DEGREE PROJECT IN THE FIELD OF TECHNOLOGY DESIGN AND PRODUCT REALISATION
AND THE MAIN FIELD OF STUDY MECHANICAL ENGINEERING, SECOND CYCLE, 30 CREDITS STOCKHOLM, SWEDEN 2021
Collection and Utilization of Market Information and Customer Insights within New Product Development
JOHN FORSGREN
BJÖRN VILHELMSSON
KTH ROYAL INSTITUTE OF TECHNOLOGY
SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT
Collection and Utilization of Market Information and Customer Insights within
New Product Development
John Forsgren Björn Vilhelmsson
Master of Science Thesis, TRITA-ITM-EX 2021:391 KTH Industrial Engineering and Management
Machine Design
SE-100 44 STOCKHOLM
Insamling och Användning av
Marknadsinformation och Kundinsikter inom Ny Produktutveckling
John Forsgren Björn Vilhelmsson
Master of Science Thesis, MF220X KTH Industriell Teknik och Management
Maskinkonstruktion
SE-100 44 STOCKHOLM
Master of Science Thesis TRITA-ITM-EX 2021:391
Collection and Utilization of Market Information and Customer Insights within New Product Development
John Forsgren Björn Vilhelmsson
Approved
2021-06-15
Examiner
Sofia Ritzén
Supervisor
Johan Arekrans
Commissioner
Undisclosed
Contact person
Hanna Petersson
Abstract
Corporate groups face many challenges related to the collection and utilization of market information and customer insight, which - if not properly dealt with - can lead to the loss of financial and competitive advantages. The corporate group that was the subject of the case study has a central product development process that is making use of the stage-gate model and is currently facing challenges regarding the capture of customer insights within that process.
The thesis strives to investigate and identify challenges connected to collecting and utilizing market information and customer insights in a central stage-gate process within a corporate group and providing a well-defined way of combating these challenges rooted in previous research and studies.
The study was based on a literature review combined with 12 qualitative interviews with the company respondents, in addition to weekly meetings with a supervisor at the Group. All interviews were transcribed and carefully compared with the literature review in order to draw the final conclusions of the study. The main challenge that was identified through the project group's research was missing, lacking and incorrect information on a brand level. Within the product development process, it was identified that there was insufficient information available within four major areas, market sizing, customer segmentation, growth predictions and product cannibalization.
The proposed solution to the identified challenge was to make use of a quantitative collection of data as the initial solution and then strengthened it by the collection of qualitative data. This would be done through an internal framework that would make it obligatory for the different brands to collect, with support from the central part of the group, a decision upon a list of data.
The collected data would then be evaluated and checked for reliability and, if needed, adjusted to achieve the desired quality and quantity.
Examensarbete TRITA-ITM-EX 2021:391
Insamling och Användning av Marknadsinformation och Kundinsikter inom Ny Produktutveckling
John Forsgren Björn Vilhelmsson
Godkänt
2021-06-15
Examinator
Sofia Ritzén
Handledare
Johan Arekrans
Uppdragsgivare Ej angivet
Kontaktperson
Hanna Petersson
Sammanfattning
Företagsgrupper står inför många utmaningar relaterade till insamling och användning av marknadsinformation och kundinsikter, som, om de inte hanteras ordentligt, kan leda till förluster av ekonomiska- och konkurrensfördelar. Företagsgruppen som var ämne för case studien, har en central produktutvecklingsprocess som använder sig av stage-gate modellen och står för närvarande inför utmaningar när det gäller att fånga kundinsikter inom den processen.
Examensarbetet strävar efter att undersöka och identifiera utmaningar kopplade till insamling och användning av marknadsinformation och kundinsikter i en central process inom en företagsgrupp och tillhandahålla ett väldefinierat sätt att bekämpa dessa utmaningar som har sitt ursprung i tidigare forskning och studier.
Studien baserades på en litteraturstudie kombinerad med 12 kvalitativa intervjuer med respondenter inom företaget, samt regelbundna möten med projektets handledare. Alla intervjuer transkriberades, gicks noggrant igenom och jämfördes med observationerna inom litteraturstudien för att komma till studiens slutgiltiga lösningar. Den största utmaningen som identifierades genom projektgruppens forskning var att information saknades, var otillräcklig och felaktig på en varumärkesnivå. Inom produktutvecklingsprocessen identifierades att det finns otillräcklig information tillgänglig inom fyra huvudområden, marknadsstorlek, kundsegmentering, tillväxtprognoser och produktkannibalisering.
Den föreslagna lösningen på den identifierade utmaningen var att använda en kvantitativ datainsamling som den ursprungliga lösningen och sedan stärkte den genom insamlingen av kvalitativa data. Detta skulle ske genom ett internt ramverk som skulle göra det obligatoriskt för de olika varumärkena att samla in information som blivit framtaget av den central delen av företaget. Den central delen av företaget ska även tillhandahålla stöd till de olika varumärkena om så behövs. De insamlade uppgifterna utvärderades och kontrollerades med avseende på tillförlitlighet och justeras vid behov för att uppnå önskad kvalitet och kvantitet.
Foreword
Dear reader,
We are excited that you have taken interest in reading this report. This Master Thesis is the resulting work of a degree project in Innovation Management and Product Development Conducted by two students at KTH Royal Institute of Technology during the Spring semester 2021. We would like to dedicate this page of the Thesis to all the people that have supported us and inspired us throughout our studies.
We would like to thank our supervisor Johan Arekrans who has supported us, given us valuable feedback and answers all our questions with care. You were always there when something needed to be cleared up.
A special thanks goes to our project supervisor Hanna Petersson, this thesis would not have been possible without her support. Working together has been an absolute pleasure and privilege, The speed you answered our Emails and booked meetings was indeed impressive.
All the people that took time out of their busy schedule, to come and participate in our interviews.
