Part lI Key requirements for successful product development Product development is the key to the future in the business strategy. In the business strategy, the top company management signifies the changes necessary for the company's future survival and growth and from this can be identified the basis for product development. The future is what product development can provide, delivering new products by the least risky, most efficient process to carry the enterprise forward. It must harmonise with the existing company activities as it delivers the new. Therefore it has to be an integral part of the business strategy with full support of top management and cooperation from management in all areas of the company. Product development builds systematically from the resources and within the constraints of the business, progressing through four key stages towards a satisfied market. The product development process is the system that integrates the activities in the four stages and its efficient and effective organisation is one of the major factors ensuring success in product development. All of product development is underpinned by knowledge of the product market, production, distribution, consumer and society. The more extensive, complete and accurate the knowledge, the greater the probability of a good fit of the new product to the business and the market. So the fullest, practicable, exploration of existing knowledge is important early in the product development process. This knowledge is extended by information from outside the company, and by creation of new knowledge inside the company The consumers are an integral part of all product development projects, even in industrial marketing where the immediate customer is the food manufacturer or food service outlet. The product is built around what the consumers need and want, and their behaviour in buying, using and eating the product
Product development is the key to the future in the business strategy. In the business strategy, the top company management signifies the changes necessary for the company’s future survival and growth and from this can be identified the basis for product development. The future is what product development can provide, delivering new products by the least risky, most efficient process to carry the enterprise forward. It must harmonise with the existing company activities as it delivers the new. Therefore it has to be an integral part of the business strategy with full support of top management and cooperation from management in all areas of the company. Product development builds systematically from the resources and within the constraints of the business, progressing through four key stages towards a satisfied market. The product development process is the system that integrates the activities in the four stages and its efficient and effective organisation is one of the major factors ensuring success in product development. All of product development is underpinned by knowledge – of the product, market, production, distribution, consumer and society. The more extensive, complete and accurate the knowledge, the greater the probability of a good fit of the new product to the business and the market. So the fullest, practicable, exploration of existing knowledge is important early in the product development process. This knowledge is extended by information from outside the company, and by creation of new knowledge inside the company. The consumers are an integral part of all product development projects, even in industrial marketing where the immediate customer is the food manufacturer or food service outlet. The product is built around what the consumers need and want, and their behaviour in buying, using and eating the product. Part II Key requirements for successful product development
44 Food product development The four important facets of understanding product development are the place of product development in the business strategy, the product development process, the knowledge in product development, and the consumer/product elationship. Thus the new product can be developed to fit most comfortably to the business that produces it and to the customer who consumes it
The four important facets of understanding product development are the place of product development in the business strategy, the product development process, the knowledge in product development, and the consumer/product relationship. Thus the new product can be developed to fit most comfortably to the business that produces it and to the customer who consumes it. 44 Food product development
Developing an innovation strategy Product development does not occur in isolation as a separate functional activity. It is a company philosophy, a basic company strategy and a multifunctional company activity. In recent years to show this all-encompassing basis, bringing together product, process, marketing and organisational innovations, there has been development of an overall innovation strategy This innovation strategy is related to the companys overall business aims and strategy, as well as the social, economic and technological environment, and the companys own knowledge and skills. The business strategy also includes a product strategy outlining the products of the future. The combination of the innovation and product strategies is the basis for the product development strategy, and from this can be developed, with the companys technology strategy, the product development programme as shown in Fig. 2. 1. In building business and innovation strategies, it is important to recognise that from them comes a product development programme both for many years ahead and for the immediate year The innovation strategy is built up in the business strategy from the innovation possibilities, but only after thorough coordination with the product, marketing and technology strategies. The product development strategy is then built from the innovation strategy, together with other parts of the business strategy such as product mix planning and marketing strategy. Finally from the new product portfolio and the prootay the product development programme sits uct development strategy is built the product dev evelopment programme. In this harmoniously with the strategic direction of the company, the companys technical and marketing capabilities, and the customers in its ultimate market
