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the right people, resources, and skills in place takes both lead time and a direction, hence the need for the definition of arenas.

Where's the Evidence?

The argument for a PIC, although logical, appears somewhat academic. One can't help but think about all those companies that have succeeded without a grand strategy for product innovation. Then where's the evidence in support of a PIC? There isn't much, unfortunately. One reason is that not too many studies have investigated the role and impact of an innovation strategy. Most of the business research into product innovation has focused on the individual product project as the unit of analysis—for example, on what makes a new product a success—rather than on the company's entire new product program.

The studies that have looked at firms' new product strategies have a clear and consistent message: new product strategies at the firm level are critical to success, and some strategies clearly work better than others.

? Booz-Allen and Hamilton's study of new product practices in corporations found that \companies are more committed to growth through new products developed internally\that includes a certain portion of growth from new products.\The authors of this study go on to explain why having a new product strategy was tied to success:

A new product strategy links the new product process to company objectives, and provides focus for idea/concept generation and for establishing appropriate screening criteria. The outcome of this strategy analysis is a set of strategic roles, used not to generate specific new product ideas, but to help identify markets for which new products will be developed. These market opportunities provide the set of product and market requirements from which new product ideas are generated. In addition, strategic roles provide guidelines for new product performance measurement criteria. Performance thresholds tied to strategic roles provide a more precise means of screening new product ideas.

? The PIMS studies (profit impact of market strategy) considered new product strategies, but in only a peripheral way. These studies looked at why certain business units were more profitable than others, and attempted to link profitability to the market strategy elected. R&D spending and product quality level were two of many strategy variables considered in these studies, and both were found to be closely connected to profitability (although detractors of the studies argue about direction of causality).

? Nystrom and Edvardsson studied a number of industrial product firms, and identified how various new product strategies were tied to performance. Strategies emphasizing synergistic use of technology, a responsive R&D organization, and an externally oriented R&D effort were generally more successful. The study was limited to only a handful of strategy dimensions, and R&D strategy may be different from new product strategy. Nonetheless, the message comes through that new product strategy and performance are closely linked.

? Our own studies looked at the performance impact of product innovation strategies in 120 firm. This study is one of the few investigations undertaken to date

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that considers a large number of strategy dimensions, and how strategy was tied to performance in a large number of firms. The overriding conclusion was that product innovation strategy and performance were strongly linked. The types of markets, products, and technologies that firms elected, and the orientation and direction of their product innovation programs had a pronounced impact on the program's success and profitability. Strategy really does count!

Evidence for Selecting the Right Arenas

Our investigation provided much more than a strong hint that strategy pays off. The study also yielded insights into the ingredients of a successful innovation strategy: the types of objectives that are reasonable and measurable; and criteria useful in the selection of arenas—the kinds of products, markets, and technologies that successful firms elect. Here are some of the more important conclusions, which we use later in the article in the selection of arenas:

? A number of strategy factors were found to impact on the new product performance of a companies. These factors fit into one of two categories: either they described the type of new product arenas the firm had chosen; or they captured the basis of how the firm would compete.

? Factors that captured the basis of competition portrayed the orientation and commitment to the new product program. They included factors such as technological aggressiveness and sophistication, market orientation, program focus, R&D spending, and the like—useful guides to how a new product program should be oriented and managed.

? Factors that described the choice of arenas constituted the second category of factors that impacted upon program performance. These could be further subcategorized into factors that portrayed:

1) The attractiveness of the arena (for example, market need, growth and size, technological possibilities in the arena, etc.);

2) The strength or ability of the firm to exploit the arena (for example, the fit or synergy between the firm's resources and the new product arena).

? In subsequent analysis, we were able to put weights on these different factors—how important is each factor in the \equation.\factors and their weights are shown in Table I. We use Table I to provide the key criteria and weights for the selection of the right arenas. The reader is cautioned, however, that these weights are derived from one study only, and serve as a guide or starting point to arena selection.

DEVELOPING AN INNOVATION CHARTER

Few can deny the utility of having a product innovation charter to guide the firm's new product efforts. But how does one go about developing such a charter? The remainder of the article tackles the difficult task of molding the PIC. A number of familiar concepts—business definition schemes and portfolio strategy models—form the basis of this development. But these models have been integrated and modified in a novel apply to new product opportunities, rather than for businesses; further, we have incorporated from our research to help quantify the select of a new product arenas.

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