Product planning—we're still getting it upside down

20

Long

Printed

Range Planning, Vol. In Great Britain

13, No. 5, pp. 20 to 26, 1981

0024-6301/81~050~,20-07~02.00/0 Pergarnon Press Ltd.

Product Planning We’re Getting it Upside Down lames

RIditch,

Chairman,

AID

Ltd.

This paper questions why tiith all the traditional inventive genius of the British people, this country is failing to hold its own against foreign competition. While the reasons for this are many, the author suggests that the conventional approach to new product development is a major factor. Industry should put the demands of the consumer first rather than an abstract pursuit of technological development. He suggests that for industry in general the needs of consumers should take precedence over the ‘technology push’.

Britain enjoys a rare reputation for inventiveness. The reputation is justified. If you take as a measure of pure invention Nobel prizes in Science-the furthest reaches of the human mind-Britain’s performance is remarkable; nearly three times that of the bursting and brilliant United States, nearly 30 times that of Japan. Astonishing. Britain is one of few net exporters licences.

of patents

and

If this is any guide, perhaps we may claim to be as a nation, in addition to being all the ‘muddling through’ things we’re accused of, extremely inventive. That applies, not only in science, but in many other walks of life. On the surface, this is very encouraging. Why? Because it is our conventional wisdom that progress and prosperity come from invention. In practical terms, that should boil down to a capacity to create new things which improve both the quality of our life and, by being manufactured and sold, our economic well-being too. So we should be sitting

pretty.

Still

we can hardly say Britain’s economic performance has been inspiring. The reasons for our relatively poor performance are complicated, we all know, and I don’t attempt to simplify them. But we must admit that countries whose inventiveness is no greater than our own, or even less good than ours, are doing better financially. There seems to be a gap, doesn’t there, between inventiveness and a capacity to develop marketwinning new products; one may riot be the fruit of the other. The assumed link may be a delusion. While we win Nobel prizes we lose markets. This is important to establish for a simple reason. Hardly a day passes when we don’t read that what we need, the answer to our competitive problems, is more Research and Development (which is where, in industry, invention formally takes place. Although, in parentheses I must whoieheartedly agree with Christopher Lorenz of the Financial Times who observes that research is different from development and, indeed, science is different from either.) This last point is of interest because, as Michael Fores, of the Department of Industry has noted. ‘part of our manufacturing malaise is due to the propagation by scientists and economists of the false idea that innovation in manufacture arises from the application of new scientific knowledge’. There can be a gap a mile wide between the work of their inventive inventors do, the brilliance solutions, and inevitable financial succt’ss. Sometimes they may, as American friends might say, ‘hit pay dirt’ but often they do not.

And yet . . . and yet Why

James Pilditch is Chairman of Allied InternatIonal Designers Ltd., 10 Rathbone Place. London Wl P ZDN. one of Europe’s largest companies specializing in problems of InnovatIon, communications and design. He founded the company. in London In 1959 after experience with U.S., Canadian and Bntish Design offices.

can that be?

The ACARD report (Advisory Committee on Applied Research and Development) argued that one of the key reasons for Britain’s industrial decIinc was *our poor performance in innovation’.

Product

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The U.S. Department of Commerce used, indeed may have coined, that same word-‘innovation’. They arrived at a definition, then tested it. They found that companies that had, as they put it ‘committed themselves to innovation as a way of life’ grew, on average, between 17 and 29 times as fast as the national average, and did so over a period of 20 years. So that is something

else astonishing.

What is this famous word? What is the magic definition that helps some firms prosper so? When I told this story to a friend of mine, the head of research in a pharmaceutical company, he agreed. ‘Innovation’ he said, ‘is just a fancy Yankee word for invention-so, of course, firms that commit themselves to it are more successful’, i.e. he followed the conventional wisdom. As head of research you’d expect him to. But is that what

they

meant?

No. Their definition of innovation, if I may paraphrase it, was ‘the whole process by which products or processes move successfully into the economy’. The whole course. But finance and pricing and

Of process. That includes invention. it also includes a heap of other thingsmarketing, manufacturing design and distribution, and a lot else.

With few exceptions, firms that place too great a faith in R 8; D (as I’ve said, their repository of invention) will be disappointed, increasingly. They’ll spend more and more to achieve less and less. Yet investment in R & D is the conventional wisdom. Nor is it confined to this country. A paper went to the Swedish government a few weeks ago proposing a subsidy for every person employed in an R & D department.

