New product development – Global Homework Experts

New product development can have a strategic value quite apart from creating new revenue flows for a company. Because of the news value of developments in big industries like aeronautics or cars, journalists flock to exhibitions and trade shows to hear manufacturers describe their dramatic plans for radical innovation. March 2001 saw the announcement by Boeing that it was developing a revolutionary new passenger jet which would fly 20 per cent faster than conventional airliners. The ‘sonic cruiser’ would maintain a speed just below the speed of sound, and with its range of 8,600 miles (13,800 km) it would make it possible to knock three hours off a Pacific crossing. Not only would there be passengers willing to pay a premium for such speed, the company argued, but the immediate customers (the airline companies) would benefit from being able to squeeze more flights from each aircraft – a key variable in profitability calculations. However, the industry’s reaction was less enthusiastic than might have been expected. The sonic cruiser launch came soon after Boeing had unveiled rather less dramatic plans for an upgrade of its classic 747 – a range of aircraft that has been in service since the 1970s. (The product life-cycle of airlines is impressively long compared to some other high-tech industries.) Compared to its arch-rival Airbus’s plans for a double-decker, 550-seat aircraft, the A380, the 747 revamp had fallen flat. Sceptics saw the speedy announcement of the sonic cruiser as an attempt to divert attention from the A380, and grab some headlines back. However, 2001 was a bad year for order books for any kind of airliner. Not only was there a slow-down in business in the summer, but the tragic events of 11 September in the US gave the world’s airline industry a traumatic shock. Prospects for any kind of new model suddenly looked grim as many companies faced possible bankruptcy because of passengers’ reluctance to fly. The name of the game for airlines now is to increase efficiencies and rebuild their finances after a difficult period. So the market for a superfast jet is less certain than it might have been. Boeing has responded flexibly. The computerised design process and application of new materials technology which yielded a 20 per cent speed increase has been drawn on to produce a more conventional plane which flies at the same speed as its competitors but is 20 per cent more fuel-efficient instead.

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1 How might new product development differ between consumer and business-tobusiness markets?

2 Using the case study as an example, explain the importance of public relations in establishing confidence among investors and customers.

3 Discuss the view that innovation is less important in some industries than in others.

 

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