To our teachers that throughout the years has given us the tools and knowledge to be able to create this Master Thesis, and our fellow students that has not only inspired us but made these past years fun.
And finally we would like to extend our gratitude towards our families, friends, and loved ones.
Without you and your support these five years of studies would not have been possible.
John Forsgren, Björn Vilhelmsson Stockholm, June 2021
Nomenclature
This short section includes a brief description of some of the terms we believe not every reader of the report might be familiar with.
Brands - The various brands (subsidiaries) of the Group.
BTB - Business to business, i.e. an organization’s business with other organizations.
BTC - Business to customer, i.e. an organization’s business with private consumers.
Customer Insights - Conclusions about a company’s customers that enable a deeper understanding of customer behaviour and why the customers make their choices. These relate to conclusions within Advertising, Product Development and Sales.
Corporate Group - A collection of parent and subsidiary corporations controlled by a central organization. Often referred to as simply “Group” in the report.
NPD - New Product Development. Refers to new projects under development through the Group’s stage-gate process.
Opportunity Submission - Proposals and new product ideas coming from the brands of the corporate group.
Table of Contents
1 Background 1
1.1 The Group 1
1.2 Purpose 1
1.3 Scope 1
1.4 Delimitations 2
2 Theoretical Framework 3
2.1 Stage-gate Process 3
2.1.1 The Typical Stage-gate Model 3
2.2 Customer Segmentation 6
2.2.1 Benefits of Customer Segmentation 7
2.2.2 Definition of Customer Segmentation 7
2.3 Business Cases 8
Business Case Framework 9
Reasons 9
Options 9
Benefits and Downsides 9
Timeframe, Costs 10
Major Risks and Opportunities 10
2.4 Validating a Business case 10
2.4.1 Evaluate Market Size 11
2.4.2 Predicting Market Reception 12
2.5 Customer Insights and Traditional Market Research 13
2.5.1 Customer Insights 13
2.5.2 Traditional Market Research (TMR) 16
3 Method 17
3.1 Qualitative Study 17
3.2 Literature Review 17
3.3 The Interviews 17
3.4 The Three Phases 19
3.5 Reliability and Validity 21
4 Results and Analysis 22
4.1 Phase 1: Scope Definition 22
4.1.1 Empirical Data Phase 1 22
4.1.2 Identified Challenges 24
4.2 Phase 2: Investigation into set Scope 25
4.2.1 Empirical Data 25
4.2.2 Initial Proposed Solutions Phase 2 28
4.2.3 Feedback on Proposed Solutions Phase 2 31
4.3 Phase 3: Development of Final Recommendations 32
4.3.1 Expanded Solution 32
4.3.2 Empirical Data 34
5 Discussion 37
5.1 Proposed Solutions Phase 3 37
5.1.1 The Process 37
5.1.2 Internal Frameworks for Information Collection 38
5.1.3 External Frameworks for Information Collection 39
5.2 Customer Insights 39
5.2.1 Differences between Deep Customer Insights, Customer Insights, and Market Data 39
5.2.2 Focus Groups 40
5.3 Perceptual Mapping 40
5.4 Customer Journey Mapping 41
5.5 Market Sizing 41
6 Conclusion 43
6.1 General Insights 43
6.2 Recommendations for the Group 44
6.2.1 Final Proposition 45
6.2.2 Perceptual Mapping 45
7 Future Work and Limitations 46
7.1 Academic research 46
7.2 Limitations of the Final Proposition 46
7.3 Future work for the Group 46
8 References 49
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1 Background
This thesis project is based on a case study on a corporate group widely successful in the European market for kitchens (referred to as “Group” and “Corporate Group” hereafter). The purpose, scope, and delimitations are discussed in this section.
1.1 The Group
The group consists of several different kitchen brands, 16 to be specific, where the strategy and product development of these brands are largely controlled by the central organization. The central organisation utilizes a stage-gate process, and collects opportunity submissions from the brands bringing them into the central product development. The opportunity submissions refer to proposals and new product ideas that are collected and proposed by the brands.
1.2 Purpose
The Thesis strives to investigate and identify challenges connected to collecting and utilizing market information and customer insights in a central stage-gate process within a corporate group. This investigation is done by comparing data collected in a case study within a corporate group (referred to as “Group” hereafter), with data collected in earlier studies collected from published literature. The purpose is to find existing challenges within the organization that are subject to the case study and find a well-defined way of combating these challenges rooted in previous research and studies. By analyzing and studying the root cause of problems, the thesis can hopefully provide a company with guidance to where they should focus their resources to combat these challenges.
1.3 Scope
The initially given scope from the Group was to investigate and identify challenges connected to collecting and utilizing customer insights in the group’s stage-gate process. The scope was deliberately left very broad, to allow the study to be adapted and changed to the challenges identified within the Group throughout the interviews. By combining the results found in the interviews with literature studies, the goal of the study was to:
1. Draw conclusions generally applicable to other companies, based on the investigated topics and any discovered gaps or discrepancies in the literature.
2. Formulate suggestions regarding which courses of actions should be taken by the Group to cope with the identified challenges.
Throughout the interviews, several challenges were identified, but only a selection of them was chosen to be a focus area of the study. It was found that a significant amount of information about the market and the company’s customers was lacking, incorrect, missing, or not utilized to its full potential. This, in turn, created problems in the NPD process, where it became difficult to validate the feasibility of many project proposals due to missing information, especially regarding the market size. The customer segmentation and market information were
2 perceived as especially important in the design stages of the Group’s stage-gate process for the design team to make well-informed decisions when developing new products. This challenge was chosen as the main topic of the study. The reasoning behind the decision was that the challenge in question was perceived to have negative consequences by the largest number of people and was the only challenge that had a direct financial impact. Incorrect, lacking, or missing information would directly affect the products brought to market in a negative way which would result in financial losses.
