Improving the Success Rate of New Product Introduction through Digital Social Media

    By: Vijaya Kumar on Aug 27, 2013

    Improving the Success Rate of New Product Introduction through Digital Social Media

    By B Vijaya Kumar, Tata Consultancy Services

    Introduction

    Global manufacturing organizations are racing against their peers in their quests for customer delight. They are constantly innovating to build efficiency and give a seamless customer experience. New product development is one of the vital means to maximize the value to their customers and gain consistent market share. However, often new product ideas are not developed and the majority of new products never make it to market. Consider these two interesting statistics: 1) New products have a failure rate of 25 percent to 45 percent1; and 2) For every seven new product ideas, about four enter development, one and a half are launched, and only one succeeds2. But the biggest challenge is how to understand what the current and future customers want and how they will respond to a new product. With 1.5 billion users3 on social media, can organizations engage customers through social media about future product ideas? How does a product developer start the process of leveraging social media? 

    Abstract

    This paper focuses on the possible deployment of social media technology in innovation and new product development for manufacturing organizations. It highlights the need for social media technology and, in particular, how manufacturing organizations can leverage social media to create value in the new product development process thereby maximizing the success rate of new products. The increasing presence of diverse consumers on the Internet and in different social media forums can help organizations reassess product development and marketing, including: product concepts, deliberate and emerging strategies, target customers, and product features and options. Connecting with target/prospective customers through social media ensures the adoption of new products with no hiccups. The analysis and judgments in this paper focus primarily on manufacturing entities; however, the arguments can apply to different industries such as retail, banking and consumer goods.

    CHANGING LANDSCAPE FOR MANUFACTURING

    According to a research by the consulting firm McKinsey, global manufacturing entities—both discrete and process-oriented industries—will face the following challenges:

    • Global demand shift to emerging economies
    • Demand fragmentation and need for customization
    • Growth of service business models
    • Rising wages in ‘”low cost”  nations
    • Growing talent shortages
    • High volatility in commodity prices
    • Innovation in new materials, product design, production processes and business models
    • Increasing support by the governments on domestic manufacturing
    • Thriving importance on regulation and sustainability
    • Growing importance on IP protection.

    The following chart shows the implications of the above challenges to the manufacturing industry from the entire end-to-end value chain perspective.


    Figure 1
               
    Innovation and new product development have always been the keys to successfully grow business. Developing new products guarantees a position as the first mover in the market while providing significant economic advantage over competitors. But to meet today’s global challenges, companies must also focus on key themes such as customer proximity, business agility, innovation and collaboration.

    However, how customers adopt the new products is still a guessing game. This is primarily because new product development remains closed within the organization. Social media, which is replete with prospective customers, enables the organizations to reduce this risk in adoption by customers and eventual success of the products in the marketplace.

    CHALLENGES IN CONVENTIONAL NEW PRODUCT DEVELOPMENT PROCESS:


    Most manufacturing organizations have adopted Stage-Gate process for their new product development.

    Stage-Gate gives structure and discipline to workflow while allowing the stakeholders to make decisions throughout. The conventional new product development follows well-defined phases with gates to control the flow of a project from ideation to launch. The decisions at each gate include ”Go,” ”No Go,” “Hold,” “Come back,”  and they can propel new projects in the right direction which will eventually turn into new products.

    The following generalized view shows the conventional new product development process practiced by manufacturing companies:

    Figure 2
    So, with Stage-Gate at the core of the product development process, why are some companies and new products failing? It appears that there could be some crucial elements missing in the approach. Product failures could be turned into successes if organizations incorporated more effective and relevant customer adoption methods to the current phase-gate process.

    The following are the key challenges in the conventional Stage-Gate new product process:


    Domesticity
    Stage-Gate new product development process revolves around the stakeholders mostly within the organization (though some inputs from the suppliers flow into the process), and it is domestic to the organization. Although cross-functional teams get involved early in the process to provide different perspectives on new products, customers have no or very limited input in the form of validation of voices or feedback at regular intervals of the process. Product managers need to ask: How often are they soliciting feedback from the market for a family of new products during the Stage-Gate process? If the answer is little or none, then they have identified the key component missing in their new product development.


