Using internal sources, the company can find new ideas through formal R&D. For example, Ford operates an innovation and mobility center in Silicon Valley staffed by engineers, app developers, and scientists working on everything from driverless cars to Works with Nest apps that let consumers control home heating, lighting, and appliances from their vehicles. Chick-fil-A set up a large innovation center called Hatch, where its staff and partners ­explore new ideas in food, design, and service. Hatch is a place to “ideate, explore, and imagine the future,” to hatch new food and restaurant ideas and bring them to life.4

Beyond its internal R&D process, a company can pick the brains of its own people—from executives to salespeople to scientists, engineers, and manufacturing staff. Many companies have developed successful internal social networks and intrapreneurial programs that encourage employees to develop new product ideas. For example, AT&T has set up an internal online innovation community called The Innovation Pipeline (TIP), through which AT&T employees from all areas and levels of the company submit, discuss, and vote on new product and service ideas. Each quarter, the “founders” of top vote-getting ideas pitch them to AT&T senior executives, who select the best three for further funding and development. Since its inception in 2009, AT&T employees have submitted more than 28,000 ideas to the TIP community, and the company has funded more than 75 TIP projects ranging from customer service enhancements to new product offerings.5

Tech companies such as Facebook and Twitter sponsor periodic “hackathons,” in which employees take a day or a week away from their day-to-day work to develop new ideas. LinkedIn, the 300 million–member professional social media network, holds “hackdays,” one Friday each month when it encourages employees to work on whatever they want that will benefit the company. LinkedIn takes the process a step further with its InCubator program, under which employees can form teams each quarter that pitch innovative new ideas to LinkedIn executives. If approved, the team gets up to 90 days away from its regular work to develop the idea into reality.6

Companies can also obtain good new product ideas from any of a number of external sources. For example, distributors and suppliers can contribute ideas. Distributors are close to the market and can pass along information about consumer problems and new product possibilities. Suppliers can tell the company about new concepts, techniques, and materials that can be used to develop new products.

Competitors are another important source. Companies watch competitors’ ads to get clues about their new products. They buy competing new products, take them apart to see how they work, analyze their sales, and decide whether they should bring out a new product of their own. Other idea sources include trade magazines, shows, websites, and seminars; government agencies; advertising agencies; marketing research firms; university and commercial laboratories; and inventors.

Perhaps the most important sources of new product ideas are customers themselves. The company can analyze customer questions and complaints to find new products that better solve consumer problems. Or it can invite customers to share suggestions and ideas. For example, The LEGO Group systematically taps users for new product ideas and input via the LEGO Ideas website:7

At the LEGO Ideas website, the giant toy maker turns user ideas into new LEGO building sets. The site invites customers to submit their ideas and to evaluate and vote on the ideas of others. Ideas supported by 10,000 votes head to the LEGO Review Board for an internal review by ­various departments including marketing and design. Ideas passing the review are made into official LEGO products. Customers whose ideas reach production earn 1 percent of total net sales of the product and receive credit as the LEGO Ideas set creator inside every set sold. So far, LEGO Ideas has resulted in 12 major new products, including the likes of LEGO Doctor Who, LEGO Birds, LEGO Big Bang Theory, LEGO Ghostbusters, LEGO WALL•E, LEGO Back to the Future DeLorean Time Machine, and the LEGO Labyrinth Marble Maze.

More broadly, many companies are now developing crowdsourcing or open-innovation new product idea programs. Through crowdsourcing, a company invites broad communities of people—customers, employees, independent scientists and researchers, and even the public at large—into the innovation process. Tapping into a breadth of sources—both inside and outside the company—can produce unexpected and powerful new ideas.

Companies large and small, across all industries, are crowdsourcing product innovation ideas rather than relying only on their own R&D labs. For example, sports apparel maker Under Armour knows that no matter how many top-notch developers it has inside, sometimes the only way to produce good outside-the-box ideas is by going outside the company. So in its quest to find the Next Big Thing, Under Armour sponsors an annual crowdsourcing competition called the Future Show Innovation Challenge:8

The Future Show challenge invites entrepreneurs and inventors from around the nation to submit new product ideas. Then, from thousands of entries, an Under Armour team culls 12 finalists who go before a panel of seven judges to pitch their products in a splashy, Shark Tank–like reality TV setting. The winner earns $50,000 and a contract to work with Under Armour to help develop the winning product. The goal of the Future Show Challenge is to “cajole top innovators to come to Under Armour first with gee-whizzers,” says CEO Kevin Plank. The first winner, and Plank’s favorite so far, is a made-for-athletes zipper—the UA MagZip—that can be zipped easily with only one hand. Under Armour’s internal R&D team had been trying to develop a better zipper for two years, but “we couldn’t get it to work,” says the company’s vice president of innovation. That simple zipper is just one of dozens of creative new product ideas from the Future Show. But by itself, it makes the entire crowdsourcing effort worthwhile. “We need to be humble enough to know that the next great thing might come from some kid playing college football who happens to have a better idea,” says the Under Armour innovation chief.