The thesis will focus on investigating the causes of why customer and market information is unreliable or missing within the Group. This could for example be due to the brands not having the opportunity or willingness to collect the information, or due to the communication with central product management being insufficient. As such, the research question for this report is as follows:
“How can the collection and utilization of customer insights and market information be managed within the product development process of a corporate group?”
1.4 Delimitations
Identified challenges within our picked scope included the use of different terminologies and formats of submission within the different brands, as well as the information being collected at different points in time, making it difficult to compile in a central process. These challenges were limited to specific brands and people and thereby excluded from the thesis due to the time limitation.
The study was performed within the central organization and has its main focus on the central process and product development. The study includes Brand representatives (Brand managers) but excludes research into individual brands as it was deemed to make the project scope too large.
Due to an ongoing global pandemic during the writing of and collection of information for the Thesis, the project group was limited to conduct the work online. Due to the pandemic meeting with the respondents face to face were deemed not feasible, this resulted in all interviews being conducted through the meeting platform “Microsoft teams”.The thesis includes a single case study and is therefore limited to the findings and challenges identified within that case. The case study includes only the central product development, within the corporate group there are smaller product development processes within some of the brands that are not covered in the study.
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2 Theoretical Framework
This section covers the theoretical framework for the project.
2.1 Stage-gate Process
The stage-gate process is a project management method that is mainly used in the area of product development. The stage gate process is utilized within the Groups central product development process and is therefore relevant to study to have a fundamental understanding of the model. What is described under the section “stage-gate process” is a typical/full stage-gate process/model and covers the full version of the stage-gate process (R. G. Cooper, 1990). This process is not used and implemented identically between companies, the process is changed to fit the company that implements it. There are several variations of the stage-gate process, for example, stage-gate light and stage-gate Xpress which are shorter versions of the stage-gate process. Even though companies change the process to fit their way of working, the same basic principles, based on a full stage-gate process are being used as seen in Figure 1.
Figure 1: Different versions of the Stage-gate process (Source: R. G. Cooper, 2014)
A typical stage-gate process, as the name implies, consists of several stages and gates that create a linear process. Each stage is followed by a gate, where the stages are different phases of work that need to be performed to move the project forward. Gates on the other hand are specific points in time during the project where a decision is made about the future of the project.
2.1.1 The Typical Stage-gate Model
Under this segment the typical stage-gate process and its different parts will be presented in detail, Figure 2 is a picture illustrating the different parts from the Discovery stage until Post- launch review.
4 Figure 2: The typical stage-gate model (Source: R. G. Cooper, 1990)
Stages
Depending on what type of project is conducted within the stage-gate process a variety of different activities can be conducted within the different stages. The stage-gate process aims to increase the speed from idea to market by allowing cross-functional work, which refers to people working with parallel activities within the same stage. The stages within the process follow the project life cycle that is described in detail in the book PMBOK-Fifth Edition (Project Management Institute, 2013) As through comparison with other sources and evaluation of its publication, was deemed reliable and included all the information that was considered valuable for the project.
Gates
During the process, the project needs to go through several gates, these gates are a kind of checkpoint where the progression of the project is decided. This section is made by a group of so-called “gatekeepers'', gatekeepers are a group of people that have a good understanding of the business they are acting within, the company's business strategy, and have the authority to make decisions. During each of the gates, three crucial points are discussed and considered before a decision is made.
The first element that is discussed within the gate is the project's input. Each gate should have a set goal of deliverables that should be fulfilled by the project before it can enter the gate in question. The usual way of deciding upon deliverables connected to each gate is either by having them set up from the beginning of the project, picked from an established list of prepared deliverables, or set in correlation with the previous gate. (R. G. Cooper, 1990)
The second point of discussion is the criteria, which is what different elements that the project in question will be evaluated from. The earlier described gatekeepers play a crucial part in the decision regarding what criteria will be suited for the project. Depending on the project and what gate is considered, the range of criteria can be relatively broad, it might include both qualitative and quantitative types of criteria. The different criteria will also be divided into
“must meet” and “should meet” criteria.
The third and final point the gatekeepers take into consideration when taking a project through a gate is the output. The output is the final decision within the gate, the output can contain detailed action plans or a list of deliverables that the project needs to fill before the next gate.
The most common decisions that the gatekeepers make are “GO” which means that the project has fulfilled everything within the gate and can proceed to the next, or “KILL” which means that the project is terminated. Sometimes the gatekeepers can also make decisions like “HOLD”
that puts the project on hold, or “RECYCLE” that makes the project redo the current stage (R.
G. Cooper, 1990) (Project Management Institute, 2013).
The Discovery Stage:
5 The discovery stage is where ideas are collected and brought into the stage-gate process. This can be done through many ways and models, the ideas are evaluated in stage 1.
Gate 1: Idea Evaluation
The first gate includes the initial evaluation of the discovered idea and a decision about whether the company in question will put resources towards this specific idea, to develop a new product.
The first decisions are often quite soft because of the high level of uncertainty this early in the process, and a harder evaluation will follow in the later stages of the process. The criteria that are used to evaluate a project this early in the process are often closely related to the alignment with the company strategy and how well it falls in with the core business. Other criteria that are often used within the evaluation are how feasible the idea is and what opportunities the idea creates for the company. If the gatekeepers decide to let the idea through the first gate it marks the starting point of a new project.
Stage 1: Project Foundation
The first stage of the process includes creating a foundation for the new project and conducting initial assessments so that a more well-informed decision can be made during gate 2 concerning whether or not the project should continue. During this stage two types of assessments should be conducted, an initial market assessment and an initial technical assessment. The market assessment will try to predict the future market potential of the product as well as its position, market acceptance, and market size. The technical assessment will try to answer questions concerning the manufacturing feasibility and estimated cost and time of production. (Project Management Institute, 2013)
Gate 2: Second Project Evaluation
The second gate has large similarities with the first gate but will take into consideration the information that has been collected within the first stage to make a beneficial decision for the company. Additional criteria might get added to this gate, depending on the information collected and decisions made during the first gate. During this gate, a new assessment regarding the financial feasibility is made and new deliverables are decided upon if the gatekeepers decide to let the project continue.
