STRUCTUHED CREATIVITY CONFERENCE EXECliTIVE SUMMAR~ BATCo document for Legal Services : Health Canada 19 May 1999 SrBOCrURPD CBEA1I~;TP CORFE3E$C~ EXEC~TI~$ SCYYlaY Background : The Conference objective was: "ro bring key ma:teting and product applications thinkers together in a situation which is sufficiently creative to stimulate gen~irely innovative product-based project ideas, but suflicie~tly slrnctured:6 examine these ideas against realistic technical feasibility and mnrhetabilitr constraints", The objective ~as achieved within a three day structure where eight delegates oelected'from BIT Group Yirketing departments and GRIDC Product Applications group gresented detailed p:ojec: 3ropo9itions to the group an the first day and each project was discussed in detail on the second day, ~ollo~iPg this discussion each presenter re-cast ~lo original projects to reflect pore tightly specified projec: objectites and technical/marketing feasibblitg~ The prsject proposals (together with the strategic objective) identified and evaluated during the Conference are shown in List B, During the evenings, cac~ delegate was interviewed individually and his judgemental criteria for defining eoimcrciPlly applicable projects were identified. On the morning 61 the third day, the criteria generated by the delegates individually were amalgamated in a group` session resulting in 8 major criteria, show in List I. The afternoon of the third day was spent by the group epnluit- Ing each of the re-structured project proposals against k these 8 judgemental cri?erta, BATCo document for Legal Oentls : Health Canada 19 May 1999 Conclusion: Project propositions, duly rated against the judgemental criteria, were treated with the type of analysis now feci!lar from DELTA, and GRtaC's Strategic Project Selection method, The top-line results of the analysis indicate that the projects can be Sroedly~ grouped in three categories, i, large cuke~ p3teriial, high behavioural validation (ep~- decce of consuier need) but potentially high associated ris4 to the business: i. Lo~ sidestr~am and irritationlarona ameliorated c~g~retres, ii. Coopensa~ab!e cigarettes~ iii, Nicotine opiimised cigarettes (least risk element). 2, High ret~r~ on investment, high communicability and high cost savings it manufacture but lower market size poten- tial: iv, Icd,riduall~ wrapped cigarettes. v, Sliz/sho:t and high expanded tobacco cik~ret:es~ ri, Moist snuff. 3~ Interesting and potentially useful concepts but lacking behevioural va;:dation at this stage: viil 'Treditiona!' full flavour cigarette~ viii, Greiter satisfaction in early puffs (front end lift), ix~ Modified menthol (aniseed, spices etc~) x~ low CO cigarette, BATCo document for Legal Services : Health Canada 19 May 1999 LIST A i, Return an investment j5y time scale) 2, Ease of communication 3, Scale of the target market 4, Lead time to manu~acturability 5, Positivelnegative manufacturer cost impact 6, Degree o: bebavioural validation (evidence of consumer need) i. Degree of external risk 8, Degree of commercial applicability BATCo document for Legal Services : Health Canada 19 May 1999 LIST B i. Modified ~~nrhollSoice 'lavour Products "To dev~lo3 a product which would offer something extra to curre-i and potential menthol smokers who require either mer,:hol plus an overt modifier or a coolinglspice alternative to menthol." 2. The 'Aiellorated' Cigarette "To capi,s!ise on the potential for a cigarette which produces less of the unpleasant after effects of smoking i,e. irritation, aftertaste, dryness." 3, Shorter lengthlReduced TobaccoContent "To offer consumers value for money through our technical abilitr to provide the same tastelsatis:ac:ion as conventional cigarettes with a considerable reduction in tobacco content," 4, Individu;l!y Heat Sealed Cigarettes "Bp offering cigarettes in peak smoking condition in any unit vo!~:e, to Increase: a) Total sales through increasing price accessability, bj ~ar~et share through genuine product beaefit~ c) Profitability through reduced variable cost, reduced P % SV costs and control of distribution up to the end user," 5~ Front End Lift "To ir3:ove the taste and flavour of the first few puffs on cigzr0:tes. BATCo document for Legal Services : Health Canada 19 May 1999 6, Comoensatab!e Filters "To make it easier for smokers to take what they require from a cigarettel This means in effect that the filter will be conpeasatabie and implies 1 high taste to tar ratio," ?, nicotine P_3timised Cigarettes "More efficient uti!lsation of in situ nicotine in cigarette smoke." 8, Ultra Slim Cigarettes "To develop a.new, higher margin, low price cigarette offering. 9, Moist Snuff "To capitalise on the potential dcsn:recd of the smoking habit as the only means to achieve nicotine satisfaction by participating in a parallel product market free of social/health concerns and with a:tractive profitability." 10, Full Flavour Product "To capita!ise on a potential return to full flavour by offering a cigarette with markedly superior smoking characteristfcs at physiologicall~ acceptable delivery levels~" Il, Low CO "To understand how to design low C3/tar ratio products and make then acceptable to smokers in the event that L they are required for league table CO." BATCo document for Legal Services : Health Canada 19 May 1999 12. High Expanded Tobacco Cigarette "To maxinise :inancial return by use of loPer amounts of tobacco Phiie ~aintaining consumer attributes of the product," 13. Lolv Sidestrcao/Amcliarated Aroma Product "To pre-empt potential volume decline from smokers under pressure it social and Pork envir6nments by providing then ~itt an offer ~~icb combines re-assurance in social smoking ~it~ taste and satisfaction," BATCo document for Legal Services : Health Canada 19 May 1999 CONFEREt;ZE OBJECTIVE To BRING KEY MARSETI~C AND P300UtT APP1ICATIONS THINKERS TOtETHE~ IN ~ SITUATION WHICH IS SUFFICIENTLY CREATIVE ;C STIMuLATE GENUlaELU INNOVbllYE PR001cT BASED PROd~CT IDEAS, BUf SUF:ltIENTLY SiRUtTU~E3 TO EX4XINE THESE IDEAS AGAINST REALISTIC TEC~IICAL FEASIBILITY ANO MARKETAalllTY CONSTR~:~IS~ BATCo document for Legal Services : Health Canada 19 May 1999 LIST OF PARTiCiPAlJTS BOB EEXON IMPERIAL ~S~ACCO LIMITED, C~~AD6 TED P~RK~CK I BROwH ~MO ~ILLIAMSON, USA IAN ROSS I SUOMElj TUP~K~A, FINL~ND MIKE SG~ii I B~A·T. UK g E, ENG1ANU MAURICI~ WBRMSER TABACA~ARld, CANARY ISLES GEOFF BRCOKS MARKETING ~E"~RT~EN:, ~IlltiANK DAVID C~EIGHTOk PRODUCT APPLICATIONS GROUP, tR & DC ROB FER~IS PRODUCT APPLICATIONS GROUP, GR g UG (CON~ENOR) COLIC GEEIE PRODUCT APPLICATIOHS GR~VP, GR g DC TAJ HIRII PRODUCT APPLICATIONS tRDUP, GA g DC BATCo document for Legal Services : Health Canada 19 May 1999 B;CIG~OOXD:X0 CO~PEE~rCE STRDC~C!~ Ihat are the distinguishing features of a coase:cial!y applicable product project? II is generally accepted that, given any set of potentially applicljle projects, decision aa~eis are capable of prioretis:ng such a set against the cri:erlon of 'degree of commercial ~Fplicab~liry'~ H'hat is less well understood is the nature of judgements ta~ec into account when mahin~ that 3riorerisa~:on, I good illustration of this p:oble; can be seer in RLD cultures, Any BED culture generates a large portfolio of projec;s, each of Fhich exhibits a :ife cycle running from origication as a 'ssurce' project generating inior~aii3n and fipdinenril understanding of principles, through to deployment as an 'applied' project exploiting such information ic product appiici:ions. The problem for aaD decision makers committed to the application of BtD innovations to the product lies in reliably distinguishing 'applied' from 'source' projects and underg:anding the basis on which szch distinctions are made. GB%DC bane atte~p;ed to resolve so~e of these problems by developing a sps:eiatic approach to evaluating projects and isolating and defining the jodgeme:~s used in such evaluations, The method is called 'Strategic Trs;ect Selection' and was developed in late 1983, in this approach every discrete project within the BOD portfolio (70 projects in ail) was subjected to a srandardised examination of strategic objectives, anticipated cons:riints, criteria of success, anticipated applications etc~ Following this, several o::he projects thus described were used in interviews with a small group of selected decision makers within GBLDC, The interviews