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relativity), but the same holds for an innovative idea--it needs to be recognizably significant in most people's eyes. It is more of what Schumpeter called an alpha-innovation, rather than the lesser innovations he called beta-innovations. Nevertheless, there continues to be a widespread impression that creativity yields an early c o m p o n e n t (the invention) and that the term innovative product should apply only to that which is implemented into marketable form. The issue is not resolved. Third, the author dealt directly with the issue of the "Big Bang" innovation. This is S c h u m p e t e r ' s distinction (above). Strategically, a firm may seek incremental innovation (beta) or breakthrough innovation (alpha). But, it usually happens that each strategy can produce products of the other type, so any significance of the term is strictly hindsight. Unfortunately, there remains a view that incremental innovations shouldn't be called innovations at all, but evolutionary, developments. The issue is not resolved. Fourth, there is innovation implementation versus innovation diffusion. What is innovative to a firm may be either (1) a difficult development of an invention into a marketable product, or (2) a simple imitation on the innovation of someone else (diffusion). Standing alone, the word innovation appears even more confusing. Fifth, the author wants people to cease distinguishing between product innovation and process innovation, if the use is strategic. Though the distinction seems clear, it really isn't. Not only does the invention/development cycle take place in both, but, and most important today, the process innovation route usually results in product improvement (even quality or cost), so the program is product innovation all along. The author proposes some reconciliation of these conflicts through an emerging systems view, but that cannot be summarized here.

Launching a Financial Service, Jane M. Klivans, Journal of Business Strategy (September/ October 1990), pp. 8-11 RKR While our knowledge of new tangible-products development has expanded considerably in the past decade, thanks to the work of the many researchers active today, new service product development has not received the attention it de-

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serves, given the dominance of services in the economy. Since new service development is expected to accelerate in the 1990s, this article by Klivans is timely in that it provides a brief primer on the particular challenges of developing a new service and an appealing case study. Opening the article is an excellent capsule summary of the problems inherent in new services development, such as the difficulty of sustaining a service's competitive advantage. The author, a director of Banc One Corporation's new business development unit, offers a number of helpful insights into the overall process. She notes parallels within the efforts of tangible product providers, where appropriate. The case study that then follows is a tight, effective treatment of Banc One's efforts to develop a successful home banking program. Success criteria are clearly spelled out, and ample details are provided on the video banking service. While the new service fell short of the criteria, Banc One has persisted in introducing a new version this past year. Overall, the article offers a timely lesson in the need for strategists to balance the speed of technological advancements with the pace of consumer acceptance. In addition, it gives the reader a useful overview of the challenges inherent in new service development.

Partnering as Focused Market Strategy, James C. Anderson and James A. Narus, California Management Review (Spring 1991), pp. 95-112 Over recent years we have seen increased attention to vertical coupling as a means of enhancing the new product capability of a given firm. This article addresses what the authors call "partnering" and defines the options and methods for its use. Their view is overall strategy, for products new or established. Partnering (coupling, symbiotic relationships, strategic alliances, whatever called) span a continuum of working relationships. On the left end is the purely transactional relationship-exchange of product for competitive prices. On the right end is the purely collaborative relationship, the ultimate in partnering where customer firm and supplier firm have strong "social, economic, service, and technical ties over t i m e . . . thereby achieving mutual benefit."

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Each industry tends to have activities concentrated in one area of that continuum, or band. This industry bandwidth has many exceptions but tends to reflect the life-cycle position of that industry. For example, they cite corrugated boxes as nearly transactional, fiber drums in the middle of the continuum, and programmable computers near the collaborative end. Each firm has the option of concentrating on one segment of the market or of offering a portfolio of relationships that cover more or most of the market segments. Generally, firms tend to stay close to the standard bandwidth of the industry because that represents the bulk of the potential. From that bandwidth individual firms may flare out to nearby segments of less potential. Such strategic decisions are made from the following paradigm of activity: 1. "Segment the market by product application and customer capabilities." 2. "Assess the value of the product offering to customers in each segment." 3. "Target segments and individual customer firms within segments." 4. "Develop and implement relationship-specific product offerings." 5. "Evaluate relationship outcomes and reassign accounts." 6. "Periodically update the value of the relationship offering." There is not enough room to summarize here the content of the six sections that follow in the article, but selected ideas are especially relevant to product innovation. •

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Basic research o f the market is critical, and the segmenting is rarely demographic. Instead, it focuses on the value of a product offering in a given customer application. The authors tell of one firm that bought the machines used by customers and set up a pilot operation in which they could use their own (and competitors') products and measure precisely the costs and savings. Point: Unless you know the value of your offering to the customer, you cannot calculate the ability of that customer to pay for the added benefits of partnering. The segmentation must be by application, because segment economics vary. A n ex-