Stage 2: Creating a Business case
When the project moves into the second stage in the process it should be clearly defined. During this stage, several analyses are made. A market analysis is made into the customers and their needs, wants, and how the product will fulfil these for the customer. A full competitor analysis should also be conducted within the second stage and through concept testing, customer acceptance should be determined. One of the last crucial analyses that need to be made during this stage is a technical analysis, which will cover all the technical requirements that will go into the manufacturing of the product in question. Finally, a development plan and an operation analysis are put into motion in correlation with that the necessary investments are estimated.
The necessary investments will include changes to the current production but also in terms of legal and/or patent work. (Project Management Institute, 2013)
Gate 3: Start of Development
Gate three is the final gate before the project moves into its development phase, this makes the gate crucial for the company. The reason that gate three is so important for the company in question is because after this stage a considerable amount of resources will be put towards the project and can result in big financial losses if not evaluated properly. A thorough examination is conducted during this gate, all the previous information is taken into consideration. The
6 information that is used during the examination includes the information validity and ways of confirming it, thus eliminating as many uncertainties as possible. If the gatekeepers decide for the project to continue into development the decision must be accompanied by strategic decisions regarding potential choices. An example of these strategic decisions is what market segments are targeted.
Stage 3: Development
The third stage is where the development of the product takes place, detailed plans of the product are developed and the final financial analysis regarding the product is conducted. This stage also includes the authorization of legal aspects, which includes for example patents.
Gate 4: Go to Testing
During gate 4 the development of the product is evaluated and the gatekeepers ensure that the project fulfils the expectations on existing plans and quality. If needed any necessary changes are decided upon during this stage, both in regards to the development of the product and the financial analysis.
Stage 4: Testing and Validation
The main tasks that are conducted under the fourth stage are validation and testing. The validation aims to ensure that the product in question reaches a certain quality and meets the expectations of the customers which were defined during the earlier stages. During this stage, the financial analysis can be revisited if considered necessary and a detailed marketing plan should also be completed before moving into gate five.
Gate 5: Approval to Launch
The fifth gate is the final evaluation before the company launches the product. The previous results from validation and testing are evaluated and the quality of the information and how it was validated are approved before moving on. The final part before moving into launch is the evaluation and approval of the marketing plan and the operations plan.
Stage 5: Launch
The product in question is brought to the market and all the approved plans are put into motion .(Project Management Institute, 2013)
Post-launch Review:
The post-launch review is not only an evaluation of the product itself but also the entire process.
An internal evaluation will be conducted into the product development process to identify its different strengths and weaknesses, this information will then be used to improve the development process in the future. After the product launch, a review will be performed, financial, market force reliable and performance data will be gathered and compared to the analysis made during the development process (R. G. Cooper, 1990).
2.2 Customer Segmentation
In the following part of the report, several benefits of customer segmentation will be presented and then it will cover different ways of segmentation with a table covering the most commonly used factors when segmenting private consumers. Customer insights were identified as a framework that could greatly benefit the group´s design team as well as its product managers.
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2.2.1 Benefits of Customer Segmentation
Customer segmentation can be beneficial in many ways and one of the prominent benefits is that it can lead to the company developing a better relationship with their customers. By not only understanding the customer needs but also their habits and preferences the company can occupy a very strong position on the market. In addition, studying customers' social and financial status can help the company's active price optimization by acquiring an understanding of what customers are willing to pay. Price optimization, in turn, will provide the company with the maximum amount of profit without losing their key customers (Pande, 2020).
Improvements related to the distribution channels are also a benefit that comes with customer segmentation. By knowing the target customer and their numbers, the company can make well- informed decisions about directing the right distribution channels where they are the most beneficial (Gil-Saura, 2009).
2.2.2 Definition of Customer Segmentation
Customer segmentation is when customers are divided into different groups depending on their characteristics. There are many ways of doing this but the four most common ways of dividing the customers into segments are as follows:
(1) Geographic segmentation (2) Demographic segmentation (3) Behavioural segmentation (4) Psychographic segmentation
These four ways of segmentation will also differ depending on if the company is working with Business to customer (BTC) or business to business (BTB). Due to the project focusing on BTC, table 1 includes factors focused on private consumer segmentation and leaves out segmentation of businesses as a customer (Cooil, 2008).
8 Geographic
segmentation factors
Demographic segmentation factors
Behavioural
segmentation factors
Psychographic segmentation factors
Zip Code Age Purchasing habits Personality traits
City Gender spending habits Values
country Income user status Attitudes
Radius around a certain location
Location brand interactions Interests
climate Family situation Lifestyle
urban or rural Education Subconscious and
conscious beliefs
Motivations priorities
Table 1: Different ways of customer segmentation (Bruce Cooil, 2008).
2.3 Business Cases
The main goal of a business case is the formal start of a project, program, or portfolio. A business case is designed to get a sponsor to invest and back the idea to its launch through the presentation of different analyses that show that the idea in question will bring a greater value to the sponsor than what they initially would invest. Because there is such a large variation of sponsors, ideas, and ways of creating value, there is also a great variation in how a business case is written. Business cases are something that was utilized in the central product development process within the early stages of the stage-gate process. It was identified that information was missing from these business cases and it was therefore relevant to give context to this identified challenge. Below is first a description of the five elements that a typical business case contains and then an example of a business case framework that utilizes the five different elements (Association of project management, 2019).
(1) Strategic context. The strategic context is the basic motivation. providing a compelling case for why the change should occur.
(2) Economic analysis. What the return on the investment will be.
(3) Commercial approach. What will the commercial approach of the idea be?
9 (4) financial case. How affordable is the investment for the sponsor within the given
timeframe?
(5) Management approach. What is the management approach? What roles will be included, who will govern the project, the project lifecycle, and so on?