Product development does not occur in isolation as a separate functional activity. It is a company philosophy, a basic company strategy and a multifunctional company activity. In recent years to show this all-encompassing basis, bringing together product, process, marketing and organisational innovations, there has been development of an overall innovation strategy. This innovation strategy is related to the company’s overall business aims and strategy, as well as the social, economic and technological environment, and the company’s own knowledge and skills. The business strategy also includes a product strategy outlining the products of the future. The combination of the innovation and product strategies is the basis for the product development strategy, and from this can be developed, with the company’s technology strategy, the product development programme as shown in Fig. 2.1. In building business and innovation strategies, it is important to recognise that from them comes a product development programme both for many years ahead and for the immediate year. The innovation strategy is built up in the business strategy from the innovation possibilities, but only after thorough coordination with the product, marketing and technology strategies. The product development strategy is then built from the innovation strategy, together with other parts of the business strategy such as product mix planning and marketing strategy. Finally from the new product portfolio and the product development strategy is built the product development programme. In this way the product development programme sits harmoniously with the strategic direction of the company, the company’s technical and marketing capabilities, and the customers in its ultimate market. 2 Developing an innovation strategy
46 Food product development nnovation strategy strategy strategy Product levelopment strategy Fig 2.1 Product development strategy generate 2.1 Possibilities for innovati Innovation is an integral part of society, and therefore an integral part of an industry and a company. There are three basic principles of innovation An innovation is an idea perceived as new by the individual (rogers, 1962) 2. An innovation causes change, which can be technological or sociological but is probably a combination of both(Earle, 1997) 3. An innovation involves a wide range of people, in the company, the companys environment and the society(Earle, 1997) Innovation is seen as the state of mind in the company(Kuczmarski, 1996). The traditional definition of innovation in companies as product development and process development has expanded to include all the other changes that can occur (Voss, 1994). Innovation can include ideas for different changes- philosophy technology, methods, organisation, market, people. But it is important for the company to recognise that any of these changes will affect not only the company but also the other organisations in the food system, the consumers and the society. Innovations outside the company also cause changes inside the company for example, the technological innovation of the supermarket changed food manufacturing and marketing. the social change of more women working caused an increase in convenience foods. So innovation is related to the climate within
2.1 Possibilities for innovation Innovation is an integral part of society, and therefore an integral part of an industry and a company. There are three basic principles of innovation: 1. An innovation is an idea perceived as new by the individual (Rogers, 1962). 2. An innovation causes change, which can be technological or sociological but is probably a combination of both (Earle, 1997). 3. An innovation involves a wide range of people, in the company, the company’s environment and the society (Earle, 1997). Innovation is seen as the state of mind in the company (Kuczmarski, 1996). The traditional definition of innovation in companies as product development and process development has expanded to include all the other changes that can occur (Voss, 1994). Innovation can include ideas for different changes – philosophy, technology, methods, organisation, market, people. But it is important for the company to recognise that any of these changes will affect not only the company but also the other organisations in the food system, the consumers and the society. Innovations outside the company also cause changes inside the company; for example, the technological innovation of the supermarket changed food manufacturing and marketing, the social change of more women working caused an increase in convenience foods. So innovation is related to the climate within Fig. 2.1 Product development strategy generator. 46 Food product development
Developing an innovation strategy 47 Finance Creation Food system Fig 2.2 Climate for innovation. the company and also that surrounding it in the food system and the society as shown in Fig. 2.2. It is important to observe the changes already occurring outside and inside the company, and to predict the possible changes that can achieve the aims of the company to survive and grow. One of the great difficulties is to differentiate between the true. long-term changes and 'fashions which die quickly. Judging wrongly may adversely affect the company The rate of innovation in a company depends on its ability to sense possibilities and to perceive and assess the likely outcomes of to evaluate and rank such outcomes strategically and operationally,in relation to company objectives to make decisions on the basis of such information and prepare appropriate strategies to implement plans and changes in managerial and technical terms(frater et These steps are shown in Fig. 2.3 Sensing the Selecting Include in possibilities innovation the feasible business for innovation innovations strategy Fig 2.3 Innovation chain
the company and also that surrounding it in the food system and the society as shown in Fig. 2.2. It is important to observe the changes already occurring outside and inside the company, and to predict the possible changes that can achieve the aims of the company to survive and grow. One of the great difficulties is to differentiate between the true, long-term changes and ‘fashions’ which die quickly. Judging wrongly may adversely affect the company. The rate of innovation in a company depends on its ability: • to sense possibilities and to perceive and assess the likely outcomes of feasible changes; • to evaluate and rank such outcomes strategically and operationally, in relation to company objectives; • to make decisions on the basis of such information and prepare appropriate strategies; • to implement plans and changes in managerial and technical terms (Frater et al., 1995). These steps are shown in Fig. 2.3. Fig. 2.2 Climate for innovation. Fig. 2.3 Innovation chain. Developing an innovation strategy 47
