Chapter 4: Innovation Management & New Product/Service

Development (NPSD)

1.1 An Overview of NPSD

New Product and Service Development (NPSD) is the process of turning a business idea, a
customer need, or a new technology into an actual product or service that people can buy and
use. It is the practical side of innovation.

Think of innovation as the big picture – the culture, the creativity, the ideas. NPSD is the engine
that turns those ideas into real things that generate revenue.

A key point is that NPSD is not a straight line. It is not like a factory assembly line where one
department finishes its work and then throws the project "over the wall" to the next department.
Instead, NPSD works best when it is a circle of continuous feedback. Different teams
(marketing, R&D, manufacturing) talk to each other constantly, learn from mistakes, and
improve the product as it goes along.

Also, NPSD looks very different depending on your industry. Developing a new cancer drug
takes 10–15 years and costs billions. Developing a new flavour of yoghurt might take a few
months. A new banking app might be developed in weeks. There is no single "right way" to do
NPSD.

1.2 Considerations when developing an NPSD strategy

Before you spend any serious money on a new product, you need to stop and think. A good
NPSD strategy is based on four main inputs:

1. Corporate planning (company goals): What is your business trying to achieve? Are you trying
to enter a new market? Defend your current market? Grow quickly or slowly? Your NPD
projects must align with these big-picture goals.
2. Market planning (customer and competitor knowledge): What do your customers really
want? What are your competitors doing? If a rival just launched a great new product, you might
need to start your own project to catch up.
3. Technology management (what you can make): What new technology does your R&D
department have? Have you seen a promising patent from another company? Sometimes you
start with a technology and then look for a market ("technology push").
4. Opportunity analysis and serendipity (luck and ideas): Not every great idea comes from a
formal plan. Sometimes a scientist has a "failed" experiment that turns out to be useful. 3M's
Post-it Notes came from a weak adhesive that was considered a mistake at first. Good companies
leave room for these unexpected discoveries.
 A smart NPSD strategy balances all four of these inputs. If you only listen to current customers,
you might miss the next big thing. If you only follow technology, you might build something
nobody wants.

1.3 NPSD as a strategy for growth

Most businesses want to grow. NPSD is one of the most powerful ways to achieve that growth.
The Ansoff Matrix is a simple tool that shows four different growth strategies. Two of them
directly involve new products:

Sell existing products Develop new products

To existing Market penetration (e.g., more Product development – This IS
customers advertising, lower prices) – This is NOT NPD. Example: Apple selling the
NPD iPhone to its existing fans. Less risky.
To new customers Market development (e.g., selling your Diversification – This IS NPD, but
product in a new country) – Minor NPD very risky. Example: A car company
sometimes needed starts making smartphones.

Most companies focus on Product Development – creating new products for their current
customers. This is safer because you already understand the market. Diversification is the
riskiest strategy because everything is new: the product, the customers, and often the technology.

It is also important to know that most new products are not "new to the world." They are
improvements, line extensions (new sizes or flavours), or cost reductions. These small
innovations add up and keep your business competitive.

1.4 Differences between Product and Service Development

Developing a physical product (like a laptop) is different from developing a service (like online
banking or a ride-hailing app). Services have four special characteristics that make them trickier
to develop.

Feature Physical Service Why this matters for

Product NPSD
Tangible You can see, You cannot touch it; You cannot "try out" a
touch, and test it you experience it. service in the same way.
before buying. You must rely on branding
and promises.
Consistent Every unit is Quality varies by who You need to train
(Heterogeneity) nearly identical. serves you and when. employees very carefully.
 Your service design must
reduce variability.
Customer role Made in a Customer helps create Your NPD process must
factory, then the service (e.g., you design the customer's job
sold. enter your own as part of the service.
information online).
Can be stored Yes, you can No. An empty hotel You need to design
keep inventory in room or an unsold plane systems to manage demand
a warehouse. seat is lost forever. (e.g., surge pricing,
reservations).

Because of these differences, New Service Development (NSD) focuses much more on
processes, people, and the customer interface. Technology is still important, but the user
experience often matters even more. Think of Uber: the technology is important, but the real
innovation was the service design (matching riders with drivers, ratings, cashless payment).

