9. A Process for Product Innovation

Although preceding chapters in this book each contain their own examples of people, products, companies, and issues, each chapter's illustrations focus on specific topics—the individual oaks, hickories, pines, and dogwoods of the forest. This chapter provides an overview of the innovation forest itself using an example from an R&D relationship between a university and the athletic apparel company New Balance. We describe a process for structuring the early “fuzzy front end” of product development from opportunity to product approval, showing how innovators implement the process and tools we describe in earlier chapters.

Sedona, AZ. “This really is God's country,” thought Karen Anderson, her feet pounding the red packed trails, as Bono sang the words on her iPod. U2 had probably never even visited Sedona. The red rocks jutted out into large cathedral peaks. The trees sent out a rich evergreen scent. And the air was dry and clean and hot!

Next week was the race, and this was Karen's weekly Saturday trip from Phoenix out to Sedona to train. On-site training gave her an extra thrill; that alone was worth the two-hour drive. Plus, she could indulge in her ritual post-training recovery stop for an energy-enhanced cherry papaya smoothie.

Karen remembered running as a kid. She had started running in middle school, on Cocopah's cross-country team. Practices were early morning, before school. She remembered how she often felt shaky after runs, after pounding the roads. She wondered whether the early runs were to blame for her poor concentration in her first class of the day, history. She had always needed recovery time, time to sit and drink a smoothie, although smoothies did not exist back then.

How things had changed. The Phoenix area was nothing like what it was in 1965, the year her school had opened. Back then, for instance, Cocopah Middle School was the northern outpost of the Scottsdale school district, located next to Camelback Mountain in Paradise Valley. Now, when Karen's kids are attending Cocopah, it is the geographic center of the school district.

Not only was life changing, but products were, too. Karen's new running shoes, for instance, were great. The guy at the New Balance store was right. Karen wondered how a company can make changes—and, in this case, improvements—to a product again and again. She always bought New Balance running shoes. She had tried others, but there really was none better.

The consistent ankle support and the improved cushioning seemed to relieve the pain as she ran. At the age of 44, she had thought her running days were over, but her switch to New Balance gave her running career new life. She enjoyed weekend 10Ks, and she enjoyed escaping from the routine of her week. She realized that for all the wear and effort she put her body through, it was, really, the shoes that allowed her to keep going.

New Balance

New Balance is a midsized company out of Boston, a privately held player in an intensely competitive market. The company began by producing arch supports in 1906. It evolved into a niche company that produced running shoes for the serious athlete. The low-volume market kept the company focused and lean, with early manufacturing primarily in New England. As its reputation spread, that its shoes were the choice of serious runners, so did the demand for its product. Amateur weekend athletes like Karen started choosing New Balance, and soon an almost cult-like following evolved.

Today, New Balance focuses on running and court shoes with a theme of fit and comfort. They are known for quality. Some of the shoes are made in the United States, separating them from Nikes which not only are made offshore but also have run into social problems after reports that they are made in sweatshops in Asia. After 9/11, New Balance did not suffer the same decline in sales as other manufacturers, partly due to its “made in the USA” policy. Although only about 20 percent of its shoes are still made in the United States, this still stands out as a local commitment in a time where tight margins keep prices low and competitive. Further, the globalization of manufacturing is no longer just an economic consideration. Asian technologies have, in many instances, surpassed U.S. capabilities. So competitors at times go to Asia, not only for cost but also manufacturing quality. Keeping shoes “made in the USA” holds brand equity, which overcomes economic costs.

Customers are loyal to the brand. “Comfort and fit” drives the product and is the New Balance identity. Manufacturing quality is consistently high. New Balance advertises but has no high-profile Michael, Tiger, or Kobe endorsements. It is a privately owned company that does not feel compelled to compete with the approaches used by its competitors. In the markets where word of mouth is a strong alternative to paid advertising, New Balance excels; however, in the markets where names as icons have sway in schoolyards and playing fields, its position is not as competitive. The company has been willing to accept that compromise, and in many ways, this has added to its sense of integrity as the shoe company for serious runners. Interestingly enough, this perceived value has spilled over into the nonrunning shoe market, where, certain high-school students whose gear for everyday life includes backpacks and Nalgene plastic bottles for drinking water have extended that trend and designated New Balance as the casual shoe of choice.