Business Case Framework
An example of a typical business case framework is presented under this segment (Herman, B.
2009) (Office of Government Commerce. 2009) (Project Management Institute. 2004).
Reasons
● What it is: the reason why the project in question was considered in the first place.
Description of what the project's context is, the problem/situation that was the factor that made the company consider undertaking the project.
● Why it is needed: What the context of the project is and its background.
● Source: What business is requesting or sponsoring the project.
● Why it might change: Is there a case where the original circumstances change or disappear, making the project no longer necessary or insufficient. Is there a scenario where a better option arises than what was considered?
Options
● What it is: What possible solutions are considered as a response to the challenges presented under the Reasons segment of the business case. What are the different strengths and weaknesses within the options and what are their anticipated results? To establish a baseline the option “do nothing”, the least that can be done in response to the challenges should always be included. Show what option/options were selected for the project and the basis of that selection.
● Why it is needed: Give an understanding of the different proposed solutions that were considered for the project, and also why the solutions that were selected were picked.
● Source: The company that requested the project in terms of strategy and goals.
● Why it might change: Elements of the picked solutions that might change over time.
Examples of this can be, change in cost, quality, or business environment.
Benefits and Downsides
● What it is: Benefits, in this case, are the expected value to be delivered by the project in question. The downsides are negative impacts that the project can have on the organization, and the project should actively strive towards minimizing them. This part of the business case should also include the following five parts:
(1) The level of benefits expected from the project.
(2) The timeframe within which the benefits are determined to be fulfilled.
(3) Any presented range of acceptability of a particular benefit within the company.
(4) How the project will plan and help assess whether benefits have been realized.
10 (5) The Expected benefits should be tied to organizational strategy.
● Why it is needed: What does the organization ultimately want to achieve by investing in this project? This section should not only include deliverables but the specific delivered value of those deliverables.
● Source: A description of the business proposing the project, strengthened by collected information.
● Why it might change: Factor that can impact the project by increase or decrease. The project can be affected by external circumstances or internal factors within the company that limit what the project can deliver.
Timeframe, Costs
● What it is: The time and costs to bring the project to market. This section should include cost figures that might have an impact on the project's success. It should also include the cost for operation and maintenance. This is done so a detailed plan can be made that shows the investors the financial benefits.
● Why it is needed: risks and other factors should be balanced against the expected benefits to determine if the project is worth starting or continuing.
● Source: The development and maintenance of the project's schedule and resources.
● why it might change: These presented figures will constantly change during the project. The presented figures should be revisited in case costs are out of line with the original expectations, it might lead to the fact that the project may no longer be viable.
Major Risks and Opportunities
● What it is: The major threats and opportunities that come with the project in question.
● Why it is needed: They could endanger or enhance the likelihood of the expected benefits being achieved. The weight of these risks, and the cost that might follow when mitigating them and the level of risk tolerance could render the project no longer viable.
● Source: Project manager, the sponsor, and the key stakeholders.
● Why it might change: Risks and the costs to mitigate them are constantly changing, and these changes in circumstance can cause a project to lose its viability.
2.4 Validating a Business case
An identified challenge was the validation of business cases and to provide a recommendation how this process can be improved upon a foundational understanding of how a validation is performed was needed. Many different areas can be studied when validating a business case.
First: Is the market big enough to make the investment worthwhile (Tronstad, 2008)? To answer this question, the firm needs tools to evaluate the market size of the ideas, which is discussed in the first section below. Another important part of validating a business case is answering the question “What is the perceived value of the product by the customer?” (Smith, Colgate, 2007) This is discussed in the second part of this section.
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2.4.1 Evaluate Market Size
The market size for a product or service refers to the number of consumers that are likely to want to purchase it, as well as the total revenue that this would generate (Mindtools A, 2018).
Establishing what the market size is before initiating a project has multiple advantages. One central benefit is that it helps companies in the decision-making for which projects are worth pursuing, and which are not (Tronstad, 2008). Another advantage is that it helps the company understand how large the project is, and thereby draw well-founded conclusions regarding the potential organizational changes that are needed and which personnel must be hired for marketing, production distribution, and other necessary project-related tasks (Melitz et al, 2008).
Top-down versus Bottom-up Approach
There are two methods for estimating the market size; the “top-down”-method and the “bottom- up”-method, respectively. Top-down is based on counting the number of potential customers (i.e customers using the product in question) and multiplying this with the average price a customer pays for that product (Watts et al 2014). However, this often leads to overly optimistic conclusions (Mindtools B, 2018), which is partly because it rarely is feasible for a single company to control an entire industry, due to the large amount of customer intimacy and marketing that is needed. Watts et al (2014) instead recommend that companies evaluate their market through a bottom-up approach. This means that the company makes its own market research, which can be done in many different ways, discussed in the sections below.
Regardless of how the bottom-up approach is made, the company will arrive at an estimate of how well the product will be received on the market. Even in this stage, however, companies can still benefit greatly by combining this with additional research such as a risk analysis (Barb, 2019).
Data Collection for Evaluating Market size
Another method for collecting data for market sizing is looking at what market share is held by the company’s competitors (Banbury et al 1995). This is especially effective if the competitors are working within the same product category as the company since there is then good reason to assume that the company itself will have a comparable market share (Banbury et al 1995).
Another option to collect data for market sizing is simply through online research. Valuable sources of information include, for instance, company or industry reports, or government whitepapers (British Business Bank, 2020). It can also be done through syndicated reports (Priority Metrics Group, 2015), which refers to studies that are performed and financed by a firm dedicated to market research, but without a specified client.
Another tool for collecting the data needed for market sizing is surveying customers (Berry, 2010). The survey can be used to measure how many of a random selection of citizens in a country use a certain product, perform a certain task with a certain frequency, belong to a
12 certain age group, income level, etc (Larsen et al, 2012). This can include both quantitative and qualitative data (Larsen et al, 2012), but according to Alchemer (2018), the latter is generally not suitable for market sizing. This is because quantifying numbers is very important for proper market sizing, and this is difficult to accomplish using qualitative data.
