What are the goals of the business?
Growth, Profit, Leadership or No. 1 position in the product / market segment, Be a benchmark organization
Mukesh Ambani has surpassed the goal of creating world class companies, his objective is to set the
benchmarks for such companies. Starting a successful new business requires a lot of thought and time
before even a cent is spent. Many people worry about whether they have a market for their product or
service, but do not put a lot of thought into how this new business will fit with the goals they have for their
Business goals should indicate a time frame for reaching profitability after launch. In addition, a time frame
should be determined for new product development and employee hiring benchmarks.
Setting business goals gives all employees a clear vision of what they are working to achieve. It helps
improve staff motivation to have everyone working toward a common end goal.
Goals, objectives and targets
The process of management begins with setting of goals, objectives and targets. The goals are long term
aims to be achieved by the organization; objective are relatively short term milestones to be accomplished,
while the targets generally refer to physical achievements in the organization’s business. The goals,
objectives and targets are so set that they are consistent with each other and help to achieve each other.
These are to be achieved within a stipulated time and failing to achieve the same, means less of business
profit and image. The difference between these entities can be best understood by examples in the three
types of organizations given in Table below.
Setting Goals and Objectives
While goals can be broad or general in nature, objectives should be clear and concise. Goals do not have to
be specific enough for you to act on, but should give you a future target or list of things you want to work
on. Objectives, however, need to be SMART—specific, measurable, action-oriented, realistic, and timely—
to accomplish the goals set for your business.
Specific objectives should be as detailed as possible. In order for the objectives to be measurable, you
should state them in terms of dollars or quantities. Objectives are clear targets of performance you can use
to evaluate the operation. Action oriented objectives state which actions need to be taken and who will take
them. Objectives should be realistic but challenging, with set deadlines in order to be timely.
Methodology for Achievement
Goals, Objectives, Targets are to be achieved by managerial actions.
Every managerial action has two dimensions.
Substantive – What to do and Procedural -- How to do.
Both are interdependent & taken together help to achieve the objectives.
Goal setting process
• In small organization (single product single location set up operating in a limited geographical area)
defining business goals & developing action plans to achieve these goals is a simple process.
• In large organizations (multi product, multi location set up having pan Indian or Transnational
presence) defining business goals & formulating strategy to achieve them is extremely complex exercise.
• Very large businesses are generally unwieldy.
• They tend to lose focus because of diversity involved
• The Top or Corporate Management has to do some introspection or soul searching to define its goals
or the purpose of its existence.
• This is an involved process which has to be gone through at the corporate level & then at SBU level.
In business, goal setting has the advantages of encouraging participants to put in substantial effort; and,
because every member has defined expectations set upon him or her (high role perception), little room is
left for inadequate effort going unnoticed. Managers cannot be constantly able to drive motivation and
keep track of an employee’s work on a continuous basis. Goals are therefore an important tool for managers
since goals have the ability to function as a self-regulatory mechanism that acquires an employee a certain
amount of guidance
Goal Setting Process
The major stages in this process are
• Set Business goals
• Environmental Analysis for present & potential product lines or SBUs
• Organizational & SBU Analysis
• Strategy Formulation / Implementation
• Evaluation of Results for feedback & course correction if needed.
This exercise leads to establishment of Vision & Mission statement of the organization & formulation of the
Organizations sometimes summarize goals and objectives into a mission statement and/or a vision
statement. Others begin with a vision and mission and use them to formulate goals and objectives.
While the existence of a shared mission is extremely useful, many strategy specialists question the
requirement for a written mission statement. However, there are many models of strategic planning that
start with mission statements, so it is useful to examine them here.
§ A Mission statement tells you the fundamental purpose of the organization. It defines the customer
and the critical processes. It informs you of the desired level of performance.
§ A Vision statement outlines what the organization wants to be, or how it wants the world in which it
operates to be. It concentrates on the future. It is a source of inspiration. It provides clear decision-making
• Vision-It indicates a dream which is to be achieved over a long term horizon. It is a wishful thinking
about a lofty & ultimate goal showing where or what you want to be at macro level.
