger
influence over the channels of distribution. The pioneer to
maintain market leadership must develop a comprehensive defensive
marketing strategy (pricing & promotion, etc) to fend off
challenges49 from future competitors. 3. The growth stage will be
entered into if consumers accept the new product and continue to
repurchase it on a regular basis. If this becomes the case then
sales will begin to rapidly rise from faster shelf off-take and
gaining new distribution points from conservative channel outlets
that held of on initial purchase and support of the new product.
New competitors will be likely to enter the market and existing
competitors likely to retaliate through discounting and more
vigorous merchandising at store level to maintain their
market-share. As the Malaysian retail sector is a supplier driven
market relying on continuous in- store activity (promotion &
merchandising) the new product must be continually promoted during
the growth stage. On an initial low sales base up to 40% of gross
sales are needed for in-store (below the line) activities. The
potential strain this can cause on funding should be underestimated
as these costs will be deducted from invoice revenue. However as
sales increase and promotional costs can be allocated across a
larger revenue, the percentage required on in-store funding will
lower to somewhere between 10-20%. The funding effect on a firm
during the growth stage of a product is shown in the example in
Table 6.5.Table 6.5. Effect on Sales Growth on a Firms Funding
During the growth Stage of a Consumer Product. On the manufacturing
side, increasing sales volumes allow the firm to purchase larger
quantities of raw materials and packaging and negotiate lower
prices leading to higher manufacturing margins and profits. The
time/experience gained also allows fine tuning of the manufacturing
process to make savings through increases in efficiency through
process and labour experience. It is not unusual for direct
manufacturing costs to come down 30% during this period. Likewise
the time/experience factor allows improvement of product quality
where the usual unexpected manufacturing and packaging
compatibility problems are ironed out. The primary objective of the
firm during the growth stage is to maintain steady sales growth
until the cost of increasing sales is higher than the extra profit
gained. Shelf off-take velocity, distribution and competition are
the three major factors that the firm needs to consider during the
later period of the growth stage. Shelf off-take velocity is
influenced by advertising and in-store promotion and is usually
manipulated and maximized through coordinated promotional campaigns
with corresponding in-store activities, utilizing purchased shelf
space from stores, participation in gondola or block promotions
along the aisles and providing discounts 21. at strategic seasonal
times, i.e., food items leading up to major festivals. Gainingextra
distribution points in the existing channel and looking for
distribution pointsoutside the existing channel increases marginal
sales of the product, i.e., moving tothe hotel trade to gain extra
customers. Competitor activity will influence salesgrowth according
to the effort and activity they undertake in the market-place
tocounter the new product and promote their product. Competitors
can be counteredto some extend by adding new product benefits and
variants to gain furthercompetitive advantage over the competition,
hence the importance of holding backon some potential product
benefits that could have been incorporated into theoriginal
product, for some future time when those features can be utilized
for marketleverage over competitors when needed. This is a common
strategy used by firms inthe telecommunications, electronic,
automobile and other consumer good industries.Figure 6.10. shows
the relationship between sales, profits, shelf velocity,
extradistribution and competition during the growth stage.4. The
maturity stage is where sales slow down and plateau. Products
usually enterthis stage when there are a number of competing
products in the market. During thisperiod, competitors will use
promotion and discounting to maintain sales levels andtarget
erosion of competitors sales to gain market-share. Competitors will
alsolaunch new product variants with added features and benefits to
switch consumerloyalty towards their brands. During the maturity
stage, where competition is at itspeak, profitability will begin to
decline as extra promotion is needed and firms begindiscounting and
lowering prices. In markets where the channels of distribution
areconcentrated, i.e., international retailers, some of the smaller
brands will be droppedfrom product ranges and even a category
rationalization can take place, leaving onlya small number of
brands.Firms need to employ strategies to maintain their
market-share and sales level, whichmentioned above will erode
profitability. Competitors will attempt to vary andsegment the
market with new products with added features and benefits and
seeknew customers through developing new market segments, i.e.,
development of aspecial bleach for washing, rather than general
purpose. Failure to do this wouldnormally result in loss of
market-share in an competitive environment and relegationto
marginality and almost total forced withdrawal from the market.5.
Eventually the product falls into the decline stage where sales
begin to go doalmost steadily. This can be a very gradual process
in stable technology markets likefood and household products or be
extremely rapid in technology based products likemedia and
communications. The speed of the decline stage is usually governed
bythe velocity that consumers change their preferences away from
the product towardsanother. In food and household products this is
normally gradual, as is withinsecticides, or rapid when VCRs where
replaced with VCDs and later DVDs in thehome media industry, with
the arrival of new technologies.When the cost of managing the
product in the market becomes high in comparisonwith the returns or
the marginal utility of focusing on a new product with
higherpotential returns is better, most medium and large companies
with large productportfolios will usually drop the product off.