1.5 Strategic Importance of New Product & Service Development

NPSD is not a "nice to have." It is a matter of survival. A famous study by ICI (a large chemical
company) showed what happens if a company stops innovating:

• For about 15 years, profits decline slowly. It does not look too bad at first.
• Then, profits crash sharply.
• Even if you suddenly restart innovation at three times the previous rate, it takes another 25 years
to recover.

That is a total of 40 years of damage. This is why successful companies never stop investing in
NPSD.

Here are the specific strategic benefits:

• Beat competitors: A new, superior product is the best way to stand out and charge higher prices.
• Lead the market: Companies that constantly innovate set the rules of the game (e.g., Apple,
Samsung).
• Replace old products: Every product has a life cycle. NPSD gives you the next generation to
sell when the old one declines.
• Renew your brand and your people: A successful new product can make a tired brand exciting
again. It also motivates employees and attracts talented people.

1.6 Risks and Challenges of NPSD

Despite its importance, NPSD is risky. Depending on the industry, 40% to 80% of new products
fail. They are withdrawn from the market or never make a profit.

The main reasons for failure fall into four categories:

• Market-related risks: The product offers nothing new or better. Or the market is too small. Or
the company misjudged what customers wanted. This is the most common cause of failure.
• Technology-related risks: The technology does not work as expected. It is too expensive to
manufacture. Or a competitor launches a better product first.
• Process-related risks: Poor planning, insufficient budget, lack of top management support,
internal fighting between departments (e.g., marketing vs. R&D), or simply taking too long to
develop.
• External risks: A strong competitive response, new government regulations, or sudden changes
in consumer tastes.

The "Valley of Death"

This is a critical concept. The Valley of Death is the dangerous gap between the end of a
successful research project (where you have a working prototype or a proven technology) and the
start of serious product development (where you invest in manufacturing, marketing, and
launch). Many promising technologies die in this valley because:

• They lack funding (research grants end, but commercial funding is not yet available).
• They lack a champion (no one inside the company is fighting for the project).
• They lack a clear business plan.

Successful companies actively manage this valley by assigning sponsors and providing "bridge
funding" to help good ideas cross over.

1.7 Success Factors in NPSD

Given all these risks, what separates the winners from the losers? Decades of research (especially
by Robert Cooper) have identified seven key success factors.

Pause for thought: Think of a recent successful new product you love. Which of these factors
do you think mattered most?

1. A unique, superior product: This is the single most powerful factor. Your product must offer
real, meaningful benefits that customers cannot get elsewhere.
2. A well-defined concept and strategy: Successful projects have a clear target market, a list of
product requirements, and a strategic role before development begins. They do not "figure it out
as they go."
3. Voice of the customer: Winning companies do not just guess what customers want. They use
deep research, interviews, and lead users (customers who are way ahead of the market) to
understand needs.
4. Cross-functional teams: Instead of throwing the project over the wall from marketing to R&D
to manufacturing, successful teams work together from day one. This is called concurrent
engineering.
5. A high-quality, agile process: They use a structured process like Stage-Gate, which has clear
decision points ("gates") where projects can be approved, sent back for more work, or killed. But
they are also flexible and can adapt to new information (agile NPD).
6. Proactive market orientation: They do not just listen to their current customers. They try to
anticipate future needs. As Sony's founder said, "The public does not know what is possible, but
we do."
7. Top management support: Senior leaders provide the vision, the budget, and the
encouragement. But they also know when to step back and let the team work.

A New Product
A new product is a product that is perceived as new by customers or the market because it offers
something different from existing products. This difference may come from new features,
improved performance, new design, packaging, technology, pricing, or a new market
position.

A product does not always have to be completely invented from scratch to be called new.
Sometimes an existing product becomes “new” by changing one or more of its dimensions, such
as quality, style, packaging, branding, or target market.

For example, Shimano develops new bicycle components such as automatic gears to improve
safety and riding comfort. Also, BMW successfully repositioned its Mini by redesigning and
relaunching it as a modern product.

So, a new product can be completely new, significantly improved, or an existing product
that has been modified and repositioned to create new value for customers.
 Defining a New Product

A new product can be defined as a product that is perceived as new by customers or the
market, even if it is not completely new in terms of technology. According to Everett Rogers
and F. Floyd Shoemaker (1972), if a product is perceived as new, then it can be considered new.
This means that newness is a relative concept.

