The Sustainability of New Product Development Process. Innovation Affected the Product Case Study

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Gain Competitive Advantage Through New Product Development

In today’s competitive world, companies do not compete on price or delivery alone. Introduction of new products or new product features has become a main source of competitive advantage. The best example of this strategy is that of Pepsi Co. For decades, Pepsi Cola & Coca Cola battled for supremacy in the cola market, however in 1990’s Pepsi gained market share, improved profitability and became World No. 1 beverage vendor by introducing slew of new products. See: The Pepsi Machine

Similarly, Apple Inc., has repeatedly outwitted competition by introducing radical new products: iMac, iPod, iPhone, iTunes, OS X etc.

In high tech world, companies can hope to survive only if they introduce new products. Old products will rapidly become obsolete & new products becomes the only source of future revenue.

New product development provides an opportunity to change the competitive landscape. New products can help company gain new customers, retain existing customers and increase profitability. In short, new products is the only source of competitive advantage - if executed correctly. And this puts the spot light on the product manager. Product manager’s role in defining the new product: specifications, features, performance, pricing et al, is vital to gain competitive advantage.

Retain existing customer base

Customer’s needs keeps changing with time. In order to retain current customers, business must constantly adapt to meet the changing requirements. For example, if GM were to keep making the same model of the cars as they did in 2000, then today it would be out of business. Companies need to constantly introduce new products to keep the existing customers exited and happy.

Another example of product stagnation & hence losing market share will be that of Motorola. For a long time Motorola made & sold only analog phones - even when the service providers had moved to digital networks. Then came Nokia with sleek digital phones & stole the market share from Motorola in 1998. (see: HOW MOTOROLA LOST ITS WAY Also see:Zombie Businesses: How to Learn from Their Mistakes)

The problem with most SME (Small & Medium enterprises is that they fail to keep up with the market - they have one/few successful products, and the management concentrates on execution & improving operating efficiency for a long period - that they forget to update their products. Eventually competition comes up with a better product and throws the incumbent out of business. For example Design Acceleration Inc. Had a great software - "Signalscan", over a period of time other competitors emerged - forcing Design Acceleration Inc. to merge with Cadence Design systems.

In India, Nirma a Gujarat based consumer and industrial products company once dominated the washing detergent market with its "Nirma" brand washing Powder. But the company failed to introduce new products - and depended solely on the flagship product for sales. Consequently its market share has plummeted and the brand has lost its relevance to most consumers.

Cannibalize yourself

Best way to retain the current market share is to attack your existing products with newer & improved products. The new products must be aimed at customers of existing products and at similar products (from competitors). Cannibalizing existing products is a surest way to retain market share, remain fresh & current in the market place - and win some market share from competition (if they do not offer exciting new products to match)

Today, cannibalizing existing products is a standard practice at all the foutune-500 firms. The best examples can be seen in Computer industry & Auto industry - where companies routinely introduce new products that replace their existing ( & even best selling) products.

On the contrary, few firms have resisted this trend of cannibalizing current product lines - and have protected their products from...
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