Smaller companies tend to hold onto aproduct until low sales make
the product uneconomic to further produce the product.Sometimes
when all brands have been withdrawn from the market, a small
companycan hold on to a minimum level of sales for a number of
years without needing tosupport the product with promotion and
discounts. The shoes polish market would bea good example of this
situation.The product lifecycle can be used as a tool to understand
how products develop, maintaintheir position and decline in
markets. However it can only provide a conceptual understandingor
guide, rather than a specific basis to develop marketing
strategies50, as it is in reality very 22. difficult to actually
determine what part of the cycle a product is actually at and
whichstrategies should be utilized accordingly.The product
lifecycle can be used to examine product categories, which include
classes ofproducts like petroleum and automobiles, product forms,
which would define the type ofproducts, i.e., in the case of
automobiles, sedans, vans and four wheel drives and brands,which
are a specific or group of products marketed by a specific firm or
group of firms.Different product categories will exhibit different
life cycles. For example, petroleum productshave an extremely long
product life cycle because alternative technology and
feed-stocksfrom renewable resources have not challenged the product
category to date, even with allthe publicity and debate about
renewable resource alternatives. This can be compared to thelife
cycle of a brand of air freshener which is very short. However the
product form itcompetes in will have a longer cycle than the
individual brands marketed within the form, i.e.,a liquid, aerosol
or gel type or household room, cupboard or automobile air
freshener. Figure6.10. below Shows the difference in lifecycles
between product categories, forms and brandsin the recording media
industry.Figure 6.10.Looking at products within the product
lifecycle framework can help distinguish betweenstyles, fashions
and fads. A style is a specific form of expression of a product,
i.e., in theautomobile example, a sedan or fastback. A Fashion is
something that is accepted at aparticular time such as mag wheels
or spoilers on cars. Fads are fashions that enter themarket
suddenly, become very popular, peak quickly and become unpopular,
because theydo not fulfill a strong need or satisfy it well51,
i.e., mens carry bags as a fashion accessory inthe early 1980s.
Styles can last many years and carry a specific consumer segment
following,while a fashion will become popular for a period of time
and slowly fad towards another. Fadswill attract a small proportion
of consumers for a short period of time. Figure 6.11. shows
thedifferent lifecycle curves for styles, fashions and fads.Figure
6.11.Technology and New Product DevelopmentIntellectual
PropertyIntellectual property can be defined as a legal entitlement
which sometimes attaches to theexpressed form of an idea, or to
some other intangible subject matter. This legal
entitlementgenerally enables its holder to exercise exclusive
rights of use in relation to the subjectmatter of the IP. The term
intellectual property reflects the idea that this subject matter
isthe product of the mind or the intellect, and that IP rights may
be protected at law in thesame way as any other form of property.52
One of the keys to intellectual property is theconcept of novelty
which is something that has not been publicly disclosed in any
form,anywhere in the world The basic forms of intellectual property
of listed in the table below:Table 6.x. Basic Forms of Intellectual
Property Term DefinitionCommercialisationCommercialisation of
intellectual property is simply about planning how you will take
your good idea to the marketplace. It involves working the idea
into your business plan, consideration of protection options and
considering how to market and distribute the 23. finished
product.PatentIs an exclusive right granted for an invention,which
is a product or a process that providesa new way of doing
something, or offers anew technical solution to a problem.Manner of
manufacture A legal term used to distinguish inventionswhich are
patentable from those which arenot. Artistic creations,
mathematicalmethods, plans, schemes or other purelymental processes
usually cannot be patented.Plant Breeders Rights Are used to
protect new varieties of plants bygiving exclusive commercial
rights to marketa new variety or its reproductive
material.Industrial Design An industrial design - or simply a
design - isthe ornamental or aesthetic aspect of anarticle produced
by industry or handicraftTrademark is a distinctive sign which
identifies certaingoods or services as those produced orprovided by
a specific person or enterprise.Copyright and Related Rightsa legal
term describing rights given tocreators for their literary and
artistic works(including computer software). Related rightsare
granted to performing artists, producersof sound recordings and
broadcastingorganizations in their radio and
televisionprogrammes.Trade Secrets/Undisclosed Information is
protected information which is notgenerally known among, or readily
accessibleto, persons that normally deal with the kindof
information in question, has commercialvalue because it is secret,
and has beensubject to reasonable steps to keep it secretby the
person lawfully in control of theinformation.Intellectual property
must be defined widely to include trade secrets and
commerciallyconfidential information, which can also be called
proprietary technology. Patents as a formof intellectual property
rights have issues related to their scope of protection, are
sometimeshard to justify in terms of costs due to the small market
the novelty will serve, are expensiveto gain registration and take
a long period of time before they are accepted through processand
review procedures53. Jaffe and Van Wijk state that in many
jurisdictions patentenforcement is very difficult due to slow court
systems, bias against foreign plaintiffs, lack oftechnical
competence and a general inability to enforce judgements54. A
survey undertakenby Lessor found that companies tended not to
patent their innovations in many cases, due tothe fear that waiting
would allow other companies to copy and counterfeit the product
first indeveloping countries that had markets too small to justify
the cost of registering a patent55.Grubb argues that in
biotechnology, patents as a form of intellectual property rights do
notserve the same purpose as in the electronics industry, where
patents are used as bargainingchips in cross licensing agreements
and patent pooling as there are common productstandards imposed by
necessity and regulation56.There are other alternative forms of
intellectual property protection used by companies thatmaintain
trade secrecy and advantage over competitors. Trade secrets can be
guarded andprotected within an organisation by maintaining
employment contracts with secrecyagreements that can be enforced
through contractual remedies. These include specificallytailored
production processes, mode and control of reactions and
formulations used in theproduction of products by a company. Under
legal license agreements, this technology, 24. although unpatented
can be protected as proprietary knowledge under contract law.
Therapid changing nature of technology and continual improvement
upon processes and product,is itself a mode of protection, as long
as the company maintains pro-active R&D in processand product
development. Patents applications can often become redundant before
theapplication is even reviewed by the patent office in an
environment of continual technologychange. 25. 1Calvin, R., J.,
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Unconventional Wisdom for Asian Business, New York, Palmgrove
Macmillan,pp. 89-95.5Jacobsen, M. (2004), De-Essentialising Chinese
Capitalism in South-East Asia, NIASnytt Asia Insights, No. 3,
Sept., P.4.6Shamsul, A., B., (1997), The Economic Dimension of
Malay Nationalism Socio-Historical Roots of the New EconomicPolicy
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