This document discusses product design and development. It outlines the typical new product development process and stages. It provides statistics on failure rates of new products introduced to the market in the 1970s-1990s, with about one-third failing to meet business objectives. Common causes of failure include small market size, lack of differentiation, poor positioning, forecasting errors, and lack of customer benefits. The document also discusses opportunities to enhance the new product development process through information acceleration, virtual prototyping, global teams, and pre-market testing using the Internet.

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

10. NEW
MARKET
EXISTING
NEW
EXISTING
PRODUCTS
NEW PRODUCT ARENAS

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