Identification of key success factors of functional dairy foods product developmentMikaela Bistro m and Katrina Nordstro m*Laboratory of Biochemistry and Microbiology,Department of Chemical Technology,Helsinki University of Technology,PO Box 6100,FIN-02015HUT,Finland (tel.:+358-9-451-2549;fax:+358-9-462-373.;e-mails:mikaela.bistrom@hut.fi;katrina.nordstrom@hut.fi)The present study elucidates key success factors influencing the product development of functional dairy foods and examines if the studied products can be categorized as potential breakthrough products primarily in a domestic market.General conclusions are also made with reference to functional foods development in the international set-ting.Three functional dairy foods were studied with specific emphasis on the key success factors influencing length and timing of individual product development phases on the total length of product development.Key factors which were identified as being the most critical were (1)the spe-cificity and action mechanism of the added health benefit of the final product,(2)the range of new product or process alternatives,(3)the selection of the consumer target group and,(4)legal and marketing issues.#2002Elsevier Science Ltd.All rights reserved.Keywords:Functional foods;Food product development;Development process;Breakthrough product;Key factors;Dairy industryIntroductionThe development of functional foods is currently one of the most intensive areas of food product development worldwide.The global functional food markets are roughly estimated to be between $10billion and $40billion with an annual increase of about 8%(Anony-mous,1998;Challener,2000).Interest in functional foods has been prompted by a rapid expansion of sci-entific knowledge of the importance of a healthy diet,technical advances in the food industry,increased con-sumer demands for health promoting food products as well as predictions for an aging population and increas-ing health care costs (Challener,2000;Hasler,1996;Mirasol,1999).Functional foods have been defined as foods that provide an additional physiological benefit that may prevent disease or promote health and well-being (Hasler,1996;Stauffer,1999).Functionality may be an inherent quality of the food raw material or a feature introduced by innovative new processing tech-nologies or by the addition of health promoting food ingredients or probiotic micro-organisms to the food matrix.The food industry is currently striving to offer such functional new products to the rapidly growing markets.This poses major challenges for product development where the ability to recognize key factors of a breakthrough product becomes essential.Breakthroughs have been defined in many industries as products,which provide a company with greater profits and a longer-lasting competitive advantage in the marketplace in comparison to minor product developments or line extensions (Samli &Weber,2000;Utterback,1994).Afundamental characteristic of break-through products is their ability to meet consumer needs,providing added value and benefit for the con-sumer.In addition,breakthroughs have been defined as products,which may expand or redefine a product category being distinct from existing portfolios.Inter-estingly,although such products may offer specific advantages over existing products both for the con-sumer as well as for the developer,consumer acceptance of such products is often slower than would be expected (Samli &Weber,2000;Utterback,1994).Thus life-cycles of breakthrough products are typically longer than those of line extensions.Consequently,the devel-opment of a breakthrough requires an intricate combi-nation of technological expertise and an awareness of0924-2244/02/$-see front matter #2002Elsevier Science Ltd.All rights reserved.PII:S0924-2244(02)00187-5Trends in Food Science &Technology 13(2002)372–379Viewpoint*Corresponding author.the not so obvious market needs.It may thus be sug-gested that also the current technology push for func-tional food development must optimally target the market pull for such breakthrough products.The present study elucidates key success factors influ-encing the completion and time frames of selected examples of functional food product development in the Finnish dairy industry primarily during1990–2000. Arguments are presented as to certain key success fac-tors related to the functionality of the product concept. These factors are interpreted as influencing the speed and success of product development of functional dairy foods.Results are presented primarily from a domestic point of view.Study design and methodologyThe product development processes of the three functional dairy food products,Gefilus,Evolus and the lactose-free milk(LFM)of Valio Ltd.,Finland,were studied.The aim was to conduct a comparative content analysis,i.e.a cross case analysis,of key success factors of the innovation activities and the development pro-cesses of functional dairy foods.The theme interview methodology of Hirsja rvi(1988) was used with minor modifications.This