Features of an effective vision statement include:
• Clarity and lack of ambiguity
• Vivid and clear picture
• Description of a bright future
• Memorable and engaging wording
• Realistic aspirations
• Alignment with organizational values and culture
Mission-It indicates the purpose for which the business is started or is existing today. It is related to the
long term objective the organization should strive to achieve. It can not & does not remain static. As the
Market Environment changes, it has to be revisited & redefined to reach the dream envisaged in Vision
quickly. A clear thoughtful Mission statement provides the sense of purpose & gives the direction to
employees, customers & all the stake holders.
Good Mission Statement should –
• focus on limited number of goals.
• Narrow the range of discretion so all stakeholders & employees act consistently on important issues.
• Amazon.com mission statement Our vision is to be earth's most customer centric company; to build a
place where people can come to find and discover anything they might want to buy online.
• Dell mission statement Dell listens to customers and delivers innovative technology and services they
trust and value.
• eBay mission statement eBay pioneers communities built on commerce, sustained by trust, and
inspired by opportunity. eBay brings together millions of people every day on a local, national and
international basis through an array of websites that focus on commerce, payments and communications
• Facebook mission statement Facebook is a social utility that helps people communicate more
efficiently with their friends, family and coworkers. The company develops technologies that facilitate the
sharing of information through the social graph, the digital mapping of people's real-world social
connections. Anyone can sign up for Facebook and interact with the people they know in a trusted
• Google Vision statement Google's mission is to organize the world's information and make it
universally accessible and useful
Microsoft Vision Statement: Create experiences that combine the magic of software with the power of
Internet services across a world of devices.
Google Vision Statement: To develop a perfect search engine.
Dell vision: Our core business strategy is built around our direct customer model, relevant technologies and
solutions, and highly efficient manufacturing and logistics
Strategy: Strategy is a managerial process of developing & maintaining a viable fit between its internal &
external environment to achieve the business goal.
Strategy at Different Levels of a Business: Strategies exist at several levels in any organization - ranging from
the overall business (or group of businesses) through to individuals working in it.
• Corporate Strategy - is concerned with the overall purpose and scope of the business to meet
stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and
acts to guide strategic decision-making throughout the business. Corporate strategy is often stated
explicitly in a "mission statement".
• Business Unit Strategy - is concerned more with how a business competes successfully in a particular
market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining
advantage over competitors, exploiting or creating new opportunities etc.
• Operational Strategy - is concerned with how each part of the business is organised to deliver the
corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of
resources, processes, people etc.
In large corporates each Business or SBU has its own independent Vision, Mission & Strategy.
For any Business or SBU, the goals in their generic form are to-
Increase the Top Line figure. Improve bottom line correspondingly. They are to be achieved by judicious
mix of existing or current product lines & developing new products.
Product and development: 34, 35 Jhamb
Combination of “products “ & “ markets “ gives us a basic 4 cell matrix popularly known as Ansoff’s
classic model of growth Strategies.
Market Penetration Strategies: Increase market Share, Increase product Usage, Increase frequency of
use, Increase quantity used, New applications. Market penetration occurs when a company
enters/penetrates a market with current products. The best way to achieve this is by gaining competitors'
customers (part of their market share). Other ways include attracting non-users of your product or
convincing current clients to use more of your product/service, with advertising or other promotions.
Market penetration is the least risky way for a company to grow.
Product Development Strategies: Product improvement, Product line Extension, New products for same
Markets. A firm with a market for its current products might embark on a strategy of developing other
products catering to the same market (although these new products need not be new to the market; the
point is that the product is new to the company). For example, McDonald's is always within the fast-food
industry, but frequently markets new burgers. Frequently, when a firm creates new products, it can gain
new customers for these products. Hence, new product development can be a crucial business development
strategy for firms to stay competitive.
Marketing Innovation & Expansion Strategies: Expand markets for existing products, Geographic
Expansion, Target New Segments. An established product in the marketplace can be tweaked or targeted to
a different customer segment, as a strategy to earn more revenue for the firm. For example, Lucozade was
first marketed for sick children and then rebranded to target athletes. This is a good example of developing
a new market for an existing product. Again, the market need not be new in itself, the point is that the
market is new to the company.
