marketing - Industrial Engineering

572 PART 8 CREATING SUCCESSFUL LONG-TERM GROWTH
Xerox's popular [1[1\'} dual-engine prillter
was a response to customers' feedback
on the value of acommercial printer witll
a back-up engine.
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any prototypes. Lucky they did. Although the Xerox team thought customers would want a second engine for
special purposes, the fact that the second engine would be a back-up if the main engine failed turned out to be
the biggest draw. As one customer said, "If you're down, you're dead." In introducing the dual-engine Nuvera
288 Digital Pertecting System in April 2007, Xerox chief technology officer Sophie V. Vandebroek cited "customerled
innovation" as a critical driver. Xerox now believes in brainstorming, or "dreaming with the customer," by
combining company experts who know technology with customers who know the "pain points" and what the
most valuable product features can be. In addition, scientists and engineers are encouraged to meet face to face
• with customers, in some cases working on-site for a few weeks to see how customers interact with products. 28
Figure 20.1 shows how three other companies instituted internal changes to try to
develop more successful new products and growth initiatives.
New-product development requires senior management to define business domains,
product categories, and specific criteria. General Motors has a hefty $400 million benchmark
it must apply to new car models-this is what it costs to get a new vehicle into production.
29 One company established the following acceptance criteria:
The product can be introduced within five years.
• The product has a market potential of at least $50 million and a 15% growth rate.
• The product can provide at least 30% return on sales and 40% on investment.
• The product can achieve technical or market leadership.
Budgeting for New-Product Development
Senior management must decide how much to budget for new-product development. R&D
outcomes are so uncertain that it is difficult to use normal investment criteria. Some companies
solve this problem by financing as many projects as possible, hoping to achieve a few
winners. Other companies apply a conventional percentage-of-sales figure or spend what
the competition spends. Still other companies decide how many successful new products
they need and work backward to estimate the required investment.
I FIG. 20.1 I • Whirlpool Corporation launched an effort in 2000 to stimulate greater innovation. The company trained 400
Three Innovation Models
employees from a wide variety of functions in a new process of "ideation." Since the initiative began,
Whirlpool has gone from a handful of product introductions per year to dozens, including the highly
successful Gladiator line of appliances, workbenches, and storage systems for the garage.
• Shell, in 1996, authorized a team of its employees to allocate $20 million to rule-breaking ideas originating
anywhere in the company. Any employee can make a1O-minute pitch followed by a 15-minute O&A Greenlight
ideas get an average of $1 00,000 and up to $600,000. Four teams out of 12 received 6-month funding for
next-stage development. Of Shell's five largest grovvth initiatives in 1999, four started this way.
• Samsung Electronics established the Value Innovation Program (VIP) Center in 1998. Core cross-functional
team members come together to discuss their strategic projects. In 2003, the center completed 80 projects.
Samsung runs an annual Value Innovation conference, and awards are given for the best cases.
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