Most new products are not completely original inventions; rather, they are improvements,
modifications, or variations of existing products. Research by Booz Allen Hamilton found that
only about 10% of new products are truly new to both the company and the market.

A product may be considered new in different ways, such as:

1. Improved performance – for example, a better washing detergent.

2. New application or usage method – for example, a new way of using a product.
3. Improved after-sales service – such as better maintenance support.
4. New image or positioning – such as eco-friendly packaging.
5. New availability or distribution method – such as vending machine sales.
6. New pricing strategy – offering the product at a different price.
 Classification of New Products

New products can be classified into different categories based on how new they are to the
company or the market. Most new products are improvements of existing products, while only a
small number are truly innovative.

1. New-to-the-World Products
These are completely new products that create an entirely new market. They usually involve
major technological innovation and carry the highest risk.
Examples:
• Dyson vacuum cleaner
• iPad by Apple
• 3M Post-it Notes

2. New Product Lines (New to the Firm)

These products are not new to the market, but they are new for the company. They help a
company enter an existing market for the first time.
Examples:
• Google entering the smartphone market
• Microsoft entering smartphones

3. Additions to Existing Product Lines (Line Additions)

These are new versions or models added to a company’s existing product line.
Example:
• HP introducing a colour ink-jet printer.

4. Improvements and Revisions to Existing Products

These are updated versions of existing products with better performance, quality, or reliability.
Example:
• HP improving its ink-jet printers over time.

5. Cost Reductions
These products deliver similar performance but are produced at lower cost. The customer may
not notice a major change, but the company benefits financially.
Examples include:
• Using cheaper materials
• Improving manufacturing processes
6. Repositioning
This involves finding new uses or new markets for existing products. It often depends on
branding and customer perception.

Example:
• Aspirin was originally used as a painkiller but later repositioned as a product that may help
prevent blood clots, strokes, and heart attacks.
 Repositioning and Brand Extensions
Repositioning and brand extension are two important strategies in new product development.
Both help companies grow, attract customers, and strengthen their market position.

1. Repositioning

Repositioning means changing how customers perceive an existing product or brand in the
market. The product may stay the same, or some features may change, but the company tries to
create a new image, new purpose, or new target market for the product.

Same product → New customer perception

A company may reposition a product by changing:

• Price – making it premium or affordable

• Technology – highlighting advanced features
• Quality – presenting it as higher quality
• Distribution – selling through new channels
• Service – improving customer support
• Brand image – changing advertising or brand personality

Researchers suggest brands can be positioned in two ways:

(a) Functional Positioning

Focuses on practical benefits of the product.

Example:
A laptop brand focuses on speed, battery backup, and performance.

(b) Symbolic Positioning

Focuses on emotional or social value.

Example:
Apple products are often associated with lifestyle, prestige, and innovation.

Types of Repositioning
1. Tangible Repositioning

When the physical product changes. Example:

• Better materials
• New technology
• Improved design
2. Intangible Repositioning

When only marketing changes, not the physical product. Example:

• New advertising campaign
• New packaging
• New target customers

Example of repositioning:
Aspirin was originally sold as a painkiller, but later repositioned as a product that may help
prevent blood clots and heart problems.

3. Brand Extension

Brand extension means using an existing successful brand name to launch a new product.
In simple words:
Old trusted brand name → New product category

This helps because customers already trust the brand.

Example: Sony using its brand name across TVs, headphones, cameras, and gaming products.

Types of Brand Extension

(a) Line Extension

The company introduces new versions within the same product category.
Examples:
• New flavor
• New size
• New color
• New packaging

Example: A shampoo brand launching herbal shampoo under the same brand.

(b) Brand Extension

The company uses the same brand name in a completely new product category.
Example: A mobile phone brand entering the smartwatch market.

(c) Flanker Brand

The company launches a new brand to target a different market segment.

Example: A company launching a lower-priced brand to compete with budget competitors.
Importance of Repositioning and Brand Extension
These strategies help companies:

• Reach new customers

• Increase sales
• Stay competitive
• Refresh old products
• Reduce marketing risk
• Strengthen brand loyalty

Especially in FMCG (Fast Moving Consumer Goods) industries, brand management is

extremely important because product differences are often small.