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If this really is the right way then the products we develop, as inventive people, should be second to none. Our competitive performance suggests they aren’t always. Or, even if they are, we, as customers don’t always appreciate it. Ah, you might say, that is simply because we don’t invest as much in R & D as others do. Possibly. But I can’t help thinking that is not really the point. You see, the trouble with believing in the primacy of R & D is that we underrate or neglect other skills that are necessary to successful product development. Remember the definition . . . ‘the’ whole process . . . ’ Second, it misinterprets why people buy things. I is not an once suggested that ‘the consumer engineer, she is your wife’. One of things I meant was that she often doesn’t know or understand or care about the miracles of science. Today she expects things to work. We lose business if our products fall short. We don’t necessarily gain it if they don’t. And, by the way, the more technical things become the more we need design to make them comprehensible and desirable. Third, the conventional process is upside down anyway. Let me give you two examples to illustrate my point. A famour engineering group, whose engineers and R & D people are world-renowned, for military and other makes diesel engines With great skill, they have specialized vehicles. redesigned their engine to be half the size of its competitor. They then, as in the sequence we’ve just seen, tried to sell it. Imagine their disappointment when they found customers still preferred the o.ther, larger engine. When I heard that story I asked, as you would, how can that be? As an afterthought, almost, I was told that the Iarger engine is easier to service.

If that is our need, how do we go about meeting it? in conventional development (See Figure 1-steps programme.)

Now, might it be that to the military. keeping their vehicles on the road has priority? Mightn’t that be the most important thing, more important than having a compact engine? Could it be, in other words, that those clever R & D people and engineers had simply solved the wrong problem? They had solved one they thought fascinating and not one that concerned the customer. And mightn’t that be a consistent risk if you leave until last the chap who buys the thing? The customer?

R 8; D leads. That’s where companies look for new products. R & D invents something, then manufacturing makes it. Finally, salesmen are supposed to sell it. That is the traditional route. It springs directly from the notion that science leads progress and that scientific invention is the key to new product development.

For my second story I’m indebted to Michael Blakstad, who wrote The Risk Business. It caused me some embarassment when I first told it. I was in Scotland, giving a talk. In the audience was a very distinguished and admired man. The story concerns ICI. Some years ago, I said, ICI developed a plastic container for carbonated drinks. That would be

What is our great national need? Is it to push forward the boundaries of knowledge or is it to generate more good products that will sell in this country (to push down the proportion of imports), and sell abroad (to earn foreign revenue)?

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terrific if it worked, they thought, because thev’d sell tons of plastic. So terrific that they spent L74rn developing it.

Is it the scientists in R & D departments? No, by no means. The way things now stand, the answer is marketing and market research.

To their product couldn’t stack on want it.

Now that really is a contentious remark. If scientists take precedence over manufacturing (as they doSir Monty Finniston is engaged even now on trying to raise the status of engineering) then everyone looks down on what is seen as the shallow profligate and specious world of selling. It’s like that ‘Two Ronnies’ sketch: He looks down on him, but Ize looks down on him. . .

dismay, when they test-marketed the new they found two things. First. the trade use it (the container wouldn’t stand uu, or a shelf). Second, customers didn’t like-it or

What a futile waste of time and money cried, warming to my theme. Immediately after the talk among those who saw the He turned to me ‘You product’ he said ‘I was in

and talent, I

I had the honour to be distinguished guest off. were right about that charge of it’.

Now what did those two eminent

invention, A brilliant technological breakthrough, employs no-one fzr long, profits noone for long, tights no competitors, earns no foreign revenue crnless it satisfies the needs and wants of customers. I risk that commonplace because failure to put the customer as the heart and purpose of any business is the number one reason for its inevitable decline.

That’s

I should

pause to explain

the term.

Just as people think ‘innovation’ is a smart word for ‘invention’ so they think ‘marketing’ is a new word for ‘selling’.

firms get wrong?

Believing in their own undisputed skill they had ignored or left until last the one thing that matters. The customer.

How pleasing, recommendation . . . emphasis excellence in industry’.

So perhaps

therefore, to see the very first in the Finniston report asks for on market-oriented engineering the products made by British

I remember well in the late fifties and early sixties when the term first became widely used. Many sales managers promptly took the new title, called themselves ‘marketing managers’, and that made them up-to-date. It was marvellous. You didn’t have to learn anything new or change your behaviour. You just changed what you called yourself. Since then, I hasten to say, the true understanding of marketing has spread, above all in consumer goods companies. Many are very expert. But the conventional approach to product development in manufacturing industry shows that more have still to learn it. A simple definition

I once heard is worth

repeating.