is a semi-structured interview method,consisting of selected, well-defined themes.Questions are not detailed nor are the questions ranked,i.e.the interviewee is not directed by specific questions but will be allowed to express opi-nions and viewpoints with reference to the themes.The answers will therefore be more personal,objective and intuitive.Three themes were used:(1)the product idea and product concept,(2)product research and develop-ment,and(3)marketing and regulatory affairs.The study was conducted and research data collected by interviewing company experts at Valio Ltd.These were individuals from the research and development division of the organization closely involved with pro-duct development of these three products during1985–2001.All interviewees had a comprehensive knowledge of the product concept itself,the progression of the development process,and other organizational issues inherent to the development of the products.As only few individuals had such knowledge spanning over at least10years,only two company experts were inter-viewed for each case by using the theme interview.On the other hand,by asking exactly the same questions, the reliability of the data could be tested.Additional data was gathered from company publications and other relevant literature.Gefilus,Evolus and LFM represent recent trends in the functional dairy foods market in Finland.The functionality is incorporated into Gefilus products by using a Lactobacillus GG strain and the functionality of the strain refers to the probiotic effects of the organism (Saxelin,1999).The Evolus products,on the other hand,contain bioactive peptides,which are reported to reduce high blood pressure(Korpela&Seppo,2000; Nurminen&Sipola,2000).Astrain of Lactobacillus helveticus produces these functional short peptides by enzymatic cleavage of milk protein.The third example, the LFM,is based on a new chromatographic method for removal of lactose,which does not affect the natural taste of milk.This pleasant,unaltered taste of the milk undoubtedly adds a very important organoleptic quality to the milk.However,as this study will focus specifically on product functionality,i.e.the health benefit,the added value of the taste of the product will not be dis-cussed further.LFM is targeted for individuals suffering from lactose intolerance who are unable to consume traditional or even low lactose milk products.Thus the health promoting functional benefit is linked to the prevention of symptoms or a disorder.The study consists of three sections.In thefirst sec-tion,the product development processes of Gefilus, Evolus and LFM are described and divided into specific phases.The structures of the separate phases and the duration of each phase are analysed,and based on these analyses a set of key success factors for product devel-opment of these functional dairy foods are formulated. In the second section,the impact of the most important and critical key success factors on the timeframes and outcomes of the three development processes are exam-ined with reference to the functional product concept as whole.Finally,in the third section,the definition and identification of a breakthrough product concept among functional dairy foods is discussed.In the present com-munication,the main focus will be on the functional feature of the product concept and less attention will be paid to critical success factors as defined in the business and management literature(Cooper,1994;Cooper& Kleinschmidt,1996;Gupta&Souder,1998;Lester, 1998;Meyer&Purser,1993;Slade,1992).Without underrating the importance of issues such as develop-ment tools,organizational and complementary assets,it was imperative that the scope of the study would remain well focused.Some limitationsThere are certain built-in limitations to the present study,which should be noted.First,the scope of the study is somewhat narrow,and more detailedfigures on sales,market volumes,etc.may have brought further insight into the results of the study.However,as Evolus and LFM were just about launched at the time of the study,no suchfigures were available for publication. Second,the Finnish dairy foods industry enjoyed a relatively protected market situation up to1995,when Finland became a member of the EU.This undoubtedly led to changes in the industry infrastructure and also reflected on organizational changes within the company itself.Such changes have undoubtedly influenced theM.Bistro¨m and K.Nordstro¨m/Trends in Food Science&Technology13(2002)372–379373development of the three products studied.Third,con-sumer awareness of the health benefits offered by func-tional food products has certainly increased from the early1990s,which has created an increasingly favour-able market for these products.In view of these limita-tions,and perhaps some not identified above,all conclusions will be made within the scope,aims and methodology of the present study.Structure of product development processesThe literature on new product development is vast and many approaches have been made