    Ambiguity
    The front end of new product development is mostly fuzzy in nature. Ambiguities occur in product planning, inclusion or exclusion of product features, targeting customers, value proposition, etc. Most of the companies conduct market research or on-field customer conversations to understand their latent or unmet needs/aspirations. However, these surveys or discussions are limited to focused customer groups with small sample size. It is also becoming difficult to predict the latent needs of the customers from these surveys. Sometimes, customers fail to express their needs completely. Despite these uncertainties, the organization decides to take the initial hypothesis and move to the drawing board for design and development. When customers’ needs are unclear, the new product development process is reduced to a guessing game which significantly affects the success rate of new products. 


    A survey conducted by Copernicus Marketing Consulting and Research shows the following key reasons for the failure of new products4:

    •  Marketers assess the marketing climate inadequately.
    • The wrong group was targeted.
    • A weak positioning strategy was used.
    • A less-than-optimal “configuration” of attributes and benefits was selected.
    • A questionable pricing strategy was implemented.
    • The ad campaign generated an inadequate level of awareness in the target customers.
    • Cannibalization depressed corporate profits.
    • Over-optimism about the marketing plan led to an unrealistic forecast of the revenue.
    • Poor implementation of the marketing plan in the real world.
    • The new product was pronounced dead and buried too soon.

    From this study, we can surmise the following:


    New products fail because customers were not engaged in the product development process. In other words, if a new product is to succeed, customers must be actively and constantly engaged in new product development process from ideation to the end of the product’s life.


    Although organizations involve ”Customer Connect” teams to make qualitative surveys, there seems to be an absence of constant dialogue with the prospective customer base throughout the new product development process. Maintaining a constant dialogue with the customers is very important because new product development lead time period is quite long (it may range from  one year for simple product extensions to five years for breakthrough products). In addition, there are different factors such as changes in customer preferences, technology obsolescence and regulatory updates that are likely to influence the new product success rate during this period.

    THE RISE OF SOCIAL MEDIA


    Gartner Inc., an information technology research and advisory company, defines social media as:

    “An online environment in which content is created, consumed, promoted, distributed, discovered or shared for purposes that are primarily related to communities and social activities, rather than functional, task-oriented objectives. ‘Media’ in this context is an environment characterized by storage and transmission, while ‘social’ describes the distinct way that these messages propagate in a one-to-many or many-to-many fashion.”

    Only social media can enable formation of online communities which can access, collaborate and propagate their members’ thoughts and opinions through mutual interaction. Following are some characteristics of social media:

    • Easy collaboration of large, diverse groups of people
    • Faster propagation of messages
    • Feasibility of one-to-many or many-to-many communication
    • Unlimited freedom to express thoughts
    • Easy to use and convenient medium

    Facebook and Twitter are not the only social media sites to host active forums on consumerism. Consider also networking sites, blogs and online consumer voice reference forums. There are millions of conversations happening online which can serve as a potential medium to engage and dialogue with the customers.

    NEED FOR SOCIAL MEDIA IN NEW PRODUCT DEVELOPMENT PROCESS


    Social media has assumed a commanding stature over the past few years. Researchers estimate that more than 1.5 billion people use social media across the globe, and 80 percent of those users regularly interact with the social networks.

    A survey5 conducted in 2012 revealed the increasing dominance of social media. The survey results are shown here:

    Figure 3

    The perception is that most of people using social media spend time on status updates or chatting with friends, but consumers also are buzzing around social media, conveying their thoughts on products and services.

    A survey by Nielsen, a global information and consumer measurement company, found that 58 percent of the people on Internet spend time discussing service and product issues. This number is quite significant and if the organization adopts a proper strategy to engage potential customers, social media can add value to the business especially in new product development.

    Figure 4
    Why can’t manufacturing organizations tap this medium to create value in new product development processes? Social media allows access to many different voices of potential customers. Social media creates a perfect platform to dialogue with customers in the new product development process thereby reducing the fuzziness and improving the success rate of the new products.

    The following table lists the key differences between situations with and without the deployment of social media in new product development processes:

    Figure 5

    APPLICATIONS OF SOCIAL MEDIA IN NEW PRODUCT DEVELOPMENT PROCESS

    For manufacturers, the prime motive behind the move toward greater incorporation of social media for collaborative business processes is gaining access to consumers to validate new product concepts or ideas. This validation cycle feeds into the traditional new product development processes, making them more robust and reliable.  