Selling, it said, is concerned with the problems of the seller. Marketing, by contrast, is concerned with the problems of the market.

the stuff. we see, works from the inside---our One, problems-out. The other, from the outside-the ‘customers’ problems-in. There’s all the difference in the world in that.

But how far will we be able to accept the consequences of that recommendation? Does it mean anything less than saying that engineers (in that case) and everyone else in industry must come to terms with subordinating their skills to the demands of the market? It is a notion many professionals find hard to accept.

Only by fitting our inventive genius into what I might call the ‘fruitful context’ of the marketplace can our industry hope to prosper.

Perhaps industry could take a tip from an American millionaire who was asked how to get rich. He replied in six words. Here are three of them: FIND A NEED. Here are the other three: THEN FILL IT.

That fruitful context is you and me and the greengrocer and the chemist and painter and beautician, the farmer, the school teacher; whoever our customers are.

Notice the sequence. You find the need first, thrn you fill it, not the other way around which is how the current approach to new product development goes.

But first, let me give a compelling reason. British industry is in a bit of a bind. Its domestic markets ate being eroded dramatically. I suggest we have two cards to play. First, is our inventiveness, if we use it properly. Second is the irrefutable fact that we are close to our customers. We ought to be able to define our precise needs better than anyone from Osaka or Houston can hope to do. Of course, I

So then you say: who, in the industrial framework is most likely to be able to find the right need? You have to answer: well, people nearest the consumer.

Product

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should add, it is because they have defined our needs that the great companies from over the sea do so well. A friend of mine at ITT said recently ‘We used to laugh at those swarms of Japanese with their cameras wandering all over Europe. Not any more. We now know what they are doing’. (Go back to our been busy finding

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The second phase (see Figure 2) is the creative one. This is where invention fits in and blossomseither by group effort (brainstorming, etc.), by searching through patents or, as Steinbeck once said ‘in the lonely mind of a man’. When you have ideas (see Figure 3) typically you’d produce over 100 this way, you screen them, already established. The through the criteria attrition rate is high. In a recent case 127 ideas were whittled down to 18. But now you can say ‘It looks as though there’s a customer need. It looks as though it fits us’.

American millionaire. They’ve a need, then filling it.)

It’s an attitude of mind. The department of commerce called it ‘a way of life’ . . . putting the customer as the central focus of all one does . . . being concerned, in other words, with the problems of the market.

What you can then do is to conduct ‘concept tests’ among ‘target users’. This works well. Some ideas you think are good get nowhere. People aren’t interested. Others seem acceptable.

How can this be done? The charts show one approach to developing new products which puts invention into this fruitful context.

We’ve had people it in the shops?’

Look at the left hand side of Figure 1. You see it looks out first, to find out what is going in the marketplace, who the competitors are, what people are buying, what they want, what their problems are.

So already you’re beginning to have some confidence that any further work you do is likely to be fruitful. And remember you haven’t tied up any money in R & D. Not a penny in tooling. Yet you may have identified a customer need.

On the right hand side you see an internal look, to see what the company concerned is able to do and what it wants.

Now (see Figure 4) the R & D Department comes into its own. And now it, too, can work in a ‘fruitful context’ . . . not in the abstract. They are asked to address specific consumer problems. Having found an idea that people seem to want, you can now ask R & D and Engineering and so on to make it. designers to design it. They may not succeed but at least they’re targetted. Having clear briefs as we know helps our imagination, rather than hinders it.

From those studies, you can produce a list of criteria, by which any idea can be judged. No mention of R & D yet, though they sit on the steering team that manages all this. We’re looking for a need and identifying our own capabilities.

initial

Feasibility

say ‘Yes, I’d buy that. Why isn’t

Study

0

I

I

Market Data Inc. Competition

Assess Company Strengths and Weaknesses

I

I Agreed Screening Criteria

Store Checks and Exhibitions

I Group Discussions with Top Market Experts and Opinion Formers

I Screens I

T Creative Briefing 0

Figure

Decision Meeting with Client

1. Developing

new products:

phase I

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1981

Creative Briefing + From Enthusiasts and Discussion Grou

From individuals

~ From Existing Products

Idea Making

+

+

From Other Sources

From Unexploited

From Brainstorming

Patents

First Ideas List

l

0 Decision Meeting with Client

Figure

2. Developing

new products:

phase 2 First Ideas List

Screening

i ~A~A~A~A~A~A~A~AT

Screening

Shot-1 ideas List

i

Product Concepts

I

I Visual Appearance

Business Rationale

Test Concepts with Users

. 0

Figure

Draft Tkchnical Description

Decision Meeting with Client

3. Developing

new products:

0

phase 3

I have been asking why it is, with all the inventive genius in this country, we are failing so signally to hold on even to our home markets against foreign competition. While I acknowledge reasons are manifold, I hage tried to suggest that one is our continued insistence, despite a mountain of evidence to the contrary, that our conventional approach to new product development is right.