followed an established psychological approach in which successive pairi3g of projects are compared and contrasted, pith a oie~ to drawing our the implicit set of judgeltents rhich :!e intervieruee is using to C: justify a more global judgement (!,c~ that one project is BATCo document for Legal Seniees : Health Canada 19 May 1999 perceft~ed more commercially applicable than another). Typically it is found that the judgement of cosmerc-Il app!lc~Silit~ for any one individual seems to rest oe a strcc~ire of about 8 'sub ~udgemen;s' on average. These personal judgement sets typically show quite a lig~ degree of overlap within any team of decision makers. :his es;~j!ishes a foundation of consensus for the nex: s;ige of the ze~~~d, in which the interviewees are brought ;sge:~o::n a group session where the individual judgement sets are reconciled to a commonly agreed and operationally deiiled set of ~~dSeaents all of which are agreed io contribute :3 Ile ove:·!l perception of 'commerc'ial epplicab;litg'~ T~e G'ih3C jud~;aectal set appears as Appendix i, illustrating :ta types of j~d;e~eni which were isolated in :~is par:icul~r i~~lica~ion~ The jutjeaents are isolated as hi-polar dimensions,;t:c~ mee~s tSai they can subsequently be used as scales ajrinst which projects can be ranked or scored, In the final siage of c~e method all the projects constituting the G3E3C 3:CjeCt portfolio were scaled by the group against their agr;,ec set of judgemental criteria, This quantitative da:a was .~en anelyse9 using the principal components method fasi!lE: to IJESTS evaluations~ This technique bad the advantage sf iliusirating: a) The contribution of particular 'sub judgements' to the overall perception of 'commercia: epplicabili~g', b] The prioretisation of projects relative to this structure oi judgement, and in terms of perceived dif:ereccelsimilarit~ to one another. The utility of this technique within the GR&DC contaz: has been ia the identification of product applications 3:ojicts, The ~ocierence reported here represents an extension of the 2 tectcizue to support a joint R&D/~arketing approach to: BATCo document for Legal Services : Health Canada 19 May 1999 'a) GEners:i3e of innovative product project propasiiions~ b) I~en~:iicT~::on o: a jointly agreed set of judgemental criteria relating to perceived commercial applicability. c) E~alcf:ion ct the innovative propositions against the c6nmercizl E~3!icahility criteria~ The conference represents a significant further step in the conuni:aes: to ge: the mos: out of the ii83/Marketing ir,;erface, partic~ler!~ in terms of providing marketing relevant leads for a~n project activity. An obvious approach to uniting R&D1ZE:ke;:cg ~l.nking on the generation and evaluation of project 1?PdS is Ib bring selected RLD and Marketing professiec·!5 totether in discussion, The conference ~as thereisre jese~ on six internationally selected Marketing prcfessio~l!s ~at four members of GSLDC Product Applications group. All too of:2n Sorevcr, 'creativity' sessions fail through lack of s::uctured outcome, therefore ta&DC's experience ritS Strategic ?-~~~c: Selection was incorporated into the structure of the t~:9~ d2r conference~ BATCo document for Legal Services: Health Canada 19 May 1999 STEL'CTI',I~ CEE~TI~ITY THE 3P,OCESS This techniqie r~co~:ises that there are three stages to tte process of gener~ti;b project ideas: DdPA ACQUISITIOIJ COXST aUCT IVE C~I T I PUE S~STt~~TIC ANALYSIS DBTA AC1UIS!:IG~I~~T 1) Refers to the coci::Sutions which the delegates make to initiate the prs:ess of structured creativity, In ~tis case each individual tide a formal, one hour presentation to the conference d~r1~5 :"e first day. The timing was designed to allow sufficiec: discussion time for points of clarification only at this si~~i~ The presentat:ons required considerable pre-work and were used as a means of generating a n~~ber of concrete prajecr ij~~s for the conference to subseqc"n;!y work with, The instructions to the delegates, in preparing their ~resentztisn,;ere as follows: "The theme of your presentation must be a persone; .interpre;~:ion of: a) The cur:2nt tobacco marketing scenario, it's key cons;rein~s, challenges and opportunities; b) d pred;c~io, of future market trends, directions, cons:rai~ts, and opportunities; c) B. perso:.a? ciev of the current and future develop- ment of coas~~er needs, attitudes, and segnents; d) Viers on current and future product trends, needs and opFs:~rcities, The present~:ioi should be structured in such a way as to end Fi:':To:sl!y specified product project pro- ppsa:5 ecco~!a~:~d wit" reasonable s~ecificatio~s of product par~=e:~:s, consumer relevance, market scenario and, ide~l:f,:erget segment and com~cnicaiion strategy," BAYCo document for Legal Services : Health Canada 19 May 1999 these *or3e: D eseci~tions are renroduced in full within the ·" volc,e which accoma·nies this retort. co~s:aucTIvE CRITIQUE (DSY 2) Refers to the subsequent process in which, after due time to 'inc~jate';he ideas presented in the papers, each contribution was re-visited and constructively exaeined by the group for ~cc~nical feasibility, marketing possibilities, and any refl~ements/el~era~ions to the basic idea, This stage resulted in an agreed statement for every project procosition specifying the strategic objective, constraints applying to its ac~ievement,;he prod~ci specification, the tecbnica2 feasibility and the marketing strategy, sus;ra~~TIc IZRdIYS!S _LDAP 31 Refers to the process of setting up a system of judgements which can be used to evaluate the final outcome of the first two stages. In ttls case individual delegates were interviewed during the evenings of the first two days of the conference to systematically draw out the types of personal judgement ~hia~:hey made when considering those aspects of projects which they felt contributed most to the probability that the project will succeed in commercia! application. On 92y 3, these individual judgement sets were consolidated through group discussion to a consensus set which was then used as a judgemental framework against which the project ideas generated in Days 1 and 2 were evaluated. Eventual analysis raS by principal components technique, --- - BATCo document for Legal Services: Health Canada 19 May 4999 The conference is therefore designed both to generate project ideas, and to develop a system for their evaluation against a criterion of commercia! applicabilitp, The conference structure is as fclloas:- DAY ONE I I DBY TH'O DAY T9BZE DATA ACQUISITION I COSSTRUC~iVE SY ST EMBT I C CRITIOOE I I ANALYSIS Personal present- Development of Agreement of a ations of project i strategic objectives ( i)(consersus set of propositions, I and consideration of 1 I i judgements. feasibility, Sca:ing of project propositions against the judge- ment set, Ar;Elysis of results, DA~ ONE [~fE) I DkY TPI'O (EFi) INOIVIDG'.i~ INDIYIDI'AL IBT~a~IE~S INTERVIEWS BMCo document for Legal Services : Health Canada 19 May 1999 ST~UCII~~D CSE~TITITT : THE O~~COEE The judgenental Set All delegates were subjected to a psychological interview conducted by the conference conrenar either on tto first or second evening of ~~e conference. These interviews, based on pairffise comparison of project ideas, produced a total of 69 ;udgements tan average of 8-9 judgements per delegate, excluding the ccnvenor and one delegate who had been i3te:riered on a previous occasion)~ To illustrate the diversit:of judgements identified as relevant to commercial applicaSili:v, this list of judgements is reproduced in full as Appendix II:. It should be re-empS2sised tt~r these judgements are 'bi- polar' that is, ther represent dimensions with logically opposite Ends along which projects could be scaled or ranked to illustrate their relative positions, it is apparent from Appendix Il that there exists a high degree of overlap across :ndividue! judgement sets, F~ict contributed to:~e relative ease with which the group came to an agreed consensus set of judgenen:s on the fine! day of ;~e conference. :t is interesting to note that no fundamental differences in judgemental structure emerged between those delegates with a Marketing, and those with a product Applications background. The finally derived set of judgements was discussed to produce an agreed operational definition of what each term meant. This agreement on