New Product Development


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New Product Development

  1. 1. New Product Development.<br />NPD<br />
  2. 2. Overview<br />
  3. 3. The Basic New Product Process<br />The Basic New Product Process<br />Phase 1: Opportunity Identification/Selection<br />Phase 1: Opportunity Identification/Selection<br />Phase 2: Concept Generation<br />Phase 2: Concept Generation<br />Phase 3: Concept/Project Evaluation<br />Phase 3: Concept/Project Evaluation<br />Phase 4: Development<br />Phase 4: Development<br /> Phase 5:Launch<br />Phase 5: Launch<br />
  4. 4.
  5. 5. NPI Process Stages…<br />The simultaneous engineering and concurrence of activities in the development of a new product:<br />In the development of a product, several activities happen simultaneously in numerous functions, departments and locations across the organization.<br />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.<br />The simultaneous engineering and concurrence of activities in the development of a new product:<br />
  6. 6.
  7. 7. Making sure every new product contributes towards the overall business goals of the company:<br />Making sure every new product contributes towards the overall business goals of the company:<br />
  8. 8. Handling multiple projects at any given point in time:<br />
  9. 9. The Stage Or (Phase-Gate Process):<br />
  10. 10. Stage-Gate System<br />Stage-Gate System<br />Detailed<br />Investigation<br />(Business<br />Case)<br />Preparation<br />Full<br />Production<br />& Market<br />Launch<br />Preliminary<br />Assessment<br />Testing &<br />Validation<br />Development<br />Gate<br />Gate<br />Gate<br />Gate<br />Gate<br />Stage<br />Stage<br />Stage<br />Stage<br />Stage<br />Initial<br />Screen<br />Second<br />Screen<br />Decision<br />on<br />Business<br />Case<br />Post-<br />Develop-<br />ment<br />Review<br />Pre-Comm-<br />cialization<br />Business<br />Analysis<br />
  11. 11. Product Life Cycles<br />Decline<br />Maturity<br />
  12. 12. Product Life Cycles<br />Product Life Cycles<br />PRODUCT DEVELOPMENT:<br />Product Development: Stages<br />New ideas/possible inventions<br />Market analysis – is it wanted? Can it be produced at a profit? Who is it likely to be aimed at?<br />Product Development and refinement<br />Test Marketing – possibly local/regional<br />Analysis of test marketing results and amendment of product/production process<br />Preparations for launch – publicity, marketing campaign<br />
  13. 13. Product Life Cycles<br />Product Life Cycles<br />INTRODUCTION/LAUNCH:<br />Introduction/Launch:<br />Advertising and promotion campaigns<br />Target campaign at specific audience?<br />Monitor initial sales<br />Maximise publicity<br />High cost/low sales<br />Length of time – type of product<br />
  14. 14. Product Life Cycles<br />Product Life Cycles<br />Growth:<br />Increased consumer awareness<br />Sales rise<br />Revenues increase<br />Costs - fixed costs/variable costs, profits may be made<br />Monitor market – competitors reaction?<br />GROWTH:<br />
  15. 15. Product Life Cycles<br />Product Life Cycles<br />MATURITY:<br />Maturity:<br />Sales reach peak<br />Cost of supporting the product declines<br />Ratio of revenue to cost high<br />Sales growth likely to be low<br />Market share may be high<br />Competition likely to be greater<br />Price elasticity of demand?<br />Monitor market – changes/amendments/new strategies?<br />
  16. 16. Product Life Cycles<br />Product Life Cycles<br />Saturation:<br />New entrants likely to mean market is ‘flooded’<br />Necessity to develop new strategies becomes more pressing:<br />Searching out new markets:<br />Linking to changing fashions<br />Seeking new or exploiting market segments<br />Linking to joint ventures – media/music, etc.<br />Developing new uses<br />Focus on adapting the product<br />Re-packaging or format<br />Improving the standard or quality<br />Developing the product range<br />SATURATION:<br />
  17. 17. Product Life Cycles<br />Product Life Cycles<br />DECLINE AND WITHDRAWL:<br />Decline and Withdrawal:<br />Product outlives/outgrows its usefulness/value<br />Fashions change<br />Technology changes<br />Sales decline<br />Cost of supporting starts to rise too far<br />Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?<br />
  18. 18. Product Life Cycles:<br />Product Life Cycles<br />Development<br />Growth<br />Maturity<br />Decline<br />Introduction<br />Saturation<br />Sales<br />Time<br />
  19. 19. What Is a New Product?<br />What Is a New Product?<br />New-to-the-World Products<br />Polaroid camera, in-line skates, Kevlar, word-processing software<br />New Category Entries<br />Hewlett-Packard PCs, Hallmark gift items, Discover Card<br />Additions to Product Lines<br />line extensions<br />Product Improvements<br />frozen yogurt, Miller Lite, Windows 98, plain-paper fax<br />Re-positionings<br />Arm & Hammer baking soda<br />
