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THE sTRATEgiC imPoRTAnCE oF PRoduCT And sERviCE dEvEloPmEnT 277

The strategic importance of product and service development

Figure 8.5 illustrates some of the more significant reasons why product and service
development is seen as increasingly strategically important. From a market perspective,
international competition has become increasingly intense. In many markets there are
a number of competitors bunched together in terms of their product and service per-
formance. Even small advantages in product and service specifications can have a sig-
nificant impact on competitiveness. This has made customers both more sophisticated
in exercising their choice and often more demanding in terms of wanting products
and services that fit their specific needs. Also, markets are becoming more fragmented.
Unless companies choose to follow relatively narrow niche markets, they are faced with
developing products and services capable of being adapted in different ways to different
markets. If this were not enough, product and service life cycles have become shorter.
An obvious way to try to gain advantage over competitors is to introduce updated prod-
ucts and services. Competitors respond by doing the same and the situation escalates.
While not every industry has such short life cycles as, say, the entertainment or fashion
garment industry, the trend, even in industrial markets, is towards more frequent new
product and service introductions.
A different, but equally important, set of pressures affect the operations resources that
have to develop and deliver new products and services. Perhaps most importantly, rapid
technology changes have affected most industries. For example, internet-based tech-
nologies have introduced startlingly new possibilities (and uncertainties) for almost
all products and services in all industries. Partly because of the scale and pace of such
technological developments, it has become increasingly obvious that effective product
and service development places responsibilities on every part of the business. Market-
ing, purchasing, accounting and, operations are all, like it or not, an integral part of
any organisation’s ability to develop products and services effectively and efficiently.
Every part of the business is now faced with the question, ‘How can we deploy our com-
petencies and skills towards developing better or different products and services?’ New

Figure 8.5 The increasing strategic importance of product and service development

Rapid Increased
technology
Means of change competitiveness Shortened
building
capabilities life cycles

Product and
OPERATIONS service MARKET
RESOURCES development REQUIREMENTS

Involves all Fragmented
parts of the markets
business

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