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New Product Development

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New Product Development New Product Development Presentation Transcript

  • New Product Development.
    NPD
  • Overview
  • The Basic New Product Process
    The Basic New Product Process
    Phase 1: Opportunity Identification/Selection
    Phase 1: Opportunity Identification/Selection
    Phase 2: Concept Generation
    Phase 2: Concept Generation
    Phase 3: Concept/Project Evaluation
    Phase 3: Concept/Project Evaluation
    Phase 4: Development
    Phase 4: Development
    Phase 5:Launch
    Phase 5: Launch
  • NPI Process Stages…
    The simultaneous engineering and concurrence of activities in the development of a new product:
    In the development of a product, several activities happen simultaneously in numerous functions, departments and locations across the organization.
    These activities usually have some kind of a relationship or dependency with another activity happening elsewhere. This means that the outcome of activity in one function could have a bearing on one or more activities happening concurrently at another location or function or on an activity at a different point of time.
    The simultaneous engineering and concurrence of activities in the development of a new product:
  • Making sure every new product contributes towards the overall business goals of the company:
    Making sure every new product contributes towards the overall business goals of the company:
  • Handling multiple projects at any given point in time:
  • The Stage Or (Phase-Gate Process):
  • Stage-Gate System
    Stage-Gate System
    Detailed
    Investigation
    (Business
    Case)
    Preparation
    Full
    Production
    & Market
    Launch
    Preliminary
    Assessment
    Testing &
    Validation
    Development
    Gate
    Gate
    Gate
    Gate
    Gate
    Stage
    Stage
    Stage
    Stage
    Stage
    Initial
    Screen
    Second
    Screen
    Decision
    on
    Business
    Case
    Post-
    Develop-
    ment
    Review
    Pre-Comm-
    cialization
    Business
    Analysis
  • Product Life Cycles
    Decline
    Maturity
  • Product Life Cycles
    Product Life Cycles
    PRODUCT DEVELOPMENT:
    Product Development: Stages
    New ideas/possible inventions
    Market analysis – is it wanted? Can it be produced at a profit? Who is it likely to be aimed at?
    Product Development and refinement
    Test Marketing – possibly local/regional
    Analysis of test marketing results and amendment of product/production process
    Preparations for launch – publicity, marketing campaign
  • Product Life Cycles
    Product Life Cycles
    INTRODUCTION/LAUNCH:
    Introduction/Launch:
    Advertising and promotion campaigns
    Target campaign at specific audience?
    Monitor initial sales
    Maximise publicity
    High cost/low sales
    Length of time – type of product
  • Product Life Cycles
    Product Life Cycles
    Growth:
    Increased consumer awareness
    Sales rise
    Revenues increase
    Costs - fixed costs/variable costs, profits may be made
    Monitor market – competitors reaction?
    GROWTH:
  • Product Life Cycles
    Product Life Cycles
    MATURITY:
    Maturity:
    Sales reach peak
    Cost of supporting the product declines
    Ratio of revenue to cost high
    Sales growth likely to be low
    Market share may be high
    Competition likely to be greater
    Price elasticity of demand?
    Monitor market – changes/amendments/new strategies?
  • Product Life Cycles
    Product Life Cycles
    Saturation:
    New entrants likely to mean market is ‘flooded’
    Necessity to develop new strategies becomes more pressing:
    Searching out new markets:
    Linking to changing fashions
    Seeking new or exploiting market segments
    Linking to joint ventures – media/music, etc.
    Developing new uses
    Focus on adapting the product
    Re-packaging or format
    Improving the standard or quality
    Developing the product range
    SATURATION:
  • Product Life Cycles
    Product Life Cycles
    DECLINE AND WITHDRAWL:
    Decline and Withdrawal:
    Product outlives/outgrows its usefulness/value
    Fashions change
    Technology changes
    Sales decline
    Cost of supporting starts to rise too far
    Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?
  • Product Life Cycles:
    Product Life Cycles
    Development
    Growth
    Maturity
    Decline
    Introduction
    Saturation
    Sales
    Time
  • What Is a New Product?
    What Is a New Product?