New Balance products nicely balance cutting-edge technology, especially in material use, ergonomics of fit, and appropriate but reserved aesthetic trends. Although New Balance meets the industry standard of new product introduction four or more times a year, it shies away from high-fashion trends and instead improves each product line. Its shoes are named by number, with increasing numeric value generally meaning a higher-performance and higher-priced shoe.

Innovation by Cooperation

As companies struggle to find new competitive advantage, they are using a number of techniques to stimulate organic growth. These approaches include working with respected experts to run workshops and hiring consulting firms to support and bring new perspectives. To extend R&D capability, some companies turn to universities to conduct research and exploration into areas the company does not otherwise have time or resources to explore. New Balance has an advanced product group, led by Edith Harmon, who we discussed in Chapter 1, “The New Breed of Innovator,” which is the greenhouse for organic growth in the company.

Harmon approached Carnegie Mellon University because she believes that the outcome of such relationships can complement and stimulate organic growth internally. She wanted the university to use its course in Integrated Product Development to explore new opportunities for New Balance. She wanted to see what integrated teams of students could achieve with direction from faculty and her New Balance group, for their performance would illustrate what could be achieved with similar teams in-house.

The award-winning course at Carnegie Mellon integrates teams of students in industrial design, engineering, and marketing, supported by four faculty advisors representing three different colleges in the university. This course has a history of successful product concepts, demonstrating the power of the innovation process. There are now examples of other universities evolving a similar cooperative product development approach, a trend for companies to take advantage of.

The Carnegie Mellon course with New Balance yielded six successful product concepts for New Balance through six student teams in 16 weeks. This chapter focuses on one of those product concepts. The success of the course demonstrates the payoff of the innovation process, and it helped New Balance recognize how it could develop products internally that it had been outsourcing. Over the years, the course has helped convince individuals such as Dee Kapur and Edith Harmon and companies such as Ford and New Balance that the innovation process delivers a high rate of return on investment.

A Case Study in Innovation for New Balance: Four Phases of New Product Development

This chapter illustrates a comprehensive methodology that includes the issues and tools presented in earlier chapters. It begins with how companies identify opportunities to develop new products, how they expand their understanding of those opportunities, and how they translate that understanding into a set of product requirements or specifications that fulfill the market's needs. The examples then show how that early set of product requirements leads to a process of product conceptualization and refinement, and eventually production of a product with features tailored to the needs of the individuals in the target market.¹

For this project, New Balance assigned the team the task of developing a new market opportunity for the growing consumer segment of people who are overweight—not traditionally a market that is targeted by athletic apparel companies. The strategic area was general in nature, not restricted to shoes or clothing or to specific genders or age groups.

Here is a quick overview of the approach. Several factors contribute to the development of new product opportunities. These factors are social, economic, and technological (SET). As these factors change over time, they generate gaps in the marketplace between products and services that exist and the potential for those that would better fulfill market needs, wants, and desires. These gaps, then, create new product and service opportunities. To respond to these opportunities, you need to understand the value that customers will expect in the new product. The customer's expectations of value must then be translated into product attributes. So understanding the changing social, economic, and technological factors leads to finding opportunities that must then be translated in value and converted into product attributes. It sounds simple when stated this way, but companies struggle, particularly when analyzing customer value expectations. If you do not get the value right, the product will not be successful, no matter how strong your quality program is or how lean your manufacturing capability.

This innovation process is a complement to the downstream programs of quality manufacture. It is a four-phase process that clarifies the earliest innovation stage, often called the “fuzzy front end” of product development. The four phases are 1) identifying a product opportunity, 2) understanding the product opportunity, 3) conceptualizing the product opportunity, and 4) refining the product opportunity. In 16 weeks, this method can support interdisciplinary teams in identifying product opportunities and turn them into fully developed product proposals and patents.

The student team described here followed the four-phase innovation process to create a complete product concept, ready for patent protection. Provisional patents were then filed to give the company time to assess the concept in the context of its business strategy.² In the following sections, we walk through the steps of the innovation process while illustrating the development of the product for the growing overweight market.

Phase I: Identifying Product Opportunities

Bob is approaching 50, and his current health and family genes are telling him he better lose the pounds. There are a lot of guys like Bob.