definition is most important since any lack of precision at this stage Inevitably leads to 'bending' of the judgemental rules at later stages when particular projects are being evaluated. The judgemental set, with associated definitions, was finally agreed as: -- --- BATCo document for Legal Services : Health Canada 19 May 1999 i, Bigh V Low Beiaviourel Validation 'A measure of the evidence which exists to support a proposition. i.e, Evidence versus speculation, F~ere high t specific observed consumer behaviour and io;: inferential soecu!aiian,' 2, Large V Smell Targer Yerte~ 'The size of the target nar4et expressed in equation terms as the number of potential markets X the p:ojected size of each affected segment Pilhin those markets~' 3, Short V lone :ead Time to Uanufac:uraSilitv 'The time required to desigo'the product and develop the necessary tec~nol6gy in anticipation of scale production, There short: ( 1 year, and long =)3 years,' 41 Easy V_Hard to Communicz~~e 1Abi!ity to express the claim clearly within the constraints of the gives market,' 5, High V Low ~xcernal Sisk 'The probability of provoking a significant attack from external groups which could underline the ability of the company and industry to continue to operate profitably,' 6, Positive V ~;e_gative ~anufactu:er Cost impact 'A measure oi the economic benefit to the manufacturer considering variable costs, fixed and semi-variable costs, and asset c::lisation,' C (II~~ BATCo document for Legal Services : Health Canada 19 May 1999 7, High V Loa~ Pive Year Return on Investment 'Defined by total offer developmec~ cost, by total marketing investment requirement, by variable aargin y,e!d derived from unit volume potential, 8, High F Loa· Commercial AFpliczbili:~ (Masrer Construct) -oOo- II is interesting to compare this judgemental set with the earlier set derived from in-house Ga~~C activity under Strategic Project Selection. This co~~~rison is il!us:reied in Table i: TIWLE 1 CO~PARISOH OF CXl&DC ~D JOI?IT ~bDI~IRf(ETI~Ct JUI)CME~AL SETS CRhDC STRATEGIC TRO:ZCT SF,liCTXO~U' RbDl~'jl~U~TING STP,UCTUE9 CE.STIVI:P Degree of Technical/Cost ieasi3:lity ) Zong Ra~5e 1' Ima!nene I tead Time ;o ~nufacru;rbi~lr~ Decree of 3reatthroceh Reccireaenr Technology Push V Ccnme:c:al Pull Degree of Cons~er Relevar,ce ) I Be~nvioun! validation Decree of Evidenced Cer:a!ntv of Success) Sire of Creative OPlortuniev I Si2e of Target Bri~er irude of Business lnPact Positive 1'NeP;a:ive ~dn~fact?:e: Cost Lpaet ~on:ributiPn to Profit Ootimisation 5 Year ReFufi, on Inves:sent :oF V Hi~h Corn~r.ercial Co3municahilitv Ease of Celraunicalion 3eqree of Commercia? A?p!icability I Degree of Cacmercial ADolic~bil! Defensive V Offensive top V Aigh Clarity of Objective Inioraa:ioc Y ?:PdllC: Orientation Deeree of External Risk BATCo document for Legal Services : Health Canada 19 May 1999 It is notable that despite the difference in objectives for these exercises, the degree of correspondence in dcdgenenlal structures is impressive; Degree of external risk is apparently the sole judgement unique to the joint R&DIMarketin~ exercise, whilst the three judgements unique to the GRtDC exercise reflect the more parochial emphasis of such an in-house approach, TEE PROJECT P~CPOSITIO~S The proceedings of the conference generated :3 discrete, product based project propositions, the only proposiii~ss ~h;ch were arrived at by more Ihac one delegate being sfdesirean reduced cigarettes and slim cigarettes, The in;tia:, uncritiqueC presentations are reproduced in the co~~~n~on volume to this report, Each project proposition was subjected to critique during the conference designed to produce an agreed specification of: 1~ STB3TEGIC OBJECiIPE (The commercial aim of the project) 2~ CO~STR~IXTS (Applying to the achievement of the objective) 3~ PRODUCT SPECIFICATION (Physical/subjective features of the product design) 4~ TECHNICAL HOW? (3esign options, and the technical feasibility of achieving the product specification) 5, MARKETING HO#7 (puality of strategy required to market the product proposition) BATCo document for Legal Services : Health Canada 19 May 1999 The 13::oposilions were as follows: 1, M03!iIED ~E~TSOIISPICE FLdVOURED FRODUCTS 2, TEI 'A~EIIORd~ED' CIGARETTE 3, S~O"TE~ IENGTHIREOCCED T03ACCO CONTENT CIGARETTES 4, ~~3IVI~UA1L~ HEAT SEALED CIGARETTES 5, 'F~ONT END lIr"I' CIGARETTES 6, COII~~BSBTIZBI~ FILTEP,S 1, ~IC3TI~E OPTIMISED CIGARETTES 8, ULTRA SIIM CIGARETTES 9, ~O;ST SNUFF 10, ~C:l F5bV07E CIGARETTES !1, ~3~ CO CIGARETTES 12. HI~i EXTA~~ED TOBACCO CIGARETTES 13, LO~ SIC~STEEdU/AMELIORdT51 AROMA '3RO0UCT Critigu~i specifications of these propositions appear in the next section of rhis report. -- BATCo document for legal Services : Health Canada 19 May 1999 STRUCTURED CREATIVITY PROJECT SPECIFICATIONS BATCo document for Legal Services : Health Canada 19 May 1999 i, MODIFIED IZS1H01113ICE FI~VO~~PD PRODUCTS Strategic Objective: To develop a product which would offer something extra to current and pote?.:ia: menthol smokers who require either menthol plus an overt modifier or a cooling/spice alternative to menthol, Constraints: i, The spice nod_lier must be highly tobacco compatible, 2. There may be a carry over:build up effect which would result in an undesirable aftertaste, 3. The conce:: nap be confi?e.", to existing menthol markets or only be applicable to certain geographical regions~ 4, Retention of f;avour during shelf life and after peck opening map be difficult to achieve, Product Specification: A nora~l king size filter, full flavour US blended product with a strong supporting blendl Technical Bow: Feasible using current technology unless flavour retention requires the use of micro-encapsulation either distributed in the blend or incorporated on the cigarette paper, .1111 L~ BATCo document for Legal Services : Health Canada 19 May 1999 lar4etilg Hoo,: Requires extensive testing to establish type and level of modifying spice. 2~ Requires qualitative work to establish validity of the concept, 3, To be positioned as a fresh, clean, high taste alternative to menthol, 4. Fresh breath assurance and good residual aftertaste should be eB~hasised in consumer communication, 5, TSe poSSibllily Of less offensive sidestrean than normal ci~erettes map be a spin-off product plus, -oOo- --- -----· BATCo document for Legal Services : Health Canada 19 May 1999 2, THE 'd~t:iOo~TED' CIGARETTE Strategic Objective: To capitalise on the potential for a cigarette which produces less of the unpleasant after effects of smoking in terms of irritation, aftertaste, dryness. Constraints: ability to mele a product. Product S~eciiication: Regular and king size, Around Icmg, around 10mg Noticeable relative reduction of afieref:ects, Maintenance of desirable (taste satisfaction) character- istics during smoking, Technical Hos: Coolants? Subliminal/low levels of coolant addition? New coolants - additives - eugenol - duolite filters - citrus pack aromas saliva generators - ventilation? blends? llarketing HoPI - position as a positive, more enjoyable smoking experience - do not concentrate on the problem - do not stigmatize the current product -oOO- --- BATCo document for legal Senrices : Health Canada 19 May 1999 3. SH09T5R LETGT~!