48 Food product development Table 2.1 Changes in society leading to food innovations patterns: urbanisation, suburban and in-city livin Working patterns: increase in office workers and decrease in blue collar workers Sex roles: women working, women in former male-dominated positions, women in senior positions Economic status: increasing incomes, more equal ution or more unequal distribution of incomes Educational status: knowledge growth from education Age structure: increasing percentage of old people in aed te n and of young people in South america Source: After Earle. 1997 2.1.1 Sensing the possibilities for innovations In sensing the possibilities, it is important to study the major changes that are taking place or predicted in society, in technology, food system, the marketplace and the consumers. Only then can the possible company initiatives be created Social and political changes cause changes in the food industry or may even prevent innovations in the food industry. Eating food is a universal activity and therefore the food industry perhaps more than any other industry is enmeshed in the social and political systems in every country Society changes in many ways as shown in Table 2 The political systems and their attitudes to the food industry also change with societal changes. In 1982, Throdahl suggested that the most important govern- mental method of encouraging innovation in the food industry was to reduce the adverse impact of regulations on innovation but did add without sacrifice of social objectives. This has been the food industry's dilemma for the past 100 years and even earlier innovation with or without consideration of society. The political system itself can encourage or discourage innovation, by placing trade barriers or subsidies which encourage local food production and discourage imports. National olicies based on societal concerns needs and wills can create a reactive environ Communication People Food industry Quality of life More than materialism Ethics Aesthetics Spirituality Trust Reassurance Function Debate Fig. 2. 4 Human values and the food industry (Source: From Earle and Earle, Building the Future on New Products, o LFRA Ltd 2000, by permission of Leatherhead Food RA, Leatherhead, UK)
2.1.1 Sensing the possibilities for innovations In sensing the possibilities, it is important to study the major changes that are taking place or predicted in society, in technology, food system, the marketplace and the consumers. Only then can the possible company initiatives be created. Social and political changes cause changes in the food industry or may even prevent innovations in the food industry. Eating food is a universal activity and therefore the food industry perhaps more than any other industry is enmeshed in the social and political systems in every country. Society changes in many ways as shown in Table 2.1. The political systems and their attitudes to the food industry also change with societal changes. In 1982, Throdahl suggested that the most important governmental method of encouraging innovation in the food industry was to reduce the adverse impact of regulations on innovation but did add ‘without sacrifice of social objectives’. This has been the food industry’s dilemma for the past 100 years and even earlier – innovation with or without consideration of society. The political system itself can encourage or discourage innovation, by placing trade barriers or subsidies which encourage local food production and discourage imports. National policies, based on societal concerns, needs and wills, can create a reactive environTable 2.1 Changes in society leading to food innovations Major long-term living patterns: urbanisation, suburban and in-city living Working patterns: increase in office workers and decrease in blue collar workers Sex roles: women working, women in former male-dominated positions, women in senior positions Economic status: increasing incomes, more equal distribution or more unequal distribution of incomes Educational status: knowledge growth from education and the media Age structure: increasing percentage of old people in Europe and of young people in South America Source: After Earle, 1997. Fig. 2.4 Human values and the food industry (Source: From Earle and Earle, Building the Future on New Products, LFRA Ltd, 2000, by permission of Leatherhead Food RA, Leatherhead, UK). 48 Food product development
Developing an innovation strategy 49 ment for innovation in the food industry. In looking for innovation possibilities, food companies need to be aware of changes in societal attitudes that fuel political changes as well as food changes. The social and related political changes have caused food innovation in the past and will continue to do so in the future. Food companies need to have methods of monitoring social changes and predicting future changes(Earle and Earle, 2000 ). There needs to be greater recognition of human values in developing innovation strategies as outlined in Fig. 2. 4 Think break 1. Identify important social and political changes occurring in your company's external environment 2. What changes could be made in the company to relate to these changes so that the company not only survives but also grows? Technological innovation spans a broad spectrum of areas from the new crop and the newly farmed fish, through new refining methods, new preservation methods, new manufacturing methods, new distribution methods, new retailing methods, new cooking and preparation methods. But it also includes changes technologies of other industries, particularly in those related to the food indust such as the processing technologies in the pharmaceutical and chemical industries, in the home appliance technologies and in the electronic and information technologies. There also needs to be consideration of new scientific knowledge that may be the basis for new technologies in the future. Companies, even very large food companies, are often based on one technology, for example emulsion echnology may be the main emphasis and this covers a very wide spectrum of foods from margarine to mayonnaise to ice cream to sausages. Their knowledge is extensive in this one technology and it is often more successful to seek nnovation from this basis. When going to a new technology, a great deal of knowledge has to be found as quickly as possible; this means building up resources either by learning or by buying a company already using the technology. It is important for companies to select a basic technology that can lead to many different types of products to satisfy different markets. Some of the technological areas for innovation( Rizviet al., 1993) are shown in Fig. 2.5 Think break 1. What would you identify as major technological developments in the processing and distribution of food products in your company,s present technological 2. What new technological developments in other parts of the food industry or in other industries at the present time might cause changes in your companys technology?
