The document discusses how to improve the success rate of new products by understanding competitive advantage in the market. It outlines that competitive advantage allows companies to make above-average returns. While new product development is risky and expensive, innovations that target competitive advantages in specific markets have a higher chance of success. The document provides a methodology for designing propositions that focus on differentiating attributes and target particular customer needs to achieve competitive advantage.
1. From Innovation to Competitive Edge
Getting the new-market product proposition right
2. The New Market Proposition Problem
The low success rate of new products means that roughly 50% of the resources
allocated to product development and introduction is wasted, either through
cancellation or failing to achieve adequate returns1. For every four products that
enter development, only one makes it to market.
Conclusion: new product development is expensive and risky,
A study in Harvard Business Review found that 86% of product launches were line
enhancements and only 14% were new market innovations. The line enhancements
generated 62% of the total revenue and 39% of total profit in the study, while the
new market innovations generated 38% of the revenue and 61% of the profit.
Conclusion: but it‟s worth doing for the growth and profit..
In a study of 229 electronics manufacturers‟ innovation failures by Stanford, 16% of
executives cited marketing, 13% cited insufficient customer benefit and 7% cited
difficulty of market development.
Conclusion: ..and some of the problems can be fixed – but how?
By understanding how to get a competitive advantage
1. “3,000 Raw Ideas = 1 Commercial Success!”, Stevens and Burley, Research Technology Management, 1997
3. Competitive Advantage – what’s changed since 1980?
Updating competition theory for the information age
Competitive advantage is the strategic advantage that one company
has over its competitors that allow it to make above-average returns
Michael Porter‟s theory of Competitive Advantage is over 30 years old
• The Web has led to complex global value chains
Value System • All parts of the chain must be satisfied for a new product to succeed
Fragmentation • Propositions must include answers for more of the value system
• The only widespread networks in 1980 were telephone networks
Network Effects • Network effects lead to new competitive advantages
• Networks can be natural monopolies
•The theory of disruptive innovation gives insights into business failure
Disruption •Disruptive innovation offers analytical tools for all types of innovation
•Disruption is difficult to spot in complex value chains
• There are new, lightweight business models based on domain expertise
New Business • Many business models have barriers to entry based on speed to market
Models • There has been a rapid shift to network and service-based business models
4. Reducing New Market Product Failure Risk
By targeting competitive advantage in the market
.. for, which requires a .. .. whose attributes lead to..
..who need a job
..which require a..
done, which they..
..with specific.. ..targeting particular..
5. Designing propositions for competitive advantage
The methodology
• Analyse capabilities to identify differentiating attributes
Technology • Map attributes to applications using good-enough / not-good-enough
• Create market-specific product variants that would value attributes
Products • Analyse competition, including substitutes, to confirm differentiators
• Determine whether products fit the RPV framework (disruptive/non disruptive)
Proposition • Ensure the product delivery capability is in place
•Make sure the value system is better off (disruptive/non-disruptive)
Markets •Analyse potential competitor response using RPV framework
• Determine what jobs the customer is employing the product to do
Customers • Develop the proposition around the jobs to be done
• Make sure there is a RoI for all in value system
Business Model • Look for and create barriers to entry
• Create marketing material targeting vertical advantages
6. A simplified example of attribute-based product differentiation
Room Temperature Maser
• The individual capabilities of the
new technology are categorised
Characteristic Attribute Application
• The capabilities are combined in
Size Portability
different ways, and with other
Mode
Pulse ,but technologies, to develop
CW shortly
marketable attributes
Operating Satellite
Temperature phone
Operating
• The attributes are matched to
Bandwidth market requirements – if an
Operating Tunability attribute is not good enough,
Frequency 1.45GHz only
when will it be good enough?
Power
500
Output
• Potential markets are assessed
Medical
Gain High Gain
Scanning for size, value and competitive
Thermal Low Noise offerings
noise <140mK
Stability High stability • A differentiated product offering
Good enough is constructed and market-
£200-£500
Cost
per unit est. Not good enough tested
7. Case Study 1: Security Protocol Developer
Technology The company had developed a novel fast
secure assured-delivery telecoms protocol to
Analysis of the technology showed that there
were several widely-applicable inventions
replace TCP and IPSEC/SSL as internet which warranted protection. Patents were
protocols because of poor performance. filed.
Markets The company saw its target market as the
large online retailers and commerce
I showed that this was not a job that needed
doing due to other higher consumer priorities.
businesses that rely on security technologies I identified other, larger markets including
like IPSEC and SSL. finance, satellite, media and „big data‟ which
would value particular attributes.
Products The company saw its primary product as a
secure end-to-end VPN technology
The company did not have the resources to
take a large-scale VPN product to market.
Combining the technology capabilities
differently allowed products to be created that
fitted the resources of the company, in
particular a custom chip.
Proposition The company had no deliverable market
proposition
I arranged an independent test facility to
provide proof of performance. I created target
propositions for each market to develop
product against.
Marketing The company had no sales or service
capability
I identified the routes to market that required
the least resources. This also offered much
earlier revenues. I identified appropriate
channels and channel approach
Customers The company had one prospective customer,
funded by the same investor, with specialist
I identified several prospects in target
markets and tested the propositions against
needs in a market of one. jobs to be done.
Result: Company closed additional funding using my report and is close to first sale
8. Case Study 2: Waste to Energy Technology
Technology The company has developed a high efficiency
W2E technology based on a cupola furnace
Analysis of the changing waste market
showed that all current technologies require
gasifier. subsidy, but this plant did not. This gives a
competitive advantage as waste becomes a
valued resource.
Markets The company saw its target market as waste
companies as an alternative to landfill. It was
Large waste companies are locked into a
contract-based value system which prevents
unable to sell the technology. adoption of technologies which are not
government-approved. A new value system
was required targeting commercial wastes. I
established a new company to do this.
Products The company was focused on one part of the
whole process (gasifying waste) and had not
The efficiency of the technology was improved
further by a change of power-generation
optimised to meet the needs of the customer, technology. We identified a suitable vendor
the electricity industry. and designed a plant capable of delivering
electricity with a high availability.
Proposition The company did not have the capability to
assemble the complex value system required
We formed a JV of three companies, including
a commercial waste operator with land. We
to deliver a complete solution brought in the additional resources required
to satisfy finance requirements.
Marketing The company had no sales or service
capability
Developed a financial model showing an IRR
of over 25% without subsidy. This attracted
sufficient financial interest to proceed to the
next stage
Customers The company had no prospective customers We have identified several prospects in
overseas markets who are waiting for the first
plant to begin operation
Result: JV formed which is arranging planning permission on first site.
Hinweis der Redaktion
Michael Porter’s theory is an industrial revolution theory, primarily based on vertically-integrated businesses. When it was formulated the only networks were Warren Buffet invests in businesses with a sustainable competitive advantage – good long-term investments
The areas that are most often overlooked are the attributes of the technology, the market proposition and the jobs that the customer is hiring the product for.
Starting with a new technology.First, the technology is analysed by its capabilities. These could, for instance, be patent claims. These capabilities are combined to create marketable attributes. Starting with a product or business model. The requirements of the current target market are identified. Competitors and substitutes are identified. The characteristics of the product and business model are mapped against competitors and substitutes to identify value created and sources of competitive advantage.