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New Product Development: Gaining and Using Market Insight

  • ID: 42754
  • Report
  • May 2001
  • 92 pages
  • American Productivity & Quality Center, APQC
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A superior product meets customers’ needs for quality and value. To leverage such market insight, an organization must clearly and deeply understand opportunities for new concepts before the product launch. The American Productivity & Quality Center studied new product launches to find critical success factors for profitability. Six organizations were examined for their best practices in new product development: 3M, Compaq, Johnson & Johnson, Maytag, Motorola, and Xerox. Understanding customers and markets—achieving market insight—is a core competency that must be nurtured, resourced, and supported at the highest levels of the organization. At best-practice companies, market insight is seen as a way to improve productivity and profitability, motivate teams, avoid staid thinking, promote product performance, and recognize and foster best-practice ideas. By creating products that perform better, companies reinforce brand positioning, which, in turn, drives pricing and distribution.

Companies have developed many techniques for getting closer to their customers.
Such methods are typically characterized as either quantitative (statistical analysis of data sets) or qualitative. Qualitative methods assess buyer behavior based on observation and interaction to learn about attitudes, thought processes, judgments, and experiences. Compaq cited an example where customer feedback radically changed a product design. The goal was to create storage space for compact discs within the central processing unit (CPU). The designer created a CPU with a pouch on the side. The drawings generated vast internal approval, but customers thought the pouch looked like a zipper and was unattractive and undesirable. When Compaq created a design that hid the CDs, the response was far more favorable.

Involving customers in the design of Motorola’s i1000 phone had a measurable
bottom-line impact. Thirty-five percent of sales in 1999 were attributed to design aspects, and the phone and company received the equivalent of more than $2 million in free advertising through design excellence awards in the media and industry. Through market insight, Maytag says it can better determine the relative value of individual product features and can therefore design products that will meet most customer needs, which is key to the company’s strategy. One of 3M’s biggest success stories is its introduction of bandages. 3M had no market presence in the category, but it did have an internal business developer who believed in the product and who believed in research; he insisted his entire team go to every focus group and market research effort, look at the same data, and stay on the same page. Today, 3M is No. 2 in the market.

STUDY SCOPE

This study focused on the specific methods, tools, and techniques used by innovative organizations to ensure their products have customers. Drawing upon input from subject matter expert John Elmer and secondary research literature, the APQC study team identified three areas for research. These areas guided the design of the data collection instrument and were critical in guiding the progress of the study.

1. Developing a market insight capability
- Centralized, dedicated market insight function compared to dispersed market
insight function
- Staffing
- Job descriptions
- Roles and responsibilities
- Experience and background

2. Creating market insights (tools and techniques)
- Observation and contextual inquiry
- Anthropological techniques, storytelling, and ethnography
- Lead-user process
- Voice of the customer
- Empathic design
- Quantitative techniques
- Data mining and multivariate analysis
- Customer relationship management

3. Sharing market insights
- Managing market insight information
- Storing market insight information
- Linking market insight information with technology competencies
- Linking market insight function with a corporate knowledge management function

The Gaining and Using Market Insight consortium benchmarking study was
preceded by and builds on three previous consortium benchmarking studies
relating to new product development:
1. Strategic Collaboration for New Product and Service Development
2. Managing Innovation for New Product Development
3. Marketing Research for New Product Development

METHODOLOGY

The consortium benchmarking methodology was developed in 1993 and serves as one of the premier methods in the world for successful benchmarking. It is an extremely powerful tool for identifying best and innovative practices and for facilitating the actual transfer of those practices. The methodology is described below.

Phase 1: Plan

The planning phase of the study ran through the spring of 2000. During this period the subject matter experts and the study team identified a number of organizations (using secondary research) that were believed to have achieved a high degree of success using market insight initiatives. Each of the identified companies was invited to participate in a screening process. Based on the results of the screening process, as well as company capacity or willingness to participate in the study, the final list of six partners was developed.A kickoff meeting was held in June 2000, during which the sponsors solidified the study scope and gave input on the data collection tool. Finalizing the data collection tool and piloting it within the sponsor group concluded the planning phase.

Phase 2: Collect

The site-visit guide was used to collect information for this study. The guide is composed of qualitative questions that parallel the areas of inquiry in the study scope and serve to structure the discussion at the data gathering session. All partners participated in the data gathering session. The APQC study team prepared written reports of each company presentation and submitted them to the partner organizations for approval and/or clarification. These site visit reports were then distributed to all sponsor organizations at the conclusion of the study.

Phase 3: Analyze

The subject matter experts and APQC analyzed the qualitative information gained
from the data collection tool. The analysis examined the challenges organizations face in using market insight information. The case examples taken from the data gathering session are contained in this report.

Phase 4: Adapt

Key lessons identified during the consortium study are adapted at sponsor
organizations, staff members are available to help sponsors create action plans
appropriate for the organization based on the findings of this study.

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- Sponsor and Partner Organizations

A listing of the sponsor organizations in this study, as well as the best-practice (“partner”) organizations that were benchmarked for their innovation and advancement in new product development.

- Executive Summary

A bird’s-eye view of the study, presenting the key findings discovered and the methodology used throughout the course of the study.

- Study Findings and Presentations

These articles provide an in-depth look at the key findings of this study. The articles are based on presentations given during the knowledge transfer
session, the concluding meeting of the study.

- Partner Organization Case Studies

Background information on the partner organizations, as well as their innovative new product development practices.
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