Challenges to new product development file

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Challenges to new product development file

  1. 1. CHALLENGES TO NEW PRODUCT DEVELOPMENT CHALLENGES TO NEW PRODUCT DEVELOPMENTH ow does one make a successful product such as an iPad, an app, a drug, or a widget? You might think that companies start with an idea about a product, something that seems cool or somehow promising. They then build a prototype to prove the conceptthat the product can indeed be built or made. And then they make more products and sell them.If only it were that easy!Unfortunately, products need a lot of work beforethey actually sell. The expected demand may turnout to not be there; the price might be too high; theproduct might be clunky; or there might be regulatory hurdles.Much of that work is done in product development. Because product development isunderestimated, most people think that the most important part of innovation is invention, theglamorous moment where a genius thinks of something new in a flash. But in reality ideas are adime a dozen whereas product development is the hard slog that really makes a difference.NEW PRODUCT DEVELOPMENTIn business and engineering, new product development (NPD) is the complete process ofbringing a new product to market. A product is a set of benefits offered for exchange and can betangible (that is, something physical you can touch) or intangible (like a service, experience, orbelief). There are two parallel paths involved in the NPD process: one involves the ideageneration, product design and detail engineering; the other involves market researchand marketing analysis. Companies typically see new product development as the first stage ingenerating and commercializing new product within the overall strategic process of product lifecycle management used to maintain or grow their market share.
  2. 2. CHALLENGES TO NEW PRODUCT DEVELOPMENTSTAGES IN NEW PRODUCT DEVELOPMENT 1. Idea Generation is often called the "fuzzy front end" of the NPD process.Ideas for new products can be obtained from basic research using a SWOT analysis (Strengths,Weaknesses, Opportunities & Threats). Market and consumer trends, companys R&D Dept.,competitors, focus groups, employees, salespeople, corporate spies, trade shows, or ethnographicdiscovery methods (searching for user patterns and habits) may also be used to get an insight intonew product lines or product features. Idea Generation or Brainstorming of new product, service,or store concepts - idea generation techniques can begin when you have done yourOPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase (shown in thenext development step). 2. Idea ScreeningThe object is to eliminate unsound concepts prior to devoting resources to them. The screenersshould ask several questions:  Will the customer in the target market benefit from the product?  What is the size and growth forecasts of the market segment / target market?  What is the current or expected competitive pressure for the product idea?  What are the industry sales and market trends the product idea is based on?  Is it technically feasible to manufacture the product?  Will the product be profitable when manufactured and delivered to the customer at the target price? 3. Concept Development and Testing Develop the marketing and engineering details. Investigate intellectual property issues and search patent databases  Who is the target market and who is the decision maker in the purchasing process?  What product features must the product incorporate?  What benefits will the product provide?  How will consumers react to the product?
  3. 3. CHALLENGES TO NEW PRODUCT DEVELOPMENT  How will the product be produced most cost effectively?4. Business Analysis Estimate likely selling price based upon competition and customer feedback. Estimate sales volume based upon size of market. Estimate profitability and break-even point.5. Beta Testing and Market Testing  Produce a physical prototype or mock-up  Test the product (and its packaging) in typical usage situations  Conduct focus group customer interviews or introduce at trade show  Make adjustments where necessary  Produce an initial run of the product and sell it in a test market area to determine customer acceptance6. Technical Implementation  New program initiation  Finalize Quality management system  Resource estimation  Requirement publication  Publish technical communications such as data sheets  Contingencies - what-if planning7. New Product Pricing  Impact of new product on the entire product portfolio.  Value Analysis (internal & external).  Competition and alternative competitive technologies.
  4. 4. CHALLENGES TO NEW PRODUCT DEVELOPMENTCHALLENGES TO NEW PRODUCT DEVELOPMENT 1. Global competition 2. Time 3. Market potential 4. Technological change 5. Distribution 6. New features 7. Price 8. Critical unmet needs 9. Promotion 10. Resistance To Change 11. Market size 1. GLOBAL COMPETITIONGlobal competition is often a major factor impacting the challenges of new productdevelopment. Since the playing field is large and diverse, often spanning the globe, it may bevery difficult for companies to gather intelligence on competitors. A company may investheavily in a new product, yet be unaware that an overseas competitor is set to release asimilar product imminently. As a result, shepherding a new product from concept to market isoften done under intense time pressure, as product developers attempt to bring the product tomarket ahead of their competition. Mahindra & Mahindra scoredits first SUV hit with bolero in 2000. Buildingon this success, in 2002 it launched theScorpio, a model that signalled M & M hadfinally achieved the right mix of design, power,and price. Not it was a looker and aperformer; it cost less than its rivals. TheXylo, launched in 2009 and the XUV500 in2011 have helped M&M consolidate its position.