Technological Innovation & Diversification Strategies: Vertical integration, Forward Integration
Backward Integration, Diversification into related Business (Concentric Diversification) Diversification into
unrelated Business (Conglomerate Diversification) Virgin Cola, Virgin Megastores, Virgin Airlines, Virgin
Telecommunications are examples of new products created by the Virgin Group of UK, to leverage the
Virgin brand. This resulted in the company entering new markets where it had no presence before.
PLC: All new products begin their lives with a low level of sales which is defined as “Introductory Stage”.
• In the next “Growth Stage” the sales gradually pick up.
• Then the sales curve reaches plateau & remains stagnant at this level which is popularly referred to as
the “ Maturity Stage”.
• Finally the curve slopes downward in the “Decline Stage”
The four main stages of a product's life cycle and the accompanying characteristics are:
1. costs are high
2. slow sales volumes to start
3. little or no competition
4. demand has to be created
5. customers have to be prompted to try the product
6. makes no money at this stage
2. Growth stage
1. costs reduced due to economies of scale
2. sales volume increases significantly
3. profitability begins to rise
4. public awareness increases
5. competition begins to increase with a few new players in establishing market
6. increased competition leads to price decreases
1. costs are lowered as a result of production volumes increasing and experience
2. sales volume peaks and market saturation is reached
3. increase in competitors entering the market
4. prices tend to drop due to the proliferation of competing products
5. brand differentiation and feature diversification is emphasized to maintain or
increase market share
6. Industrial profits go down
1. costs become counter-optimal
2. sales volume decline or stabilize
3. prices, profitability diminish
4. profit becomes more a challenge of production/distribution efficiency than
Videophones certainly are in the introductory stage of the product life cycle. Limited numbers of
consumers can afford this technology. As prices come down for videophones, and as consumers recognize
the relative advantage of this form of communication over existing communication products, sales may
begin to grow and the videophone should transition into its growth stage.
The Internet, more specifically the World Wide Web component of the Internet, is probably in the growth
phase of its life cycle. The advantages of the Internet have resulted in its very rapid acceptance in consumer
and business markets. CD-ROMs and personal computers are close to, if not fully, mature products. Vinyl
records provide an excellent example of a product that is approaching the end of its decline phase and is in
imminent danger of disappearing from the market entirely. Vinyl records now are mainly collector’s items.
PLC and relevance in NPD: Generally all products follow this curve & all companies strive hard to extend
the life cycle of existing products.
• Before the existing product enters decline stage, new product has to be in introductory stage.
• Influencing factors that tend to modify its shape & shift turning points are -Customer needs, Market
demands, Technologies involved, Product categories, Brands , Competition.
• Though the general pattern remains the same, influencing factors create aberrations to
-skip a stage (fashion industry – some products disappear suddenly / quickly)
-remain stagnant in a particular stage for very long time (Mahindra’s MUV Bolero has been in Maturity
stage for more than a decade despite appearance of new versions of Scorpio & Xylo )
Influencing factors for NP: In competitive markets the main factors influencing the requirements of new
• changing requirements of customers (death of alarm clock after cell phone hand set, Video libraries &
• giving practical shape to ideas struck accidentally.
• Filling the gap in the incomplete range of products ( CG manufactured power transformers upto 20
mva at Washington & then very big ones upto 750 MVA at Canada .This gap is now filled by improving the
manufacturing capacity in Washington plant upto 100 mva)
• Giving a boost to the existing product range ( Rcom acquired Digicable to provide a boost to its DTH
• New & improved versions of the existing products that will match the market expectations &
demands. ( Bolero / Scorpio / Xylo)
• Utilizing idle resources / capacity & special skills vailable with the company
• Projecting corporate image of the company ( All leading newspapers have their business paper
editions even if they are losing proposition)
• Protecting the company against the risk of being wiped off by having few products with new designs
or as per emerging trends. ( Bajaj introduced motorcycle when its scooter was in Maturity phase &
• objectives & strategies of competitors ( Maruti & Padminir, IA & Jet )
• Attractiveness of market to new competitors ( Nationalized Banks & Pvt. sector Banks , LIC /GIC &
new players in insurance sector)
• Emergence of new Technologies ( B & W photos / TV to Color, Digital Cameras).