~I3tC13 TOBACCO CO~TP~T CIGARETTES Strategic Objective: To offer consumers value for money through our technical ability to proride the same taste;satisfaction as conventional ciSiret~es with a considerable reduction in tobacco cocten:.' Duty stru~tcre~ a.!l in most marl;ets allow significant cost savings, ~e.cg based to varying degrees on tobacco weight/ad v·16r;;, t8ased on the fact that only a snell proportion of tobacco is actually sicked, the rest bein: dissipated during the smoulder process Constraints: Specific dc:y s:"uctures where apalied will not allow for comparable cos: savings, The product will be unconventional in appearance and it may be difficult to communicate the conce~: in a believable manner. Product SPeciii:?:lon: Use of specialist paper (Papyrosa?) to achieve slow burn rate thereby cc;:ing down dissi~a~ion~ possible use of extra length bc:der. Possible use oi 20 low circumferencelextra length rather than say 2j s~?l! size cigarettes at same price as normal length cigarettes, 111,· BATCo document for Legal Services : Health Canada 19 May 1999 Technical 20w: ~o:biig new suggested in the making technology - ~:andard blends, Papers already available, Packaging oay require new machinery dependent on filler ;Ipe used, Marketing How: Market as a new, unconven~ione! breakthrough - sno;ing on a really different product concept. Pack design/advertising should reflect this difference, Pricing could be based on more cigarettes for sace ~rlce (2j for 20 price) or even at a certain preaiu~~ possibly 20 cigarettes for lower price especially if a sli~ size/extra length concept is used, There is a spin-off benefit o~low sidestresm wh:i~ could be the ms~n marketing concept under appropriate ~1:ket conditions, -oOa- --- BATCo document for Legal Services : Health Canada 19 May 1999 4, INDIVIDUALLY BE$: SEIIED C~GaEi~lES Strategic Objective: BJ offering cigarettes in peak smoking condition in any unit volume, to increase: 1) Total sales ~~rougb increasing price Pccessabilitr, b) Market share through a genuine product benefit, c) Profitability through - reduced oariable cast - reduced F~Sr costs - control of distribution up to the end user, Constraints: i, innate conservatism of target smokers. a, Besistazce of traders to lower margins on stick sales, 3, Increasing accessability to young people, 4, Physical protection of the cigarette mag be redaced, 5. Ease of opening - consumer acceptable? 6, lisibflitf of individual stick PSI cost constraint of using clear films. ?, Greater bulk - shipping costs. Product Boeciftcation: - standard prodPct with hot foil dye stamped brand identifier - continuous reel or board backed units C· - printed film or blister packs ,,!,, BATCo document for Legal Services : Health Canada '14 May 1999 TecBnicai gOF: - Idspt exisrinl technologg for heat sealing oc the ml~er;hus eliminating the packing unit, Yir~eting BoP: - Use the selling proposition of "Factorl Sealed for Periectpcaliry" - It should ~e ePsP:ed the branding bad value added image is cilbnced by the ae~ packaging, This eoa!d be achieoed in a number of tale: i, Bo; fall s;apaing Of the brand identifier on each Froductlsticl; 2, Brand:ng material printed on the film wrap 3, Use of dispensert in eoajnaction with reels of individually Frapped sticks 41 Self liqn!dating permanent packs as gioe-arays Fith 5i~Ck sales, -oOa- BATCo document for Legal Services : Health Canada 19 May 1999 5~ 'FROh'T EBD LIFf' CIGd~~r!S Strategic Objective: To improve the taste aDd:LaIOuT of the first ier puffs on cigarettes, i, It is assumed that smokers are most likely to make judgements about cigarette quality in the first few p~iis~ 2, It is assumed that "need' for smoking satisfaction is highest when a c:S~rette is first lit, Constraints: People do not smore !!~e machines, It is understood that they do in fact take longer puffs to some extent It the beginning of a cigarette thich will give an effective front end 1iiIl Ing additional desigLed '::on; end lift' should be modest to remain credible, people are unlikely to tcnr to change their 'PorPal' smoking patterns, Front end lift is likely to disturb normal smoking patterns, Smokers lay have to learn how to smoke these prOd3CtB~ prod_uct ~Specificetioc: Can be applied to 111 cigarettes, but likely to be less effective on lor dei:;ery products for established lo~ delivery smokers, ~he:e such a product may lack credibility, ··I·~ BATCo document for Legal Services : Hel~h Canada 19 May 1199 Technice: nov: Several ideas currently in ~&O: i, BalEnced ventilation designs. 2~ Codevac design (tobacco rods Tith constant density but variable blend co~posi:iae)~ 3~ Stnctured cigarettes wiih hig3 flavocr tobacco at front end, 4, lo~ efficiency blocking tilters such as HEE, CSF~ 5, Partial blocking filters of ai~er designs, 6~ Addition of volatile flavocrs~ Marketing How: Bse the general selling propos!iion e,g~ "a better flavocr product" , Do not stress "!ront end lift" or anything techoica!, -oOo· " BATCo document for Legal Services : Health Canada 19 May 1999 6, COMPEASS1AEIE F!5TE35 Strateg ic Ob_j ec ii ve: To make it easier for smokers to ta4e what they require from a cigareire~ This means in effect that the filter will be compensitaSle end implies a high taste to tar ratio~ Constraints: what are the ethical implications of such a development7 People who buy an 8np product expect to get 8mg, It Is also understood that people smoke cigarettes differently under different conditions of stress and relaxation, so they must be aware a; some level that they can adjust the delivery of individual cigarettes as well as smoking different numbers o:~cigarettes. Should such a development be the sub~ec; of a clear declaration of its elasticity? if such a declaration is not made, how well protected is our competitive advantage from the reaction of our compe:itors~ Should we monitor competition product to see if they already have "e!as;ic designs"? Product Specification: This concept is aimed at low and ultra low products. Care must be exercised with blend strength or a credibility gap will be found. Thus a successful low or ultra low should show just more than a prorata increase in delivery for the increase in puff volumes It ma~ be desirable to take these changes step wise rather than abrupt development of an ultra low that smokes I:ke full i!avo~r, -- BATCo document for legal Services ; Health Canada 19 May 1999 The concept of a 14mg cigarette designed to smoke If~e a 17-18ng cigarette was also discussed and endorsed, Technical Hop: Not know:, st present, but current R&D leads ~en::e around: Opti=ise~ comhiaations of conventional material, 2, Velocity sensitive filters. bIariretir.e Her: if the eventual design is visually co~vention~!,;he proposi:.on would be of a better cigarette that helps you get what you Fant more easily, ~f the design is visually different the proposition would be for a low tar product specially designed to produce more en~~nced taste and flavour, -oOo- BATCo document for legal Senices : Health Canada 19 May 1999 f, IICOTLNE OPTIUISED CICIIETPSS Strategic O55ectives: Yore efficien;Ptilisation of in situ nicotine in cigarette smoke, Constraints: i, Derelopment oi a reliable measurement system for iree base a:cot!ne. a, lKe require a better understanding of ho~ to produce the elfect ol increasing the ratio of Iree base nico:iae available !roo Sn6ke, a, Unknown eifects when applied to Virginia blends, Product Soeciiication: 05 blended cips:etces in genera~, Technical Bbl: i, Use of a~~onia treated sheet material~ a, Use oi di-Lsani~p phogpste on blend 03 theet. 3. Other 'basic' treatments for the blend, 4, The sPae e!fect is not achieved with alkaline iiltcrs~ Marketi?p Bor: 1~ Pull flavoar brands:- utilise either no message or 1 rciaiorced ilavour proposition~ 2, Lor deiirerp brands: use toproved taste or special process tr~e propositioas, L' ~Oa- -- BATCo document far Legal Services : HadL Canada 19 May 1999 8, CLTT,.I. St,I!I Cf CZRETTES Strategic Objective: i, US ~a:ket:~To develop a new, mainly female-arlentei, 'style' segme~i~ 2, :nie:aaiiona!: To develop a new, higher nar~:n, lo~ price offering, Constraints: 3:lysical product assembly. 2, Consumer Ecce~tnnce: a) 'i.andling bJ Xouthfeel c) Sao'se quality d) Social acceptability e) ~~le VS Female appeal Product S?eciiication/Technical How: i, cS : !'1 3 94 - 100~Fm, 20 t sticks, unique box 2~ int: 11-20 X 80 - 84, 20 sticks, STD 10's box 3, .:verzge puff -t, taste/flavour profile 4~ packaging configuration) j, ;il~er/Rod Assembly as appropriate ~a:keting How: Proposition themes would depend on market context, but in the C'S :or example prime selling propositions would be as a cigarette for females and as a stylish produci variant, Seconder~ benefits with potential proposition use would be e~0n0rf and low sidestream, C -oOo- BATCo document for Legal Services : Health Canada 19 May 1999 9, MOIST S~i'F Strategic Obj Ec t ivc: To capitelise on the potential dbwntrend of the sno~i~~ habit as the only means of achieving nicotine satis:actio~ by participating in a parallel product market ~hic~ is free of social/health concerns, end with attractive profitability potential, Constraints: a) Alleged irritation effects b) Potential criticism from the medical/dental profession, c) Tectnologi:al know how is currently non-existent within the jM group, Product SDeci:lcetion: a) loose snuff in Ij to 2 ounce cans in oval form or 20 pouches in rectangular can, b) Starter low tar, with menthol and full flavau: