Product
The items that firms sell to satisfy a consumer need and to make a profit for the
business are broadly termed product, whether they are something tangible like
toothpaste or an intangible service such as an insurance policy. In a typical life
cycle, a product is developed and launched, and a few customers take it up. The
domino effect causes wider distribution. Growth eases as the market becomes
saturated, and sales flatten and decline until the product is no longer viable.
Product evolution
From start to finish, every product,
such as a tube of toothpaste, goes
through a process of testing,
innovation, and quality control to
ensure that it will make the biggest
impact on release and throughout
its life span. Successful companies
understand the limited life span of
products and thus invest in the early
stages to maximize growth later on.
New product idea
A company decides to release
a tube of toothpaste with a new
flavor. Its viability is evaluated
and potential competition
researched. The new toothpaste
also requires other qualities,
such as whitening and enamel
protection, to capture its segment
of the market. See pp.304–305.
Testing and
development
A focus group is assembled
to taste the new flavor, along
with some variations. Their
preferences and comments
are noted, and the toothpaste
is developed into a usable
product. See pp.302–303.
“A lot of times,
people don’t
know what
they want until
you show it
to them.”
Steve Jobs
US_300-301_Product_Overview.indd 300 15/12/2014 13:54
300 301
How operations and production work
Product
PRODUCT LIFE SPAN
Packaging and design
The toothpaste tube is given a
bright, clean, and attractive look.
Design considerations include
functionality, expense of materials,
and an appeal to current trends.
See pp.306–307.
Quality management
A period of quality control
begins, in which standards
of safety and comfort are
thoroughly checked. It is far
cheaper to correct defects in
the design phase than later
in production. See pp.308–309.
Product-process matrix
Using a product-process matrix,
the company identifies the correct
production method for the
toothpaste. Because the company
makes only a few products, each
at a high volume, it decides to use
assembly-line production
See pp.310–311.
Home entertainment offers different products to
consumers. These are four examples of products at
different stages in their life cycle (see pp.184–185):
Introduction 3-D televisions—only recently
available for the home
Growth Blu-ray players—steady increase in sales
because of enhanced viewing experience
Maturity DVD players—challenged by more
sophisticated technology
Decline Video recorders—cheaper and more
modern viewing formats now available
Product
Process
A
B
C
D
1 2 3 4
$3.6
trillion
the value of goods
traded between EU
member states in 2013
US_300-301_Product_Overview.indd 301 15/12/2014 13:54
How it works
New product development is a
process with a number of critical
stages to ensure that a business
focuses its investment on products
that will sell and, above all, make
aprofit. It starts with an idea,
possibly to improve and relaunch
an existing product. Some
companies run sessions to
encourage creativity and generate
a pool of ideas, a few of which
can be explored. They might work
with potential customers and
also with suppliers, if part of the
manufacturing process is to be
outsourced, to refine and develop
ideas before finally bringing the
product to market.
New product
development
The development process
The nature of the idea and the size of the company affects each stage and
how long the product takes to reach the market, but the process is
generally the same.
Companies cannot stand still. In today’s fiercely competitive
marketplace, they have to budget for research into new ideas and
identify new products to bring to market simply to stay in business.
Ideas can come from
anywhere: customers may
express a need or employees
may make suggestions.
Screen ideas
Criteria help identify products that fit
business strategy, will be easy to make,
and will be profitable to produce.
I
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New products are influenced by
trends, reflected in the claims on
packaging and in advertising. The
top claims on new food products
in the US from 2000 to 2010, for
example, were “natural,” “organic,”
“single serving,” and “fresh.”
TRENDING CLAIMS
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302 303
How operations and production work
Product
250,000
new products are
launched globally
each year
Test concept
Feedback from consumers, using focus
groups, interviews, or online evaluation,
ensures that an idea is worth pursuing.
Develop products
Features are confirmed, actual product
designed—taking account of test-concept
stage—and prototype developed.
Companies ensure distribution and tell customers
about new product, through social media or
advertising, to kick-start sales.
Launch
Analyze market
Analysis of opportunity,
influenced by predicted
growth and trends,
helps build a picture of
potential sales.
Test market
Product is tested on
section of market,
perhaps a selected
geographic area with
good representation of
target audience.
US_302-303_New_product_development.indd 303 21/11/2014 16:29
302 303
How operations and production work
Product
250,000
new products are
launched globally
each year
Test concept
Feedback from consumers, using focus
groups, interviews, or online evaluation,
ensures that an idea is worth pursuing.
Develop products
Features are confirmed, actual product
designed—taking account of test-concept
stage—and prototype developed.
Companies ensure distribution and tell customers
about new product, through social media or
advertising, to kick-start sales.
Launch
Analyze market
Analysis of opportunity,
influenced by predicted
growth and trends,
helps build a picture of
potential sales.
Test market
Product is tested on
section of market,
perhaps a selected
geographic area with
good representation of
target audience.
US_302-303_New_product_development.indd 303 21/11/2014 16:29
How it works
Innovation needs a culture that encourages people
to be inventive and explore ideas. It also requires
processes that can take initial ideas and develop them.
Successful businesses such as the 3M, Apple, and
Google technology companies know how to do this.
Innovation is not small, incremental changes, but
transformational ones, such as solving an existing
problem in aradically different way, or identifying
an unknownproblem and inventing asolution.
Innovation and
invention
Innovating is more than just having a bright idea—it is the way
inventions and ideas reach commercial success. It is the lifeblood of any
company, because keeping ahead of the game is essential for survival.
From idea to product
Innovation is stimulated by many triggers. The idea then requires
people to be working in a conducive environment to ensure that
it is implemented and makes a difference.
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Idea
Shifts in society, such as leaps in IT
and growing concerns about climate
change, as well as internal company
developments, create new needs.
Innovation triggers
$
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304 305
HOW OPERATIONS AND PRODUCTION WORK
Product
DIFFERENT TYPES OF INNOVATION
Sustaining innovation Significantly
improving existing products, typically
through technology—for example,
more pixels in cameras, smaller and
more powerful laptops
Sustainable or eco-innovation
New product that has minimal
impact on the environment
Frugal innovation Low-cost
product for emerging mass market
Breakthrough innovation Product
or service that simultaneously shifts a
market and has significant outcomes
for the world at large, such as the
Fairtrade initiative
Disruptive innovation Displaces
established competitors or changes
the norm—for instance, the internet
or iPads
Intellectual property (IP) is the expression of an idea.
IP might be a design, an invention, or another type
of intellectual creation, and it can be protected by
law—for example, with a patent.
“Genius is
one per cent
inspiration,
and ninety-
nine per cent
perspiration.”
Thomas Edison
Product
The culture and processes of the
company have to be favorable for
testing the viability of ideas.
C
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Individuals and
teams need the time
and mental space to
think originally.
Brainstorm
US_304-305_Innovation_And_Invention.indd 305 21/11/2014 16:29
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