  5. 5. CHALLENGES TO NEW PRODUCT DEVELOPMENT 2. TIMEThe companies today are facing time as one of the critical challenges in new product challenge.Introducing the new product at the right time reduces the ambiguity about the failure of theproduct. Giving the market a product at a time when there the need for such a product/service isnot required is surely a planned way to head for the edge. Spanish apparel brand ZARA takes just two weeks to create a new productline out of high street fashion design and ship it to stores making it the world‟s most popular„fast fashion‟ brand. Zara has replicated a model that has worked for it globally - creatingaffordable, copycat versions of the latest fashions or designer-wear and making themavailable to shoppers indoublequick time. Zara is knownfor its fresh fashion deliveryevery week. Their weeklydelivery supply chain is thebest in the world. 3. MARKET POTENTIAL A company needs to know their current and future competitors. In today’seconomic climate only two products will be successful in any given market. Unless your productis far superior to your competition, you will not be able to enter a market successfully or retainyour leadership in the market. While it is initially fine to get to know your competition fromsearching online, it cannot replace feedback from customers who use the product. Knowing yourfuture competitors will help you to develop a strategy to retain your competitive advantage. The social media network Facebook has taken the world by storm since itwas introduced to the web in 2004. The Harvard student Mark Zuckerberg had no way ofknowing how quickly and readily accepted his social networking site would be. An app, known
  6. 6. CHALLENGES TO NEW PRODUCT DEVELOPMENT as Instagram, was developed to make photo-sharing easier and quicker for users. Not only could users share their photos quickly, but they could edit them and add special effects to their photos before sharing them. With 1 million iPhone and Android users being added each and every day, Facebook saw Instagram as its fastest growing competitor and decided to take control before itbecame a problem for Facebook. Facebook acquired Instagram for $ 1 billion which was not aneasy or cheap process, but it eliminated the stress of a future competitor, or even worse,the app being acquired by an already powerful competitor such as Google or Twitter. 4. TECNOLOGICAL CHANGERapid advancement of technology may be considered by many to be among the top challenges ofnew product development. A technological arms race may put product developers in a precariousposition of uncertainty. Product developers may not know what the next development might be.If a firm chooses a pathway to creating functionality using a form of technology that may besoon obsolete, the company’s investors could lose a sizable investment. Without question, nearly everyone believes the equation Apple =Innovation is a fundamental truth.Starting from the first Macintosh to the ipod,ipad, iphone , the list is still growing and apple hastime again proved that innovation is the ultimatesuccess of a new product. That‟s why the companystands out of the crowd when it comes to itsinnovation. The company is a leader in producing
  7. 7. CHALLENGES TO NEW PRODUCT DEVELOPMENTinnovating products and amazing the customers and making them think that this is it,but not for Apple. This year, Apple will spend $10 billion investing in its futureinnovations. The company is ranked number 5 in The World‟s Most InnovativeCompanies as per the Forbes list. 5. DISTRIBUTIONWhos going to sell the product? Can you use the same distribution channels you currently use?Can you use the same independent representatives or sales force? Is there sufficient salespotential in the new product to convince a distributor, retailer, or agent to take on the new line?There are significant up-front selling costs involved in introducing new products. Everyone inthe channel wants some assurance that the investment of time and money will be recovered. Taking the first step towards its long- awaited entry into India, US coffee chain Starbucks on Thursday said it has signed a pact with Tata group firm Tata Coffee for a possible alliance that could include retail operations and sourcing. Starbucks Coffee Company and Tata Coffee signed a non-binding Memorandum of Understanding (MoU) to collaborate in sourcing of coffee beans and roasting facilities, relating to Starbucks entering retail operations in India initially. The collaboration would also explore other Asian countries over a period of time. The twocompanies will also collaborate on the promotion of responsible agronomy practices,including training for local farmers, technicians and agronomists, to improve theircoffee-growing and milling skills. The brand‟s ranking is 54th in the most powerfulbrands of the world.
  8. 8. CHALLENGES TO NEW PRODUCT DEVELOPMENT 6. NEW FEATURESCompetitive advantage needs to be articulated to your customers: how does the product (orattributes of the product) meet your customers’ unmet need that no other product can. This is thereason why customers will use your product over any other product. Knowing your competitionwill validate or invalidate your competitive advantage and potential market leadership. Adding new features can increase your overall product value andconsequently, increase your market share. What makes new product development different fromproduct development? While new product development can be revolutionary, productdevelopment (i.e. adding new features) is an evolutionary process. Google is a leader in both areas. Thesearch giant develops revolutionary products (i.e.new product development) and finds ways ofimproving upon them (i.e. product development).Gmail is one of many Google products thatillustrate this point. Once Google mastered theend product, the search giant was able to add new features to increase theproducts overall value. For instance, enables users to make large changes, such asadding a customized inbox skin or SMS through Gmail chat, and small adjustments,such as YouTube e-mail previews. The company is ranked 7th in the most innovativecompany. 7. CRITICAL UNMET NEEDSStatistics on the success rates of new products show that for every four new products that enterdevelopment, only one becomes a commercial success. Research by Calantone and Coopershows that the number one reason for a new product to fail is the lack of attention paid to the realneeds and wants of the marketplace.There are three key elements to meeting a customer’s need when developing new products orservices.
