In two recent product development projects in your company (one incremental and one radical innovation):
1. Identify the times in the PD Process when the need for resources was identified and when the resources were allocated.
2. What resource needs were identified - finance, people, equipment, raw materials, information? How were the resources found? Were there any other resources needed?
3. Who were the people who developed the budget proposal in these projects and who made the decision to guarantee the budget?
4. Were there any delays in the projects because of poor prediction of financial needs? Were there cost overruns?
5. Compare the resource management and financial control in both projects, and identify the difference between an incremental project and a radical innovation.
Product development does not occur in a vacuum! There is an environmental situation that sets the parameters and constraints for the project. All the layers of the environment - society, industry, market and company - limit or constrain the area of the project as can be seen in Fig. 6.6.
Parameters that need to be considered at the beginning and throughout the project are the needs and wants of the consumers, the processing and marketing technology available, the knowledge capability, the time and the resources. Some important company parameters are the business strategy, the innovation level, expertise, management style, location of plants and markets, distribution system, product development organisation and management. Some of the environmental parameters are local government, national government, industry
agreements, farmers' agreements, economic and technological status, business cycle as well as any social restrictions and attitudes.
Constraints caused by the different parameters are identified. Constraints can be set on the product, processing, marketing, finance, time and resources. These constraints are often quantitative, for example on the product there can be chemical composition, microbiological level, nutritional value, and a specific requirement such as the use/non-use of an ingredient. Some of the constraints important in product development projects are shown in Table 3.1 on page 100. Three important areas to develop constraints are the competitors, government regulations, user needs with their related societal attitudes (Holt, 1983). The company selects the important competitors, and the areas for competition, for example product technology, marketing, costs and prices, and the position of the new product as related to the competing products. Functional requirements or some other product quality may then be set according to the qualities of the competing products. These will then be part of the product design specifications and limit the area for design. Another important area to develop constraints on the design of the product is government regulations, both internal to the country and at entry to the country. These must be identified early in the project. There is little point in designing a canned fruit in syrup only to discover that there are high import duties related to the level of sugar in the product; or there is a quota on certain meat or dairy products into a country and these are already filled; or that only certain ingredients are allowed in bread; or there is a basic vitamin content if the label says vitamin-enriched. The government regulations need to be surveyed and the important parameters and constraints identified to avoid developing products that will violate the law. The very important area for setting constraints is the study of the user - what their needs, wants and fears are, and how these relate to the product design specifications; their attitudes to pollution, farming practices, environmental sustainability. Various factors may be constrained, for instance for a nutritional drink:
• product - nutritional, minimum percentage of protein, maximum percentage of fat;
• processing - minor adaptation of present production;
• marketing - existing distribution channels;
• financial - maximum level of investment in the project;
• company - two project members, one technical, one marketing; functional departments as support groups;
• food regulations - no preservatives, nutritional labelling required.
The parameters that can constrain product development are many and it is not possible to study them all when identifying constraints on the product development project. It is important to identify the critical constraints and not to have these constraints any tighter than is necessary to meet the parameters. One always needs to ask is this constraint valid? Is it necessary? If the constraints are very tight, then the opportunity for creativity is reduced. The constraints are important in the product screening and project evaluation, and are used in building up the product concept and product design specifications. It is important that they are clear and as quantitative as possible.
Some parameters for the Mexican and US markets for tortillas are identified in Box 6.1.
Few things are more Mexican than the tortilla. But when it comes to making money off the ancient disks, most of the action today is north of the border. That's why two of Mexico' s biggest food companies, Grupo Industrial Maseca SA (Gruma) and Grupo Industrial Bimbo SA have chosen the US as the main battleground for their fight to control the $5 billion world tortilla market. So they're pitching their mass-produced, packaged tortillas to a foreign audience and honing their marketing skills for the day when Mexico's tortilla market joins the modern world.
Mexicans eat 360 billion tortillas per year, 10 times the number of tortillas per capita as Americans. The market is overwhelmingly dominated by tortillerias, small businesses. More than 96% of all tortillas are sold in little shops licensed by the government. These outlets, many grinding tortillas on hand-powered conveyor belts, are virtual monopolies in their neighbourhoods, with a captive market that so far has resisted modern sales efforts. In part the reason is cultural: Mexicans like their staple fresh, hot off the press. But more importantly, Mexico subsidises small tortillerias with cheap prices on corn flour, making it possible to sell corn tortillas for less than the production cost. 'People stand in line for two to three hours for tortillas. It's worth it because they are so cheap.'
Thus, despite modern baking technology, companies such as Gruma and Bimbo simply are unable to make tortillas cheaply enough to compete with the small businesses, however inefficient they may be. Once tortilla subsidies are phased out, millions of Mexicans will buy their tortillas just like Americans do, in plastic bags in supermarkets. If Mexican companies could raise their packaged-tortilla sales to 20% of the Mexican market from 5%, they would match the tortilla output in the USA.
There is a Mexican immigrant market but tortillas are also making in-roads among Anglo families. The US market is growing 10% per year in dollar terms, compared with just 2% for Mexico.
Gruma purchased Guerrero Foods, an East Los Angeles tortilleria founded by Mexican-Americans, in 1988. It works with Mission Foods, another
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