to divide product development into specific phases(Cooper,1990;Cohen, Kamienski,&Espino1998).In the present study afive phase system was chosen to facilitate the analyses of the different activities within the functional dairy food development processes.Accordingly,we defined the product development processes of Gefilus,Evolus and LFM as consisting of following separate phases:(1)idea generation,(2)basic research,(3)development of the final product concept,(4)clinical testing of thefinal product and(5)marketing activities and product launch (Fig.1).It is to be noted that the basic research phase of Gefilus and Evolus refers to the research on the phy-siology of lactic acid bacteria and the selection of sui-table raw materials,k,fruitjuice,etc.However, for the LFM this phase refers to development of the methodology used for lactose removal.Furthermore, development of thefinal product concept phase refers to formulating thefinal product concept in research laboratories and/orfinalizing the large-scale processing of the product.An examination of the structures of the product development processes shows that the Evolus-project was executed within the shortest time frame and the Evolus product development process was distinct from those of the Gefilus-and LFM-projects(Fig.1).The cross-functional activities in the Evolus-project is seen as an overlapping of each phase which evidently spee-ded time to market.The duration of the research and development phases in the Evolus-project was clearly shorter than in the two other projects.On the other hand,although the testing phase of Evolus was equiva-lent to that of Gefilus,the early timing of the testing phase in the Evolus-project is distinct.Most notably, the efforts put into marketing and testing from the very start of the Evolus-project resulted in a shortening of the total amount of time spent on this project.Thus Evolus exemplifies a product concept in which the idea has met marketing at an early stage.Hence,it can be concluded that the structure of the Evolus development process as a whole is in accordance with Takeuchi and Nonaka’s(1986)rugby type approach to R&D.The compact and overlapping pattern of product development phases discussed earlier for Evolus was, however,not as evident in the development processes of the other two products.The marketing phase of Gefilus and LFM were relatively short run events in the total share of the development cycles,whereas the duration of the basic research phases were substantially pro-longed when compared to that of Evolus.The Gefilus project did show some overlapping of individual phases (Fig.1),but there were problems with reference to prompt implementation of the phases and to the dura-tion of individual phases.Consequently,the Gefilus project suffered from a late participation by marketing. Although,not evident from Fig.1,it was difficult for the company to allocate sufficient attention to the mar-keting of Gefilus.In1990,there was no previous experience on marketing strategies of functional dairy foods in Finland,or even abroad.In addition,as can be seen in Fig.1,the research and development phases were rather lengthy and reflects the hurdles faced by R&D with novel product concepts.The ladder-like pat-tern of Gefilus(Fig.1)also indicates that each step was initiated and taken in turn.Thus each phase became an isolated procedure or an individual project not con-nected to the process development as a whole.Similarly in the case of LFM,there was only modest overlap between thefive product development phases.It is evi-dent that each individual phase of the LFM-project resembled that of Gefilus in representing in fact a sepa-rate research project.These separate projects spanned also vertically across product development rather than becoming integrated into eachother and progressing as a continuous process.Functionality and production technologies influence product developmentAs shown earlier,the structure of the three product development processes as well as in the timing of the separate phases differs.This raises the possibility that product development may depend on inherent features of the functionality incorporated into the dairy product as well as on the production technologies.Thus the effect of these features on the time frame of product development can be considered in more detail.The definite action mechanism of blood pressure lowering functionality of Evolus is attained by blending the active bacterial strain to chosen dairy raw materials. The functionality of Gefilus,on the other hand,is due to the probiotic effects of the added Lactobacillus GG, which is documented to have a positive effect on the gastrointestinal tract(Saxelin,1999).Thus,the action mechanism and functionality of Gefilus is more diffusely defined than that of Evolus.Consequently,we suggest that this less defined health effect may have influenced the development process of Gefilus by delaying the onset and prolonging the execution of the clinical test-ing phase considerably.Furthermore,the product