    Gone are the days when customers responded to traditional market surveys. Today, with the presence of customers in many online forums, organizations can dialogue with the customers to understand their current and latent needs.

    The following figure portrays how manufacturers can leverage social media in their conventional new product development processes:
    Figure 6
    Social media can be leveraged to act as a bridge between the customers or even potential customers and the new product development team. Some of the potential applications in new product development are presented in the table below:


    Figure 7

    APPROACH FOR EMBEDDING SOCIAL MEDIA IN DNA OF NEW PRODUCT DEVELOPMENT PROCESS


    The following figure shows the step-by-step approach for organizations to adopt social media in their new product development:
    Figure 8

    There are several factors that influence the successful use of social media in new product development.  These factors include selection of right IT tool, alignment of new product development processes, restructuring the PD organization, hands-on training to product development managers on the use of social media, organizational change management, and the culture of the organization to drive decisions based on input from social media.

    Social media can be a double-edged sword. It exposes the organization to criticism and even theft of ideas. Organizations must understand the whole dynamics of this mammoth tool before deploying it for new product development. Exercise caution when exposing proprietary ideas to the world.

    CONCLUSION

    Manufacturing organizations are constantly searching for new products to bring to the market. In this journey, understanding the customer perspective, needs and emotions are vital for the success of new products. In fact, taking one step backward to understand the end customers is very important in segmenting and targeting new products. The bigger question is: Can organizations understand consumer problems without talking to them? How do they communicate with their customer base? Organizations can easily tackle the above dilemma and can make the right decisions and engage their customers by leveraging social media. By tapping into the strengths of social media, new product development will no longer be a guessing game.

    References

    1Crawford, 1987; Cooper, 2001.

    2Booz & Hamilton study

    3Various public research reports, 2012

    4Conducted by Copernicus , a market consulting firm

    5Source : Browser Media, Socialnomics, MacWorld

    Resources

    1. “Manufacturing the Future: The Next Era of Growth and Innovation,” McKinsey Global Institute, 2012.
    2. “The Social Economy,” McKinsey Global Institute, 2012.
    3. “The Success and Failure of New Product Development,” a study with focus on the early phases, Institute of Economic Research at Lund University, 2007.

    About the Author

    B. Vijaya KumarB Vijaya Kumar is a domain consultant in the New Product Introduction Value Engine—Innovation and Transformation Group, Manufacturing Industrial Solution Unit, of Tata Consultancy Services. He has consulting experience with a large, global base of customers. Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business. All exhibits are based on Tata Consultancy Services research and consulting experience unless otherwise stated.

    Released: August 27, 2013, 10:53 am | Updated: September 3, 2013, 1:35 pm
    Keywords: PDMA Blog

    Anjani Kumar Budhadev, Assistant Consultant Good read
    By: Anjani Kumar Budhadev, Assistant Consultant | Posted: August 28, 2013, 12:02 am

    Certainly, Social media is revolutionalizing the way new product development is happening.


    Nice approach outlined in the paper that organization may contextual and use


    Regards,


    Anjani Kumar


     

    Srikanth Thirumalasetti Start integration of SM as a plug-in process
    By: Srikanth Thirumalasetti | Posted: September 1, 2013, 6:37 am

    While I'm in accord with the author on the need for integrating social media into the NPD process to increase the success rate of NPI by increasing the 'frequency of customer feedback', it is important that this integration is done gradually by starting as a plug-in process. Here's why and how:

    - It is important to ensure that the pace of execution of activities as planned (sans SM inputs) in each of the stages of the NPD process is not getting slowed down because of a) un-verifiable inputs from the social media and b) time taken to precipitate the conversations into well-defined customer reqs.

    - As you noted, an SM platform manned by dedicated SM analysts should monitor the chatter on the social media and route it through a well-defined internal process of facilitating conversations within and outside of the organization to arrive at a clear set of expectations from the customers as part of the Gate criteria at various stages in the NPD process.

    - The question now is about the frequency of Gate reviews, which additionally include the new set of expectations derived from SM inputs.


    Srikanth


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