ment for innovation in the food industry. In looking for innovation possibilities, food companies need to be aware of changes in societal attitudes that fuel political changes as well as food changes. The social and related political changes have caused food innovation in the past and will continue to do so in the future. Food companies need to have methods of monitoring social changes and predicting future changes (Earle and Earle, 2000). There needs to be greater recognition of human values in developing innovation strategies as outlined in Fig. 2.4. Technological innovation spans a broad spectrum of areas from the new crop and the newly farmed fish, through new refining methods, new preservation methods, new manufacturing methods, new distribution methods, new retailing methods, new cooking and preparation methods. But it also includes changes in technologies of other industries, particularly in those related to the food industry such as the processing technologies in the pharmaceutical and chemical industries, in the home appliance technologies and in the electronic and information technologies. There also needs to be consideration of new scientific knowledge that may be the basis for new technologies in the future. Companies, even very large food companies, are often based on one technology; for example emulsion technology may be the main emphasis and this covers a very wide spectrum of foods from margarine to mayonnaise to ice cream to sausages. Their knowledge is extensive in this one technology and it is often more successful to seek innovation from this basis. When going to a new technology, a great deal of knowledge has to be found as quickly as possible; this means building up resources either by learning or by buying a company already using the technology. It is important for companies to select a basic technology that can lead to many different types of products to satisfy different markets. Some of the technological areas for innovation (Rizvi et al., 1993) are shown in Fig. 2.5. Think break 1. Identify important social and political changes occurring in your company’s external environment. 2. What changes could be made in the company to relate to these changes so that the company not only survives but also grows? Think break 1. What would you identify as major technological developments in the processing and distribution of food products in your company’s present technological system? 2. What new technological developments in other parts of the food industry or in other industries at the present time might cause changes in your company’s technology? Developing an innovation strategy 49
50 Food product development Safety Handling Control Food technology Storage Transformation in processing quantification, understanding of physical and chemical Materials properties. Packaging, transport, Energy L Storage. Design, operation. lastes Process Instrumentation Changes in the structure of the food system are also an important source of ideas for innovation possibilities. There are often changes in the importance of the various parts-production, ingredient processors, food manufacturers, retailers, food service- and the pressure for innovation moves from one section to another Recently there has been increased new product activity in the ingredients industry which is being transmitted to both producers and food manufacturers. Both vertical and horizontal integration have occurred in the last 50 years, and caused major innovations. For example vertical integration in the chicken industry led to chicken as major meat, and to the development of many new products, horizontal integration led to many new products in the baking industry A change in one part of the food system leads to new products in other parts In particular, innovations in the primary producing industries produce new ingredients, which then advance to new consumer products. Canola seed was developed with low erucic acid, and these seeds were used to produce oil with high polyunsaturated/low saturated fatty acids, and the oil was then used to develop oil-based consumer products which were more attractive nutritionally The food system changes slowly. During the last century changes were incremental with some major changes, and the radical changes were well spaced This may be caused by d with the innovative industries such as electronics, it is more difficult to invent new products; consumers-many are cautious and suspicious in judging new foods, food consumers change slowly unless they recognise marked benefits in the product, and new benefits are more difficult to design than in other industries for example information technology
Changes in the structure of the food system are also an important source of ideas for innovation possibilities. There are often changes in the importance of the various parts – production, ingredient processors, food manufacturers, retailers, food service – and the pressure for innovation moves from one section to another. Recently there has been increased new product activity in the ingredients industry, which is being transmitted to both producers and food manufacturers. Both vertical and horizontal integration have occurred in the last 50 years, and caused major innovations. For example vertical integration in the chicken industry led to chicken as major meat, and to the development of many new products; horizontal integration led to many new products in the baking industry. A change in one part of the food system leads to new products in other parts. In particular, innovations in the primary