In the first phase of the process, product opportunities are identified, starting with research into trends. By the end of this phase, the development team will have identified gaps in the marketplace where a product or service would improve the well-being of the target market. The goal of Phase 1 is to identify one product opportunity. The opportunity must be stated in broad terms, with a focus on the experience of the opportunity, without any hint of a product description. It would be stated something like “a process and/or device to safely protect a child in a car.” Most people automatically want to develop a car seat.

Chapter 4, “Identifying Today's Trends for Tomorrow's Innovations,” discussed trends and their implications—in particular, the SET factors that interact in a dynamic way to create product opportunities. For instance, the rising number of overweight people worldwide, but especially in America, yields new opportunities for athletic apparel companies to widen their target beyond the fit and trim, to design products for those needing help with a first step toward activity. As Americans become heavier, the pressures to get thin have increased with current emphasis on diet control. Issues of style in fashion have emphasized women more than men. Insurance companies are beginning to consider obesity a disease that could demand some level of reimbursement. This economic factor did not come into play as the eventual product was developed, but it was important to consider in understanding the overall opportunity.

Trends such as these lead to product opportunity gaps in the marketplace. For example, a more sedentary populace expands the market for equipment used in low-exertion exercise, such as walking. A heavier populace puts more stress on shoes, increasing the need for high-performance materials that can better stand the rigors of heavier people. Insights that identify such trends come from customer-based interviews and interactions as well as secondary literature-based reading and research.

The team went in depth in each direction and brainstormed more than 100 product opportunity gaps in the marketplace. Selecting the best opportunity from a field of 100 requires qualitative research with possible users, coupled with a sense of the profit potential of each. Many could develop into exciting and successful products. Insights from potential customers and experts become the filter that selects the one product opportunity that survives. For instance, the product team was composed of students in their early 20s, but after studying the social, economic, and technological factors, they narrowed their target to middle-aged men. As these students moved forward in their work, the decisions were increasingly made for them by the information they had gathered, not by themselves, because they had to look completely outside themselves to properly serve their focal market.

As examples of the range of product opportunities developed in this phase, the team considered changing the orientation of foot entry into a shoe, an all-inclusive measurement system for fitting shoes, and “sexier” walking equipment for that market. Only after much thought and discussion on numerous ideas did the team settle on the opportunity “to allow overweight 40- to 55-year-old men who have long been sedentary and who have become more aware of their health to overcome physical and mental hurdles on the way to establishing an active, healthy lifestyle.”

This phase began with general strategic directions and ended with open opportunities, not with product ideas. This first phase defined the scope of the problem to attack, the opportunity to be explored in later phases, and the questions to be answered.

Phase II: Understanding the Product Opportunity

If Bob could walk 10,000 steps a day, he could get enough exercise to lose weight and get himself in better shape. He is willing but does not want to wear a sign saying “Look at me; I'm walking.” How can he get feedback and not have to wear something overt for everyone else to see?

The next step in the process is to gain an in-depth and insightful understanding of the user and purchaser and to identify and understand all the influences and implications of the product to them and to the market at large. The example shows how developers translate customer insights into product requirements, which will then form the criteria for assessing concepts developed in Phase III. Engineers and designers often develop concepts with little frame of reference. Without a clear framework for decision making, teams usually fail to choose the most appropriate options. Establishing of a wide range of criteria for a potential product helps support the parallel development of product visual attributes of lifestyle, ergonomic aspects, and core technology. Teams must develop actionable insights that stem from a clear understanding of the stakeholders and a particular focus on emerging needs of the end customer.

This is the key phase for innovation, and this is where many of the ideas and tools discussed in this book become critical. This phase is focused on qualitative research, an approach at times especially difficult for traditional market researchers and engineers, who are trained in the use and comfort of statistics and numbers. It is here that a proposition of value based on customer needs, wants, and desires creates a framework for product innovation. The challenge is to identify, understand, and articulate the key attributes of value and to turn that value proposition into actionable insights that will eventually be developed into a product. It is here that strategic planning (see Chapter 7) and identifying a market in terms of a scenario rather than a statistic (see Chapters 4, and 6) come together in an analysis of market value.