I hope that we don’t look on the magic of microprocessors as an end in itself. However, much they thrill electronics engineers (and microprocessors are thrilling) don’t lets spawn another generation of products that fail to give us what wr want. Here, too, people in industry must put the consumer first. How

illogical

it is, to put the customer

last.

Lord Brown, you will recall, wrote ‘If the University tradition’ (which he described as ‘the untrammelled search for knowledge’) ‘holds sway in the minds of those accountable for a company’s product design the effect can be disastrous’. No smoke without fire.

If I hammer this point it is partly because the whole upside down process is being sanctified now by a push’. People argue clever new phrase, ‘technology the benefits ofthat versus ‘consumer pull’ as though they were equal.

Unless there is a change we risk making the same mistake about the next great opportunity-or risk-microprocessors.

I accept that for a few great firms in the world and for Government laboratories, ‘technology push’ has a meaning. But I have to say that for most firms

Product

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Presentation 0 Product Brief and Budget for Each Product

1

f

\

Research and Development

Product Design

\

/ 1 Model Prototypes 0 (Brand Names and Package Design)

Prepare Marketing

Distributor

Acciptance

0 and ‘Pay-back’

Plan

1 User Acceptance

Research

\

Research

J 1 Feed Back

0

Figure

Decision Meeting with Client

4. Developing

new products:

phase 4

letting science lead is not the right way. More modesty would be as becoming as it would be profitable.

Suggested

Reading

List

Publications (1) Roderick White,

ConsumerProduct

of Business & Management

(2) R. C. Parker,

Guidelines

(3) Tom Cannon, New (1978). (4)

Kenneth (1979).

Corfield.

(5) Innovation (8)

Development,

for Product

Product

Pelican Library

(1973). Innovation.

Industrial

& Competitiveness,

Publications

(ACARD)

Innovation

HMSO

CB I (1980).

Christopher Lorenz, Investing in Success: How to Profit from and Innovation. Anglo-German Foundation for the Study of Industrial Society (1980).

Design

(7)

Keith Pavitt (Ed.), Technical Innovation MacMillan, April (1980).

and British

Economic

Performance,

Other

Articles

(1) Design-Why Marketing

by the Author do the British neglect a key elemen? in Marketing, 14 March (1980).

Week,

(2) Design-Instrument

of Change, The Business Graduate, No. 3, Autumn (1978). Britain

can Compete-Marketing,

Success Story

Ten years ago, Thomas Salter, in Glenrothes, was a small toy company. They had sales of ~330,ooO and 1CMJemployees. Today, that part of their business has a turnover of &3,3rn and 270 employees. It is a pure example ofjob creation. Before they came to Scotland thei: products were characterized by low value and low margins. Their presentation was as average as the premises they occupied. (A point always worth considering is just how one presents oneself to the outside world.)

B.1.M (1980).

MCB

Development,

Here is a Scottish

Vol. VIII.

December (1978).

(3)

How

(4)

Of course you can afford lo keep up wrth change, ChiefExecutive, May (1979).

(5)

Reputation and reality in design, Industrial Quarter (1980).

Marketing

Digest,

1 st

The question you may have asked is: Would you think it was possible for an organization of that kind to compete in the next decade? There had been major changes in the market. People like Fisher Price, and Lego and companies of that standing came in promoting good quality products with powerful advertising. What to do against this sophisticated competition? Let us see how they went about trying to adapt themselves to these changes. Thomas Salter were brave enough to go outside and ask for help: then act on what was said. Their transformation came from a philosophy more than it did from any particular product. I must say it didn’t happen very formally. It grzw gradually. The first product they looked at had been selling for over 10 years. They improved the presentation and the perception of the product, and concentrated on making it believable to the child and his parents. Sales increased in the first year 200 per cent. The same happened with their table tennis sets. Again, just rethe products, giving them a quality of packagmg presentation, that had not been achieved before. Already we see they are starting to establish a new credibility in the market and, I’d add, confidence in themselves.