    New-to-the-World Products
    Polaroid camera, in-line skates, Kevlar, word-processing software
    New Category Entries
    Hewlett-Packard PCs, Hallmark gift items, Discover Card
    Additions to Product Lines
    line extensions
    Product Improvements
    frozen yogurt, Miller Lite, Windows 98, plain-paper fax
    Re-positionings
    Arm & Hammer baking soda
  • Types of NPD Projects:
    Types of NPD Projects:
    20%
    New product
    lines (e.g. AT&T
    Universal Card)
    10%
    High
    New-to-the-world
    (e.g. laser printer)
    26%
    26%
    Additions to existing
    product line (e.g. Bud light)
    Newness to the company
    Revisions/improvement to
    existing products (e.g. MS Excel ‘00)
    11%
    7%
    Cost reductions (e.g. Low-end PC)
    Repositionings (e.g. A&H Deodorizer)
    Low
    Newness to the market
    Low
    High
    Source: New Products Management for the 1980’s (New York: Booz, Allen &Hamilton, 1982
  • What Is a Successful New Product?
    Although you may hear much higher percentages, careful
    studies supported by research evidence suggest that about
    40% of new products fail -- somewhat higher for consumer
    products, somewhat lower for business-to-business products.
  • Classic Brand Names>>
    Budweiser
    Ivory
    Coca-Cola
    Maxwell House
    Kodak
    General Electric
    Steinway
    Wrigley
    Kleenex
    Waterford
    L.L. Bean
    Ford
    John Deere
    Maytag
    JCPenney
    Sears
    Colgate
    Hershey
    Gillette
    Ticonderoga
  • Quality
    Value
    Time
    Cost
    The Conflicting Masters of New Products Management:
    Three inputs to the new products process: the right quality product, at the right time, and at the right cost.
    These conflict with each other but may have synergies too.
    Issue: how to optimize these relationships in a new product situation.
  • Challenges in New Product Development:
    • Failure occurs frequently
    - Studies have shown that 40%-45% of
    NPD projects introduced to the market fail
    • Inefficiencies are pervasive*
    - Only 59% of products intro’ed were successful
    - Only 6.6 new product ideas lead to 1 success
    - More innovative projects took 23.8 mos.
    • Very expensive
    - Tens of $millions to several $billions
    * 1995 PDMA Best Practices Survey
  • Market Uncertainty:
    Market Uncertainty:
    • Consumer fear, uncertainty, and doubt (FUD)
    • Customer needs change rapidly and
    unpredictably
    • Customer anxiety over the lack of standards
    and dominant design
    • Uncertainty over the pace of adoption
    • Uncertainty over/inability to forecast market size
  • Technology Uncertainty:
    Technology Uncertainty:
    • Uncertainty over whether the new innovation
    will function as promised
    • Uncertainty over timetable for NPD
    • Ambiguity over whether the supplier will be able
    to fix customer problems with the technology
    • Concerns over unanticipated/unintended
    consequences
    • Concerns over obsolescence
  • Competitive Uncertainty:
    Competitive Uncertainty
    • Uncertainty over who will be future competitors
    • Uncertainty over competitor’s strategies
    • Uncertainty over product form competition
    (competition between product classes vs.
    between different brands of the same product)
  • NPD Myths
    First to market wins!
    Company reputation, a strong brand name and a good selling effort will make almost any new product a success.
    Having a low price is critical to winning.
  • Key Reasons for Failure
    Key Reasons for Failure:
    • Market too small
    • Poor fit with company’s strengths
    • No real benefit for customer
    • Not new/not different product
    • Poor competitive positioning
    • Poor timing of product introduction
  • Key Reasons for Failure (cont.)
    Key Reasons for Failure (cont.)
    • Lack of coordination across functional areas
    • Organizational problems (e.g. conflict,
    communication, top management support)
    • Inaccurate forecasts
    • Inadequate support by channel
    • Market changes in customer tastes
    • Competitive response to new product
    • Major shifts in technology
  • Not All New Products Are Planned:
    Microwave ovens
    Aspartame (NutraSweet)
    ScotchGard fabric protector
    Teflon
    Penicillin
    X-rays
    Dynamite
    In each case, an accidental discovery -- but someone knew
    they had something when they saw it!