Channels for New product: Marketing innovation, product improvement, Technological innovations
Marketing innovation: Many companies make improvements in one or more characteristic features of the
existing products & launch them as their new product in the market.
- Duke’s Mangola & Parle’s Frooty( change in container bottle to tetrapack ),
- Lemon, Limca, Nimboos,( Branding with different names)
- Shrikhand & Amra Khand ( improved taste & flavour).
Here product owes its existence & success to marketing innovations such as packaging, branding, easy
availability etc. rather than any significant change in the substance of the product itself.
Product improvement: Here the product category as such does exist in its primitive form. & the new
product takes birth by innovation or improvement in technology or the design of the existing product.
• Improvement to existing products is a continuous activity of every manufacturer.
• Improvements are done for meeting short term objectives as well as long term objectives.
The short term issues are to -
- Provide a new look to the product.
- Better utilize the existing facilities, equipment & manpower.
- Satisfy immediate needs of the customers
- Stimulate sales by providing new advantages.
Long term objectives: Monopolizing the market ( microsoft )
• Ensure long term growth of the business.( Mahindra’s MUV )
• Reduce cost ( Indigo Compact Sedan)
• Improve product quality ( Indica )
• Threat from competitor( Hero Honda’s & Kawasaki Bajaj)
• Technological up gradation (Conventional camera & instamatic or Polaroid camera .
• User friendliness ( Tea powder to Tea bags )
• Ease of maintenance (Conventional refrigerator & frost free fridge)
• Convenience (Old B.P. measuring instruments with liquid filled manometer & separate stethoscope
to New generation instrument with inbuilt stethoscope & dial type pressure gauge.)
• These new products are generally targeted for a new class of buyers or consumers..
Technological innovations: The products embodying the new advances in technology belong to this
• 3G cell phones & Broadband Wireless Access ( BWA ) radio spectrum . The service providers have
paid more than one trillion (Rs.67000 & 36000 Crores resp.) as license fee.
• In such Technologically Innovative new products, the early entrants do reap the benefit of
leadership and subsequent entrants of similar “ me too “ products find it difficult to get a foothold in the
• ( R Com de merged its 95% subsidiary Reliance Infra & allowed its merger with GTL Infrastructure to
raise resources for new product development)
Routes for new product: Four different routes through which new products get introduced into the
1) Technology Related.( New Technology) : New Technology can be sourced from either the parent
company ( the foreign collaborator) or can be innovatively copied / home grown. The products of
emerging technologies can be hi-tech like personal computers, photocopiers, third generation mobile
telephony, digital cameras etc. or can be as mundane as carbonless paper for taking 3/ 4 multiple copies
2) Market related
-Diversification / Penetration into new markets:
1) Diversification: Aggressively growing companies diversify into different fields & launch new products for
entering into new markets. HMT diversified into different product lines & introduced new products like
agricultural tractors, wrist watches. ITC diversified from Tobacco business to Hospitality segment &
established star hotels under the banner of Welcome Group to compete with established players belonging
to Taj & Oberoi chain.
2) Penetration into new markets : Anil Ambani’s ( ADAG ) forays into entertainment, infrastructure, energy
, financial services.
3) Repositioning or Product Relaunch : Aarey dairy has been offering its sweetened milk along with its
regular pasteurized milk . When the sales did not show any improvement, they branded the product as
“Energee” & repositioned as a cold drink. The re launch of the product as a thirst quenching as well as
energy giving drink appealed to health conscious segment of the market which has worked wonders with
the sales graph.
3) Manufacturing related
i. Additions to existing products / new product lines:
• Taj group of Hotels having presence in luxury segment only, launched new brand –Ginger when they
wanted to enter the segment of budget hotels .
• Bajaj Auto who were “numero uno “ with their Chetak brand scooters added new products of 50, 80
100 125 cc vehicles covering the entire spectrum. They also diversified from scooters into mopeds , motor
cycles to offer the total spectrum of two wheelers.