This analysis of the value must be broken into attributes that product developers can act on to develop so that they can produce products that are highly desired by the end users and purchasers. The analysis of value helps transition product development from qualitative insights to realized product features. So we discuss product value before product attributes.

The idea of value is not to get more features for less money. Instead, value is the connection of a user to a product in a way that augments his lifestyle and makes his activities easier and better. Value is the product's ability to fulfill wishes, to meet expectations of fantasy. The challenge is how a product developer understands the value a customer seeks, and translates that understanding into product characteristics. All the research and analysis we have discussed so far provide that understanding. Now they need to be converted into design attributes that evolve into product attributes.

Value Opportunity

We have developed a framework that both represents attributes of value and provides a mechanism to translate those attributes into product requirements. Value can be broken into seven discrete classes, called value opportunities, that capture an initial but complete understanding of what people need, want, and desire in the products and services they use.

• Emotion

The first is emotion, the direct connection to the user experience and fantasy. What fantasy do people expect from use of the product? For overweight men who have become aware of their need for a healthier lifestyle, emotion is critical. Products that make them feel powerful and independent will support their choice to be more active, and products that aid their confidence will encourage them as they strive toward a new lifestyle.

• Ergonomics

Next is ergonomics, the attribute that addresses the physical interaction with a product. How easy and intuitive is the product to use? From an interview of a shoe store manager, overweight men were happy just to find a durable shoe that would fit and would have enough initial cushioning to be comfortable. As expected, many larger individuals had trouble donning and removing shoes.

• Aesthetics

Aesthetics includes not only visual, or form, but all the senses that interact in experiencing a product. Overweight men are accustomed to sacrificing aesthetics to live with shoes that are either comfortable or visually appealing, not both. On one hand, such a finding could support the notion that aesthetics could be ignored. On the other hand, any product that met other needs in addition to scoring high on aesthetics could have significant impact.

• Identity

A product is the physical statement of the brand identity and is central to its success. Every experience with a product affects the identity, and identity sets up the experience. Overweight men, like everyone else, use products to make personal statements and to express self-definition. In the arena of health-enabling products, whether enabling shoes or enabling medical devices, products lack identity and differentiation, so an opportunity exists to bring positive self-expression into this market.

• Impact

Next comes impact—addressing the societal influence connected to and addressed by the product. This includes social relevance to groups and individuals, and environmental considerations. As exercise networks and clubs increasingly become a nexus for social interaction, as obesity increasingly captures U.S. national attention like smoking did a few years ago, the opportunity for societal impact increases the relevance of obesity-related products.

• Core technology

Core technology addresses the functions that enable performance. Is the product state-of-the-art in its ability to perform? To date, exercise technologies have concentrated on the needs of those already exercising, not those who are struggling toward an active lifestyle. In shoes, where the provided cushioning does not vary by shoe but the need for cushioning varies by person, the cushioning and reliability are calibrated for the lighter and fitter. So exercise shoes for the heavyset may benefit from technologies to allow for size-appropriate cushioning and performance.

• Quality

Quality addresses not only manufacturing quality but also the expectation of how the product will perform overtime. Although traditionally viewed as manufacturing quality, it also includes the product's fit and finish and its durability. How quickly do shoes wear out when used by those with larger bodies?

Innovation begins with understanding how these aspects of value connect customers to market opportunities. The use of this understanding is a sophisticated process of defining each value attribute for a product opportunity and then refining that definition into attributes that a product or service must incorporate to succeed. As the product development process proceeds, the articulation of those attributes gets refined and eventually becomes the product's form and features. Finding a solution that holistically integrates these attributes can be a difficult process of negotiation that requires an innovative outcome. It is this step-by-step process of exploration and refinement that separates comprehensive innovation from technology-focused invention, and also the innovative from the mundane.

Understanding Customers in the Field

Innovative product developers spend time in the field. They observe, interview, and analyze the actual people who will use their product. At New Balance, Josh Kaplan from the advanced product group flies around the country and goes on runs with different lead users, understanding the nuances that make their running experience great. Designers at Whirlpool go on service calls to understand the context of where their product is used and how to make it better; that even includes VP Chuck Jones. CEO Eric Close and the engineers at RedZone spend days on site observing how the crews interact with their equipment and each other to improve the experience of sewer repair.