So, repositioning changes customer perception, while brand extension uses an existing brand
name to enter new markets or launch new products.

New Product Development as an Industry Innovation Cycle

William Abernathy and James Utterback (1978) explained that new product development
follows an industry innovation cycle. According to them, when a company introduces a new
product, other companies gradually respond, and this creates a cycle of innovation across the
industry.

This cycle usually happens in the following stages:

1. Introduction of a New-to-the-World Product

At the beginning, large companies with strong financial, technical, and marketing resources
launch completely new products. These products often create a new market and involve major
innovation.
Examples:

• Apple launching the iPad

• Dyson introducing innovative vacuum cleaners

This stage involves high risk, but it can also create market leadership.

2. Competitors React

After the success of the original product, other large companies quickly develop similar products
or improved versions.
This includes:

• New product lines

• Additions to existing product lines
• At this stage, competition starts increasing.

Example: After Apple introduced smartphones and tablets, companies like Samsung and
Microsoft entered the market.

3. Entry of Small and Medium Firms

Small and medium-sized firms also enter the market by creating their own versions or improved
products.
This helps them compete with larger firms and sometimes achieve major growth.

Example: HP became one of the world’s leading computer manufacturers by following this
strategy.

4. Increased Competition

As more firms enter the market, competition becomes stronger. Companies compete for
customers, market share, and profits.

At this stage, firms focus on:

• Better product quality

• More features
• Better customer service
• Competitive pricing
5. Cost Reduction and Process Innovation

When the market becomes highly competitive, companies try to reduce production costs while
maintaining product quality.

This leads to:

• Improved manufacturing processes

• Use of cheaper or better materials
• Increased efficiency
• The goal is to increase profits and remain competitive.

New Product Development Process

The New Product Development (NPD) process consists of several important stages that help
firms reduce risk and increase the chance of market success. The major stages are:

Idea Generation

Idea generation is the first stage of the NPD process. In this stage, organizations search for new
product ideas from both internal and external sources. The purpose is to create innovative ideas
that can satisfy customer needs and provide competitive advantage.

Sources of ideas include:

• Customers
• Employees
• Research and Development (R&D)
• Competitors
• Suppliers
• Market research
• Crowdsourcing and lead users

Example: Apple developed the Apple Watch by combining customer demand, technology, and
app developer contributions.

Idea Screening

Idea screening is the process of evaluating product ideas and selecting the most suitable ones for
further development. The objective is to eliminate weak or unrealistic ideas at an early stage.
During screening, firms consider:

• Market potential
• Technical feasibility
 • Cost
• Company objectives
• Risk factors
• Profitability

This stage helps organizations avoid wasting resources on unsuccessful ideas.

Importance of Idea Screening:

• Reduces development costs
• Saves time
• Minimizes business risk
• Focuses on profitable opportunities

Concept Development and Testing

In this stage, the selected idea is transformed into a detailed product concept. A product concept
describes the features, benefits, and target market of the proposed product.

After developing the concept, companies test it with potential customers to gather feedback and
understand customer reactions.

Concept testing helps firms determine:

• Customer acceptance
• Product usefulness
• Expected demand
• Necessary improvements

Example: A company developing a smart water bottle may test whether customers prefer
temperature tracking or hydration reminders.

Business Analysis

Business analysis involves evaluating the commercial viability of the product. At this stage,
firms estimate the financial and business potential of the new product.
The analysis includes:

• Sales forecasting
• Cost estimation
• Profit analysis
• Investment requirements
• Break-even analysis
• Risk assessment

The company determines whether the product will generate enough profit and align with
organizational goals.
Importance of Business Analysis:

• Ensures financial feasibility

• Assists managerial decision-making
• Reduces chances of failure

[Link] of New Product Development:

The text begins by classifying the vast "burgeoning" management literature into a clear
taxonomy of eight categories. It identifies a significant gap between academic theory and
practical reality, noting that while "decision-stage" and "activity-stage" models dominate
textbooks, many small specialist companies still successfully use a "craftsman-style" approach.
This traditional method—prevalent for 500 years—relies on a single person or a very small
group handling everything from drawing to delivery, proving that sophisticated models aren't
always a prerequisite for production

4.1- Departmental-Stage Models:

These models are built on a rigid functional hierarchy where a project is passed sequentially
from one department to another. The text highlights the "over-the-wall" phenomenon, where
departments (like R&D or Engineering) complete their specific portion of the work in isolation
before "throwing" it to the next team. This creates a disconnect where the "Works" or
"Production" departments might receive a design that is impossible to build, leading to the
"swing" paradox where every department has a different, incompatible version of the product's
reality.

