Chapter 08 - Innovation and New Product Strategy

Chapter 08
Innovation and New Product Strategy

True / False Questions

1. (p. 239) A similarity etween e!pectations and use e!perience with e!isting products may
indicate a new product opportunity.
FAS!

Difficulty: Easy

". (p. 241) #adical innovations have the potential o$ disrupting e!isting technologies and
creating negative impacts on the leading $irms that pursue new product strategies using
e!isting technologies.
T"#!

Difficulty: Easy

%. (p. 242) &hen products ecome commodities' pro$it margins increase and di$$erentiated
advantages are $inally achieved.
FAS!

Difficulty: Easy

(. (p. 244) Creating an innovative culture and setting oundaries $or the types o$ new products to
e considered are important to the $oundation necessary $or success$ul innovation.
T"#!

Difficulty: Moderate

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Chapter 08 - Innovation and New Product Strategy
). (p. 246) *he ris+ matri! shows' it is $ar more ris+y $or a usiness to launch a new product or
technology into a $amiliar served mar+et' than to adapt a current product to a new end-use
mar+et.
FAS!

Difficulty: Moderate

,. (p. 257) Analyses appropriate $or new-product evaluation include rea+-even' cash $low'
return on investment and pro$it contriution.
T"#!

Difficulty: Calle!"i!"

-. (p. 26#) A test mar+et is a controlled e!periment conducted in a care$ully chosen mar+etplace
to measure mar+etplace response and predict sales or pro$itaility o$ a product
T"#!

Difficulty: Easy

8. (p. 263) Commerciali.ation is introducing new products into the mar+et. *his re/uires
$inali.ing the mar+eting plan' coordinating mar+et entry activities across usiness $unctions'
implementing the mar+eting strategy and monitoring and control o$ the product launch.
T"#!

Difficulty: Moderate

0. (p. 263) &hen the responsiility $or the new-product launch is assigned to a mar+eting or
product manager no coordination is necessary with other $unctions o$ the company.
FAS!

Difficulty: Calle!"i!"

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Chapter 08 - Innovation and New Product Strategy
10. (p. 264) *he new product planning process descried in the te!t is ased on the logic o$
eing mar+et driven and $ocused on customer needs. Since a mar+et-oriented $ocus is always
important' no variations in the generic process are ever necessary.
FAS!

Difficulty: Calle!"i!"


$ultiple Choice Questions

11. (p. 239) Products such as Automatic *eller 1achines that are radically new and the value
created are sustantial are called 22222.
A% *rans$ormational innovation
3. Sustantial innovation
C. Incremental Innovations
4. Planned innovation

Difficulty: Easy

1". (p. 239) Products such as 4iet Co+e that are signi$icantly new and create important value $or
customers are called 22222.
A. *rans$ormational innovation
&% Sustantial innovation
C. Incremental Innovations
4. Planned innovation

Difficulty: Easy

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Chapter 08 - Innovation and New Product Strategy
1%. (p. 239) New products that provide improved per$ormance or greater perceived value 5or
lower cost6 are called 22222.
A. *rans$ormational innovation
3. Sustantial innovation
C% Incremental Innovations
4. Planned innovation

Difficulty: Easy

1(. (p. 239) 22222 indicate5s6 how well the product use e!perience compares to the value
e!pected y the uyer.
A% Customer satis$action
3. Customer value
C. Customer needs
4. Customer innovation

Difficulty: Easy

1). (p. 239) 22222 is the comination o$ ene$its provided y a product minus all o$ the costs
incurred y the uyer
A. Customer satis$action
&% Customer value
C. Customer needs
4. Customer innovation

Difficulty: Easy

1,. (p. 239) *he o7ective o$ 22222 is to identi$y needs $or new products or improvements in
e!isting products' processes and supporting services.
A. Customer satis$action
&% Customer value analysis
C. Customer history analysis
4. Customer innovation

Difficulty: Moderate

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Chapter 08 - Innovation and New Product Strategy
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Chapter 08 - Innovation and New Product Strategy
1-. (p. 244) 22222 occurs when a new product attracts sales $rom an e!isting product.
A% Canniali.ation
3. #adical innovation
C. Success$ul innovation
4. 3orrowing

