PRODUCT DEVELOPMENT & MARKETING

Product Development & Marketing

Product Development & Marketing

Introduction

There are different types of classification for product innovation based on Schumpeter's work. With reference to product innovation, a classification of the innovation phenomenon focuses on what degree of innovativeness a product should reach (radical/ incremental innovations). Henderson and Clark in 1990 described incremental innovation as relatively minor changes to existing designs that exploit the potential of the established design, and often reinforce the dominance of established firms, as opposed to radical innovation, such as the introduction of a totally new type of machinery.

Radical innovation is based on science and engineering concepts and leads to opening up whole new markets, which can create great difficulties for established firms. Radical innovation establishes a new dominant design, while incremental innovation refines and extends an established design. He also identified two additional forms of innovation between the extremes of radical and incremental innovation.

Modular innovation creates change in the component technologies, while architectural innovation changes the linking mechanism between technology components in new ways. An important insight from the innovation research is the importance of radical innovation for private firms as the source of the largest productivity gains, as Duguet argued in 2002.

Expansion strategies seek to increase the size and scope of an organization. If expansion is selected as the best way to perform the mission and realize the vision of the organization, several alternatives are available. Expansion strategies include diversification, vertical integration, market development, product development, and penetration.

Diversification

Diversification strategies are selected because opportunities have been identified outside of the organization's core business that offer potential for growth. Often an organization that selects a diversification strategy is not achieving its revenue goals within its current service area or product offerings. Other organizations diversify to achieve growth in less regulated markets such as specialty hospitals, long-term care facilities, or managed care.

Diversification can be a risky alternative, because the organization is entering a relatively unfamiliar market or offering a product or service that is different from its current products or services. Organizations have found that the risk of diversification can be reduced if complementary markets and products are selected.

Vertical Integration

A vertical integration strategy is a decision to grow along the channel of distribution of the core operations. The growth of an organization along the channel of distribution toward its suppliers (upstream) is called backward vertical integration. The growth of an organization toward the consumer or patient (downstream) is called forward vertical integration.

A vertically integrated health care system offers a range of patient care and support services operated in a functionally unified manner. The expansion of services may be arranged around an acute care hospital and include prea-cute, acute, and postacute services or may be organized around specialized services related solely to long-term care, mental health care, or some other specialized area. The purpose of vertical integration is to increase the comprehensiveness and continuity of care, while simultaneously controlling the channel of demand for health care services.

Vertical integration can reduce costs and thus enhance an ...