4.2- Activity-Stage Models and Concurrent Engineering:

These move the focus away from who owns the project to what is happening. They emphasize
that tasks should be iterative and include feedback loops, which the linear departmental models
lack.

Concurrent Engineering: This is a philosophy of simultaneous development. Instead of waiting

for one stage to finish, multiple functions (design, manufacturing, and support) are involved from
the outset. The goal is a "project orientation" where everyone focuses on the final outcome rather
than just their individual functional task.
4.3- Cross-Functional Models (Teams):
These models are a direct response to the communication "black holes" that exist between
departments like Marketing and R&D. To fix this, organizations create Cross-Functional Teams
(CFTs).

Organizational Modification: This isn't just a meeting; it requires changing the company's
structure to place power in the hands of interdisciplinary teams. By having a dedicated team that
stays with the project from start to finish, the company avoids the "back-and-forth" delays and
the constant redesigning that happens when departments don't talk.

4.4- Decision-Stage Models:

These view the entire New Product Development (NPD) process as a sequence of critical gates.
The emphasis here is on the evaluative hurdles a project must jump over to progress. While these
models facilitate iteration through feedback, the text notes a major flaw: the feedback is often
implicit. This means that while a project might pass a decision point, the underlying friction
between departments isn't always explicitly resolved, which can lead to problems resurfacing
later in the cycle.

4.4/1- Stage-Gate Process:

Popularized by Robert Cooper, this is a highly disciplined, time-sequenced framework. It divides
the effort into "stages" (where the work happens) and "gates" (where management makes
"Go/Kill" decisions).

The Limitation: Because each stage depends heavily on the information from the previous one,
managers can get "trapped." If early decisions were flawed, the sequential nature of the gates
makes the process inflexible. It often focuses more on satisfying the "gatekeepers" than on the
actual needs of the customer, making it risky for highly uncertain, radical innovations.
4.5- Conversion-Process Models:
These treat NPD as a transformation system, often described as a "black box." The logic is that
you pour in various "inputs" (such as customer requirements, technical ideas, and manufacturing
capabilities) and the system "converts" them into a finished product. While this accurately
captures the idea of resource transformation, its biggest weakness is the lack of detail regarding
the internal creative and managerial processes—it tells you that a product is made, but not how
to manage the chaos inside.

4.6- Response Models:

Rooted in behaviorist psychology, these models analyze how an organization or individual reacts
to change or a new idea. Instead of looking at the product's design, they look at the screening
stage. They explore the factors that influence whether a manager will accept or reject a proposal.
This model is unique because it treats the "decision to proceed" as a human response to a
stimulus (the new idea), highlighting why some great products never make it past the first
meeting.

4.7- Network Models:

This represents the most modern, "non-linear" thinking. It views NPD as a process of knowledge
accumulation rather than a set of steps.

The Snowball Effect: Just as a snowball gains mass as it rolls, a product accumulates knowledge
from a vast network of sources—competitors, suppliers, distributors, and university departments.
This model emphasizes external linkages, suggesting that a company's ability to innovate
depends on its ability to pull in and synthesize information from the entire market environment
simultaneously.

5. New Service Development Process

The new service development (NSD) process is the overall process of developing new service
offerings from initial idea generation through to market launch. Because services are
produced and consumed simultaneously, the process relies heavily on "offer development." This
combines the development of the core service attributes with the processes by which consumers
evaluate, purchase, and consume the service. Traditional linear product development models
often fail to capture the dynamic nature of NSD because, in services, the consumer acts as a
"co-producer." Consequently, gaining a deep understanding of customer interactions and
integrating consumer involvement throughout the process is critical to a successful market
outcome.

