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Ideas are essential for growth, but even great ideas are insufficient for success. What many companies studied lacked was an effective framework, or process, for developing those ideas into viable businesses. The traditional processes used to develop incremental products and product line extensions did not suffice when new market applications were the goal. When managers think about growth, too many, particularly in technology-intensive industries, think narrowly about new technology. Profitability is enhanced when these new applications share common product and process platforms. Learning must be done fast as well as effectively; in companies often the most learning takes place as the new product line is being test-marketed on real users. IBM's success is the foundation for the business process presented in this chapter—a management framework specifically designed for the rapid and effective development of new market applications: the fast path to corporate growth.

For growth-seeking companies with sound technologies and executives who aim to create new streams of revenue within two or three years, strategy need not be so complicated. Market segmentation is the first step in new market applications development. The best way to understand market segmentation is, like most things, to understand its fundamental principles and observe those principles at work in different examples. The examples offered in this chapter run the gamut from physical assembled products, to software and systems, to biotechnology, and to services. Marketing specialists correctly suggest that the differences between segments must be measurable and meaningful. That means that you must have concrete data for the different regions on your grid. These data might include: current sales by segment, annual growth rates, market share, competitors and their market shares. Putting all these together on a single page provides a rich picture of the market and the competitive landscape.

This chapter describes how one such firm—Mars, Incorporated—has become a leader in innovating new product concepts. In fact, the chapter sees how teams inside the company synthesized many of the methods described in this book: segmenting markets for growth, diving deep into user needs, defining new product line architectures to incorporate modular platforms and flexible manufacturing processes, and combining all these factors into business models different from the company's standard fare. The chapter also suggests how new market applications can change the way a company thinks about itself as a business—not just what it makes, but how it sells and how it makes money. It then provides instructive examples for the business model before and the financial modeling and business process.

Every process, to be effective, requires an owner. This chapter states that owners of the framework should be a few select executives who take personal responsibility and who are intellectually and emotionally committed to organic, enterprise growth. They comprise a special-purpose executive board. The new market applications development process and the projects flowing through it are their direct responsibility. This executive body should be thought as owning the corporation's new market applications for internal, organically grown ventures. The chapter refers to it simply as “the Board.” The Board defines strategic opportunities at the highest level, new product line or service opportunities that may exist in current or new market segments, launches teams and then responds to progress at key checkpoints in the development process, and provides the necessary funding to support the next phase of a team's growth.

An overall product or service concept is the composite of more specific design concepts that serve specific needs that are targeted for implementation within the major subsystems of the product or service. This chapter looks at the process of implementing these technical solutions. The ability of companies to leverage their core technologies to new market applications rests on the increasing modularity in the design and implementation of technology. The best way to leverage technologies for new market applications begins with the development of a robust, modular architecture composed of subsystems, each of which has a specific purpose. The chapter considers how this works for physical products first, and then extends the thinking to software systems and services. The product line architecture shows the major subsystems common to a closely related set of products, a product family. The product line architecture also indicates how and where specific customizations can be performed to tailor products for specific users and uses.

There are few examples of reshaping a withering traditional enterprise as dramatic as IBM's renewal of its mainframe computer business. It is perhaps the greatest industrial turnaround story in American business during the 1990s. Also, it clearly shows the differences between reinvigorating an existing product to better serve current users and uses and extending that product line to capture new users and new uses. The three areas of innovation are the focus of successive sections of this book and are challenges faced by every corporation, large or small, in the journey toward internally generated growth. IBM's turnaround is an amazing story of how a management team was able to integrate innovations in all three dimensions, first to save its core business in transactions processing and then to leverage new technology to new market applications. These new applications focused on Web-centric, on-demand computing across major industry vertical markets.

A business model explains the mechanisms for making money. A business plan goes a step further, explaining the strategies and actions that will put the model to work. Effective business plans gain senior management's respect and stimulate discussion. Sloppy plans hurt a team's effort as much as a poorly conceived design concept. If a team lacks business planning and financial modeling expertise, it must get that expertise on board during the early phase of the project. “Making the business case” is a parallel activity with user-centered design within the framework for new market applications development—and it is of equal importance. This involves creating a prototype of their business plan, just as they created sketches of product or service concepts. This chapter calls this business plan storyboarding. The major categories of the storyboard template contain the key sections of a solid business plan: market, technology and products, channel, supply, financial projections, and organization.

The next step in user-centered design is to translate observed user needs into product or service concepts. This chapter introduces methods for leveraging insights gained from user research into full-fledged, user-tested designs and prototypes. User case scenarios are a powerful method for uncovering the perceived and latent needs of target users. From this work, the innovation team can develop a list of potential features and benefits to build into its new product line or service. Most practitioners use that list to propose a product or service concept and illustrate it with sketches or diagrams. This act of creation produces a design concept. A number of the companies found “conjoint analysis” useful in validating their product designs for new market applications. Using this method, an innovation team can quickly identify the features or attributes that target users prefer most and the extent to which they are willing to pay for them.

This chapter explores business model innovation, which can be as essential to enterprise growth as anything discussed to this point. Within the context of the management framework, business model innovation must occur early on in parallel with user-centered design and prototype development. After the market test is completed, a team may then find it necessary to fine tune or, in some cases, fundamentally revise its business model. An innovative business model can be a clear point of competitive differentiation, providing value to both customers and shareholders. Changing an established business model is often necessary if one aims to capture the full benefits of a new market application. However business model innovation is something that many innovation teams fail to consider. For executives, this can be particularly challenging, given the many years they have spent growing the established business. Seeing the prototype is one thing; visualizing the business behind that prototype is something else.