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They had been using prmters to do their packaging. Printers sell not only ink but board JS well: when they re-designed the archery set, we used less packaging material. That raved ~14,000 In board costs during the first year. They were still much within their established base. by staying vrrv Improving and establishing a much better quality of product. Now important progress occurred. Thomas Salter started to analyse future potential for themselves in the market place; to determlne which market sectors were growing. in which markets they should be represented, and what strengths ofthe organization could be useful. The sectors they identified were educational toys, science toys, craft toys and sports. They were areas into which they could quite easily move, with their existing knowledge and experience. The organizational strength they identified was great purchasing know-how. They knew where to go for things. They also knew how to pack them-not in presentation terms so much, but m terms of collation, packaging and distribution of products. They knew-and were known in-the wholesale trade. Then they began to present the company in a way more relevant to each ot‘its identified growth areas. Thev started to say, ‘We sell products m each of these catcgorlcs’. So when they were talking to the.wholcsale trade, buyers immediately understood that they operated not just in one very tight art‘a but that they offered other product ranges. Within each of these sectors, thcv had to develop products. because in many mstanccs they did not have them. The first step was to create a flagship product-something that would do the job of establishing a foundation on which to build within the sector. It had to establish their credibility. They wanted to add value. Their science range is an example to show how they went about doing this. First they developed .I range ofchemistry sets. These were designed to be scientific, taking the child seriously. Did It work? Well, 1f1 tell you they have sold well over 1 million ofthese chemistry sets, you may say ‘yes’. This was their flagship product. in the ‘science’ markets they had identified. Having established it they could begin to introduce other products to that market.

By establishing products of this kind and starting to get new notice in the toy trade, not only were they building the credibility of the organization but also making IC possible to charge higher prices for their products. Ifyou recall that at the start the average price of their products was about 5Op. and these science toys were from As-L9 you will see how they added value. Here’s another example-microscopes-a long way from cheap imported products from Hong Kong. Interestingly enough, when they first looked at the microscope, one oftheir reactions was to go to Hong Kong to buy It. But then they returned to the criteria they had set for each sector. Jnd decided it had to be of a higher quality and of a higher value than other products in the market place. For the tirst time. they had actually designed a product to their own specification. This IS another example of the value of outsiders. Thomas Salter hadn’t the technical or design skills to create this product-they bought them in. So you see outsiders helping making mnovation possible.

1981 In our view thorough competitive product analysis IS very important. (Often it is competitors who establish standards.) We looked at the competitive products and created a better one. Thomas Salter’< had .I ground glass lens-all the imports used plastic; they had above and belou stage lighting, and so on. They had dcveioped a very good product-.1 major step for the organization. They also developed a system approach; the child can go from a simple !ab set (‘one’) to a microscope lab (‘four’). These rctailcd at between A?+ and &9 with a much higher value added than they’d known before. They also aimed to discover how they could adapt products to new and different users. Most of their products were boyorientated. They had very few products that appealed to other people. What could they do for girls-or for adults? They looked at crafts. Activities like leather craft, needle craft or string craft. In the tirst year, export sales ofjust one ofthcir craft products achieved 8 per cent of the total export figure for their full range. One of the major export markets for this product was Japan. This was particularly satisfying-coals to Newcastle--because they had always been buying components to make up from the Far East and suddenly they were selling back to them-but now with added value that stays in Scotland. A second approach was to look at the science based products and to see whether one of thein could be developed in a more ‘girl-orientated’ way. They looked at nature studies and built up a range of products which could appeal to girls. They were still utilizing their existing buying experience, product sources and experience. Then came the problem of year round salts. (In the toy trade 80 per cent ofsales arc made m the last 8 weeks ofthr year.) To go for year round sales it was necessary to look for new outlets-smaller stores-smaller shops, kiosks and CTNs (confectioners. tobacconists and newsagents). There were problems with these kinds ofoutlets. They do not have very they are not .lble to stock or disp!ay much space- therefore very many large box games, for example. They asked themselves: ‘What lf we take what we already have and make it smaller?’ They used the items that they were already buying in arid adapted them. For example, they were able to adapt a lot of the items they had bought for chemistry sets and so on to build into products for this sector. They produced a range for smaller outlets retailing at around Al each. So now they have a higher volume product selling at a lower price for the year-round saIrs-pocket-money buying. In this way they cried to adapt themselves and their product lines to year-round sales. This Scottish company has grown lo-fold since this work was started. It has nearly trebled its workforce. It has become a very successful company in developing products on a yearround basis, so the effort has obviously paid off. They have broadened their market base now and segmented the market in each one oftheir business sectors. They have added value by adding to their skills imagination and creativity, and understanding of the market place. To return to the tirst point I was making: they went for help. Since they have done that, they have been organize a new product development team internally handle the whole project very well. They have tlot .lbihty to come up with winners.

outside able to thdt can lost the