5.1 Service Idea Generation

Idea generation is an early stage in the NSD process where organizations identify market gaps
and source potential new service concepts. Customers play a vital role here by stating their
needs, problems, and criticisms of existing services, as well as outlining their criteria for
adopting a new service. However, relying entirely on customers to generate ideas can be
challenging. Consumers frequently have difficulty articulating their exact needs for completely
new services—a phenomenon described as "sticky information". To overcome this
communication gap, firms are increasingly turning to internet-based communities and "user
toolkits" that give customers the freedom to customize and co-create innovative service ideas via
iterative trial and error.
Example: Netflix introduced personalized recommendation systems after analyzing customer
viewing habits and feedback.
5.2 Service Design and Blueprinting
This stage involves the specific design of both the core service and its delivery system. Because
a service is essentially a process, a key activity during this phase is to review and jointly
develop service "blueprints". Blueprinting helps the development team map out the exact steps
of the service delivery process to suggest improvements by proactively identifying potential
weak or "fail points". To ensure the design is effective, customers and personnel are often
brought in to observe and participate in service delivery trials, allowing them to collaborate on
refining the process and system design before the service is piloted.
Example: A hospital may create a service blueprint showing every step from patient registration
to discharge in order to reduce waiting time and improve patient care.
5.3 Service Testing
Due to the intangible nature of services, it is often easier to modify them compared to
physically manufactured products. Because of this flexibility, customers frequently take on the
role of co-producers and test services following their market launch rather than just during the
initial development stages. For example, the software industry actively uses "lead users" as
testers—such as Microsoft Beta testing initial versions with voluntary users—and leverages
online user communities to provide collaborative assistance in refining the service. However,
marketing literature criticizes the practice of only involving consumers at the very end; evidence
shows that the most successful developers communicate with their lead users continuously
throughout the entire new service development process.
Example: Microsoft releases beta versions of Windows to selected users so they can test features
and report problems before the final launch.
5.4 Service Launch
From a business perspective, innovation is not a success until it has established and fixed its
place in the market. Therefore, the act of putting a service on the market is not an end, but the
beginning of a new phase. Having the service on the market allows the organization to validate
or reject important estimates and assumptions that were made during development about
customer attitudes, behaviors, and desired benefits. A successful launch demands close and
constant monitoring of the reactions of customers, distributors, and competitors to inform the
proceeding strategy. Firms must quickly unravel whether the desired positioning was achieved, if
the pricing plans were appropriate, and if the right level of customer service is in place.
Example: When Disney+ launched, the company closely monitored subscriber growth, customer
feedback, and competitor responses to adjust pricing and content strategy.
5.5 Continuous Service Improvement
Once a service is inaugurated, it requires continuing attention given to its improvement to
secure, deepen, and widen its market position. Organizations must actively track and respond to
post-launch feedback, assessing whether customers use the service as originally envisaged, if
unarticulated problems have emerged, and how the service platform might need to evolve next.
This ongoing refinement is also a core element of the Total Quality Management (TQM)
philosophy, which is built on the concept of a continuous cycle of improvement. By embedding
this approach into the company culture, a constant stream of small, relatively easy-to-achieve
incremental improvements can cumulatively yield long-term results that exceed those of
singular, radical solutions.
Example: Facebook regularly updates its interface and privacy settings based on user feedback
and changing market needs.

