Inter-Functional Market Orientation between Marketing Departments and Technical Departments in the Management of the New Product Development Process

By Gresham, George; Hafer, John et al. | Journal of Behavioral and Applied Management, September 2006 | Go to article overview

Inter-Functional Market Orientation between Marketing Departments and Technical Departments in the Management of the New Product Development Process


Gresham, George, Hafer, John, Markowski, Edward, Journal of Behavioral and Applied Management


ABSTRACT

The marketing concept states that firms who first determine and then satisfy customer needs should realize superior performance. Market orientation (MO) operationalizes the marketing concept and is the organization-wide generation of market intelligence, dissemination of the intelligence across departments, and organization-wide responsiveness to it (Kohli and Jaworski, 1990). Market oriented firms should enjoy successful new product programs (Slater and Narver, 1994). However, empirical findings are mixed. This research conceptualizes MO at the departmental level, specifically within cross-functional new product teams. Findings here suggest inter-functional market orientation (IFMO), between marketing and technology groups, is directly related to new product program success.

Introduction

The importance of new product success is evidenced by its reported impact on firm performance and its strategic role as a benchmark metric for driving growth and sustaining long-term competitive advantage. For example, before JVC pioneered the VHS format and launched the home VCR market, it was virtually unknown outside of Japan. Upstart Apple outpaced competitive stalwarts General Electric, AT&T and Honeywell to challenge IBM's dominant position with an outpouring of successful new products that made it a major player in the U.S. personal computer industry. Nokia, previously a Finnish boot manufacturer, rode from obscurity to household name on its innovative cell phone technology. A small British pharmaceutical house named Glaxo catapulted to No. 2 in the new product-driven pharmaceutical industry, not by mergers and acquisitions or other conglomerating activities, but with the introduction of a single, new anti-ulcer drug, Zantac(TM).

Just the promise of new product success can boost a firm's investment value. For example, on May 22, 2003, Genetech's stock rose 40% with announcement of favorable clinical trials for its new anti-cancer drug. Conversely, reports of failure or delayed product approval can be devastating. When a Food and Drug Administration advisory panel failed to endorse Maxim Pharmaceutical's new liver cancer drug, the hopeful San Diego, Calif., biotechnology firm suffered a stock decline of 44% in one day.

Yet, despite its importance to growth and long-term survival for many firms, new product success remains frustratingly elusive. Crawford (1977) and Ottum and Moore (1997) claim new product success rates have not improved in 25+ years. In a study by Data, Monitor, Inc., 80% of newly introduced products fail to establish market presence after two years (Marketing, July 12, 1996). New product failure is not limited to a few industries with manufactured products; services suffer failure rates estimated at 80% (Clancy and Shulman, 1991). News magazines and industry trade journals have documented ubiquitous new product failures. For example, according to a Wall Street Journal article on June 11, 2003, p. A12, drug makers rolled out just 17 novel drugs in 2002, the worst new-product performance since 1983. Also, according to a Frozen Food Digest article in May 17, p. 76, an estimated 1,935 products from 20 food companies had a failure rate of 70% to 80%.

Purpose

The purpose of this research is to investigate whether market orientation, as defined by the independent variable inter-functional market orientation (IFMO), is significantly related to new product program success as opposed to the customary approach of measuring the success of a single product or, success of the firm in total. This research adds to the new product development (NPD) literature in several unique ways.

First, this research introduces the calculation of the independent variable IFMO. IFMO, as defined here, is an inter-functional measure of market orientation attainable by independently measuring the level of market orientation of both the marketing group members and technology group members. …

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