extensions, Technical How: To be developed based on currently existing industries in the US, Sweden and Decmark, MarketinE How: - open to full creative treatment The product category is free of any advertising restrictions in most eloiro~·en~s,, -aOo- ·· ·- BATCo document for Legal Senices : Health Canada 19 May 1999 10. F~LI F!;POGa i!O~~CT Strategic O~fect!re: To cap!:alise on a potential return to full flavour by offering a ci$brc~te with markedly superior saoling characteris~-cs (~articularly qualitatively) at phgsiological!! acceptable delivery levels. Censtraints: i. No empirical evidence of 8 consumer depnnd~ 2, Ya:!ab!e cos; implications~ 3, OaconPe::iooa! technology would be a long tern dcvclopzest if feasible at all, 41 Can the csnce~t fas:iig a price prelfaat 5, St;engtt of existing full flavour brand iaageo, Product _Sgecif icp:ioas: sola4 x ai,s;a;~o x aOm gS or SC IS or Ca Blend PYI~P 14 Pgs Ippror~ Nic: 1.4 mgs Technical Ho~: - Blend andlor ' - lanulirlSe:i-annular construction Short term Front end lift - lerosol dispe:sioa'(iodified smoke Long term flow Patterns) 1l111 BATCo document fDI Legal Services : Health Canada II May I991 Marketing How - Direct appeal io nostalgia of the 'good old' cigarettes~ - Strong, supportable product claims. - ~igh image coaso~ant w:th product charecter~stics~ -oOo- BATCo document for legal Services : Health Canada 19 May 1999 II. LOT CO CIGARETTES Strategic Objectives: To uoderstandhav to design low C3ltar ratio products and make them acceptable to smokers in the event that they are required for league ta~:e CO~ Constraints: 1) This is an area where we should be prepared but sho~!~ be reactive rather t:ce pro-active~ 2) There is increasing evidence that consumers don't want more product informatio· - one view is that low CO cigarettes should be marlieted covert!yl 3) There will Se a "warning period" which should allow time for transition to the new product should league table CO 5e introduced in a~~ market. Product Specification: 1) This project Is already within GR&DC and sets out principals of product construction rather than any single product spec~ficatioc, 2) Dependant upon the style of league tables it may be necessary to develop a product in several categories and ensure that we are not "top", Technical How: 1) This is essentially understood. There map be a conflict of interest since CO levels tend to rise if highly expanded tobacco levels are used for financial reasons, Provided that the smoker concurs, we should take the money now and only go to low CO if forced to, C ---- BATCo document for Legal Services : Health Canada 19 May 1999 Markeling_Bo~: Make no overt proposition to the consumer in the absence of CO league tables. 2, In the case of the appearance of league tables, enphesise positive positioning pre and post this imposition. -oOo- BATCo document for legal Services : Health Canada 19 May 1999 121 BIGH EXPANDED TOBACCO CIGARETTES Strategic O_bj ec Ilve: To maxisise financial return 5F rbe use of lower amounts Of tobacco, Thus lower tobacco narchases enable loner ~arehousirg and finance charges ~~i!e malnt~ining oonsurcer attributes of the product, Constraints: 1) Use of high levels of expanded tobacco usi 3a~i? any way jeopardize aroduc: c~alicy, 2) It can be anticipated th~: there map be adverse consumer reaction to some elements of the Froduc;, (e~gl burn rate, firnness, d:aw c~eracteris:ics, ash stability), Product ~Speci:icetion: i, Curfent!y under test proposal, sith the al:~l?r being to match an existing brand off a live msr4e: as closely as possible, Product specification is similar to the existing brand in question, and level of inclusion of expanded tobacco is at 801, 2, There are alternative blendlconstructions/;~: levels available, Technical How: 1) This is a known area and with the possible exception of fast drying o~~ in ho;ldr~ markets is well documented, Yarketing How: 1) Since there is little mileage in telling tte consumer (3 that belshe is ge:ting less tobacco fo: his/her money, this is a covert proposition, u --- f3ATCo document fDI Legal Services : Health Canada 19 May 1999 It may be possible to turn this concept into a product plus if required i.e, within an ultra slim "new era technology" product positioning, it aay be possible io add a "netv tobacco blend technology" proposition, Positive_spin-of:s of the use of hi~S level of inclusion of expanded_~l6Sacco: Ij "Elastic" delivery products, 2) low CO products~ 3) Reduced sidcstream products, -aOb- BATCo document for Legal Senrices : Health Canada 19 May 1999 13. 'UOA' SID~STE~:Y S~OhEIhYgLIORITED bBDYI C!GARE::E~ Strategic Ob~ectlve: lo pre-enpr/aroid potential volume decline iron sno~erg under pressure in social and work e3P~r6nmen:s Sy prooiding t~en rith an offer which combines reassurance In social smoking ~~ilst delivering good taste and satlsiacl:on, Constraints. I) Risk of $opc:nieat enforced citendbbilitp to all brands. b) Sifficul;y in achieving equivalent taste s~~isfacrion to conventional produces, c) Potential negative consumer reaction to possible aon- tobacco taste or unusual visualltactile c~~r~cteristics of the p;oduct~ d] puesr!acable real psychological pressure release for smokers, Non smokers reaction to the proposition is uopredictable. Product Soeci!ication: a) Yin:nnk actual reduction in sidcstreai gmo2e of 501 required to achieve a visually perceivable effect, b) Ose of Ecrsta velvet paper os equivalent. c) It least 20: of expanded tobacco is blend to maintain conventional puff number eIpsc:ations~ d) Deliver:: levels open to market ~peciiico~ c BATCo document for Le9al Sen~es : Health Canada 19 May 1999 Technical How: Further development wor4 required on papers and appropriate blends, considerably more development work required on sidestrean aroma ameliorants, Itlr_keting How: Communication platform based on a sociability or 'snoker courtesy' focus with perceived lower sidestream smoke and pleasant aroma as the reinforcing elements. Consumer targets would be socially concerned, pressured or 'dissonant' smokers~ -oOo- BA~Co document for legal Services : Health Canada 19 May 1999 ~rklllTIOT Of PBOJECt PfOPOSITIONS `The project specifications were subsequently used by the conference Ee~ejares as the basis for evaluating the projects against the ce.tJercial applicability judgements previously outlined. The process involved tPiing each project singly and assigning it a score (by group~consensus) on each of the B judgebeat?! ~fae:siocs. For this purpose each judgement was co?s:dercC to Se a 10 point scale. For example: 10W CCe~ERC:~: I i I I 1 I I I I I I HIGH COM~ERCIIL bPPLIC~~ILIII 1 2 3 4 5 6 7 8 9 :O IPP~ICAIILi:P The outcome of this process is a matrix of scores for projects X judgecen:s~ "he matrix arrived at can be seen in Table 2, Visual inspection of the matrix indicates the types of evaluation beftf made about each projeci~ For example, it can be inferred that the low s!de~trca~/alcliorated aroma product proposition is seen Is hiving high behavioura! validation, I~~~e target market, long lead time to manufacrurabi:~iy, easy communicability, high external risk and negative Einu:acturer cost impact, only modest return on Investnent, b2: re:Bt!lel~ high commercial applicability. The first s:e):o analysing the relationships in this data in 1 more Ipstes~:ic fashion is to establish correlations of the iollowing types within the matrix: 1, ROu;TO~Ox: in which case we Ire comparing the scoring behaoioar on any one judgement (bcroso 111 the projects), with the scoring behaviour on any other judgement (across all the pr~jec:s]~ Far example, the correlation between the first:wO data rows of our matrix would give us an estimate 01 the degree to which the use of those judgements was similar or not i,e~ whether judgements of degree of Z be~r~ioP:a: validation were similar or different to judgements of size of target mar~e:~ B#Co document for legal Services : Health Clnada II ray 1999 TABLE i P%OSEC; rf'~UhTI3A DATA $~ n el C= ,r 3$ x O ~x jt k ,Z i i $ i: I !~e Ti Z 1 a c~ n ii C ;e ox v~ z i z ,r r 1* ~ n I~ln s f -e rZ 1 ~5 i a $ $ 51 r ~I IJ =~ n i; i *I X r: v m r ;ri ·e H P 0;~0 I~I~:3U~LY HEAT SEALED CIGARETTES ~ u u i ~ u in in r I F1ZL FIA1'OUZ PRO~CIT ~ u u N OI D1 1 10(; SIDEj';~J~.~.~I~L~;L' IORATED ~Ot·ti PSCI1'CT ~ \s o a ul ~o f· m I HOIST S~~~; -C ~1111 C N a:;IA SL!