Crowdsourcing can produce a flood of innovative ideas. In fact, opening the floodgates to anyone and everyone can overwhelm the company with ideas—some good and some bad. For example, when Cisco Systems sponsored an open-innovation effort called I-Prize, soliciting ideas from external sources, it received more than 820 distinct ideas from more than 2,900 innovators from 156 countries. “The evaluation process was far more labor-intensive than we’d anticipated,” says Cisco’s chief technology officer. It required “significant investments of time, energy, patience, and imagination . . . to discern the gems hidden within rough stones.” In the end, a team of six Cisco people worked full-time for three months to carve out 32 semifinalist ideas as well as nine teams representing 14 countries in six continents for the final phase of the competition.9

Thus, truly innovative companies don’t rely only on one source or another for new product ideas. Instead, they develop extensive innovation networks that capture ideas and inspiration from every possible source, from employees and customers to outside innovators and multiple points beyond.

Suppose a car manufacturer has developed a practical battery-powered, all-electric car. Its initial models were a sleek, sporty roadster convertible selling for more than $100,000, followed by a full-size sports sedan priced at $71,000.11 However, in the near future it plans to introduce a more-affordable, mass-market compact version that will compete with recently introduced hybrid-electric or all-electric cars such as the Nissan Leaf, Chevy Volt, KIA Soul EV, and Chevy Bolt EV. This 100 percent plug-in electric car will accelerate from 0 to 60 miles per hour in four seconds, travel up to 300 miles on a single charge, recharge in 45 minutes from a normal 120-volt electrical outlet, and cost about one penny per mile to power.

Looking ahead, the marketer’s task is to develop this new product into alternative product concepts, find out how attractive each concept is to customers, and choose the best one. It might create the following product concepts for this all-electric car:

• Concept 1. An affordably priced compact car designed as a second family car to be used around town for running errands and visiting friends.

• Concept 2. A mid-priced sporty compact appealing to young singles and couples.

• Concept 3. A “green” everyday car appealing to environmentally conscious people who want practical, no-polluting transportation.

• Concept 4. A compact crossover SUV appealing to those who love the space SUVs provide but lament the poor gas mileage.

Concept testing calls for testing new product concepts with groups of target consumers. The concepts may be presented to consumers symbolically or physically. Here, in more detail, is concept 3:

An efficient, fun-to-drive, battery-powered compact car that seats four. This 100 percent electric wonder provides practical and reliable transportation with no pollution. It goes 300 miles on a single charge and costs pennies per mile to operate. It’s a sensible, responsible alternative to ­today’s pollution-producing gas-guzzlers. Its fully equipped base price is $28,800.

Many firms routinely test new product concepts with consumers before attempting to turn them into actual new products. For some concept tests, a word or picture description might be sufficient. However, a more concrete and physical presentation of the concept will increase the reliability of the concept test. After being exposed to the concept, consumers then may be asked to react to it by answering questions similar to those in Table 9.1.

Table 9.1

Questions for the All-Electric Car Concept Test

The answers to such questions will help the company decide which concept has the strongest appeal. For example, the last question asks about the consumer’s intention to buy. Suppose 2 percent of consumers say they “definitely” would buy and another 5 percent say “probably.” The company could project these figures to the full population in this target group to estimate sales volume. Even then, however, the estimate is uncertain because people do not always carry out their stated intentions.

Above all else, new product development must be customer centered. When looking for and developing new products, companies often rely too heavily on technical research in their R&D laboratories. But like everything else in marketing, successful new product development begins with a thorough understanding of what consumers need and value. Customer-centered new product development focuses on finding new ways to solve customer problems and create more customer-satisfying experiences.

