|Book Review: New Product Forecasting|
New Product Forecasting: An Applied Approach
Written by: Kenneth B. Kahn. Armonk, NY: M.E. Sharpe, 2006. 157+xviii pages.
“New product forecasting is an important topic” (p. 3) is how this book by long-time PDMA supporter and experienced product professional Kenneth Kahn opens Chapter 1. Kahn shares an experience in the Preface where using a simple forecasting approach yielded better organizational results than the sophisticated Bass diffusion model (discussed in Chapter 5). Based on Kahn's writing, and from my own experience, new product forecasting is indeed one of the most important and underappreciated disciplines in product development. Adding to this challenge is that product leaders need to sell their forecasts and to build consensus using methods that other functional managers will be able to understand quickly and support. New Product Forecasting reviews much of the arsenal that professional product leaders will need to develop quality new product forecasts and to build support for them.
The book is not meant to be an all-encompassing tutorial on new product forecasting or a step-by-step handbook but rather a survey of available methods. Each technique is discussed briefly, some in more detail than others, and is illustrated with a range of hypothetical examples. At a relatively scant 157 pages in eight chapters, it merely touches the tip of the proverbial iceberg on most of the techniques, leaving it up to the reader to research desired methods further. The References section assists further exploration with an extensive list of resources, but again, it is up to the reader to identify the correct resource for any given forecasting method discussed.
Kahn does, however, provide a very good survey of many of the most used and relevant new product forecasting techniques, organizes them well, and explains them effectively. This allows the reader to identify quickly the best method to solve a specific problem or to examine each approach systematically.
The book, as noted on the back cover, is targeted as useful for “students and professionals.” I believe this is correct, with a caveat that the professional should be a student at heart to appreciate Kahn's academic style. You will not find many personal anecdotes or examples taken from the successes and failures of real product managers in real companies. But Kahn clearly knows his stuff and speaks with authority and solid research as he navigates quickly and logically through a lot of material in a very short time.
Kahn divides this book into three parts, starting with Part I, “Foundations of Applied New Product Forecasting.” Chapter 1 provides a reasonable overview of forecasting challenges and a quick review of all the techniques divided into five categories. He also uses the common new markets–new products matrix to outline the methods. This preview helps the reader mentally navigate through the rest of the book.
Chapter 2 proceeds to put product forecasting in the context of an overall product development process. Kahn reviews each stage of a State-Gate® process and clearly describes the role of product forecasting in each stage. Although this context is valuable, particularly for new product leaders, I thought this could have been summarized further to allow more depth into some of the challenges facing product managers and forecasters described in later sections.
The heart of the book is Part II, “New Product Forecasting Techniques.” Kahn takes us on a whirlwind tour of 17 forecasting techniques starting with the “Jury of Executive Opinions” (p. 39) and ending with “Regression Analyses” (p. 99). To help guide the reader through the complexity, the methods are broken down into four categories, each encapsulated in its own chapter. The format is concise and efficient, leaving little room for fluff. You no sooner have a chance to catch your breath with one technique when it is on to the next one.
This part starts with judgmental techniques (p. 39), where he discusses a range of qualitative techniques such as sales force composite forecasting (p. 41) and assumptions-based modeling (p. 44). These methods provide a good start since Kahn begins with techniques most product leaders will find familiar. The section ends with an interesting discussion on Markov process models, which are “probabilistic frameworks that determine a future state based on current state behavior” (p. 63).
In the second chapter of Part II, Kahn reviews several market research techniques, such as lead-user analysis, concept testing, and market testing. In doing so he takes on a broader set of strategic and tactical new product questions, such as new product viability. He also covers feature trade-off and relative value methods, such as conjoint analysis (p. 72) quality function deployment (QFD) (p. 77) and the Kano model (p. 82). Though it is impossible to do these valuable techniques justice in such a short amount of space, Kahn provides an excellent summary to introduce these tools as well as makes a valiant attempt to explain conjoint analysis with simple examples using a small number of variables.
Additional chapters in Part II cover time-series techniques such as looks-like analysis (p. 86) and diffusion modeling (p. 90). Each method is summarized well and provides examples for how to apply the technique.
When describing the methods, Kahn spends more time describing statistical methods, such as conjoint analysis and regression techniques, than the more qualitative methods, such as sales-force composite. The additional depth he provides for methods requiring statistical tools such as Excel or advanced models does help, but it still leaves the reader wanting more to be able to actually implement the technique.
Although it is clear that all the techniques Kahn discusses must consider price, marketing spending, market growth trends, and other factors, the discussion around the methods could have been clearer on how to incorporate these factors, particularly considering that topics such as price sensitivity are highly contentious in most companies. Kano and QFD could also benefit from more discussion and tips on how to apply the techniques to new product forecasting.
Part III, “Managerial Considerations for Applied New Product Forecasting,” starts with a broad overview of the product life cycle and how to consider factors such as product launch issues, S-curves, and cannibalization in new product forecasts. This is a valuable addition but could have been explored even further since these problems occur so commonly.
The book ends with benchmarking information to illustrate the successes different industries and firms are having with each technique. This section is an important supplement to help practitioners evaluate their own forecasting success.
Overall, I found this book to be credible and to serve two main purposes: (1) as a good overview of the available product forecasting methods that then allows you to find additional sources to fully understand and apply the techniques; and (2) as a reference and refresher on techniques you may have not used for awhile. The index is excellent and provides a handy quick reference to the technique you are seeking.
To make the book more readable and even more applied, more time could be spent on building connecting tissue between the methods and the underlying assumptions to create viable, supportable new product forecasts. This could be in the form of anecdotes, case studies, or tips on how to create and gain support for forecasting assumptions. An addition for the next edition might be a website or CD that provides tools and examples to really be able to apply the methods.
New Product Forecasting should be a helpful addition to your new product library and provides a good survey of forecasting methods and a primer on how to apply them. Less experienced product leaders will need to delve deeper into some of the advanced tools the author summarizes to fully apply them in a real-world environment.