~ (AS A t~~kle S?13Ga PSOPM:TIO::) o m c * CP VI N I UlfRrZ S1I~1 (AS r! LOIJ COST PROPOSIT!OS) In uld N m pi CIGARETTES'I~ROKi ED LIFT' ~IF .. u-c· eo m I C~MPEHSP.:L31E FILTERS c i c i in I ~P in r I r IMODIFIED ~I.Z~jT90ZiSPICZ FI~VOUREI PRO3UCTS c ~3 i P W in ~D ) NICOTINE 0PTIM1SZ3 CICARET?ES ·j · I ; B r i JIlVl\i,i\ i~;~uin, h;uu~u i i runatc'3 Irl~r-nlarn~~rm j rlP 1 TOBACCO COSTZNT CI(I, F: I in I O~ VI * N 3 1AHStIOI~~SD' CIGARETTE c~ I r i P \D I r I * I BICH EXP~;i)E3 TOBACCO eIURE:'IES c ~ o u o DO N ~3 LOi; CD CIGkREJES I i Ilrlrl 1- r A A AIAIP Z r V) ~5 kr)DS 3 E~nO~PZ~s tl a r~ C: b I" f3 BATCo document for Legal Services : Health Canada 19 May 1999 2, COII'~B Te COLUI!1': i?, n~cich case we are comparing the scoring be~ivio~r on any one project (across all ~ct~emcnti) with the scoring Seharlaur an any other project (ac-sss all judee·2c:s;l ~or example, the correlation beiee9n the first t~o data columns of our matrix would give ~s an estimate of the degree to which the projects unde: comparison were judged to be similar or different In character i,e. whether individual crap and full flEtour product projects were seen as relatively similar or different in nature, 31 ROi TO CC~I')IN: in which case we are estimating the extent to which 33:ticular projects correlate, or load high or los, on particular judgement dimensions. This gives us s type of descriptive profile of the nature of the project~ The interpretation of a correlation estimate is s:raig~:fareard, an estimated correlation between two sets of scores er3:esses the degree of similarity or difference between them. correlation cin fall ao~rjere between - i, through O, to ~:, A +I correlation indicates that the profiles of scores ·nde~ comparison are exac:ly the same; a -1 correlation indl~ites that the profiles of scores are exactly inversely oppo~lte to one another [En equally high correlation, but a negative one); whirs; a correlation of O indicates a perfectly random relationship jetwe·e the scores. Clearly in most circumstances correlated relatiocs~igs rill fall somewhere between I~e extremes of ·! to -:, -aOo- The correlated relationships between the judgements derived and used in :~is conference are presented as Table 3: BATCo document for Legal Services : Health Canada 19 May 1999 TABLE 3 CI3RLLhTIO?IS B'Ph~Z:; ~SCE~S~1;;S a a ~ c F·l 1 3 r 3 35zCJ 01 1 rl i U 2 I 2: r E C Z r ; 5; "i: O i; E .13 ~~ i C BE~iOURII B~ID~TIb: (~1,0 +~1 j -,S S ~,2 TARGET ~ii~T I 1+1,0 1-,2 -,3 1 -14 1 -,4 O '~5 IE~ TIME 4,2 +,1 t.5 +.3 O COMyVG~cbGIIITY I I 1 ;,3 ·t,? +,1 E~iRh'AL F(ISK I I I I Itl,O ·1.4 ·t.2 -,f POS, M4fBr~AC'iLIRTSG I i I I I 1+1, O +,I COST IMPACT B.O,I, I I i I I I C3~aCr41 tlPPtIC~I?I::~ I I I I I I li1.0 This information gives interesting insights into the relationships betFeen judgements. Picking out just two of the more notable correlations, we can observe a relatively high negative correlation (-,6) be~~eea 'behaviour~l validation' and 'external risk' indicating the:, in the judgements of these delegates, ~~en hehavioural validation is high, external risk tends to be low and vice versa, Fe observe a high positive correlation (+,7) between 'positive manufacturing cost impact' and 'return on inves~~ent' indicating that the delegates expect a close positive relationship betreen manufacturing cost and return on investment, it is of psrticu:a: interest to e;ramine the correlations of judgements to the oajor judgement of interest to us : COYMERCIdL APPLICBBIIITY. :~ese correlations indicate the ex:ent to C: which particular judgements contribute to this overall perception: h BATCo document for legal Services : Health Canada 19 May 1999 DEGREE Oz CORRELXIO~ TO TEE JUDGE)IIEhT i COUII:FI1CIIL APP1ICIBI1I;Y ~UDGE~!E~T BEHd~lOURSZ YdlIDAT!OX ~,2 TARGET MARI~T 1,5 1EAD TIME O COMMUN~CBBI1~TP EXTERNAL RISK -~5 POS,MANU FAC~U RING COST -,2 IMPACT RETURN ON I~~EST~EKT This information indicates that for these delegates the most po~er:ul contributors to t~e judgement of potential commercial ap~!icabllity of projects are size of target market (a positive relationship), and degree of external risk (a negative relationship), Degree of be~avioural validation is also relatively positively related to com~ercial applicability, and, perhaps suprisingly, positive manufacturing cost impact is relatively negatively related to commercial applicability (indicatlng the expectation that commercially applicable projects cost more in manufacturing terms), -oOo- The correlated relationships bet~een the projects developed during this conference are presented as Table 4: BATCo document for Legal Services : Health Canada 19 #ay 1949 O r 0!r IEi 1 or 1m r rj =I~ F s r:r ~ c 2 t C ilc!31C u ~ r Z r t; I Sim a r j v, r *I- ~ :E .Im m i c O Z rrrl Xlp r;lVila e ~ '- 01 Sr X iClr II It C ~1~;F Z m tolml*l Ilal~ c m n 012 ~ C t: 112~n a r n n o n ,, i, n I~ Om r n c ~l~lcl~i 0 og it P m r: nz ~ cn * rsli a ZX i mi I i I~ al7i i I I~ ii I I I I I im ii I I Iro tcl I I i I 1 1'4 B fl;3!C,'kil~P C'IC~P~:~ES c, mL~ ~~OUR 0 Cr F i f r t~ I[ik' S;3SSSREP~Y~ m bl r Orw : j 1 Ici i o o, HO'IS; S;3F1 z o*t~ SbI~'S: ~-~~'J~T COtr'CPT " O;u*F s:ry: ~~u cosl co:;cai OO*Mc* rO 1·I $ i I I E(O~T I:;D tIFI i CI ;$f~~u + ,' I COZ~~S:TAat~ FILTZ~S CI tuo~Co*mru c ~DIiiI: EENT~OI owSF~:;J;;~ i ,' i OI~TI~SZD NICOTIHE 01 auu00lne*rr r sli0ar CIGARETTE b i $'i " eS ;r ;3 1] NFuoPw b ,i + $ $ ~:O~TSD C!CXRE~TE FrFrrct:~:b~ n HIGB I~13DED I ~ i iii i pi I N k, u I ~ C:C;JZ~~E .0 f. N " N W W;~ I t .+ i IOr; C3 TRODUC: ,, ,w~to:tGo~~ll C C \D BATCo document for Legal Services : Health Canada 19 May 1999 The perceived sim!larity/difference between any pair of projects can be derived fron this information by reading the correlation at the appropriate row/column intersection of the two ~rodecis which it is desired to compare. Illustrating some of the more notable relationships, strong similarities [posirive correlations) in the commercial applicability ch~ncieriseics of the following project pairs cec be seen: CO~PEE;S~TA"D~E ifL:ERS IOR' SrDESTREd~ (1,8) SiiORT CIGd2E;T5 SLIMS - FE~dlE CONCEPT (-,8) IiIGH EXPBNDEC CI~hREITE : 'SLIMS - IOvi COST CONCEPT (;,7) Correspondingly strong differences (negative correlations) in the commercial applicability characteristics of the fellowing project pairs can be seen: SLIMS - LOH' COST CONCEPT LO~ SIDESTREU FRONT END I!~; UOIST SNIFF (-,9] SHORT CIG~aET':E COI~E.USIZTABL~ FILTERS COUPENSI1TAB~i FILTEP,S Slr~S - ~iSIA1E COh'CEPT (-,8) -oOo- The correlated relationships of projects to particular Judgements are presented as Table 51 BATCo document for Legal Senrices : Health Canada 19 May 1999 WLES CORREL;ITIS~S OF PROJECTS TO ~UDCI~2~S " amg r ·e b > 3 0 :3 ;n i II C i ;0 r. !' · a I, m ri 0 n x o p PI" o m z~ ~s E~~~;P5 H~srcene ~~Z [Ce~ " 1 ·1i0 n 0 ) c2iZJ~T~ n cnlrl la r zlxl~l I~ 3/ (0/ Icl IM ~ ~al I i Iri ~ $ n re t* O 01 ;Vli I I i I~ $I icil I I 1 I~ 4 i o I I INDB. h~P C~;I~;T~S N~nf·W~U r i I i I FUtt Fl~lcOUR rvl~nw~w~nw i I I I i i IOF SIDESIIEhY 1'5·01YINOly101 i i I I HOIST S~l'~i ;~IONVIVIWW i i I i I 1 I S!LYS: 13~1LE CO~CE?I C·~GDYlnDslP i i I I I 1 I SLIMS: 106 COST CO~CE!T rO~CJUNUHVI I I FRONT E);D II~T ~o u*wu + I I I I I i CO~efNSd~SIE FI:TEBS ~NU~WU~OI NODIFIED ~ENTHO1 U~NWNNO~VI + i I I I I i I I OPT~IISEI 1IeOT~)r~ 5~*rUWWU~ i i i I I I SBORT CTC.WTTE brb·;~'wl~l i i I I I I1~SIIOR1:SD CIGXRf~~ CnWrr UWD i u I I I HIC2 EXP~h'D~3 CIGhPE~I:i ONU WNU i I I i I I I M~ CO PRODUCT VI U N ·N Cn N W W O c 0: C~o BATCo document for Legal Services : Health Canada 19 May 1999 iech co:~a~ of this table represents a descriptive profile of the relevant projec: against the judgements on which it ~os era!ua:c~. :or excple, examination of the 'optimised c-coiins' column Indicates ~~at this project was perceived to have j:~~ behavio~ral validation, a large target market, msderalel~:ong lead ti,e to mauniecturability, relatively difficult cocan:ca8:li:r a high external risk, intermediate manufacturing cost irr,3acl, noderL~E!B high return on investment and overall, a high cd~unercial applicability, ~ usef~! way of representing information comparing projects is 13 ploi correlations from this Table on a profile diagr~s, for example, comparing 'modlfied menthol' with the 'optimiseci n.co;:ne' project: ~--DEGaZE 01 #RRELATION --3 -1 O ~1 iO~ hHki':515R1L BICE BE~Z.VI~~W i · · I LARGE TARGE; i I ~eR~1 