During the process of market sizing, it is not uncommon for managers to interpret the available data to support their own business case (British Business Bank, 2020). It is important to interpret the data honestly, and act according to what the data shows; Should the data suggest that there is less market interest than expected for the product or service that is developed, it is important to reconsider if that project is worth pursuing.
Traditional Market Research and Customer Insights
Another way of evaluating market size is through Traditional Market Research and Deep Customer Insights, which is discussed later in section “Deep customer insights”. There is often a gap between what customers value in their own words during an interview, compared to the factors they genuinely value during a purchase. As such, companies need to be conservative when evaluating market size through TRM methods; Otherwise, it is a high likelihood that the market size will be overestimated (Mindtools B, 2018).
2.4.2 Predicting Market Reception
Part of the validation process of a project is finding out the market’s interest in the particular product or service that is being developed. Some methods for this are discussed in this section.
Perceptual Mapping
One method, Called Perceptual Mapping, is used to visualize both how well an existing product has been received by the market, as well as how a product during development can be expected to (MindTools B, 2018). The purpose of this method is typically to help the firm understand if a new product or service idea should be pursued. In broad terms, this is achieved by ensuring that it has a clear, unique, and valuable offering, through investigating several parameters that motivate consumers to purchase the product (Gelici, 2013). The method consists of several steps. Initially, the company decides which parameters they would like to study. This could for instance refer to “attractive look” or “fun/easy to use”. These parameters are then ranked by customers on a scale, for example, -10 to 10, which is then plotted in a graph that is then analyzed (Tammo, 2012).
The graph is then analyzed, and there are multiple ways of doing this. One question that could be asked is “Does the product have a clear, attractive offer in comparison to its competitors?”.
If not, the firm should analyze how the product might be modified in terms of function, price, or quality - and if not - if the product is worth pursuing (Carter et al, 2008). Another aspect to consider is comparing the product with other products within the firm. If the products have a large overlap, this introduces the risk of product cannibalization.
13 With regards to the limitations of Perceptual mapping, (Steenkamp et al, 1994) argue that it is a problem that the framework only deals with two variables at once. It is usually not correct that only two major factors are decisive for the customer’s purchase of a product. To help deal with this, the firm can use multiple graphs, or even use graphs that enable multivariable analyses for three or more factors.
The Mom Test
The Mom Test was popularized by Rob Fitzpatrick (2013) in his book of the same name. While the model is primarily aimed at startups, it can be of great benefit to larger organizations as well, because it contributes to the validation process of an idea by conducting the interviews properly. The idea behind the principle is to remove the biases that arise due to social norms during interviews with potential users of a product. Since many interviewees will view it as impolite to reject the utility of a new product idea, they are likely to give encouraging answers even when the product isn’t very impressive (Chugh, 2019). This bias is mitigated by asking the right questions so that a product idea, in theory, could be validated even by responses by the developer’s mother, thereby the book’s name (Fitzpatrick, 2013).
There are different ways of approaching this. One tactic is based on not discussing products with the customers, but rather the problems they experience. When the problems are discussed, Fitzpatrick argues that it often is helpful to focus on specific events that the customers have experienced. For instance, instead of asking a customer “How often do you go to the gym?”, ask “How often have you gone to the gym during the past month?”. By asking questions this way, it helps to remove biases where the customer is tempted to give an answer that is more in line with how frequently or infrequently they aspire to do the activity they were asked about.
An additional tactic is to validate customer interest by seeing if they are willing to take any concrete action concerning the product, for instance by paying in advance or introducing the product to a specified amount of their peers (Chugh, 2019). While this can be difficult to accomplish, it constitutes much more substantial evidence compared to a customer simply responding verbally in an interview that a specific product is interesting.
2.5 Customer Insights and Traditional Market Research
Traditional Market Research (TMR) and Customer Insights are two different broad approaches to collecting customer data, both of which aim at improving the firm’s understanding of their customers. How this is achieved is, however, very different between the two methods (Price, et al, 2015). Customer insights and Traditional market research has close ties to the project scope and provide an understanding of challenges within these approaches.
2.5.1 Customer Insights
This section is divided into three parts; what customer insights are, what deep customer insights refer to, and how customer insights can be found.
14 Types of Customer Insights
It is important to not mistake market data for customer insights (Price, 2015). Market data is simply objective information about the customer and their behaviour, such as what the current socio-cultural trends are. In contrast, customer insights (also referred to as “consumer insights”) enable a deeper understanding of customer behaviour and why the customers make their choices (Zaltman, 2003). There are several types of usages of customer insights (Plangger, Watson, 2015), including but not limited to:
● Advertising: Understanding how to showcase and market the products to customers.
● Product Development: Understanding what products the customers want, in terms of challenges they currently face, as well as insights regarding market size (Greenberg, 2009). This allows the company to tell which products to focus on within NPD projects, based on their anticipated performance on the market.
● Sales: Understanding how the sales department should work to sell the products or services that the company delivers.
In this report, both Customer Insights and TRM are used for the two latter purposes. They are used in the context of helping the organization identify market size and customer segmentation (as discussed in sections 2.5.1 Evaluate market size and 2.3 Customer segmentation, respectively). This use is supported by Fiaidhi (2019), who states that a way to gain customer insights is through customer segmentation analyses since segmentation analyses help to answer central questions about customer behaviour.
Deep Customer Insights
Deep Customer Insights (DCI) methods aim to allow the firm to get a close and shared understanding of the needs of the customer; including subtle needs that may be difficult to articulate, as well as present and future needs (Bucolo, Matthews, 2011). Price, et al (2015) argue that rather than asking customers how and where customer decisions are made, the firm should ask why, which requires asking indirect questions that enable the firm to understand their values. All DCI methods yield qualitative results. Four examples of these are as follows:
(1) Persona design, i.e design that is created under a fictional character defined by characteristics such as their demographic, goals, interests as well as challenges they face.