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ample was a firm that sold acrylic woven fabrics into the awning market and into the marine market. Within the marine segment there was use inside the boat and outside it (covering). The latter was utilitarian, with little partnering opportunity, but firms that designed items for use inside the boat found great differences in the value of material options. For each use, define the core product and its core value. Usually there is a level of service-warranty-etc, that goes with the basic sale, and this is not partnering. E.g. on new programmable computers, there is a required level of initial training. Strategic partnering options exceed this core level. Another example was a firm that was wrestling with an R&D investment o p t i o n - which of the available fiber drum uses should they make product improvements for? Research disclosed that highly acidic or alkali products were toughest on the competitive steel drums, therefore they constituted high-value segments for the fiber drum firm. Within segments, research can qualify individual customer firms, because their philosophies, strategies and technologies vary greatly. Watch to see that the supplier firm and the customer firm each finds significant, and about the same, value f r o m the partnership. This keeps everyone focusing on increasing the size of the " p i e . " Try to focus on the " l e a d " users (ones whose present needs reflect segment needs in future months or years). If the lead users are tied up, and they often are, then look for smaller, leap-frog userfirms that commit to new technology as a means of jumping past current leaders. Particularly if the supplier can help in supplying the jumping technology. See if it is possible to flare out (expand the edges of the industry's current bandwidth on the partnering continuum) by unbundling

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the product/service offering. If not, try bundling, augmenting new product/service values that heretofore have been marketed separately. The rest of the article deals primarily with managing the partnerships, and evaluating them.

Fantasies for Sale: Marketing Products That Do Not Yet Exist, Vivian L. Gernand, The Journal of Business and Industrial Marketing (Summer/Fall 1991), pp. 31-36 GPL The author is concerned with a process she calls future marketing, which is concerned with technology-centered companies that wish to develop and market new products that do not yet exist. She draws upon her own personal experience as Market Development Manager and Director of Corporate Marketing at Coming, Inc. The first step in such new product development is understanding the organization's culture: mission, past successes and failures, current markets, R&D and manufacturing capabilities, processes, and, especially, biases (notably personal feelings of top management). Understanding the company's history and past track record can help you set realistic expectations and assess and correct your own biases. For instance, Corning has learned to set its sights not so much on superstar products for which they are so well known (e.g., cookware) but rather on good but smaller projects that are more realistic. Coming then uses two basic methodologies for identifying new markets for products they might create: the inside-out method and the outside-in method. The inside-out method begins with a material or product and finds the most appropriate applications or markets, whereas the outside-in technique looks at a broad area of activity, tries to identify future needs, and then figures out if the firm has anything that might contribute to solving problems. Using the inside-out method, the first step is to identify and thoroughly understand the industry (suppliers, customers, industry infrastructure, etc.); this can help you plot your potential competitive positioning. Next, look at applications for the product in the industry, focusing on unsolved problems. For instance, Coming could

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talk with manufacturers in the automotive market to uncover problems that might be solved by a particular new material Corning can visualize. Once the opportunity has been identified, perform a more tightly defined industry analysis as above. Pay special attention to cultural biases that influence, rationally or emotionally, the choice of materials or suppliers. For example, in the automotive industry the problem of excessive weight might be solved by lighter materials in major components. Corning's new material might perform even better than plastics. However, the industry might have a historical bias towards metals, so Corning must discern whether their new material will be purchased. Additionally, talking directly with manufacturers lays for Corning the groundwork for future sales. After industry structure, competitors, and customers are understood, the focus can shift to the normal market sizing process: determining market size, forecasting share (largely a function of the likelihood the industry will, in fact, buy our product), and developing a marketing strategy. The outside-in method, on the other hand, begins not with a product or material, but rather by identifying future needs within a sphere of activity. In the first stage, a list of growth industries is inspected to find those with products or materials that fit within your mission and capabilities. Then, within this shorter list are identified the markets in which you already participate. Finally, look for the highest growth industries within that group. The next step is to talk with those in the identified industries to discover what problems they are facing and requirements they see in the identified solution. Coming talks to technology people to discover desired capabilities of its materials or products. Then, scientists are consulted to ascertain that the project is feasible. The third stage involves assessment and planning. Size, structure, participants in, and growth rate of the current market, both with and without the new product, are determined. Then, past history is inspected; was there a similar occasion when a new product or material impacted the growth of an industry? What problems and successes have similar products experienced? The final phase involves the usual activities of planning the entry of a new product in a new marketplace: plot the product life-cycle, deter-