development of Gefilus was based onfinding new and innovative production technologies,which may also374M.Bistro¨m and K.Nordstro¨m/Trends in Food Science&Technology13(2002)372–379have contributed to the lengthy development process.This was most probably due to the fact that Gefilus was a pioneering product in the functional foods sector in 1990in Finland and was based on a new technology of combining a probiotic organism with an organolepti-cally acceptable dairy food matrix.LFM on the other hand,may be argued to represent a health maintaining product for a selected market segment.This product contains no added health promoting substance or quantifiable entity as such.The functionality of LFM is based on a new production technology,where the aim is to optimize different process variables to accomplish a functional and pleasant tasting end product.Some conclusions may be drawn on the earlier dis-cussion on the effects of functionality on product devel-opment.First,much of the focus during product development of both Gefilus and LFM needed to bedesignated to finding innovative solutions at the basic research and development phases before moving onto the next phase of the development cycle.Second,the earlier arguments suggest that a less well defined func-tional action mechanism as seen with Gefilus,or func-tionality based mainly on perfection of a new production technology,exemplified by LFM,may partly contribute to an extended step-by-step develop-ment process.Technology push functionality may evolve into a market accepted food conceptAt the beginning of the product development of Gefilus and LFM,the functional foods era was still in its infancy in Finland.When Gefilus was launched in 1990it was the first product in Finland bringing a health promoting feature to foods.Thus Gefilus asaFig.1.The timeframes of the three functional dairy product development processes and of the separate stages within thedevelopment processes.M.Bistro ¨m and K.Nordstro ¨m /Trends in Food Science &Technology 13(2002)372–379375concept initiated the functionality and health foods era in the Finnish food industry.Furthermore,both Gefilus and LFM,of which the latter was launched several years after Gefilus in year2001,represented new and unique product concepts and manufacturing technolo-gies respectively at the time of initial product launch. However,not one of these features or technologies were expected by or familiar to dairy markets or could con-sumers have requested such features or technologies in advance.Therefore,it may be argued that both Gefilus and LFM represent technology push products as has been defined by Samli and Weber(2000)for other industries.Evolus,on the other hand,exemplifies a somewhat different product.At the time Evolus was developed and when it appeared on the Finnish dairy food market in 2000,Gefilus and other functional food products had already introduced domestic markets and the consumers to the idea of the health promoting benefits of func-tional foods.Therefore,a certain market acceptance of the functional food concept in general existed amongst the consumers.On the other hand,there was no prior demand,i.e.no definite market pull,for a functional dairy product such as Evolus with blood pressure low-ering specific activity.Consumers could not have been aware of such a technological possibility.Thus Evolus may be argued to represent a product that combines technology push functional activity with a market acceptedfinal product concept.Acombination of such features made a speedy development process possible, where the aim was to get the product out on the domestic market while no competing dairy products with similar functionality existed.The earlier arguments lead us to draw some general conclusions on the structure and time frame of product development of functional dairy foods such as those used as examples presently.We suggest that,(1)devel-opment of functional dairy foods,which are distinctly technology-push products such as Gefilus and LFM, must be combined with marketing at very early phases of development.This could reduce the risk of step-by-step product development,which otherwise could result in significant time delays and possibly even in loss of focus.On the other hand,(2)a defined functional action mechanism is a distinct advantage in speeding-up the total development process.Focusing on the function-ality of the desired dairy product will carry the initial idea across all phases of development.Furthermore,if a product with such definite functionality is built on a previously established concept,even new technologies will be met by a certain market acceptance.Finally, (3)for functional dairy foods to become truly mar-ket-pull type of products,it is necessary to increase consumer awareness of the many technological oppor-tunities available in future functional foods product development.Key success factors of functional foods product developmentIn order to develop a deeper insight into the product development processes presented earlier,factors