Academic journal article Journal of Business and Entrepreneurship

A Four C's Framework for Evaluating New Product Ideas: Identifying Strong and Weak New Product Value Chains

Academic journal article Journal of Business and Entrepreneurship

A Four C's Framework for Evaluating New Product Ideas: Identifying Strong and Weak New Product Value Chains

Article excerpt

ABSTRACT

This paper adapts Porter's (1985) concept of a value chain to the task of evaluating the feasibilty of a new product idea. A Four C's framework will help the entrepreneur to translate any new product idea into a chain of value-creating activities that begins with raw materials and ends with the customer. The strength of a new product value chain is a function of (1) Cost-revenue projections for Constituents at each link in the new product value Chain, and (2) Change-related incentives and disincentives for these constituents. Feasibility depends on the strength of the best case value chain scenario.

INTRODUCTION

Entrepreneurs hold one of the keys to a competitive edge in the marketplace: innovation (Hood, 1992; Teece, 1987). Innovation begins with a good idea, something new and useful to customers. Successful product innovations require more than an inventive mind, however. The entrepreneur must find a way to move the idea from the drawing board to the marketplace (Vesper, 1993). One of the central challenges in bringing a new product to market is coordinating the activities that will occur along the entire value chain, beginning with raw materials and ending with the customer.

This paper examines the current state of value chain analysis and adapts it to the specific needs of entrepreneurs who are evaluating the feasibility of a new product idea. New product value chain analysis will help entrepreneurs to translate any new product idea into the chain of value-creating activities required to make the product and deliver it to the customer. Feasibility depends on the strength of this chain, and a new product value chain is only as strong as its weakest links. A Four C's framework will help entrepreneurs to identify strong and weak links on the basis of: 1) Cost-revenue projections for Constituents at each link in the new product value Chain; and 2) Change-related incentives and disincentives for these constituents. The ultimate goal is to evaluate the merit of a new product idea based on the projected strength of the entire value chain, from raw materials to the customer.

The intent behind the Four C's framework is not to replace existing ways of evaluating new product ideas (e.g., Timmons, Smollen, & Dingee, 1990; Vesper, 1990). Rather, the intent is to provide a value chain approach that can be used in conjunction with market analysis, break-even analysis, and other existing methods to gain a more complete view of the impacts that a new product will likely have as it moves along the entire value chain to the customer. The framework may also be applied during the idea refinement process (Vesper, 1993) to redesign a product in ways that maximize product support and benefits to constituents along the entire value chain and that minimize product resistance and costs.

VALUE CHAIN ANALYSIS

A value chain identifies the sequence of distinct value-creating activities that begins with raw materials and ends with the customer (Porter, 1985). Figure 1 portrays a generic value chain that includes some common types of links' or value-creating activities. Of course, since there is no universal value chain that holds true for all types of products and services, each firm must first construct a chain which accurately represents the sequence of activities associated with its own product or service. According to conventional value chain analysis (see Shank & Govindarajan, 1992), costs, revenues, and assets are then assigned to each value-creating activity. The next step is to examine the sources of costs at each link in the value chain. Finally, the firm attempts to gain a competitive advantage by finding ways to increase net value along the chain by reducing costs, increasing revenues, and/or reconfiguring the existing value chain by forward integration, backward integration, or outsourcing (Quinn, 1992).

In its current form, value chain analysis is tailored to the needs of ongoing business enterprises looking for a competitive edge within an established industry. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.