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New product development


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New product development

  1. 1. New Product Development Strategy, Tactics & Process Anand Subramaniam
  2. 2. “Knowledge speaks, but wisdom listens." - Jimi Hendrix 2
  3. 3. HighlightsNPD - StrategyNPD - DesignNPD - TypesNPD – ProcessNPD - Levers 3
  4. 4. Reason for New Product FailuresOverestimating market sizePoor marketing researchDesign problemsExcessive development costsIncorrectly positioned, priced, oradvertisedCompetitive reaction 4
  5. 5. New Product Development Strategy
  6. 6. New Product Development StrategyOriginal productsAcquisitionProduct improvementsProduct modificationsNew brands through the firm’s own R&Defforts. 6
  7. 7. NPD - Value Add NEW PRODUCT DEVELOPMENT QUALTITY BRAND GROWTH PRODUCTIVITY IMPROVEMENT MAINTENANCE• Line Extensions • Reduce Cost • Quality of Design • Conformance• New Products • Formulas • Special Situations• New Packages • Packages • Regulatory • Manufacturing • Environmental • Specifications 7
  8. 8. NPD Strategy - Planning Levels Mission Identity Objectives Mission Business Company Strategy Objectives Units PRODUCT STRATEGY Business Strategy •Technical Competencies Categories •Strategic Principles •Organisation •AlliancesPortfolio Strategy PRODUCT PORTFOLIO STRATEGY •Project Mix Brands •Resource Levels •MilestonesProject PRODUCT DEVELOPMENT STRATEGY •Resource Allocations •TimingStrategy Projects •Technical Approaches •Deliverables 8
  9. 9. Cross Functional Team Technology & Quality Marketing Packaging Marketing Research Engineering/Process Engineering Sales Quality & Safety Research & Development Industrial Engineer Mechanical Engineer Manufacturing Operations Logistics Procurement Supply ChainFinance & Admin Quality Control Legal Affairs 9
  10. 10. New Product Development Design
  11. 11. Product Design Specification Environment Patents Shelf life Testing Packing Safety Competition Legal Weight Quantity Maintenance Materials PoliticsErgonomics Plant Aesthetics DESIGN Disposal CORE Installation Shipping Service life Size Standards Processes Performance Customer Quality Timescale Storage assurance 11
  12. 12. New Product Development Types
  13. 13. Product Development Types Generic Technology Push Platform Process Customisation (Market Pull) Products IntensiveDescription The firm begins The firm begins The firm assumes Characteristics of New products are with a market with a new that the new the product are slight variations of opportunity, then technology, then product will be constrained by the existing finds an finds an built around the production configurations. appropriate appropriate same process. technology to market. technological meet customer subsystem as an needs. existing product.Distinctions Additional initial Concept Both process and Similarity ofwith respect activity of development product must be projects allows forto the generic matching assumes a developed a highly structuredprocess technology and technology together from the development market. platform. very beginning, or process. an existing Concept production Development is development process must be almost like a assumes a given specified from the production technology. beginning. process.Examples Sporting goods, Synthetic Fabrics Consumer Snack foods, Switches, motors, furniture, tools. electronics, cereal, chemicals, batteries, computers, semiconductors. containers. printers. 13
  14. 14. New Product Development Process
  15. 15. New Product Development Process “The Fuzzy Front End” Opportunity Idea Concept ConceptIdentification Generation Development Screening* Product Development Marketing Test Commercial- Plan Marketing* isation Development Positioning Development *”Stage Gates” 15
  16. 16. Opportunity IdentificationInternal sources Company employees at all levelsExternal sources Customers Competitors Distributors Suppliers Outsourcing 16
  17. 17. Idea Generation (Ideation)Cross Functional TeamGenerate Ideas • Brainstorming • Suspend judgment • Encourage creativityIdentify Opportunity Areas • Problem solving to bring new ideas to the table • Sketching or prototype • Idea prioritisationGenerate New Product Concepts and evaluate against aset of company criteria for new products. 17
  18. 18. Concept DevelopmentDone by Marketing and/or Advertising AgencyConducting “Focus Groups”Objectives Judge whether the concept fits the opportunity area, and constraints Refine and / or describe the product concept • What it is : • What benefit(s) will it deliver to the user • Key information – size, varieties, package, price 18