The student team spent much time studying potential users and other key stakeholders. They extensively read current research on exercise, and they conducted many interviews of adults who were formerly out of shape but had begun to exercise. They found that exercise does not have to be relegated to a reserved part of the day, but that small bouts of exercise scattered throughout the day, like the walk from the car to the office, can accumulate and become a beneficial, healthy, active routine. They found that lack of time was the number one reason for inactivity, that busy lifestyles left no time for aerobic workouts, that these busy individuals were willing to tackle small goals but refused to commit to large lifestyle changes.

The product team narrowed its focus to men in part because a narrower market segment can be more closely matched with design attributes. But there were additional reasons for the increased focus on men. More middle-aged men are overweight than middle-aged women—with 43.25 percent compared to 27.3 percent. Also, men tend to exercise to lose weight, whereas women tend to diet. Finally, New Balance serves a larger proportion of adult men than women, so a focus on men fits well with current company strengths. Men who had stopped exercising may have previously been the “no pain, no gain” type, but they had too long been accustomed to comfort to have affinity for high- performance athletics. These research findings revealed that attributes of a product solution would aid a comfortable transition to exercise from an inactive lifestyle, fitting into current life patterns to the greatest extent possible while motivating the user toward more activity. One scenario that they developed read as follows:

Ted Franklin recently lost his father to a heart attack. He is 44 years old, 5 ft, 10 in, weighing 220 lbs. Although his wife and two kids have been harping on him to lose weight, it took the scare of his father's death to make Ted realize that he, too, will have serious health problems if he doesn't start losing his sedentary lifestyle. He was never the kind to use exercise clubs, and there was no way he was about to sweat in front of those buff kids. Yet he needed some type of motivation to get himself moving again, to keep himself going.

Phase III: Conceptualizing the Product Opportunity

Bob would use a “smart insole” that could record his steps and then use a device like a watch or key fob that would more subtly give him feedback on how many steps he has taken all day, not just during formal exercise.

Next comes the more concrete part of product development, the part that takes the insights gained so far as a basis for generating actual concepts, attributes that can be built into actual products or services. At the beginning of this phase, the team has only a vague idea of what the product will accomplish; it has no idea of specifics. For instance, the team knew that walking 10,000 steps a day was a nonthreatening approach to exercise that could be achieved in smaller increments throughout the day. They wanted to reinforce the benefits of this “bite-sized” exercise, but they recognized that many different products could achieve such goals. By the end of the phase, the team has fleshed out the concept and has even made early prototypes of it. In between, the team considered many different ideas: indicators on the shoe that change color, a wristband or watch pedometer device, a “shoe garage” that downloads information from the shoe, and a modular shoe system in which worn shoe parts could be individually replaced.

Innovation comes from staying true to the value proposition, and product attributes are determined through the research. The approach is iterative in that multiple concepts are considered, refined, and tested, and then the process begins again, with each iteration becoming more focused as more is learned about the product. All aspects of the product—its form, function, and market reach—are considered and integrated into a single concept. The product's emotional potential is realized, and the brand identity is developed. The process is visual in that all ideas are sketched or mapped out to provide a common representation among the product development team. The conceptualization process is energetic and exciting. At the same time, it is frustrating and grueling, because every attribute identified through research must be translated into a feature that performs as an integral part of the product.

The team looked at the dilemma of how to lose weight and become active, a dilemma for Bob and Ted. After discussing the merits and features of more than 50 concepts, the team worked on the idea of a smart insole, one that would track and record exercise throughout the day. The insole would be plush and comfortable, one that would ease the man toward activity. It would have embedded technology to count steps throughout the day, recording and reporting walking totals so that users can track progress toward daily goals. Insoles would fit in regular shoes, accompanying the men in their existing routines, encouraging them to be ever more active in the course of the regular day. The exercise totals could be transmitted to a key fob, an item that men already carry with them. The insole and key fob are discreet objects, not overt advertisements that show the user to be in need of healthful activity. Finally, New Balance already makes insoles, and the technology of feet and exercise is well within the boundaries of the New Balance brand.