producing industries produce new ingredients, which then advance to new consumer products. Canola seed was developed with low erucic acid, and these seeds were used to produce oil with high polyunsaturated/low saturated fatty acids, and the oil was then used to develop oil-based consumer products which were more attractive nutritionally. The food system changes slowly. During the last century changes were incremental with some major changes, and the radical changes were well spaced. This may be caused by: • maturity of the industry – compared with the innovative industries such as electronics, it is more difficult to invent new products; • consumers – many are cautious and suspicious in judging new foods; food consumers change slowly unless they recognise marked benefits in the new product, and new benefits are more difficult to design than in other industries, for example information technology; Fig. 2.5 Technological areas for innovation. 50 Food product development
Developing an innovation strategy 51 biological product development- it takes time to develop a new plant, a new animal, a new fish, and even a new safe process, and these are the basis of the dical changes. Because of the expense of these developments, they were mainly funded by governments in the past (Earle and Earle, 1997), which also led to slowness marginal returns on new food products-compared with other industries, for example the pha tical industry, the profits on new food products are So it may be that this has been the most suitable innovation method - mostly incremental product changes, some major changes and a few radical changes But with today's high rate of technological change in other industries, there may be change in the rate of innovation in the future The knowledge and understanding of technology in the total food system is continuing to grow rapidly and, if this is recognised by the industry, it will impact on new products, new processes and new manufacturing systems but more important on the consumers and societys attitudes and behaviour towards food. However, if acceptance by the consumers is to be widespread and willing, then they must see obvious overall benefits to themselves; this needs, among other things, full and clear information. A striking lesson in the difficulties that may arise is to be seen in the introduction of genetically engineered foods. The bundle of products and services that the food company calls an innovation is now in the eyes of the consumers an experience, which they hope is safe and enjoyable(Pine and gilmore, 1998). The food industry has gone through Commodities→ Products→ Services→ Experience nnovation occurs today at all these levels in the various parts of the food ystem When searching the food system for innovations, some leading questions are What are the changes in the relative importance of the various sections in the food system? How is the capacity of the industry changing? What are the changes in the ownership structure? Are there predicted take-overs in the industry? Are there predicted take-overs from outside? Hostile? Friendly? Are there predicted investment changes? Are there new companies entering the industry Who are the innovators in the industry? 1. Try to answer these questions
• biological product development – it takes time to develop a new plant, a new animal, a new fish, and even a new safe process, and these are the basis of the radical changes. Because of the expense of these developments, they were mainly funded by governments in the past (Earle and Earle, 1997), which also led to slowness; • marginal returns on new food products – compared with other industries, for example the pharmaceutical industry, the profits on new food products are small. So it may be that this has been the most suitable innovation method – mostly incremental product changes, some major changes and a few radical changes. But with today’s high rate of technological change in other industries, there may be change in the rate of innovation in the future. The knowledge and understanding of technology in the total food system is continuing to grow rapidly and, if this is recognised by the industry, it will impact on new products, new processes and new manufacturing systems but more important on the consumers’ and society’s attitudes and behaviour towards food. However, if acceptance by the consumers is to be widespread and willing, then they must see obvious overall benefits to themselves; this needs, among other things, full and clear information. A striking lesson in the difficulties that may arise is to be seen in the introduction of genetically engineered foods. The bundle of products and services that the food company calls an innovation is now in the eyes of the consumers an experience, which they hope is safe and enjoyable (Pine and Gilmore, 1998). The food industry has gone through: Commodities Products Services Experience Innovation occurs today at all these levels in the various parts of the food system. Think break When searching the food system for innovations, some leading questions are: • What are the changes in the relative importance of the various sections in the food system? • How is the capacity of the industry changing? • What are the changes in the ownership structure? • Are there predicted take-overs in the industry? • Are there predicted take-overs from outside? Hostile? Friendly? • Are there predicted investment changes? • Are there new companies entering the industry? • Who are the innovators in the industry? 1. Try to answer these questions. Developing an innovation strategy 51