(2) Storytelling, i.e asking customers about telling a story about their experience
(3) Customer Narratives, i.e focusing on creating a timeline of the various important points in the customer journey where the customer interacts with the firm to purchase a product or service.
(4) Scenarios, i.e studying a hypothetical scenario in the future to gain knowledge about risks and opportunities for future development.
The strengths of DCI include enabling the company to connect with its customers. For example in the case of storytelling, this can be done in two different ways. One way is by informing the company on the present needs of the customer, whereas the other focuses on inspiring the company’s design team for new product development (Beckman & Barry, 2009).
15 A challenge with DCI methods is that, unlike TMR, they do not provide quantitative data like numbers and equations, and instead provide more abstract descriptions like words and images (e.g trends). This rarely results in direct and clear conclusions about which products to develop.
In addition, the complexity of the data collected means that the analysis of the data becomes complicated, demanding time and expertise and therefore a bigger capital investment from the firm (Price et al, 2015).
Customer Journey Mapping
Customer Journey Mapping is a visual depiction of the sequence of events by which customers interact with a service or organization during the entire purchasing process (Rosenbaum, 2017).
The process lists all possible touchpoints where the customer interacts with the organization and attempts to understand the customer in-depth to foster the organization's innovative capabilities. CJM can be a very effective way of collecting customer insights (McKee, 2015).
The most important aspect of this method is trusted since a customer is not likely to share information about themselves unless they trust the firm in question, and believe they will get something in return. As such, building a long-term relationship will be important to make this method work. Once trust has been built, data is collected to map the customer journey. The goal is to in a simple but effective way identify the key touchpoints that motivate the customers to take the next step in the purchasing process (Rosenbaum, 2017). A selection of the various points in the customer journey is shown in Figure 3 below.
Figure 3 - An example of the customer journey map and its various stages (McKee, 2015).
There are many ways of finding the appropriate data to create the customer journey map. One is through web analytics, i.e collecting and analyzing data about the market and customer on the web. However, McKee (2015) warns that it is easy to make false assumptions through this method. For example, the fact that a user visits a web page does not necessarily mean that they are interested in the corresponding feature or service. To cope with this Waisberg (2009) argues that all data that the company spends any considerable time collecting and analyzing, should be connected with at least one Key Performance Indicator (KPI) that shows whether the company is getting closer to its objectives or not. For example, if measuring the marketing cost per visitor to a website, it can have two related actions; one for a decline in this number, and one for an increase.
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2.5.2 Traditional Market Research (TMR)
Traditional Market Research (TMR) refers to research methods for collecting information about customers’ interests and needs, including methods such as interviews, focus groups, and surveys. This can be done in multiple different ways, including in-person, over the phone, or through the internet. In the case of Focus groups, the session is usually done in person, where an interviewer interviews six to eight participants in a semi-structured discussion and focuses on a topic selected in advance (Price, et al, 2015). Traditional Market research results in quantitative data that answers basic questions about a customer or product, such as customer preferences on where they buy products, how often they do this, and which products they buy (Harrison, et al. 2011).
TMR methods are effective in situations where the firm’s customers, as well as the competitive environment, do not experience fast change. In situations like these, the company can receive valuable and actionable information, such as which products are in the highest demand, as well as identifying which pricing, packaging, and product description will be best for the market (Sen, 2009).
Regarding the weaknesses of TMR, the weaknesses depend on which method is utilized. In the case of surveys and questionnaires, these methods can easily lead to skewed results, since the customer is limited to answer a set of predetermined questions, which do not allow the customer to speak their mind (Witell et al. 2011). Focus groups are an attempt to deal with this, allowing an open discussion where the participants are allowed to speak for an average of 10-12 minutes each (Rubin, 2011). While this can give more substantive answers than surveys, Langford and McDonagh (2003) argue that it is insufficient for a deeper discussion, as the participants often are discussing with strangers for whom they lack the necessary trust to share personal thoughts and feelings. In addition, the data collected through this method can be difficult to analyze due to the social influences present during the discussion (Sen, 2009).
Especially within larger organizations, companies may outsource their market research to other companies. This has the advantage of potentially improving the quality of the market research due to enlisting a professional and experienced market research firm. However, the costs of analyzing the data are usually quite high (Griffen and Hauser, 1993).
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3 Method
This section describes the method used throughout this study.
3.1 Qualitative Study
The study of this project was explorative, starting out with a broad scope that is over the early stages narrowed down based on the initial findings. The project had two primary goals. The first was to discover areas of improvement for the Group within the given scope and propose solutions that could be implemented to deal with those challenges. The second goal was to use the case study to draw conclusions about project management and product development that were generally applicable to other organizations than the one studied during this report.
Because the authors had limited prior knowledge about the Group, the project started with interviewing several relevant employees at the organization. According to Strauss et al (2008), Qualitative research is suitable either when investigating a new field of study, or when theorizing to gain deep insights into an existing field. Of course, customer insights and the validation of New Product Development projects are topics widely studied in academia.
However, it is still clearly a prominent challenge for companies as evident by the company analyzed in this case study. As such, it is interesting to study these topics deeper.
3.2 Literature Review
Continuously throughout the process of conducting the interviews, the project group conducted a literal study. The literature that was studied related both to the topics that were brought up by the respondents, as well as topics relating to the project group’s proposal of solutions. A literature review needs to draw on and evaluate multiple different types of sources, including academic and professional journal articles, books and web-based resources (Rowley, 2004).
Because of this, and the fact that academic peer-reviewed articles have not been sufficiently specific and applicable to the company of the present study, the study uses references from multiple books and websites in addition to academic literature. As this introduces the risk of compromising the validity of the references, extra effort has been taken into examining the sources that do not originate from peer-reviewed articles. By combining multiple types of sources, the aim is to deliver a result that is as beneficial and applicable to the Group as possible. By doing this, as well as answering the research question described under the scope section, we hope to simultaneously deliver a valuable contribution to academic literature (within the chosen scope).
