ABSTRACTS

cotigtry and (3) domestic. nearest neighbor and

some number of other countries. this categoq being called world. (Since these firms were prob- ably Canadian, though the report does not say, the nearest neighbor classification was probably the United States.)

The category of international design was an answer to questions about whether the de- veloping firm consciously tried to design the product in such a way that it would better meet the needs of world countries.

The question of success was a multidimen- sional measure that utilized overall profitability. payback. market share and sales growth.

Along the way the researchers also gathered information on whether foreign market research

was done, whether there was trial selling in foreign markets and whether in general there were much stronger foreign selling efforts. These were used to strengthen the classifications on world design and world targeting.

Put together. the analysis yieided a 3 x 2 matrix of domestic. nearest neighbor or world targeting and domestic or world product design. For example. 31% of the 203 new products stud- ied were domestic design and domestic marketed. At the other end of the matrix. I?% were intema- tionally designed and internationally marketed. (Oddly. 22% were internationally designed but cnly domestically marketed.)

The success percentages were dramatic. For all products domestically designed, the success rate was about 45%, however marketed. For ail internationally designed products, the success rate ranged from 61% (if domestically marketed), to 78% (if marketed to nearest neighbor), to 85% (if marketed on a world basis).

Other data analyzed in the study generally supported the overall conclusion. For example, “international products marketed at world and nearest neighbor export markets achieved foreign market shares that were almost double the shares earned by domes&k producers aimed at these same export markets.”

Interestingly, international products aimed at export markets also fared better in their domestic markets, shares almost doubled shares of domes- tically designed products.

ors conclude: “The results . . . ap- pear to support the r;nderlying thesis of the

research: that an internationaily oriented product innovation effort is the preferred strategy.“

the Ih.k Betweem R&D

ricer and Deborah H. TtiaM, Thi JOWW~ of Bushess Strategy

(January-February MB), pp. 38-42

This is a report on strategic change at Xerox, presented in the larger setting of industry as a whole. Some while back, Xerox executives be- came aware that the firm was not optimizing their R&D accomplishments. For example, the firm lost leadership potentials in both graphic work- stations and networked systems in spite of tech- nological leadership.

The answer, in these authors’ opinion, is to couple R&D activities more closely with overall corporate strategy. Though this sounds like aban- doning more basic r,ooearch to the appIied needs of development groups and marketing depart- ments, this need not be so. The trick is to protect the basic, but see that it at least builds on commercial opportunities and assure that the nonbasic parts of the R&D program are closely tied to current strategic thinking.

There are three reasons for this need (beside past disappointments). First is the current pace of change. One demonstration of this rate is the statement that “the average 1988 automobile has more computing power than the university com- puter science department of a decade ago.” A more rapid R&D operation almost inevitably calls on a merging of in-house technical efforst and those of outside firms or research centers. The authors cite how IBM paired Microsoft and Meta- phor with their own departments in the PC and PSI2 series. Opportunity windows close almost as soon as they open.

SecoEci is competitive pressure. This m22ns in every phase of a firm’s business, with the result that R&D now must contribute to the entire chain: design, manufacturing, distribution, iales and service. DEC, for example, applied its artif% cial intelligence program to improve its customer service through a new order entry process.

Third is overhead reduction (cost reduction). More and more we will see the R&D budget managed as an investment, with specific expecta- tions for return.

EfloptS to tie R&D more closely to corporate strategy are many. Some firms. for example Gen- era3 E;lectric, have tied technical competence directly into their chref executive’s office. An- other Line of effort is to find innovative ways to allocate R&D costs to divisions and other operat- ing units and. in the process. find ways to mea- sure R&D productivity that can replace the very inadequate methods of the past (e.g.. publications and patents).

Still other firms use organizational devices. for example. “Sharp is the benchmark for low-cost design and high-volume manufacturing on a worldwide basis.” a result the authors feel that came from their combining R&D. manufacturing and product development under one manager. General Foods and others are using new commit- tees and boards to stimulate communication. AT&T has some dotted lines going from R&D groups out to product Organizations.

The key is communication, both the desire for it. and the getting of it.

Modeling the Decision to Add New Products by Channel Intermediaries, Vithala R. Rao and Ed- ward W. Laughlin, Jorrrrml qf Marketing (Janu- ary 1989). pp. 80-88

The importance of getting good distribution for new products is well known. But little is known about how channel intermediary managers make decisions on stocking and promoting the many new products they are offered. The current au- thors selected the packaged grocery products channel for their study, meaning that they asked buyers in grocery chain headquarters for (1) the

full information surrounding a set of new prod- ucts proposed to them and (2) whether they accepted or rejected each of the items.

Their purpose ~‘2s to prepare a model that would forecast the acceptance of new grocery products given information abc)ut them (market- ing support, product uniqueness, etc.).

The authors scoured the literature to gain in- sight about various factors that affect the accept/ reject decision. They tars (price. margin. titive factors (nu brands already availa tars (for example. product uniqueness and ven-

ABSTRACTS

dor effort) and other factors (primarily category growth and syuergy of the item with other items in a family line).

For each of the factors they needed to know in which direction it works (accept or reject) and the power of that e ct. This led them to the large supermarket chain; it agreed to supply them data on some 2000 new products presented to chain buyers in a recent eight-month period.

Because tiles were often incomplete, the re- searchers ended up with slightly over 1000 prod- ucts for which there were complete data. Using half of this set they developed the directions and the factor parameters. The model was then vali- dated by predicting fcr the other half of the products and comparing those predictions with actua! decisions.

The results were pleasing to the author: a “hit rate” of X.6%, significarltly above what random choice would have gotten.

The actual data are of interest primarily to grocery products manufacturers. They should consult the original article which shows that they must always be careful. For example:

Gross margin was slightly negative, meaning that the higher the gross margin, the less the chance the item would be stocked. Though strange. this result also appeared in a previ- ous study.

The highest score factor was category growth, meaning that stores stock to cate- gory sales.

In contrast, product uniqueness was positive too. but only about a third as strong as category growth. If you’re going to be unique, make it in a growing market.

Vendor effort (television, couponing an slotting allowances) did not appear to sup- port an acceptance decision.

Bey-ond these specific finding fers readers in other industries could use to build models app industries. There was no indication as to whether

ethod would work in industrial channels. s to be no reason w