IOSG 1E~ :!Y i '~ I S90R: LZ~O ;II :O ~1~FiC~a I I TO ~IS~'bCT;;- ~ZIIIX i ' I ; I ABIII" D;~iICU:: I II I EAST CD~NIC.;?I1ITY i I COtCrV'h'IUB:L:~: BICB EXIE~;~ I ( ', I LDU ECEiCI~ ~SE: I ·' i R~SR FEC~TfVE ~;U- I ;i I POS;Tlt'i ?U'T:- FiCTjRING QST I .' \ I FAC~U'RI:IC MS; I~~CT I \ I IMpaCT IOk' REIIIR~ ON I ,· I HICB RE;j'a~ C~ i · i INI[EST~ST LOT COH~RCI~ I BICB CO~RCI~L APPI~C~a~i::Y APPL!C1BIL:T~ ----I OPTltlISZD E;C::IhZ L ''''''"' MIDI'IED ~SS31 BATCo documentfor Legal Services : Health Canada 19 May 1999 ·In this acser,,te strengths and weaknesses of particu;;: projects, as evaluated, are graphically illustrated, Ano:~~r Beans of representing information of this sort is to use a:: of r~~se correlations in a principal components analysis oi the :rpe familiar from the DELTA techni~ue~ :~e adva~tage of this approach is that it produces a single representation of all of the relationships between I~e judgeaen:s and t3~ projects on one map~ From this ray of presenting the information we can discern the overall trends within the ~a~a, ~hlch is difficult to achieve by using I·e more detailed correlation tables. Principal co~~onecis analysis works by treating a!! Of t~~ correlation data reviewed so far as though it were SiPplr a collection of angular measurements (which in fact correlations are)~ The statistical method produces a 'best fit' orgacisation all these Il~!es;o produce a two dimensional re~resenta:ion, or nap, of the relationships between judgements and projects, The positions of projects are detsmined in this statistical map 5~ the sun effect of correlations relating then in various degrees of sirenErl or weakness to all other projects and all judgec;ents on which the project was evaluated. The principal coc?onents analysis of the data from this conference appears as Figure i. On this map, judgements appear as dinensi3n lines with positive and negative ends (like the evaluative scales which they represent), the angle between er~ two dimension lines indicates the degree of relat;ons~i~ between those types of judgement, the smaller the eagle, r:e more similar the types of judgement. ~e can see for exe~~le I~at size of targer market and degree of external r:s~ are highly related judgements, whereas return on investment and size of target market are relatively unrelated, BATCo document for Legal Senrices : Health Canada 19 May 1999 FIGURE 1 PSIHZIF~! C2'1?1';3l:S PLOT 0F STRUC~U~EO CIIEBIYITY RESULTS HIGH GOE1'4UNICRSI1IN HIGH RETURN ON IIIVE5T~EHT HIGH' BE~AVIOURAL Y~LIDAiIOn POSITIVE H IGH COlilHE RC:A: g X MANUFACTURING APPLICA3IIIiY n p , B IMPACT HIGH EXTEF~VAL RISK LARGE TARGET MARKET j \ SHORT IEkO iil~f ,a ,12 ,11 LONG LEAD TIME i SMALL TARGET MARKET LOW EXTERNAL RISK NEE~IVE MA;IUiACiilfiING \ / ~ y low COMME RCIAL COST IMPACT APPLICABILITY (9 · IOW 6EHABIOUP,BL VALIOnTIOA 1011 RETU~ ON IN~ESTEll;i 10W COMI~11'NIC~iIL::Y i, INOIV~~U~iLY WRAPFEI;:GARETiES 8. COMPENSATABLE FILTERS 2. FULL FLA~CUR PRODL';; 9, MODIFIED MENTHOL/SPICE PROBUCIS 3, LDW SIOESiRE~IIP~ELJ~~;EO AROF;A 10, NICOTINE OPtIMISEO CIGARETTES 4, MOIST SNUFF 11, SHO RTER LENGTH/REDUCED TOBACCO CONTENT i, ULTRA S;IM (iEkKE CCt;~f;i) 12, 'AMELIORATEO' CIGARETTE 6, ULTRA SLIM (LOU C3Ei C;:;iEPT) 13, HIGH EXPPSIDEO TOBACCO CIGARETTES 7, 'FRONT ESO LIFT' C:;;,:,f;TES 14, 10k' CO CIGARETTES BATCo document for Legal Services : Health Canada 19 May 1999 The perceived simll~~itp or difference of projects tin terms of their co~ercia: epplic~S:lity characteristics) is given simply by the physical proximity of their points on the zap. For example, we can see that low sidestream and compensa~aSle filter projects are judged to have sicllar commercial applications charac:eristlcs, whereas modified menthol and moist snuff projects are clearly perceived to have different char;cterisiics. The predominant features of any particular project will be revelled by the extent to r~ich it locates itself toward the ends of any particular judgement dimension or cluster of dimensions, ~or ex~;ple, sidestream end compens2tab;e filter projects sho~ predocinant festcres of large target m~rkei, high external risk and high commercial applicability, ~RIRC: PAI CO~pON~NTS INTEP.P2ETdTION Inspection of :his p:ot structure inCicates three zones of project classification into which projects tend to segregate tbemselves~ ZONE 1 "GIOBhl STRATEGIC PIIOJ'EGS" Charecterised by: HIGH COM~~ECIAL APPLICABILITY IIIGH BEH~VIO'JRII 1:~LIDATION (EVIOESCE; OF CO~SU~~R li~ED) LaSGE TARG ZT MARhI; But with associated:` HICr, EXTEtSdl RISE: LO~GEP, LE.:3 TIME TO hlAh'UFaC~URABILIT~ -· I BAtCo document for legal Services : Health Canada 19 May 1999 Projects charr!cterised in this re~ are: LOW SIDEST~EdUld)lEiI OP,~TED AP,dYd COMPENSdTa31·E FILT~RS NICOTINE OPt~IISED CIGARETTES Within this project set, 'nicotine opt~mised' cigarettes represents the least risk element and the highest perceived cor~nercial applicability land in fact exhibit the highest leeding on return on i?,vestment). These projects should be regarded as risky but major in terms o: the scope and size of markets affected, ZONE 2 "OPPORTU#ISTIC Pfl03EC"rS" Characterised by: HICH RET'jRY ON IN?EST~3h'T POSITIVE MUUFACTUilIIIG COST I~ACT SBORT LEAD TIIE TO MhN3iACTUBaS:L~TY LOYi EXTEP,~~ RISE; But with associated: SMALL TA.SG iT ~~i~FT Projects characterised in this way are: INOII'IDUAILY WP,APPED CIGARETTES MOIST SNUFF ULTRA SLIMS (FE~ALE CONCEPT) ULTRA SLIMS (LO~ COST CONCEPT) SBORTER LE~GHIREDUCED TOBACCO CO~T3YT IIIGH EXPABOED TOBACCO C!GBR~:~S These projects could be regarded as unprablematic, profitable, opportunistic developments likely to Se restricted in scope to specific markers, C BATCo document for Legal Services : Health Canada 19 May 1999 XOBB 3 'vAlio;riOS PEOJECS" Chnracrerised by: LOI BgBaVIOOB~ V.4LLD:.TION LOe BgTDEl Or !nGStrE~: LOr COY~XIC:SIIITY Projects charcctei!sed in rh!s way are: FULL PLIVOUB pP.(3DUCT 'PBONT PTD liFT' CIC1BETTGS YODIPIED IG~TJO!/SPICE PBODORS The most characteristic feature of zone 3 ;;ojcctr is their current Isck of beta~iours: validation I.e~ they are good ~deaslproduc:s looking for a rationale 13 terms of consu;per needs, The nest ~rgent reluireoent prior to further development of those projects would be appropriate conS~Pe; validation exercises on the concepts~ The sole exception to thir broad classification of project zones Is the 'sre!iorated cigarette' conce3t which positions on the basis of high behev;oaral validation, lorv external ris~ and high return on invest~ent. This ~diosyncratic positiooirg pa~ reflect the fact that this project was presented within the context of its thoroughgoing validation ~ithin the spec!iic context of the Canadian market (see delegate presentations), As a point of interpretation, it should be clearly understood that this classificdtiop Into zones is a relative exercise and that although it is possible to generalise about the characteristics of each zone, it is equally true that particular projects within each tone will exhibit more or less of each of the features going to characterise that zone, --~- --~---e -- BATCo document for Legal Services : Health Canada 19 May 1199 _ i· ~···· : "·;.· · :· ~.. \e ~:· STRUCTUREO CREATIVITY ~.. ~'· ·'R~ i~i~i; CONCLUSIONS i. I ~·-· ·· r~ 1:w· ';r ~ -:·;. ;c~2~ ;·; ·· j.t~ r~t~:; 1 !$L.~. ~I- *" :I; '' .,i ~: ·· ~··- ·· * 13· .i '··I :pr. ~··. i~.- j O O U1 BATCo document for Legal Services : Health Canada 19 May 1999 II ~arketi?~ pn~ 3"Rdllrt InnlirRtinn~ nrnfPc~innsle RnnRrpntle -~~- -~----~ ·~rr----·--··- r·-------··-·- -rr-'*"'~~ achieve ~iS~ levels Of synergy in creativity sessions structured in such a Fap as to produce discip;i~ed considert:ion of the marketing and technical feasibility of project le~ds, Comparisons of the judgements used by Marketing end 5y RED professionals in dis:inguisbing commercially applicable projects indicates only marginal differences beneen these groups. 2. Marketing professionals are likely to be relatively more ·r sensitive to risks involved in certain project propositions with regard to external. backlash from Governmental and Competitor sources~ 31 The s~nciure of judgements contributing most clearly to : perceived probability of commercial application includes considerations of bebavioura~ validation (evidence of consumer need), external, risk,, and size of target market, : jia~· The highest probability of successful commercial application is associated rilh high levels of all of these attributes. 