6. New Service Development Models

New service development models are largely derived from the process models that were initially
created for the development of manufactured products.
6.1 Sequential service development models or Stage-Gate® models
The majority of new service development models are based on the traditional new product
development framework and are characterized by a linear progression of activities. These stages
typically include new product development strategies, idea generation, screening and evaluation,
business analysis, development, testing, and commercialization.
A defining feature of this model is the inclusion of "gates"—review points where decisions are
made on whether to proceed based on the information generated in the preceding stages.
However, these models suffer from several significant limitations:
• Inflexibility: Because each stage must be completed before proceeding to the next, the
model does not allow for the parallelization of activities, resulting in a costly, time-
consuming, and overly bureaucratic process.
Example: A telecom company may need approval from multiple departments before
launching a new customer support service, causing delays.
• Missed Market Windows: Due to the time-consuming nature of sequential models, a
market opportunity identified at the beginning of the process may no longer exist by the
time the service is ready for commercialization.
Example: A company developing an online tutoring platform may lose customers if
competitors launch similar services earlier.
• Premature Rejection: A failure at a single gate can result in a potentially successful
product being dropped entirely. Furthermore, their rigid structure gives little room to
adapt to project-specific features or to accommodate the fact that service development is
an iterative process that continues even after market launch.
 Example: A new mobile banking feature may be rejected early due to budget concerns
even though customers might have found it highly useful later.
6.2 Concurrent service development models
Concurrent service development models also known as simultaneous engineering, concurrent
service development overcomes the limitations of sequential models by offering a more flexible
approach that enables the parallelisation of activities. The objective is to consider the service
development process as a unified whole rather than isolated, individual stages.
Key characteristics of this model include:
• Speed and Efficiency: By employing the expertise of all departments simultaneously
and improving cross-functional communication, this model is faster and less costly than
sequential models.
Example: Amazon develops and tests new delivery features simultaneously across IT,
marketing, and logistics teams to speed up implementation.
• Error Prevention: Collaborative parallel working helps avoid potential design errors
that might only arise in future stages under a linear model.
Example: In airline service development, customer service staff and technical teams
work together to identify booking system issues before launch.
• Collaborative Challenges: The primary drawback of concurrent models is that bringing
together specialists from different departments can create friction. Because these
specialists frequently do not speak the same professional "language" and may have little
understanding of each other's activities, collaborative problems can arise which may
ironically lead to increased costs and longer times to market.
Example: Marketing and software engineers in a fintech company may disagree on
whether to prioritize customer convenience or technical security features.
7.1 Importance of Creativity in NPSD
There is a fundamental tension within organizations between the need for efficient, stable
routines and the need to nurture a creative environment for future competitiveness. The
development of new products and services requires creativity and room to try out new
ideas, which is usually achieved in a loose and flexible organizational environment. Providing
this "space for creativity" is identified as a key organizational characteristic that facilitates
the innovation process and helps managers overcome the innovation dilemma. Ultimately,
firms must practice "ambidexterity" to balance exploitation (efficiency and variance reduction)
with exploration (search, discovery, creativity, and embracing variation) to successfully develop
new market offerings.
Example: Google allows employees to spend time on innovative side projects, which led to
services such as Gmail.
7.2 Techniques (Brainstorming, Design Thinking)
To stimulate new product and service ideas, organizations rely on a variety of creativity
development methodologies, with brainstorming, lateral thinking, the Scamper method,
mind mapping, and TRIZ being among the most heavily utilized tools. TRIZ (the theory of
inventive problem solving) is particularly emphasized as a systematic toolkit that provides
a logical, predictable approach to creativity by leveraging repeating patterns of technical
evolution and problem-solving across different industries. While the specific phrase "design
thinking" is not explicitly used, design is recognized as an expanding applied activity within
research and development, defined as the "emergent arrangement of concrete details that
embody a new idea.’’
Example: Apple uses brainstorming and design thinking sessions to create user-friendly products
and services like Apple Pay.
7.3 Role of Organizational Culture
A firm’s heritage and culture are considered crucial to its technological and innovative
capabilities, as they foster and encourage widespread recognition of the need to innovate and
share knowledge. An organizational culture that successfully supports innovation is
characterized by a commitment to long-term growth, vigilance to external opportunities,
receptivity to new technology, and an acceptance of risks. Furthermore, highly innovative
companies build their culture around trusting employees, promoting entrepreneurship,
providing freedom for exploration, and tolerating failure, recognizing that a high attrition
rate of new product ideas is an inevitable and necessary part of the creative process.
Example: 3M encourages employees to experiment with new ideas, which resulted in
innovations like Post-it Notes.

7.4 Cross-functional Teamwork

Because new product development is a complex, cross-disciplinary process, it suffers heavily if
it is segregated by traditional, isolated functional departments. To overcome the inefficient
"over-the-wall" approach—where departments like R&D, engineering, and marketing work in
isolation and throw projects sequentially to the next phase—organizations utilize cross-
functional teams (CFTs) that bring together specialists from different areas
simultaneously. The success of these teams depends heavily on group cohesiveness, shared
understanding of project goals, and the ability to resolve interdepartmental conflicts.
Bridging the gap at the marketing and R&D interface is especially critical, as these cross-
functional teams must continually overcome varying perceptual, cultural, and language
barriers—such as marketers focusing on product benefits while scientists focus on technical
specifications—to effectively deliver new products.
Example: In a smartphone company, engineers, marketers, and designers work together to launch
a new phone successfully.