  20. 20. Types of NPD Projects:<br />Types of NPD Projects:<br />20%<br />New product<br />lines (e.g. AT&T <br />Universal Card)<br />10%<br />High<br />New-to-the-world<br />(e.g. laser printer)<br />26%<br />26%<br />Additions to existing<br />product line (e.g. Bud light)<br />Newness to the company<br />Revisions/improvement to<br />existing products (e.g. MS Excel ‘00)<br />11%<br />7%<br />Cost reductions (e.g. Low-end PC)<br />Repositionings (e.g. A&H Deodorizer) <br />Low<br />Newness to the market<br />Low<br />High<br />Source: New Products Management for the 1980’s (New York: Booz, Allen &Hamilton, 1982<br />
  21. 21. What Is a Successful New Product?<br />Although you may hear much higher percentages, careful <br />studies supported by research evidence suggest that about<br />40% of new products fail -- somewhat higher for consumer<br />products, somewhat lower for business-to-business products.<br />
  22. 22. Classic Brand Names&gt;&gt;<br />Budweiser<br />Ivory<br />Coca-Cola<br />Maxwell House<br />Kodak<br />General Electric<br />Steinway<br />Wrigley<br />Kleenex<br />Waterford<br />L.L. Bean<br />Ford<br />John Deere<br />Maytag<br />JCPenney<br />Sears<br />Colgate<br />Hershey<br />Gillette<br />Ticonderoga<br />
  23. 23. Quality<br />Value<br />Time<br />Cost<br />The Conflicting Masters of New Products Management:<br />Three inputs to the new products process: the right quality product, at the right time, and at the right cost.<br />These conflict with each other but may have synergies too.<br />Issue: how to optimize these relationships in a new product situation.<br />
  24. 24. Challenges in New Product Development:<br /><ul><li>Failure occurs frequently</li></ul>- Studies have shown that 40%-45% of <br /> NPD projects introduced to the market fail<br /><ul><li> Inefficiencies are pervasive*</li></ul>- Only 59% of products intro’ed were successful<br />- Only 6.6 new product ideas lead to 1 success <br />- More innovative projects took 23.8 mos.<br /><ul><li> Very expensive </li></ul> - Tens of $millions to several $billions<br />* 1995 PDMA Best Practices Survey<br />
  25. 25. Market Uncertainty:<br />Market Uncertainty:<br /><ul><li>Consumer fear, uncertainty, and doubt (FUD)
  26. 26. Customer needs change rapidly and </li></ul> unpredictably<br /><ul><li> Customer anxiety over the lack of standards</li></ul> and dominant design<br /><ul><li> Uncertainty over the pace of adoption
  27. 27. Uncertainty over/inability to forecast market size</li></li></ul><li>Technology Uncertainty:<br />Technology Uncertainty:<br /><ul><li> Uncertainty over whether the new innovation </li></ul> will function as promised<br /><ul><li> Uncertainty over timetable for NPD
  28. 28. Ambiguity over whether the supplier will be able </li></ul> to fix customer problems with the technology<br /><ul><li> Concerns over unanticipated/unintended </li></ul> consequences<br /><ul><li> Concerns over obsolescence</li></li></ul><li>Competitive Uncertainty:<br />Competitive Uncertainty<br /><ul><li>Uncertainty over who will be future competitors
  29. 29. Uncertainty over competitor’s strategies
  30. 30. Uncertainty over product form competition</li></ul> (competition between product classes vs. <br /> between different brands of the same product)<br />
  31. 31. NPD Myths<br />First to market wins!<br />Company reputation, a strong brand name and a good selling effort will make almost any new product a success.<br />Having a low price is critical to winning.<br />
  32. 32. Key Reasons for Failure<br />Key Reasons for Failure:<br /><ul><li> Market too small
  33. 33. Poor fit with company’s strengths
  34. 34. No real benefit for customer
  35. 35. Not new/not different product
  36. 36. Poor competitive positioning
  37. 37. Poor timing of product introduction </li></li></ul><li>Key Reasons for Failure (cont.)<br />Key Reasons for Failure (cont.)<br /><ul><li> Lack of coordination across functional areas
  38. 38. Organizational problems (e.g. conflict, </li></ul> communication, top management support)<br /><ul><li> Inaccurate forecasts
  39. 39. Inadequate support by channel
  40. 40. Market changes in customer tastes
  41. 41. Competitive response to new product
  42. 42. Major shifts in technology</li></li></ul><li>Not All New Products Are Planned:<br />Microwave ovens<br />Aspartame (NutraSweet)<br />ScotchGard fabric protector<br />Teflon<br />Penicillin<br />X-rays<br />Dynamite<br />In each case, an accidental discovery -- but someone knew <br />they had something when they saw it!<br />