4, The por o!io cf projects generated in this conference can be classified in terms of: a) "GlOj~l STP,aTEGIC PP,OJECTS" representing propositions with the nosr un:versal· relev'ance and hence potential seals of tarket, least market specificity, and most risk of external response. b) "OPPO~T~~ISlrC PROJECTS" representing unp;oblematic, profitable propositions which are likely, however, to be restricted in scale to specific markets, c) "PALIDBTIO~ PROJE~I~S" representing well elaborated product propositions in the absence of any behavi6ural valijat-o;l (evfdence of consumer need)~ Further devel6pnent of validation projects should pend appropriz:p consumer validation ezercises~ BATCo document for Legal Services : Health Canada 19 May 1999 .'~1.· "' ·~ .i 5, This type of exercise should not be confused airh detailed feasibility exercises. Tbe intention is to prdride ;·c:· appropriate leeds for a subsequent in-depth feasibility programme conducted bg assigned Project Managers. 6, Project Selection and Structured Creativity exercises apparently offer a relatively systematic and time effective route to genera;ing and evaluating project propositions against the criterion o! Commercial Applicab~liip~ It is anticipated that the exercise of such techniques within keg Operating Coapenies ~ould add a local market perspective to our current, less market specific level of understanding, L*\' !~· :·c~-~ ~-~5~i· 8. B 1~ a .. ·:~· BATCo document for Legal Senices , Health Canada 19 May 1999 APPENDIX I pDC SICATEGIC PROJECT SELECTION JLDFEIIENIPL S~ BATCo document for Legal Services : Health Canada 19 May 1999 A, LONG Ad5Gi P ~~X:~EYT The timescale between the currec~ point in time and the point at which the project is co=3leie (deflned as the point at ~hicb one could reasonably expect to malte a viable prod~c:)~ B, DEFENSIVE ii OPFETSIVE A measure of hoa we are reacting to external pressure as contrasted wi~b how far we are taking action independent of external pressures, e~g~: STRATEGIC STRATEGIC ST~ITEG!C STRATEGIC ih'FaeMlrl3~) naoal ·~ lao~l9TIor ~PP:DGb BASED BASED BASED BASES DEFENSE DEFENSE ATTACK ATTACIi C, TECHNOLOGY ?US~ V COM~EECIAL PUII The distinction between projects which have origins within GR&DC end may De dominated bB what we can do, and those which have targets emerging from commercial activity and may be dominated by considerations of what se should do, D, 10W V HIGH COESU~ER RELEVANCE The degree to which a project is informed by or directed by any understanding of consumer needslrequirements. E, LO~ V HIGH 8RURTHRDUCH E~OUIREIEST The extent to which the perceived required technology is available~ F, I~FORMATIOI ~ PEODOCT ORiS~T$TiO~ Activity aimed at producing information about the product as contrasted aith activity aimed at changing the product, - ----~--~- BATCo document for LegalServices : Health Canada l9 May 1999 G. LOX V HIGH TECESICALICOST FZdSIB~IITY d measure of litelihoad of uptake in the operating (specifica!ly manufacturing) environment, K, LESS ~ ~O~E CREATIVE OPPORTORI~Y The degree of scope or lack of constrain: in ter~s of erticipaied number of opportunities for new prodrc:s~ I, 10H' V HIGH CLARITY OF OBJECTIVE The degree of specification or gue~tification of parameters of the project within an agreed end tar~et~ J, 101 V HIGH COMMERCIAL CO~~UNIChBIIITY Ability and:'or freedom to put over the project outcome nessage free of constraints in teres of consumer coaprehensioc and legislative barrierso i, LOU ~ HIGH EVIDENCED CERTAINTY OF SUCCESS d measure of the extent of prior commercial ~at~ii:ding or precedent, I, :OU' V HIGH BIACRITUDE OF BUSINESS T~?ACT On the assumption of project success - a measure of anticipated commercial value, Y, 10~ V HIGH CONTRIBUTION TO PROFIT OPTIMISIZ~ION The extent to which the project is seen to con:ribute to achieving optimisationlimprovemenl of profit from the current commercial scenario~ (S LO~ V HIGH CO~~ERCIAL APPI!CaBILIT" [kster Construct) Q BATCo document for Legal Services : Health Canada 19 May 1999 APPENDIX ii IOTAL_IHI~VID(IAl COMMERCIAL APPL!CABILLIY dUDCErE~TS ERIIM_ STRUCULR~n.~EA~~ IIY IN'IERVLEWS BATCo document for Legal Services : Health Canada 19 May 1999 RVIE# IN~RVLEW1 KNOWN RANUF~~TU~~3111TY V UNKNOWN MdNUF~CTU~~BII1TY REALISTIC SE1!INE PRICE UNK~OHN SELLING PRICE LOn DEVELOP~I~T COST V HIGH DEVELOP~EST COST I~MED[AiE Pr:~CTIC~I \, tills TERR (SPECULA:[:'E) IMPLEMENT~IIOS APP1ICABLE i~ DEcE1~TED V APPlltAB1E TO DEYElO:iH; MARKETS MAXKESS UNIVERSAL ~"~iB~ V LIMITED SEGMENT APPE-I CONTH~ViffSI~L v UNCONTROVERSIAL IOW CONCEPT COM~~~I~~BIIITY Y HIGH CDNCEPT CO~MUSIC~aillTY Hit~ DEFINED tO~S~~E4 V 10W DEFINED CONSUMES OPPO~TUNiTY OPPDRTUNITY HIGH PE~FII C3N;iiBUilON V IOW PROFIT COHTRI~UTIO~ HIGH HEALS~ 2EkSflRANCE V 10W HEALTH RE~SSO~kNCE PERCEIVED 6nGD V~IUE FOR V PERCEIVEU POOH VALUE ,"DR MONEY MONEY -- BATCo document for Legal Senrices : Health Canada 19 May 1999 INVRVIEls 2 HIGH P20FIT ~OTENlrAL V LOW PROFIT POIE~TI~L IMMEDIATE MARKET RELEVANCE V kNTICIPdlEO MARKET RELEVANtF. CONCRETE CONSUMER ~EEU V PERCEIVED CD~SUMER BENEFIT EVIDE~CE PROMPTED SPECULATION PROI~IPTED HIGH ISGHNOLOSY/RESOURCE V LO~ TECHNULOEYIRESOURtE DEMAND DEMAND B1EH C~NSU~ER COMMUNICABILITY V LOW CONSUM:~ COM~U~ICAYI1I~Y IOU CO~POR4T~ KUDOS V HIGH CORPORATE KUDOS LOn S"IN-OFF PROBABILITY V HIGH SPIN-OFF PROBABILITY --- · BA~Co document for Legal Services : Health Canada 19 May 1999 INTERVIEli 3 DEMA~~I~G LEAST BEHAYlOoR v DEMANDING MOST BEHAVIOUR CHANGE C~kHEi LARGE SCALE BUSINESS V SMALL SCALE BUSINESS IMPACT IMPACT H!GH POTE~iiAL S~I#-OFF IIW POiENT~AL SPIN-OFF HIGH PREii~EeT fOR SUCCESS v I~w PRECEDENT FOR SUCCESS H~G3 SR~KI~S g ~EkliH V LOW SMOKING g HEALTH RELEVANCE RELEVANCE MARKET PU',! · Y TECHNOLOGY PUSH HI5h CONSU~E~ O~IE~TkTIDN V LOW CO~SUnER OBIENTBTIC~ I~~ "RBFII [BNi~lB2TIDN V ~iG~ PROFIT CS~TRIBUTI~N PRODUCT ATTACK Y SiffATESiC DEFENSE -- BATCo document for Legal Services : Health Canada 19 May 1999 INTERVIEW ~ SHORT TERM FEASIBILITY V LONG TERM FEASIBILITY DEFINED CONSUMER NEED1 V GENERIC NEEDIA~ORPHOUS SEGMENT TARGET ESTABLISHED BEHAVIOUR MOOE~ V NEW BEHAVIOURAL HABIT WITHIN BASE TESH~~IOGY V OUTSIDE 9ASE TECHNOL06Y RISK MI~IMISAIIOM Y RISK TOLERANCE HIGH RETURN ON TOTAL v IOw RETURN os TOTAL ASSET HEQUIRE~ENT ASSET REQUIR~ENT HIGH CONSUMER SALIE~GE V LOW CONSUMER SALIENCE LOW CONSUMEH tOMnU~ICA~IIITI V HIGH CO~SU~ER COMHUNI~ABI1IIY POSITIVE PRECEDENT V NEGATIVE PRECEDENT LOW PROFIT ~PTiMIS~TI~~ V HIGH PROFIT OPTIMISATION BATCo document for Legal Serrices : Health Canada 19 May 1999 rNiiRVIEIIE HIGH EVIDENCE Oi MARKET V LOW EVIDENCE OF MARKET OPPORiUNIIY OPPDRT~NITY MORALIETalC~L FREEDOM Y MO~ALIETHICAl LIMITAT1ONS IMPROVE~ENIO~ EST63LISHED V KEW OPPORTUNITY GAP SIIUkT~DN LIMITED IMPACT V BROADER IMPACT (MARIET SPECI'IC) (GAOUP RELEVANT) PRDTECilON 01 MARKET SHARE V VO1uME BUI1DIBG CO~SURE~ BENEFIT Y ·dANUFACiURER BENEFIT BATCo document far Legal Services : Health Canada 19 May 1999 IG~IIVIEk'4 CONViNIIONAI TECHNOLOGY V UNCONVENTIONAL TECHNOLOGY SHORT DEVELOPMENT TIME v LOFIG DEVELUPMENT TIME EVIDENCEI~E~A~IOURAL FACT V SUPPCSIT1ONIA;TITUDINAL STANCE EASY TECHNICAL RE41ISATION DIFFICULT TECHNICAL HEA1ISAilON LARGE POTENTIAL MARKET V SMALL POTENTIAL MARKET BREADTH OF IMPACT V LIMITED SEGMENT APPEAL ~1EH CON;RISUTIO~ V LOW CONTRIaUTION COMMERCIA! DEMAND V SELF JUSTIFYING TECHNOLOGY HIGH COE]SUMER RELEVANCE V LOU GOHSOAEA RELEVANCE INCREMENTAL CANNIBALISIN6 ---- -- BATCo document for Legal Services : Health Canada 19 May 1999 IN?ERVIEw 7 ~I6~ CERTAINTY OF EVIDENCE V LOG( CERTAINTY OF EVIDENCE OF A NEED OF A NEED LOW HISK Y i~lGH RISK POTE~TIA1LY REDUCES INDUSTRY V POTENTI~11Y INCREASES INDUSTRY SI~E SI~E UNET~ICdL V ETHICAL IOWE~ ~ET NEW SHARE V HIGHER ~ET NEW SHARE - BATCa document for Legal Services : Health Canada 19 May 1999 INTE~RVIEw 8 VIEW 8 IDENTIFIABLE SEGMENT TARGET UNIDENTIFI~BLE SE6NENT TARGET FA~!1IA~ V A1IEN PERCEIVEU NEEDS g RTTIIUDES V CONCRETE NEEDS g Bi~A~IOUR ~ENERALISED CB~SUME~ V SPECIFIC SE~ME~i APPEAL CATCHMENT REMOTE COM~UNIC~IIO~ V 'SYKP~THETIC' COMMU~IC~TION iOw PROFIT OPTI~IS~T!ON HIGH PROFIT OPTIRIS~TION LO~ RATIO OF CONTRCLIEO RISK V HiG~ RATIO OF CONT~D1LED RISK MANUFACTURER BENE'IT V CDNSU~ER BENEFIT BATCo document far Legal Services : Health Canada 19 May 1999