Phase IV: Realizing the Product Opportunity

The technology exists to make an appropriate-priced shoe insert with a stylish key fob that Bob could use to read and record his progress. We know how to price it, design it, and manufacture it. We have a plan to package it and present it in stores with a roll-out strategy and a forecast for sales and profit for the next three years. Bob is happy to be getting into shape. New Balance has a new line of products for a new market for overweight men that will extend the brand and keep the idea of performance and fit. This is a market that has tremendous growth (no pun intended).

At the end of this phase, the concept is detailed to the point that the company can decide whether to move the product to production. This is represented in several ways. A complete and accurate visual model is developed through prototypes, computer modeling, and sketching. The technology is shown to be effective through mathematical and computer analysis and through a working, functional prototype. A business plan that includes market introduction and financials argues the business case. Finally, a manufacturing plan dictates how the product will be produced. Even in this phase, the basis for success lies in the eyes of the stakeholders. Very often, this phase can be compromised by a premature commitment to the product, a seductive feeling that the product will be a success, where internal groups rush to judgment without gathering or properly assessing customer feedback.

In this phase, each feature of the concept is detailed individually and as part of the overall product assembly. The cost and manufacture are balanced with the experience of using the product. So the team must work together in an integrated manner to combine the technology and features into a form that not only delivers the technology, but also provides a rich experience of interaction and enjoyment. The product must look as good as it works. It must not only be useful, it must be easy to use. It must naturally fit into its environment of use as well as make that environment function better.

The team designed an insole that functions like any other insole that New Balance makes. But hidden in the heel is a radio frequency-enabled (RF) pressure switch, combined with a microcontroller, that registers each footstep taken by the wearer and enters this data into its memory. This memory is contained within a microcontroller unit, which keeps track of the pressure sensor's input state and stores the daily number of steps for retrieval by a key fob monitoring unit. The number of daily steps taken by the insole is uploaded to the fob, which itself was carefully crafted to be visually appealing as well as discreet. Every insole that the user has in each pair of shoes can be programmed into the same key fob. This device, then, stores the user's total daily footsteps and displays this number to the user, along with other calculated quantities, possibly including mileage, calories burned, or percentage of a goal achieved. This product also includes in its display a graphic representation of the user's progress toward a daily goal. The technology is inexpensive to produce and will not need replacement, because it outlasts the insole in which it resides.

The insole design was prototyped to prove that it worked, analyzed to prove that it would work as promised, and visualized to show what a production version would look like. In sum, it worked, it worked well, it was very well received by the target market in focus groups, and it was ready for patenting. It maximized style and technology and was clearly considered an innovation within its product field. The team did not invent new technology; they invented a new use of the technology and an emotional way to deliver it.

New Balance submitted a provisional patent on this concept, along with five other equally innovative and engaging product concepts that came from teams in the same Integrated Product Development class. New Balance will analyze the business case of each to decide whether to invest in developing the prototypes into manufactured products. The further investment will happen from within, organically growing the company with new market introductions.

As a partnership between the company and university, everyone got a significant return on investment. New Balance received a number of product concepts and details that it could develop into patented products. It also acquired six case studies on the innovation process to help solidify this approach internally throughout the company. The students were given a strong, state-of-the-art process in innovation to take with them into industry, and the faculty had additional examples to demonstrate the process of innovation.

The process laid out in this chapter creates a product that is better positioned for lean manufacture or other programs that assure quality of manufacture. The most critical aspect of quality is the ability to approach launch with complete control and confidence. Any product changes made in the later phases of product development are extremely costly and can affect the ability to deliver quality manufacturing and craftsmanship. By resolving the major issues of a product in the fuzzy front end, the downstream process can more effectively focus on manufacturing and launch.

Today's innovative companies follow a process such as the one described in this chapter to develop new product concepts through the fuzzy front end. These early phases set up the platform for innovation. But these early phases are, for many, the most difficult to navigate. The uncertainty and incomplete information from which decisions must be made are uncomfortable for the traditional breed of engineer and marketer. Yet it is the ability to understand the complete picture of what that information tells you that enables innovation and successful new product development to take place. The tools in this chapter and book are best practices that companies deploy; they are consistent strategies for innovation from within. For that is the approach of the Edith Harmons and Josh Kaplans at New Balance and the Chuck Joneses, Dee Kapurs, and all the others discussed in this book as the new breed of innovator.