One study found that the most successful new products are ones that are differentiated, solve major customer problems, and offer a compelling customer value proposition. Another study showed that companies that directly engage their customers in the new product innovation process had twice the return on assets and triple the growth in operating income of firms that did not. Thus, customer involvement has a positive effect on the new product development process and product success. “Choosing what kind of value your innovation will create and then sticking to that is critical,” says one expert.17

Intuit—maker of financial software such as TurboTax, QuickBooks, and Quicken—is a strong proponent of customer-driven new product development:18

Intuit follows a “Design for Delight (D4D)” development philosophy that says products should delight customers by providing experiences that go beyond their expectations. Design for Delight starts with customer empathy—knowing customers better than they know themselves. To that end, each year, Intuit conducts 10,000 hours of what it calls “follow-me-homes,” in which design employees observe firsthand how customers use its products at home and at work. They look to understand problems and needs that even customers themselves might not recognize. Based on customer observations, the next D4D step is to “go broad, go narrow”—developing many customer-driven product ideas, then narrowing them down to one or a few great ideas for products that will solve customer problems. The final D4D step involves turning the great ideas into actual products and services that create customer delight, collecting customer feedback steadily throughout the development process. Intuit works relentlessly to embed Design for Delight concepts deeply into its ­culture. “You’ve got to feel it,” says the company’s vice president of design innovation. “It can’t be in your head. It’s got to be in your heart. It’s got to be in your gut. And we want to put it in our products.”

Thus, today’s innovative companies get out of the research lab and connect with customers in search of fresh ways to meet customer needs. Customer-centered new product development begins and ends with understanding customers and involving them in the process.

Good new product development also requires a total-company, cross-functional effort. Some companies organize their new product development process into the orderly sequence of steps shown in Figure 9.1, starting with idea generation and ending with commercialization. Under this sequential product development approach, one company department works individually to complete its stage of the process before passing the new product along to the next department and stage. This orderly, step-by-step process can help bring control to complex and risky projects. But it can also be dangerously slow. In fast-changing, highly competitive markets, such slow-but-sure product development can result in product failures, lost sales and profits, and crumbling market positions.

To get their new products to market more quickly, many companies use a team-based new product development approach. Under this approach, company departments work closely together in cross-functional teams, overlapping the steps in the product development process to save time and increase effectiveness. Instead of passing the new product from department to department, the company assembles a team of people from various departments that stays with the new product from start to finish. Such teams usually include people from the marketing, finance, design, manufacturing, and legal departments and even supplier and customer companies. In the sequential process, a bottleneck at one phase can seriously slow an entire project. In the team-based approach, however, if one area hits snags, it works to resolve them while the team moves on.

The team-based approach does have some limitations, however. For example, it sometimes creates more organizational tension and confusion than the more orderly sequential approach. However, in rapidly changing industries facing increasingly shorter product life cycles, the rewards of fast and flexible product development far exceed the risks. Companies that combine a customer-centered approach with team-based new product development gain a big competitive edge by getting the right new products to market faster.

Finally, the new product development process should be holistic and systematic rather than compartmentalized and haphazard. Otherwise, few new ideas will surface, and many good ideas will sputter and die. To avoid these problems, a company can install an innovation management system to collect, review, evaluate, and manage new product ideas.

The company can appoint a respected senior person to be its innovation manager. It can set up web-based idea management software and encourage all company stakeholders—employees, suppliers, distributors, dealers—to become involved in finding and ­developing new products. It can assign a cross-functional innovation management committee to evaluate proposed new product ideas and help bring good ideas to market. It can also create recognition programs to reward those who contribute the best ideas.

The innovation management system approach yields two favorable outcomes. First, it helps create an innovation-oriented company culture. It shows that top management supports, encourages, and rewards innovation. Second, it will yield a larger number of new product ideas, among which will be found some especially good ones. The good new ideas will be more systematically developed, producing more new product successes. No longer will good ideas wither for the lack of a sounding board or a senior product advocate.

Thus, new product success requires more than simply thinking up a few good ideas, turning them into products, and finding customers for them. It requires a holistic approach for finding new ways to create valued customer experiences, from generating and screening new product ideas to creating and rolling out want-satisfying products to customers. More than this, successful new product development requires a whole-company commitment. At companies known for their new product prowess, such as Samsung, Google, Apple, 3M, P&G, and GE, the entire culture encourages, supports, and rewards innovation. For example, at Google and its parent company Alphabet, innovation is more just than a process—it’s part of the company’s DNA (see Real Marketing 9.1).