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  1. 1. Management of Technology (OM476) Managing the NPD Process March 1, 2006 S. Fisher
  2. 2. Agenda <ul><li>30,000 new consumer products are introduced annually, and over 90% of them fail (Christensen, Cook and Hall, 2005, HBR) </li></ul><ul><li>What’s wrong with the new product development (NPD) process? What are the challenges? How can firms improve? </li></ul><ul><li>Mid-semester feedback </li></ul>
  3. 3. In-class writing <ul><li>List at least two stakeholder groups who have input on NPD in the auto industry. </li></ul><ul><li>What can each of these stakeholders offer to the NPD process? </li></ul>
  4. 4. Auto industry: Innovation sources Source : Center for Automotive Research (March 2005). Automotive Product Design and Development Delphi. Retrieved from
  5. 5. NPD Process <ul><li>Three primary objectives </li></ul><ul><ul><li>Maximizing fit with customer requirements </li></ul></ul><ul><ul><li>Minimizing development cycle time </li></ul></ul><ul><ul><li>Controlling development costs </li></ul></ul><ul><li>How important is each of these to the firm’s ability to make money on the new technology? </li></ul><ul><ul><li>How much can we sell? </li></ul></ul><ul><ul><li>At what cost to the firm? </li></ul></ul>
  6. 6. Maximizing customer fit <ul><li>Involving customers in NPD </li></ul><ul><li>Getting feedback on failed products </li></ul><ul><ul><li>First Palm product, the Zoomer, failed. Turned out that customers wanted connectivity with their computers, leading to synchronization . </li></ul></ul><ul><li>Observation </li></ul><ul><li>Beta testing </li></ul><ul><ul><li>Google </li></ul></ul><ul><ul><li>But are lead users representative of later user groups? </li></ul></ul>
  7. 7. Minimizing development cycle time <ul><li>Related to first mover advantages </li></ul><ul><li>Product life cycles generally becoming shorter </li></ul><ul><li>Shorter cycles allow a company to </li></ul><ul><ul><li>Respond to consumer needs/desires, competitor designs </li></ul></ul><ul><ul><li>Correct mistakes </li></ul></ul><ul><li>Downsides of short cycle time? </li></ul>
  8. 8. Development cycle time
  9. 9. Development costs <ul><li>Break-even analysis </li></ul><ul><li>Example - Honda Today </li></ul><ul><li>For Option 3 (increase both bore and stroke), how many cars would you have to sell in order to recoup the R&D costs? </li></ul><ul><ul><li>Per car profit = 25,600 yen </li></ul></ul><ul><ul><li>1.5 billion yen additional investment </li></ul></ul><ul><ul><li>Need to sell 59,000 additional cars </li></ul></ul><ul><ul><li>In 1987, sold 100,660 Todays </li></ul></ul>
  10. 10. Sequential vs. parallel <ul><li>Benefits of partly parallel process? Potential drawbacks? </li></ul><ul><li>Outsourcing of development </li></ul><ul><li>Another approach to the same goal: using cross-functional teams – will discuss more in Chapter 12 </li></ul>
  11. 11. Involving the supply chain <ul><li>Firm’s supply chain managers </li></ul><ul><ul><li>How hard will it be to get the needed components at the right time? </li></ul></ul><ul><ul><li>Assemble in-house or use modular delivery? </li></ul></ul><ul><ul><li>Logistical and cost implications of absorbing warranty costs, reverse supply chain </li></ul></ul><ul><li>Suppliers </li></ul><ul><ul><li>Tapping into knowledge base for ideas on products or production process </li></ul></ul><ul><ul><li>Can help with overall cost savings </li></ul></ul>
  12. 12. Product Design and Development for Auto Interiors
  13. 13. Product Design and Development for Body/Chassis/Suspension
  14. 14. Project champions <ul><li>Commonly used, but impact on project success is debatable </li></ul><ul><ul><li>Appears unrelated to success in the marketplace </li></ul></ul><ul><ul><li>Does appear to enhance odds of finishing the project – is this a good thing? </li></ul></ul>
  15. 15. For next class <ul><li>Finish reading chapter 11 (pages 224-236) </li></ul><ul><ul><li>NPD tools, measuring performance </li></ul></ul><ul><ul><li>Will also discuss technology acceptance model </li></ul></ul><ul><li>On Wed. March 8 </li></ul><ul><ul><li>Eli Lilly case </li></ul></ul><ul><ul><li>Team 5 presenting </li></ul></ul><ul><ul><li>Team 1 review/questions </li></ul></ul><ul><ul><li>All others – exec summary </li></ul></ul>
  16. 16. Mid-semester feedback <ul><li>Anonymous </li></ul><ul><li>What do you like about the class so far? What should we keep doing? </li></ul><ul><li>How can we improve the class for the remainder of the semester? </li></ul>