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PRODUCT DESIGN AND
DEVELOPMENT
15.823 SPRING 2001
GLEN L. URBAN
OUTLINE
• NEW PRODUCT DEVELOPMENT PROCESS
• REALLY NEW PRODUCTS --INFORMATION
ACCELERATION
• “LISTENING IN” -- Advisor/Virtual Engineer
• IMPLICATIONS FOR INTERNET
– TESTING CONVENTIONAL PRODUCTS ON THE
INTERNET
– DESIGNING INTERNET PRODUCTS
FAILURE
• WHAT IS FAILURE RATE OF
PRODUCTS INTRODUCED TO THE
MARKET?
• WHY FAIL?
• IMPLICATIONS FOR INTERNET
STARTUPS?
SUCCESS OF COMMERCIALIZED
NEW PRODUCTS
Unsuccesful
33%
1976 - 1981
Unsuccesful
33%
1963 - 1968
Successful
Met Company
Criteria
65%
Successful
Met Company
Criteria
65%
ANA - 1984
• 138 Member Firms
• 43 of 100 Top Advertisers
• 74% Packaged Goods
• 12% Durables
• 12% Industrial
• 9% Services
• Line Extensions 27%
• New Brand/Existing Category 31%
• New Brand/New Category 60%
FAILURE RATE
(Not Meet Business Objectives)
1990’s
(Cooper and Kleinschmidt 1994
• 203 Industrial New Products -- 50% Fail
• 103 Chemicals -- 35% Fail
(21 Firms in N. A./Europe)
Market Success
• Superior Product (Unique, Value, Quality,
Physical Benefits, Visible)
• Market Driven (Market Study, Customer Tests)
• Up Front Homework/Product Definition
• Cross functional Team/Strong Leader
Causes of Failure
• Market Too Small
• Not New/Not Different
• Poor Positioning
• Forecasting Error
• Competitive Response
• Change in Customer Tastes
• Poor Repeat/Diffusion
• Low ROI
• Organizational Problems
• Poor Match for Company
• No Real User Benefit
• Little Channel Support
• Poor Timing
• Shift in Technology
• Change in Environment
• Poor Service
• Lack of Coordination
• Poor Quality
PERCENT TRANSITION IN STAGES
1968 1981
Idea Generation and Screening to
Business Analysis
21.3 67.7
Business Analysis to Development 55.9 71.2*
Development to Testing 37.8 80.0
Testing to Commercialize 62.2 70.2
Commercialized to Success 60.7 65.3
*i.e. 71.2% of the ideas to enter Business Analysis pass criteria to enter Development phase.
Source: Elrod/Booz, Allen, and Hamilton
INTERNET STARTUP
• WHAT IS CHANCE OF SUCCESS?
– IDEA
– BUSINESS PLAN
– LAUNCH
– IPO
• HOW TO MAXIMIZE SUCCESS?
– RESEARCH
– TIMING
NEW
MARKET
EXISTING
NEW
EXISTING
PRODUCTS
NEW PRODUCT ARENAS
STATE OF THE ART
• PROCESS ENHANCEMENTS
• INFORMATION ACCELERATION
• LISTENING IN
• IMPLICATIONS FOR INTERNET
Proven Methods
DESIGN
PRE-MARKET TESTING
TEST-MARKET
LAUNCH AND LIFE CYCLE
MANAGEMENT
OPPORTUNITY
IDENTIFICATION
•Customer Active Paradigm
•Focus Groups / Voice of Customer
•Order of Entry
•Multi-Dimensional Scaling/Conjoint
•QFD
•Lead Users
•Concept/Product Testing
•Laboratory Test-marketing
•Information Acceleration
•Stochastic Models
•Electronic Measurement
•Life Cycle Modeling
•Scanner Data/Brand Management/D.S.S.