3.3 The Interviews
Throughout the project, a total of twelve semi-structured interviews were conducted, about half of which in English and half in Swedish. Each interview was prepared with a unique interview guide, since each employee had a unique role, and because the scope was gradually narrowed
18 down throughout the project. Even though each interview was unique, all interviews were connected due to each interview being made partially based on answers from previous interviews. As stated, to prevent biased answers and leading questions, open-ended questions were used, allowing the respondents to express themselves freely.
The twelve interviews were made with employees working within or in close relation to the central organization, including two Product Managers, two Brand Managers, one Design, two R&D managers, two employees within Digital as well as an Insight Manager. A more detailed description of the interviews and respondents can be seen in Table 2. This gave the project group a comprehensive and nuanced picture of how the Group is working, as well as which challenges they face. In addition to the interviews, the project group held weekly meetings with the projects’ supervisor, who worked in the design department. Because the supervisor had good knowledge of the organization, this was an effective complement to the interviews, as the supervisor could clear up potential questions or uncertainties that arose after certain interviews.
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Interview no.
ID and Role
Interview Time(Minutes)
Phase 1
1 Insight Manager - Works with managing customer insights on a group-level.
55
2 Design Manager - Works with the early stages of the product development process with setting directions and visual goals.
45
3 R&D Manager - Works with the late stages of the product development process; finalizing designs and manufacturing.
45
4 Product Management Director - Works with approving the projects that are initiated within the group.
30
5 Digital Manager - Responsible for digital transformation on a group-level.
50
6 Digital Employee - Part of the digital experience team, designing websites and collecting data from the web.
40
Phase 2
7 Brand Manager 1 - Responsible for strategy development and product portfolio in one of the regions in which The Group is active in
35
8 Brand Manager 2 - Same responsibilities as Brand Manager 1, but in a different region.
50
9 Product Manager 1 - Responsible for approving opportunity submissions in one of the group’s product categories, and ensuring that the submissions align with The Group’s strategy.
50
10 Product Manager 2 - Same responsibilities as Product Manager 1, but in a different product category.
50
Phase 3
11 Insight Manager - [Role already described] 45
12 Product Manager 1 - [Role already described] 30
Table 2 - An overview of the respondents who participated in the project.
3.4 The Three Phases
The project was divided into three phases. The first phase consisted of six interviews, with the purpose of gradually setting and narrowing down the scope of the project, which was built around the broad question initially given by the Group: “How can the Group work to better capture customer insights in their stage-gate process?”. As such, the interviews involved asking
20 the respondents about the areas of improvement each employee saw within this topic. This phase includes interviews with 1 Product Manager, 1 R&D Manager, 1 Design Manager, 2 employees within Digital, and 1 Insight Manager. Examples of central questions that were asked during the interviews of this stage include: What types of customer insights are collected and used in The Group today? Where in the stage-gate process are they used? How are they collected (through central organization, the brands, and through the digital department, respectively)? Within this work, what areas of improvement do you see?
The second phase consisted of four interviews, where the scope of the study had been set. In brief terms, the scope was about investigating what information The Group was missing related to validating the feasibility of new opportunity submissions. This phase includes responses from two product managers and two brand managers. Examples of central questions that were asked during the interviews of this stage include: What challenges do you see when it comes to the collection and communication of market data and customer insights from the brands? What information that is needed by the central organisation is missing from the brands? What are the challenges of collecting this information?
At the end of phase 2, the project team compiled all the identified challenges on the relevant topic and through literature studies provided the first proposition of possible solutions. These propositions in connection with the identified challenges were then presented to two company representatives. After the presentation had occurred the project team together with the company representatives moved into an evaluation stage. During the evaluation stage, the proposed solutions were discussed and decisions were made regarding how the project would move forward, this is discussed further in the section “phase 2, proposed solutions” under the chapter Results.
After the focus areas were decided for the continuous project work, the project team conducted two more interviews with two employees who had been previously interviewed; one interview with a Brand Manager, and one with the Insight Manager. The literature review was used to develop proposals of solutions, which were then presented and discussed during the interviews.
Finally, the interviews combined with the full literature review was used to arrive at the project’s final conclusions. This is referred to as phase 3. For an overview of the three phases, see Figure 4.
21 Figure 4 - The focus of the interviews and the literature review
during the three different stages of the project.
3.5 Reliability and Validity
A study’s validity refers to how accurately it represents true findings among similar external studies. One way to increase the validity of the study is to include multiple sources of evidence (Flyvbjerg, 2010). This is one of the reasons why the study is a combination of a qualitative case study, as well as a literature review. In addition, the validity of the study is supported by the fact that throughout the study, the conclusions in the report were presented to the various respondents included in the study. Most of the respondents were experts in their own field, and could thereby contribute with constructive feedback regarding the validity of each conclusion.
The reliability in a study refers to the existence of biases and errors within it. One factor that determines the reliability is how the interviews are done, i.e if the study is structured, semi- structured, or even unstructured. Gillespie et al (2008) conclude that while semi-structured interviews risk providing biased results due to being less objective than structured interviews, they allow for open responses and let the respondent respond in their own words, as opposed to binary “yes or no''-types of answers. This makes qualitative research, as agreed by Strauss (2008) suitable for the present study. Due to the risk of semi-structured interviews leading to biased results (Gillespie et al, 2008), the project group opted to ask mainly open-ended questions that the respondents could elaborate on. In addition, much effort was put in when creating the interview guide to avoid including leading questions.Another factor determining the reliability of the study is how the interviews are analyzed. In order to minimize the potential biases of interpretation from the interviews, all interviews were recorded, transcribed and subsequently analyzed carefully to not miss any important details.