Difficulty: Easy

18. (p. 244) 22222 consists o$ the pursuit o$ a delierate' ongoing strategy o$ developing and
introducing new products that attract the uyers o$ a company8s e!isting products.
A. 9nusual innovation
&% Proactive canniali.ation
C. Success$ul innovation
4. 3orrowing

Difficulty: Moderate

10. (p. 245) Planning and implementing an innovation wor'shop o( top e)ecutives to develop
an innovation plan would e part o$ creating a5n6.
A. 9nusual innovation
3. Proactive canniali.ation
C. Strategy $or innovation
*% Innovation culture

Difficulty: Moderate

"0. (p. 245) *eveloping an innovation state+ent highlighting the co+pany,s o-.ectives and
senior management8s roles and responsiilities is part o$ creating a5n6 22222.
A. 9nusual innovation
3. Proactive canniali.ation
C. Strategy $or innovation
*% Innovation culture

Difficulty: Moderate

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Chapter 08 - Innovation and New Product Strategy
"1. (p. 245) *he company8s 22222 spells out management8s choice o$ the company8s most
promising opportunities $or new products.
A. 1ission statement
3. :ision
C% Innovation strategy
4. Innovation culture

Difficulty: Moderate

"". (p. 245) 4e$ining the strategic $ocus $or the corporation in terms o$ product scope' mar+ets
and technologies is a part o$ 22222.
A. 1ission statement
3. :ision
C% Strategy $or innovation
4. Innovation culture

Difficulty: Moderate

"%. (p. 245) A ma7or enchmar+ing study across a range o$ industries indicates that a care$ully
$ormulated and communicated new product 22222 is a +ey cornerstone o$ superior new
product per$ormance.
A. 1ission statement
3. :ision
C% Innovation strategy
4. Innovation culture

Difficulty: Moderate

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Chapter 08 - Innovation and New Product Strategy
"(. (p. 249) ;uided y the new product innovation strategy 22222 is the starting point in the
new/product develop+ent process
A% <inding promising new ideas
3. Screening new ideas
C. 3usiness analysis
4. Product development

Difficulty: Moderate

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Chapter 08 - Innovation and New Product Strategy
"). (p. 249) 3y opening their oundaries to suppliers' customers' outside researchers' even
competitors' -usinesses are increasing the i+port and e)port o( new ideas thus0
i+proving their 11111 process%
A% New idea generation
3. Screening new ideas
C. 3usiness analysis
4. Product development

Difficulty: Moderate

",. (p. 253) 1anagement needs a 22222 and evaluation process that will eliminate unpromising
ideas as soon as possile while +eeping the ris+s o$ re7ecting good ideas at acceptale levels.
A. Idea generation
&% Screening new ideas
C. 3usiness analysis
4. Product development

Difficulty: Moderate

"-. (p. 255) =stimating the commercial per$ormance o$ the new-product concept with $inancial
pro7ections is part o$ the 22222.
A. Idea generation
3. Screening new ideas
C% 3usiness analysis
4. Product development

Difficulty: Moderate

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Chapter 08 - Innovation and New Product Strategy
"8. (p. 255) An initial mar+eting strategy should e developed as a part o$ the 22222. Included
are +ar'et target2s30 positioning strategy and +ar'eting progra+ plans%
A. Idea generation
3. Screening new ideas
C% 3usiness analysis
4. Product development

Difficulty: Moderate

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Chapter 08 - Innovation and New Product Strategy
"0. (p. 257) *he 22222 includes product design' industrial design 5ease-o$-use and style6' process
5manu$acturing6 design' pac+aging design and decisions to ma+e or outsource various product
components.
A. Idea generation
3. Screening new ideas
C. 3usiness analysis
*% 4evelopment o$ the new product

Difficulty: Moderate

%0. (p. 26#) 4uring the 22222 positioning decisions such as pac+aging' name selection and si.es
are made. *he value chain strategy determines the customer access channels to e used. *he
price' advertising and sales promotion strategies are chosen
A. Idea generation
3. Screening new ideas
C. 3usiness analysis
*% 1ar+eting strategy development

Difficulty: Calle!"i!"