52 Food product development 2. Identify possibilities for new products in your company based on this information 3. What new technological developments are predicted in the food system that could affect your company? Marketplace changes provide a rich source of innovation possibilities (Earle, R L and Earle, M.D., 1999). There needs to be searching for long-term possibilities, as well as tactical thinking for the immediate marketing plans. Four areas to consider when looking for long-term marketing possibilities are international comparisons; product and service developments; arket specialisation new distribution methods Looking internationally, it is important to take a broad look over many markets and compare them. The home market in the USA or Europe may be static, but markets in Asia are increasing rapidly. Alternative possibilities are either in the home market to increase a market share or to have higher value products, or in the new market to relaunch the old basic products. As can be seen with McDonald's and Coca-Cola, relaunching on a new market is successful in the long term, but there is a need to keep the home market viable as the basis for the new venture. The reverse also occurs: products on an overseas market can produce ideas for the new product in the home market Changing the ratio of product to services is another way of identifying innovations. Once the new product was the main innovation in consumer marketing but increasingly service has become important. How far does the food manufacturing company go in providing services for the consumer; how far does the ingredients company go in providing services for the food manufacturer? Certainly innovation can be found; for example food service providing the materials and the recipe for the dish opens up a whole range of new products to be supplied to small restaurants, providing complete chilled meals, ready-to- heat, in supermarkets again leads to many new products Market specialisation has gained increasing recognition in searching for innovations. In the past the food companies tried to provide a wide range of foods, and their innovation growth was often achieved by buying or amalgamating with other companies. Today should marketing be more focused and the innovations aimed at specific target markets? In other words, should variations of a product be developed for different market segments, so that the new products are more focused on the people in that market? Distribution has always been an area for major new developments- from the grocer's shop to the supermarket to the mega-market- and one would predict that there are going to be major changes in the next ten years with the introduction of e-commerce and other uses of the Internet. The information age
Marketplace changes provide a rich source of innovation possibilities (Earle, R.L. and Earle, M.D., 1999). There needs to be searching for long-term possibilities, as well as tactical thinking for the immediate marketing plans. Four areas to consider when looking for long-term marketing possibilities are: • international comparisons; • product and service developments; • market specialisation; • new distribution methods. Looking internationally, it is important to take a broad look over many markets and compare them. The home market in the USA or Europe may be static, but markets in Asia are increasing rapidly. Alternative possibilities are either in the home market to increase a market share or to have higher value products, or in the new market to relaunch the old basic products. As can be seen with McDonald’s and Coca-Cola, relaunching on a new market is successful in the long term, but there is a need to keep the home market viable as the basis for the new venture. The reverse also occurs: products on an overseas market can produce ideas for the new product in the home market. Changing the ratio of product to services is another way of identifying innovations. Once the new product was the main innovation in consumer marketing but increasingly service has become important. How far does the food manufacturing company go in providing services for the consumer; how far does the ingredients company go in providing services for the food manufacturer? Certainly innovation can be found; for example in food service providing the materials and the recipe for the dish opens up a whole range of new products to be supplied to small restaurants; providing complete chilled meals, ready-toheat, in supermarkets again leads to many new products. Market specialisation has gained increasing recognition in searching for innovations. In the past the food companies tried to provide a wide range of foods, and their innovation growth was often achieved by buying or amalgamating with other companies. Today should marketing be more focused and the innovations aimed at specific target markets? In other words, should variations of a product be developed for different market segments, so that the new products are more focused on the people in that market? Distribution has always been an area for major new developments – from the grocer’s shop to the supermarket to the mega-market – and one would predict that there are going to be major changes in the next ten years with the introduction of e-commerce and other uses of the Internet. The information age 2. Identify possibilities for new products in your company based on this information. 3. What new technological developments are predicted in the food system that could affect your company? 52 Food product development