New Product Process and Proven Marketing Methods
ENHANCEMENT
OPPORTUNITY IDENTIFICATION
DESIGN
TESTING
INTRODUCTION
INNOVATION AND BUSINESS
STRATEGY
•Proactive Budgeting -- 25%
•Technology/Customer/Production/Engineering
•Organization -- Large Scale to Start Up
•“Really New” -- Create Markets
•Needs vs. Desire
•Global Team -- 24 Hour work Day
•CBP Specs Design Sophistication
•Virtual Prototyping
•Platforms and Architecture -- Process Intensive
•Premarket Forecasting -- Risk Management
•Virtual Testing
•Model Response - Specs -- Cost
•Marketing world-wide
•Channel Power/Remote Buying
•Little Protection -- Pioneering Benefits
•Elaborate For Segments
•Rejuvenation Cycle
•Learn from Failure
PROFIT MANAGEMENT
New Prod - Set 1.ppt
New Prod - Set 1.ppt

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New Prod - Set 1.ppt

  • 1. PRODUCT DESIGN AND DEVELOPMENT 15.823 SPRING 2001 GLEN L. URBAN
  • 2. OUTLINE • NEW PRODUCT DEVELOPMENT PROCESS • REALLY NEW PRODUCTS --INFORMATION ACCELERATION • “LISTENING IN” -- Advisor/Virtual Engineer • IMPLICATIONS FOR INTERNET – TESTING CONVENTIONAL PRODUCTS ON THE INTERNET – DESIGNING INTERNET PRODUCTS
  • 3. FAILURE • WHAT IS FAILURE RATE OF PRODUCTS INTRODUCED TO THE MARKET? • WHY FAIL? • IMPLICATIONS FOR INTERNET STARTUPS?
  • 4. SUCCESS OF COMMERCIALIZED NEW PRODUCTS Unsuccesful 33% 1976 - 1981 Unsuccesful 33% 1963 - 1968 Successful Met Company Criteria 65% Successful Met Company Criteria 65%
  • 5. ANA - 1984 • 138 Member Firms • 43 of 100 Top Advertisers • 74% Packaged Goods • 12% Durables • 12% Industrial • 9% Services • Line Extensions 27% • New Brand/Existing Category 31% • New Brand/New Category 60% FAILURE RATE (Not Meet Business Objectives)
  • 6. 1990’s (Cooper and Kleinschmidt 1994 • 203 Industrial New Products -- 50% Fail • 103 Chemicals -- 35% Fail (21 Firms in N. A./Europe) Market Success • Superior Product (Unique, Value, Quality, Physical Benefits, Visible) • Market Driven (Market Study, Customer Tests) • Up Front Homework/Product Definition • Cross functional Team/Strong Leader
  • 7. Causes of Failure • Market Too Small • Not New/Not Different • Poor Positioning • Forecasting Error • Competitive Response • Change in Customer Tastes • Poor Repeat/Diffusion • Low ROI • Organizational Problems • Poor Match for Company • No Real User Benefit • Little Channel Support • Poor Timing • Shift in Technology • Change in Environment • Poor Service • Lack of Coordination • Poor Quality
  • 8. PERCENT TRANSITION IN STAGES 1968 1981 Idea Generation and Screening to Business Analysis 21.3 67.7 Business Analysis to Development 55.9 71.2* Development to Testing 37.8 80.0 Testing to Commercialize 62.2 70.2 Commercialized to Success 60.7 65.3 *i.e. 71.2% of the ideas to enter Business Analysis pass criteria to enter Development phase. Source: Elrod/Booz, Allen, and Hamilton
  • 9. INTERNET STARTUP • WHAT IS CHANCE OF SUCCESS? – IDEA – BUSINESS PLAN – LAUNCH – IPO • HOW TO MAXIMIZE SUCCESS? – RESEARCH – TIMING
  • 11. STATE OF THE ART • PROCESS ENHANCEMENTS • INFORMATION ACCELERATION • LISTENING IN • IMPLICATIONS FOR INTERNET
  • 12. Proven Methods DESIGN PRE-MARKET TESTING TEST-MARKET LAUNCH AND LIFE CYCLE MANAGEMENT OPPORTUNITY IDENTIFICATION •Customer Active Paradigm •Focus Groups / Voice of Customer •Order of Entry •Multi-Dimensional Scaling/Conjoint •QFD •Lead Users •Concept/Product Testing •Laboratory Test-marketing •Information Acceleration •Stochastic Models •Electronic Measurement •Life Cycle Modeling •Scanner Data/Brand Management/D.S.S. New Product Process and Proven Marketing Methods
  • 13. ENHANCEMENT OPPORTUNITY IDENTIFICATION DESIGN TESTING INTRODUCTION INNOVATION AND BUSINESS STRATEGY •Proactive Budgeting -- 25% •Technology/Customer/Production/Engineering •Organization -- Large Scale to Start Up •“Really New” -- Create Markets •Needs vs. Desire •Global Team -- 24 Hour work Day •CBP Specs Design Sophistication •Virtual Prototyping •Platforms and Architecture -- Process Intensive •Premarket Forecasting -- Risk Management •Virtual Testing •Model Response - Specs -- Cost •Marketing world-wide •Channel Power/Remote Buying •Little Protection -- Pioneering Benefits •Elaborate For Segments •Rejuvenation Cycle •Learn from Failure PROFIT MANAGEMENT