Academic journal article e-Journal of Business Education and Scholarship Teaching

Challenges in Introducing New Products: A Case Study on the New Product Development Process

Academic journal article e-Journal of Business Education and Scholarship Teaching

Challenges in Introducing New Products: A Case Study on the New Product Development Process

Article excerpt

Introduction

Business instructors strive to utilize teaching tools that expose students to as well as simulate the realities of the work environment and/organization. Case studies are often used in business courses because these stories are complex, yet realistic and engaging (Christensen, 1981). According to Barkley, Cross and Major (2005), case studies "bridge the gap between theory and practice and between the academy and the workplace" (p. 182). In using the case study method, students are required to evaluate the situation, identify the problem(s), conduct relevant research, discuss various course(s) of action and decide on a feasible solution. Through the case study method, students simulate the role of managers and/or decision makers facing critical business issues.

This paper introduces a business case to help students understand the challenges in introducing a new product. In using the case study method, the instructor can discuss how the different functional areas of business can impact the decision to introduce [or not introduce] a new product. The instructor can also engage students by discussing the different steps in the new product development process as well as anticipate potential strategic problems.

To accomplish the above objectives, the next section provides a literature review on the importance of new products as well as the new product development process followed by case learning objectives and student audience. Background case information on Parson Foods Vegetable Company is presented including case questions for class discussion, and teaching notes.

Literature Review: New Product Development

One of the paths to sustained growth and profitability has been through the development and introduction of innovative new products. The strategic importance of new products to an organization is evident in metrics developed by companies such as 3M. For example, 3M uses the New Product Vitality Index to measure the sales percentage of new products introduced in the previous five years (Forbes, 2016).

The cost to bring new products to market is constantly increasing. Cecere (2013) estimated the cost to launch a new product for the period 1997-2010 was US$15 million. Companies launch new products to cater to consumers' appetite for something unique, different or innovative. According to the results of the Nielsen Global New Product Innovation Survey, 6-in-10 of its thirty thousand respondents preferred new product offerings. Fifty seven percent claimed to have bought a new product during their last grocery shopping trip (Nielsen, 2015). And yet, regardless of the seemingly skewed consumer preference for new products, numerous empirical studies have reported that new product failure rates hover around forty percent (Castellion & Markham, 2013). And more alarming, some researchers have even reported new product failure rates as high as eighty percent (Perreault, Cannon & McCarthy, 2014). Despite companies' research and development (R&D) expenditures and consumers' preference for new products, a large percent of new products fail.

Significant research exists that investigated the reasons why new products fail. Schneider and Hall (2011) compiled a list of reasons for new product failure. Problems in new product launches are, in general, a result of lack of preparation. Schneider and Hall (2011) summarized product failure as follows: "Companies are so focused on designing and manufacturing new products that they postpone the hard work of getting ready to market them until too late in the game" (p.21). Additionally, Biyalogorsky, Boulding and Staelin (2006) found that new products fail because management persists on committing to a losing course of action (e.g., escalation bias). Because there is a high level of commitment for innovative projects, some managers insist on investing in failing projects (Schmidt & Calantone, 1998).

Herein lies the importance of a thorough and objective vetting process for new products. …

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