specifi-cally affecting the timeframe and labor intensiveness of each project were further evaluated.The main focus was on the key features of functionality.The data gathered by the interviews allowed for the identification of cer-tain key success factors with reference to the functional feature of the dairy product.These were:(1)the added value to the consumer or the developer,(2)the possibi-lity for further product applications,(3)the selection of consumer target group and(4)the legal issues(Table1). The influence of these key factors was evaluated with a ranking scale of positive impact,no impact,and nega-tive impact.By using this method of ranking,Gefilus and Evolus both gainedfive positive impact points respectively.These two products differed in two differ-ent aspects,which can be further examined.The added value brought by Gefilus was primarily in the knowhow it contributed to the company,paving the way for other national functional dairy foods,such as Evolus among others(Table1).In addition to the organizational advantages,i.e.the knowhow and com-petitive advantage,the added value of Evolus was strongly connected to the specific health promoting benefit for the municating the func-tional benefit to the consumers as well as to all the team members of the project was consequently easier com-pared to that of Gefilus.Furthermore,although both products offered many possibilities for alternative pro-duct applications,Evolus targeted a well defined con-sumer group whereas Gefilus offered benefits to all consumers.Turning the attention to the negative impact scores of the development process of Gefilus and Evolus shows that both scored one negative impact point.In both product development processes these were due to food legislation,which posed restrictions on the domestic marketing actions with reference to health claims.In the case of Evolus,these issues were solved whilst the pro-ject was ongoing and regulatory aspects had therefore no major impact on the total timeframe of the develop-ment process.However,as Gefilus was a forerunner in thefield,it confronted many unexpected restrictions. Conforming to these regulatory requirements influenced the time frame of the development process by prolong-ing the marketing phase distinctively(Fig.1).Impact scores of LFM resembled those of Evolus in many aspects(Table1).Specifically,the added value for the company with the LFM development process was the increase in knowhow of a new production technol-ogy,i.e.the production of pleasant tasting lactose-free milk.The convenience for the consumers brought by LFM was due to the prevention of the symptoms of lactose intolerance,without changing the taste of milk.376M.Bistro¨m and K.Nordstro¨m/Trends in Food Science&Technology13(2002)372–379On the other hand,with reference to regulatory issues and marketing,also LFM and the new production technology confronted problems.Consequently,pro-duct launch was delayed by approximately two years. However,the new and innovative production technol-ogy of LFM does offer numerous possibilities for use in many different product applications.An extension beyond the niche-market of lactose intolerants is cer-tainly possible.On the other hand,as the processing technology of LFM is rather expensive this might not be profitable.More specifically,if the lactose free end pro-duct is to be modified further by,for example,adding flavors or to produce yoghurts,the added value of the pleasant taste of LFM may be masked by otherfla-vours.Such further developments thus remain to be seen.Breakthrough products in functional foodsIn order to examine if Gefilus,Evolus and LFM can be considered to be breakthrough products in the Fin-nish functional dairy foods sector,the definitions of breakthrough and line extension products of Samli and Weber(2000),were used as references(Table2).By using this method of evaluation,Gefilus may be inevi-tably argued to represent a breakthrough product con-cept.Gefilus fulfills all the features typical for breakthrough products at the time of development and product launch(Table2).However,with reference to Evolus and LFM,the definition of a breakthrough is not as clear(Table2).Evidently,many of the definitions for a breakthrough apply both to Evolus and LFM but these products also possessed faster speed to market combined with an impression of lesser risk to the man-agement during the development processes.With refer-ence to new product development in general(Samli& Weber,2000),the latter criteria are more typical of line extensions.For Evolus the speedy development was very evident.However,with LFM the speed to market was not in reality very fast but the product concept and the underlying rather straightforward technology did offer possibilities for speedy development.Moreover,as Evolus and LFM were launched several years after Gefilus,they satisfied an already existing or emerging consumer trend.Gefilus had also already confronted and resolved the challenges brought on by regulatory issues concerning health claims of functional