  9. 9. CHALLENGES TO NEW PRODUCT DEVELOPMENTDesirability: the new product or service must be desirable, i.e. a person wants to use itPurpose: the new product or service must have a useful purpose, i.e. a person will use itUser Experience: the new product or service must provide customer satisfaction, i.e. a person ishappy using it.When creating and designing a new product or service it is important to consider the use of the product (what does the product do), the level of usability of the product (how does it work, can it be used comfortably) and the meaning that the product conveys. Considering that the Men cosmetic segment was still untouched in India and thinking of a fairness cream as a unmet need of the customers EMAMI introduced the fair and handsome cream particularly targeting the men consumers. The brand has rightly positioned itself in the new segment though it now faces competition from Vaseline and Garnier. Though communications of this type have raised criticisms from some sectors of the society arguing that fairness of skin implies better acceptability, themarket is growing by over 10% per annum. 8. MARKET SIZEIt is also important to keep an eye on the market size as well as the market potential for theproduct in meeting the business goals of the company. The last thing you want to find out is thatthere is no market for the product or that the customer isn’t buying the product. In addition tomeeting a critical unmet need you need to be in a market where you sell a significant amount ofproduct to develop more products and expand your business. It often makes sense to outsource tosomeone who can determine the size of the market and the market potential for the product inmeeting the business goals of the company through market research and talking to potentialcustomers.
  10. 10. CHALLENGES TO NEW PRODUCT DEVELOPMENT A secret new product created by therenowned inventor Dean Kamen was leaked to thepress nearly 12 months before the product‟s release.When investors and the public learned that theinvention was actually a technologically advancedmotorized scooter, they were dumbfounded. Adsshowing riders who looked like circus performersperching on weird-looking chariots didn‟t help, nor didthe price tag $5,000. Instead of selling 10,000machines a week, as Kamen had predicted, theSegway sold about 24,000 in its first five years. Nowit sells for far less to police forces, urban tourguides, and warehouse companies, not the generalpublic. If there was ever a product to disprove theaxiom “If you build it, they will come,” it‟s theSegway. 9. PRICESetting the right price of the product before introducing it in the market is also a challenge forthe organisation. Suppose you set the price of your product almost same as that of yourcompetitor and assuming the product is similar in quality and features and the competitor holds agood position in the marketplace, then the success of your product will depend on the market and in my opinion your ‘LUCK’. Well good luck if you believe your luck is good. Else anyone would surely believe that the product has hardly any chances of survival. Thus setting your product at the right price at the right time is a challenge. When MICROMAX recently introduced its smartphone model CANVAS. Knowing that it faces a tough competition from
  11. 11. CHALLENGES TO NEW PRODUCT DEVELOPMENTthe large market leaders like APPLE, SAMSUNG, the company has introduced a beautiful andstriking product which is not only unique from its other products but is also economical inmeeting the Indian customer needs. The ultimate success of the product was its price whichnot only ensured the longevity of the product but also opened gamut of opportunities for thecompany. Currently the mobile is giving a slight competition to Samsung SIII and is quicklyrunning out of stock. 10. PROMOTIONPromoting a new product in the new market or in the current market is the job of every marketerand the utmost requirement for the longevity of the product in the market. Firms who hardlypromote their product are rarely recognised by the market and thus remain a mystery product forthe consumers. Promotion techniques adopted by the firms from print media to social websites isall a one step of the staircase approach of NPD. Thus promotion is must process for the newproduct hit. RA ONE was akind of new product in itself forthe Indian movie watchers.Knowing that the movie wasn‟t upto the mark, the producersadopted a first of its kindadvertisement strategy.Newspapers, popular websites,magazines, music channels etc. wereand are all flooded withadvertisement posters of the movie, showcasing to thepeople the unique characters much before the movie was released. Tie-ups with popularbrands such as McDonalds, KFC was done as a part of co-branding and increasing thecredibility of the movie.Even before its release, Ra One managed to earn a revenue of Rs132 crore simply by givingaway the rights of the movie. The cost of the movie was 100 crores and 52 crore were spentonly in its promotion.
  12. 12. CHALLENGES TO NEW PRODUCT DEVELOPMENT 11. RESISTANCE TO CHANGEMost customers, so the argument goes, are intrinsically conservative and resist innovation. Apartfrom the few early adopters, whose enthusiasm for newproducts knows no bounds, the broad mass of customers seesinnovation as risky and finds new unproven products lessattractive than tried and tested alternatives. Consequently, anyinnovative product, particularly if it has a high technologicalcomponent, will meet resistance and will sell slowly until it isperceived as safe by potential customers. Often cited as the ultimate exampleof one of the most notorious product flops - and brandmissteps - of all time, New Coke was launched in the mid-1980s by Coca Cola in an attempt to help the soda companystay ahead of competitors during the so-called "cola wars."Instead, it just annoyed consumers. The tacky way it wasintroduced made it seem as though the regular Coke drinkersmattered little to the company and a boycott was started.
  13. 13. CHALLENGES TO NEW PRODUCT DEVELOPMENT REFERENCES1. www.wikipedia.org2. www.forbes.com3. www.economictimes.com4. www.businessworld.com

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