To Market, To Market

To the uninitiated, there may seem a vast difference between an entrepreneur launching a new startup and an executive heading an existing legacy corporation. And, sure, there are significant dissimilarities between these two roles. But one of the most important decisions both individuals must make is what product or services their company should bring to market. Without a meaningful offer, there is no customer and, hence, no business. It’s a decision that carries with it a tremendous amount of risk; the wrong choice might cause a startup to fail or cost a corporation millions of dollars and countless hours of wasted time. Smart companies of both types — and every corporate iteration in between — involve their marketing teams in new product and service launches from the start. These companies realize that it’s the marketing group that has the best understanding of what consumers want, and creating products and services that consumers desire is the name of the game no matter what size the company or what stage of development it finds itself in.

That’s why Andres Terech’s course New Product Development: Human-Centered Design of New Products and Services is one of UCLA Anderson’s most popular. Terech, who earned his Ph.D. at Anderson in 2004 and became a full-time member of the faculty in 2009, is faculty director of the Morrison Center for Marketing and Data Analytics. He is a multiple winner of Anderson’s teaching awards, earning distinctions in both the full-time and fully employed programs. His research focuses on how companies need to evolve their brand as competitors enter the market and the broader environment changes.

Terech says the goal of his product development class is for students to learn how to control the innovation processes from opportunity identification through launch so they can reduce the risk associated with any innovation. He notes that many of Anderson’s marketing courses focus on what happens after the product is in the market. This class centers on the earlier stages before a product launch to try to uncover consumers’ unmet needs and reduce uncertainty before committing to significant investment.

Q: Are the students who take this course primarily budding and seasoned entrepreneurs, or are they looking to a future with large companies?

Some students who join this class are already involved in other entrepreneurship classes and they have an idea for a product or service, while other students don’t. But the most important reason why any customer is in a relationship with any company is the services that they offer. So anyone who is studying for an MBA must fully understand that the solution that the company brings to market is the essence of the customer relationship, and how to develop the right solution is key.

I like to say that in my class, both entrepreneurs and intrapreneurs benefit from knowing how to control the process. It is for entrepreneurs, but it is as much for people who are with a company and want to develop a new product or service — sometimes not even for external customers, but for an internal customer. Companies must ask: What are the problems consumers have? What are the problems we’re trying to solve? And how do we ideate potential solutions that will have a good market fit? The class goes from discovering those opportunities to ideating possible solutions to multiple stage testing and forecasting. The class aims to move from job-to-be-done to knowing that, when the product is launched, it will do the job it is hired for.

Q: Are the students who take this course primarily budding and seasoned entrepreneurs, or are they looking to a future with large companies?

Some students who join this class are already involved in other entrepreneurship classes and they have an idea for a product or service, while other students don’t. But the most important reason why any customer is in a relationship with any company is the services that they offer. So anyone who is studying for an MBA must fully understand that the solution that the company brings to market is the essence of the customer relationship, and how to develop the right solution is key.

I like to say that in my class, both entrepreneurs and intrapreneurs benefit from knowing how to control the process. It is for entrepreneurs, but it is as much for people who are with a company and want to develop a new product or service — sometimes not even for external customers, but for an internal customer. Companies must ask: What are the problems consumers have? What are the problems we’re trying to solve? And how do we ideate potential solutions that will have a good market fit? The class goes from discovering those opportunities to ideating possible solutions to multiple stage testing and forecasting. The class aims to move from job-to-be-done to knowing that, when the product is launched, it will do the job it is hired for.

Q: Are there any prerequisites for the course?

The only prerequisite is the marketing core class. I presume that students understand segmentation and positioning and the knowledge relevant understanding customers.

In this class, try to bring to life some concepts that are not well covered in the core course. A very popular term in this field is “design thinking.” The idea behind design thinking is that to develop a solution, you first need to understand the problem in the eyes of the person who has it. Thus, empathizing with the consumer is key. You need to be able to understand whether your theory diverges from what the customer believes is a potential problem. Then, you test many different possible concepts (“What if we…?”) to see where solutions converge.

The design thinking philosophy underlies the class. At the end of the day, we need to develop solutions to the problems someone else has. The new product is not for us, it is for them. You need to put yourself in their shoes and listen in order to understand the benefits the product will deliver and the tradeoffs the customer will have to make so that you can actually develop the right solution, the one that has the higher chances to succeed.

Q: Many people think of “marketing” as what happens after a product is developed — the branding, the advertising, the media relations, the sales. Why is it important for marketing executives to get involved in product development? In other words, why is this a marketing course, as opposed to, say, an entrepreneurship course?

It is a marketing class because a significant number of dollars are invested in the innovation piece, and because marketing is the side of the company responsible for understanding and interacting with the customer. If a company doesn’t control the process and waits until the investment in a new product or service is large, in terms of finance or time, it potentially runs into a problem where it’s trying to sell something that no one wants. Figure out first what the consumer wants and then develop it, test it and sell it. That’s why you get the marketing team involved early.

In some industries, like the software industry, you can easily develop something very quickly and inexpensively and launch it to market. If it does not work, it is usually not a huge problem. But when you develop a car that takes six or seven years to build, when there are a lot of regulations, or when investment in factories and molds is high, you want to be sure where you’re putting your money. You want to limit the risk of failure. You want to reduce uncertainty at the minimum cost. Marketing must coordinate and work with R&D. As a CMO, I’m thinking about allocating resources; don’t give me products to sell that were developed by R&D without thinking about the customer or consumer testing because I’m going to use my dollars on something that is actually going to work.

Q: What are some of the assignments and class requirements?

There are typically a couple of cases that we discuss, so there’s typically a case write-up or two. A big component of the course is a group project, which works as the final exam. In this project, students need to implement all of the concepts and frameworks learned in class, and go through the different product development states that we go through in class. Some students are also involved in the Business Creation Program capstone project, so they already have an idea and they apply those concepts to their project. There are also smaller, ungraded assignments related to this core project throughout the quarter, whichare very valuable, as I provide feedback so they can improve their final project.

Q: You mentioned case studies as part of the class material. Do you also incorporate current events or your own research?

Sometimes we talk about current events just to illustrate the things we’re discussing in class. You can really see these concepts on a day-to-day basis.

This is an industry-agnostic class, so a lot of the lessons might be applied to a tech company or a more traditional company like Mattel, a toy company. For instance, we discuss a case about reMarkable, a technology product, as well as a case about Hot Wheels that I recently wrote. It’s also interesting to understand failure in product innovation, it teaches a lot.

I try to update the cases when something feels old or when an industry has moved away from a product. If students have the story already, it’s not much of a surprise, and it doesn’t allow me to teach them the tools I want to teach.

Q: When a student has successfully taken this course, what do you hope they have learned? In practical terms, how might they apply these lessons to their career?

You will gain the ability to think before you spend money on innovation. You should really understand the customer. You will fully embrace the importance of that idea and be able to raise that question through your role in the company. You will have full experience and understanding of the whole development process, you will know the different techniques for opportunity identification and different testing strategies — from concept tests to alpha and beta tests, to simulated and market tests, and how to forecast with limited information.

You will also be able to identify the gaps in your company, where your company is cutting corners, which may increase the risks of their products or services failing because you have jumped over some of the steps.

There is one other unique thing we cover in this class. Companies have a portfolio of products in the market, but they also have a portfolio of innovation. What are the projects you are working on and how does the company make decisions about allocating and optimizing the investment across them? This is a very challenging and difficult optimization problem because each innovation project is at a different stage, and the uncertaininty associated with them is different. You can’t use standard metrics only.