An Analysis of New Product Ideas in Small Business

Abstract

AN ANALYSIS OF NEW PRODUCT IDEAS IN SMALL BUSINESS Like other organizations, many small enterprises depend on new products and services for prosperity and survival. As established product offerings mature, rivals produce innovations and customers demand new benefits. As a consequence, managers find it necessary to inject new offerings into the marketplace. This involves risk, of course, but many firms find that the potential long-run returns outweigh potential losses. principal part of succesful new product introduction is the development of new product ideas. These can derive from a variety of sources, depending on the philosophy, history, and capabilities of management and the resources of the enterprise. The purpose of the study described in this article was to examine the sources of ideas that lead to new product introduction among small businesses. Information on this topic is of obvious interest to small business managers, academics and public policy formulators, because new product development affects the performance of small firms and overall industry growth. BACKGROUND Managers are concerned with new product development as an ingredient for success in the marketplace.(1) One of the most important determinants of small business profitability is innovation on the part of management and employees.(2) One study found that 70 percent of a sample of succesful firms had redefined their basic business at some time during the life of the enterprise.(3) Most managers discover that determining what new products to produce or to purchase is complex and difficult.(4) (1) R. Rajan Varadarajan, Diversity and Firm Performance: An Empirical Investigation, Journal of (July 1986), pp. 43-57. (2) Rajeswararao Chaganti and Radharao Chaganti, A Profile of Profitable and Not-So-Profitable Small Businesses, Journal of Small Business Management (July 1983), p. 49. (3) Fred L. Myrick, Succesful Small Business Managers, Journal of Small Business Management (July 1977), p. 19. (4) Doug Lincoln and Gary McCain, Marketing Decision-Making Problems Faced by Small Business Retailers, Journal of the Academy of Science (Summer 1985), pp. 183-198. Generally, it is necessary to generate a large number of potential new product ideas to arrive at a small number of ideas likely to meet with success.(5) Two major risks are that an attractive opportunity will be overlooked (or preempted by competitors) or that market preferences will change prior to final introduction of the product. In these cases, firms either fail to perceive opportunities or perceive them too late.(6) Reactions to changes in the marketplace are particularly important to small retailers, who count rapid modifications in strategy and tactics among their means of competing with larger retailers.(7) The literature suggests that successful new product introduction often results from a program of very carefully planned and conceived strategies. In the export market, for instance, one key to success is orienting new products toward the needs of foreign consumers.(8) One of the reasons for the succesful penetration of the worldwide consumer goods market by the Japanese has been their adeptness at exploiting new opportunities with carefully prepared plans prior to market introduction.(9) The sampling procedures used in this study differed in several respects from those of the typical mail survey. SAMPLE AND SURVEY Questionnaires were mailed to fifty directors of Small Business Institutes at fifty colleges and universities in (5)Samuel Rabino and Howard Moskowitz, Optimizing Product Development and Shortening the Lead Time for Product Introduction, Journal of the Academy of Science Annual Educators' Proceedings (Miami: Academy of Science, VIII, 1985), p. 231. (6)Peter R. Dickson and Joseph J. Giglierano, Missing the Boat and Sinking the Boat: Conceptual Model of Entrepreneurial Risk, Journal of (July 1986), p. …