  19. 19. Market Research Options Depth InterviewsQualitative Focus Groups Expert Judgment Surveys Product Use Tests Concept Tests Lab Test Market Perceptual Maps Conjoint Analysis Test MarketQuantitative Pre-Prototype Post-Prototype 19
  20. 20. Concept Screening / TestingProduce a Concept BoardConduct a survey Representative sample of end users via Internet, Panel Show concept and ask buying intent, uniqueness, valueAnalyse the results Compare scores to internal criteria, benchmarks, norms Forecast “Trial”If end user shows interest in trying the product during the trialforecast, then the concept qualifies for development – It clears thefirst stage gate. 20
  21. 21. Product DevelopmentInitial stages with broad design parameters Produce early prototypes Show and obtain feedback from end users Refine designFine tune & finalise design Vary formulations on key ingredients Conduct product testing amongst end users Experimental designs offer most powerful learning Optimise final design and packaging 21
  22. 22. Position DevelopmentDevelop positioning Target : Benefit(s) : Frame of Reference : SupportDevelop communications strategies Media strategyTest & refine copy Qualitative research – “Communications Check” Produce, test and refine the advertisementsConduct final test (Stage Gate Review) 22
  23. 23. Marketing Plan DevelopmentFinal Positioning Statement Target : Benefit(s) : Frame of Reference : SupportSales Plan Who will sell it? : Where will it be sold?Advertising Media Plan How will we advertise it?Promotion Plan Consumer promotion (coupons), Trade promotion (on-sale)Production Plan How will we make it? (make / buy analysis)Financial Plan How do we make the profit necessary to satisfy our share holders? Fixed Costs : Variable Costs : Breakeven : Targeted ROI 23
  24. 24. Test MarketingTwo Stages: Simulated Test Market Live Test Market 24
  25. 25. Test Marketing (Contd.)Simulated Test Market (STM) Similar to Concept Test but with product Provide samples to consumers who are interested in the concept Measure both trial potential and reaction to product Reaction to product is used to forecast repeat rate Volume is forecasted on basis of both the trial forecast and the repeat forecast. 25
  26. 26. Test Marketing (Contd.)Live Test Market (LTM) To measure actual sales volume • Controlled – Behavior Scan • Conventional –normal channels.Track sales rate, trial, repeatCompare to goals and identify gapsInvestigate and close gaps 26
  27. 27. CommercialisationNational expansion of product Develop market rollout planCan involve significant capital investment Brick & Mortar : EquipmentCan involve distribution costs Slotting fees : Sales incentivesBuild product into a “Platform” Maintain growth and sustain competitive advantage 27
  28. 28. New Product Development Levers
  29. 29. Time to MarketPrioritise development projects Obtain personnels commitment to theDon’t overload resources project planRapidly staff the project according to plan Communicate project plans andEmphasise design re-use to minimise responsibilitiesdevelopment cost & schedule Identify project staffing requirementsCapture and document requirements and Plan development resource requirementsspecifications completely Allocate and manage resourcesTightly manage requirements Use modular design approachPlan concurrent development Standardise parts and materialsTightly synchronise development Balance testing and time-to-marketactivities considerationsLearn to work with partial information Create electronic mock-up of the productPrepare to roll out the product early Simulate & analyse product designs earlyInvolve subcontractors and suppliers in to minimise late iteration and physicaldevelopment prototypes.Plan and coordinate production Tightly integrate analysis & simulationrequirements with designResolve production problems quickly Use rapid prototyping technologiesCreate a comprehensive, realistic project Use collaboration systems to facilitateplan communication 29
  30. 30. Points to NoteNew Product Development Process is used to reduce the risk offailure, and produce new winning productsIt should start with an opportunity identification stepThe “Fuzzy Front End” considers a lot of alternativesBusiness analysis occurs throughout the process“Stage Gates” are built in: At the concept test stage – to justify development costs At the test market stage – to justify going to market.The Marketing Plan includes a comprehensive set of plans thatinvolve Sales, Finance, Promotions, Advertising and Production 30
  31. 31. “Opportunities multiply as they are seized." - Sun Tzu 31
  32. 32. Good Luck 32