dairy foods in marketing.Thus this was not or should not have been an issue at the time of development and launch of Evolus and LFM.In a previous communication on the emergence of new probiotic functional foods,we have shown that the Gefilus product concept may also be regarded to repre-sent a dominant design in the functional foods market in Finland(Nordstrom&Bistrom,2002).Such a pro-duct may be defined within a product class as the one which wins the allegiance of the marketplace and the one that competitors and innovators must adhere to if they hope to command significant market following (Abernathy&Utterback,1978;Anderson&Tushman, 1990).Furthermore,according to Utterback(1994) dominant designs usually have the power to create new industry standards.Gefilus emerged as a new product concept innovation during the years1987–1990.After launch,this product concept gradually established a new standard of health promoting products in the Fin-nish food sector,which may be called a platform of functionality in Finnish dairy products.Furthermore, Gefilus as a dominant design,created a platform for a product concept from which several processing alter-natives or precursors of functional product designs appeared.Consequently,based on the present data,we suggest that Evolus and LFM have evolved fromthis M.Bistro¨m and K.Nordstro¨m/Trends in Food Science&Technology13(2002)372–379377functionality platform.There is no doubt that the tech-nologies used to attain functionality for Evolus and LFM are different from that of Gefilus,but as health promoting dairy products they may be argued to have evolved from the Gefilus platform.The most valuable contribution of this platform was in providing the underlying knowledge on production,marketing and legal issues of functional dairy foods.Hence the few similarities to line extension products,found in both Evolus and LFM,are due to the benefits gained by exploiting the platform established by the Gefilus pro-duct development process.As Evolus and LFM both contained new and unique functional characteristics it may further be argued that these products can also be considered as breakthrough dairy product concepts in their own category.Discussion on future developmentsWe have previously proposed that the market pres-sure for functional foods is established by the perceived value of health promoting products to the consumers (Nordstrom&Bistrom,2002).As consumer awareness of functional foods increases there will be more pressure for developers to bring new products with new func-tional features onto the markets.According to the data of the present study,we further suggest that Evolus, LFM and Gefilus can all be defined as representatives of first generation functional dairy food products within the Finnish dairy industry.All three products add new attributes of value to functional dairy food products. The diversification of thefirst generation product con-cepts and in time,the possible conversion of these fea-tures into‘must be’everyday products may also give rise to a second generation of dairy products.Therefore, the domestic market acceptance offirst generation functional food products will lay a foundation for possible second generation products to emerge.Pressure for second generation products may result in an increased demand for products with increased perfor-mance,which entails more specific,more noticeable, and perhaps even more fast-acting features of function-ality.Furthermore,as switching costs of consumers may decrease as market pressure increases,it may be postu-lated that consumers may also become more willing to switch to completely new and different product alter-natives.Such products may be,for example,novel foods,nutraceuticals or other products which currently are categorized as medicines,but which may enter the markets of health promoting foods in the future.New product alternatives and technologies can be developed and introduced from any industry,the pharmaceutical industry being the most probable one. Consequently,the functional foods sector may become crowded with new players,encouraged by a lowering of the barriers to entry,which in the case of functional foods,correlates with the eagerness of con-sumers to accept new products and processing technol-ogies.Therefore,the possibility and risk that second generation products evolve mere as line extensions of thefirst generation product concepts should be carefully evaluated with reference to possible competition from outside the food industry itself.For the functional foods sector to remain within the food industry,developers should focus on initiating a new era of second genera-tion products within the food industry itself. ConclusionKey success factors of new functional dairy foods development in the Finnish dairy industry have been identified in the present study.Speedy development of functional dairy foods requires focus on the added health benefit to the consumer,the range of newappli-378M.Bistro¨m and K.Nordstro¨m/Trends in Food Science&Technology13(2002)372–379。