!ssay Questions

%1. (p. 241) 4iscuss the issues in matching capailities to value opportunities when evaluating
new product opportunities.
=ach value opportunity should e considered in terms o$ whether the organi.ation has the
capailities to deliver superior customer value. >rgani.ations will normally have the
capailities needed $or product line e!tensions and incremental improvements. 4eveloping
products $or a new product category re/uires realistic assessment o$ the organi.ation8s
capailities concerning the new category. Partnering with a company that has the needed
capailities is an option concerning the addition o$ a new product category.

Difficulty: Moderate

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Chapter 08 - Innovation and New Product Strategy
%". (p. 241) 4iscuss the value o$ using customer and management8s vision as guides to evaluate
trans$ormational innovation ideas.
Customers may not e good guides to totally new product ideas that may e called radical or
rea+through innovations since they create new $amilies o$ products and usinesses.
,
&hen
such ideas are under consideration' potential customers may not understand how the new
product will replace an e!isting product. *he prolem is that customers may not anticipate a
pre$erence $or a revolutionary new product. <or e!ample' initial response $rom potential users
o$ optical $iers' video cassette recorders' <ederal =!press and CNN was not encouraging. In
these situations' management must $orm a vision aout the innovation and e willing to ma+e
the commitment to develop the technology as Corning Inc. did with optical $ier technology.
*he ris+' o$ course' is that management8s vision may e $aulty.
Incremental product improvements are guided y analy.ing customer value opportunities'
whereas these approaches to $inding new product opportunities are not very use$ul in
evaluating potential trans$ormational innovation. *he $amiliar admonition to e customer-
driven is o$ little value when it is not at all clear who the customer is - when the mar+et has
never e!perienced the $eatures created y the new technology.

Difficulty: Moderate

%%. (p. 244) &hat is proactive canniali.ation and what strategic logic support this strategy?
Proactive canniali.ation consists o$ the pursuit o$ a delierate' ongoing strategy o$
developing and introducing new products that attract the uyers o$ a company8s e!isting
products. *he strategic logic o$ this concept is o$$ering uyers a etter solution to a need
currently eing satis$ied. =!ecutive resistance to canniali.ation is driven y the elie$ that it
is unproductive $or a company to compete with its own products and services. Nonetheless'
the reality is that changes in mar+et re/uirements and customer value opportunities will result
in competitor threats $or e!isting products and technologies.
Proactive canniali.ation may e essential to many $irms to sustain a competitive advantage
and achieve $inancial per$ormance and growth o7ectives. In support o$ the logic o$ proactive
canniali.ation' research sponsored y the 1ar+eting Science Institute indicates that
managers o$ success$ul $irms proactively resist the instinct to retain the value o$ past
investments in product development.1
%
*hey pursue proactive canniali.ation initiatives.

Difficulty: Calle!"i!"

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Chapter 08 - Innovation and New Product Strategy
%(. (p. 246) =!plain why' as the ris+ matri! shows' it is $ar less ris+y $or a usiness to launch a
new product or technology into a $amiliar served mar+et' than to adapt a current product to a
new end-use mar+et.?
1ar+et ris+s are much greater than product ris+s ecause there are more dimensions o$
uncertainty' including competitors' channels and consumers. I$ the mar+et is entirely
un$amiliar' the $irm doesn8t even +now what it doesn8t +now@and the +nowledge is hard to
ac/uire. 1ar+et ris+s also tend to arise much later in the product development process and are
harder to resolve. A $urther complication is that an e!isting rand name may have no meaning
in a Anew to the companyA mar+et. 3ecause prospective uyers lac+ any e!perience' they
view the new entrant as ris+y and need special inducements to try the new product.

Difficulty: Calle!"i!"

%). (p. 24$) In new product planning when is the design team and design center more e$$ective
and when is the traditional 8product manager8 ureaucratic structure more e$$ective?
*he design team and design center are more recent new-product coordination mechanisms.
*hough cross-$unctional teams are widely cited as promising new-product planning
mechanisms' research $indings suggest that they may e most appropriate $or planning truly
new and innovative products.
18
*he more traditional ureaucratic structures 5e.g.' new
products manager6 may e etter in planning line e!tensions and product improvements. *he
danger o$ the traditional structure is $ailing to identi$y new product opportunities outside the
scope o$ e!isting new product planning and not identi$ying potential disruptive threats.

Difficulty: Moderate

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