Physical vs. Digital Products -- Physical products are those that can be touched, felt, have physical presence, must be produced, warehoused, packaged, shipped and purchased. However, physical products are most certainly not limited to brick and mortar stores. The Internet has opened up an entirely new world for commerce online -- in both physical and virtual worlds with e-Commerce. E-Commerce is the buying and selling of products and services over electronic means, usually the Internet. As Internet usage grows, so does trade conducted electronically, allowing for a number of improvements and innovations that follow suit. Most economists see e-commerce as a market segment that leads to intensive price competition and consumers armed with greater knowledge. In two particular industries, e-commerce has actually changed the way the market works on those industries, causing the brick and mortar versions to fade away. In fact, larger e-commerce firms like Amazon.com, use economies of scale to drop prices, increase variety, and capture the market (The Click and the Dead, 2010).
Physical products offer numerous advantages to online businesses; detailed pictures and descriptions allowing potential buyers to browse and buy, and the idea that without a brick and mortar overhead, the physical product can be sold and shipped at a lower cost. Physical products do have disadvantages, too, though. Shipping can be formidable -- expensive and problematic. They can be perishable, requiring certain types of storage (freezing, etc.) and incur inventory management costs. They may break in delivery, and replacing parts is never cost effective. Digital products, however, have no large storage requirements, no physical dimension, and require only hardware storage. Even if they are now packaged in a box and are on disk, the costs are far lower, easier to deliver. Digital download allows more client convenience, and with a product guarantee, a safety net for the consumer and fewer barriers to entry for the company (Physical Product vs. Digital Product, 2010).
New Product Development and Digital Products- For modern consumer companies to remain successful, then, the New Product Development process must be robust, ongoing, and systematized; indeed, there must be a strategic commitment to the overall long-range process from senior management for the process to remain viable (Anderson, 2008, 553). Innovation is often the key to strategy, when combined with the right marketing mix. Of late, though, the industry has been policing itself and concerns have arisen regarding the number of new products flooding the market each year, and whether those products are positives or actual deterrents to the industry. Simply placing a new label on a product and announcing that it is more effective than ever in "treating X" may constitute a brand extension, but it is, over time, problematical for long-term efficacy and customer loyalty (Lehman, 2006, 8).
It is information technology and the speed at which breakthroughs from ideas to market take place that constitute one of the major differences in new product development for digital products. The products can be tested easier, require less staff, and certainly less of a dollar commitment prior to roll-out. The typical NPD process required a rather resource heavy command and control process, while digital products are now launched in alpha and beta forms that get quicker feedback from customers, allow for that feedback to go to programming, and patches, bug fixes, and new editions launched. This is clearly advantageous for the company, and can reduce research and development costs dramatically. It can also be advantageous for a certain demographic/psychographic of the population -- the 2.5% innovators and the 13.5% early adopters, or, about 16% of the total market. However, it is disadvantageous in that alpha and beta versions may crash, underperform, generate bad publicity, and become so annoying that the public sees them in a negative light. For digital products, word of mouth marketing is powerful, and a too quick or too problematic launch can taint the product forever ( Ramaswamy, 2006)
New Product Development Process -- There are really five major phases of a digital product development cycle. There are also those companies that skip certain stages of a physical product development cycle by using digital tools for R&D and even models of consumer behavior. However, in general, the phases for NPD are:
Conception -- products need ideation and the definition of the requirement needed for the product, the company, the consumer, regulatory issues, etc. This is the concept stage, the stage in which the questions asked are: what do we need? Who wants this? What needs to they have? Will they pay to have these needs realized? Do we have a product that needs updated to meet these needs?
Design -- the real power of the digital work is that the design of a new product is rapid, streamlined, and cost-effective. Much of this depends on computing power and programming expertise, but can often be completed up to 80% faster than many physical products. This is often, however, the stage that digital products are launched, since many programmers use the early percentages of users as paid test marketing.
Realization -- Typically, though, the realization stage would allow for selling, delivering, and marketing awareness strategies. This is usually the place in which a heavily tested software application is released, or rereleased.
Service -- Because the digital process often circumvents the middle range of the cycle, service is often exaggerated during the beginning stages when more "bugs" are found. This has increasingly become the bone-yard for many new products, because their effective life cycle is so short that by the time any of these topics could be implemented, the product will be passe.
Revamp, review, and renew -- Fortunately, the rapidity we have seen in the marketplace may often spin off into the real world. Certainly the speed at which a new software application is launched, alpha and beta tests, revamped and sent out, has increased to the point that in some cases, the product is somewhat obsolete and outdated before any fully tested version can be produced, causing a loop in which another new product comes to market prior to being tested (Tersko, 2004).
Sustainable Competitive Advantage with NPD -- Digital NPD clearly gets the product to market quicker, establishes a greater user base, and hopefully uses innovation to exploit the needs of the marketplace. This advantage can get the needed product to the end-user prior to other company incursions, and may even capture the market prior to prelaunch or other versions. Innovation and competitive advantage are both complex and multidimensional though. NPD also depends on whether one is imitating or actually providing something very new and different. There is also a disconnect when marketing version of the new product fails to match the actual physical version (Lengnick-Hall, C., 1992).
Microsoft's Vista -- Debacle? Lessons?- Microsoft has been a key leader in the marketplace for systems using the Personal Computer for decades. As computing power became more robust, and as end-users demanded more and more, Microsoft moved its operating system (OS). This new innovation was called Vista, and promised lighting fast internet speeds and competitive advantages in multitasking, video environments, programming, and heightened security. While many of these innovations were realized; the too early research of Vista resulted in numerous crashes, a memory hogging OS, and one that was not as safe as expected and very prone to outside attacks. The product was slower than its predecessor (XP), even though it promised to be faster, and because of such an early launch, cased a conundrum with XP products not working on the Vista operating system. Microsoft, however, tried to create buzz and hype even though the product was really not working yet, and third-party developers were still having difficulty ensuring compatibility (Fried, 2006). Lessons that Microsoft, and other firms, should learn from the Vista issue is to test before making claims, to be ready to launch when stated, and to follow the appropriate rubrics needed by the company's millions of consumers (not a memory hog, ease of use, easy to clean and maintain, etc.) The constant release of Service Packs combined with what was seen as overly draconian padlock technologies caused a number of crashes and cynicism in the marketplace. Fortunately, Windows 7 was released in October of 2009, less than three years after Vista. Windows 7 focused on incremental upgrades, fewer crashes and a more intuitive environment from which to work (Nash, 2008). So unloved was Vista that Microsoft quickened its past to launch Windows 7, some experts noting:
Customer will not be disappointed. Windows 7 is all its unlamented predecessor, Window's Windows Vista, should have been. It does not hog resources anything like as much as Vista did, making it a far sprightlier performer. It will even run on diminutive netbooks that currently have to use leaner Linux or Windows XP operating systems because of Vista's girth and weight.
Finally, PC users can enjoy much the same kind of performance and services that owners of Macintosh and Linux computers have long taken for granted (Microsoft's Seventh Seal, 2009).…