• Telco has been occupying number one position in HCV segment. By scaling down the technology of 12
tonner truck , they entered into LCV segment to launch 709, 608, 406, 204 & Ace minitruck
• In cooling products business space , Voltas added Refrigerators to its existing product of air
conditioners whereas Godrej extended its refrigerators line to include air conditioners.
• Cadbury added drinking Chocolate ( Bournvita ) to its chocolate bars.
• Amul’s primary product milk has been supplemented by its value added variants like curd, Shrikhand,
butter, cheese, icecream
ii. Revision / Improvement to existing products: Mahindra’s old product was Jeeps for defence &
police departments.They revised & improved this platform substantially to enter MUV segment
successfully. ( Bolero, Scorpio, Xylo )
• TELCO had presence in cargo moving vehicles only.
They graduated into people transporter segment from Tatamobile to Sumo , Safari & Grande. These
new products offer superior performance compared to their old models.
• Historically the obsolescence of bulky radio by compact transistor, B & W TV by colour TV or
currently replacement of stationary land line instrument by mobile phone are the examples of new
products emerging through the improvement route of existing products.
4) Cost related.: When Hindustan Lever’s premium brand Surf was not able to maintain its market share ,
they had to launch cheaper brands in terms of Rin, Wheel etc. to cater to different segments.Many
producers of “ Luxury Goods “ come out with stripped down versions or base models of their products to
reduce costs & make them affordable to a larger section of the potential customers
In business and engineering, new product development (NPD) is the term used to describe the complete
process of bringing a new product or service to market. There are two parallel paths involved in the NPD
process: one involves the idea generation, product design and detail engineering; the other involves market
research and marketing analysis.
NPD is a long & involved process.It starts from Product Design & ends with its satisfactory usage by the
customer.Product Design & Product Development are two distinctly different stages in this Business
Process.Product Design is the process by which the needs of the customer are transformed into a product
which can satisfy these needs. It is essentially an exercise in problem solving.Design Engineer who carries
out this process is the father of the new product. Therefore generally he has a tendency of making his
design robust & fail safe.
Developmental stage: Product Development process comprises of translating product design into
manufactured product. Though Manufacturing the product is the prime responsibility of the factory , many
departments in the organization contribute to this new product development process.Any problem or
difficulty faced during manufacturing development process is referred to Designer for its
resolution.Designer may have to tweak his design for overcoming such difficulties & keeping development
costs under control.
2 approaches to NPD: traditional and modern
Traditional: Product Development process begins only after Product Design is finalized & released for
manufacturing. It consists of many downstream activities from different departments .Different functions
get involved in ( contribute or add value to) the development process one after the other or sequentially i.e.
subsequent activity starts when the preceding activity is over.Therefore it is commonly known as Sequential
Engineering Process.For resolution of any problem or difficulty that may crop up in the downstream
activities, it necessarily has to be referred to the Design Engineer who has fathered the Design.Thus the
manufacturing development process has a tendency to back track – sometimes right up to design stage-
before it gets completed.Hence Development lead time is generally quite long & protracted.Development
costs are accordingly higher.
Modern: It is basically a multifunctional team approach which considers Product Design & Development
as a holistic & totally integrated process. All the interfaces or functional engineers involved in this process
form a Development Team.Every member of this cross functional team brings the perspective of his
function to the table in the Design discussion stage itself.Thus a number of Design concepts emerge which
are evaluated from the angles of all downstream operations.This joint team effort enables to foresee the
likely difficulties or problems that may be encountered before hand. After careful assessment of different
options by Matrix Evaluation Technique the best or the most optimum design is frozen for moving ahead
on development part.This approach is popularly known as Concurrent Engineering which is more cost
effective & time efficient process than Sequential Engineering.
Business Analysis & Evaluation
Preproduction run & Test Marketing
Idea Generation is often called the "fuzzy front end" of the NPD process
The process of generating new idea may involve one or more of the following activities viz. brain
storming, attribute listing, focus group discussion, problem inventory analysis
Quite often it involves creative thinking & technological developments .
The new product ideas can come through different channels or sources like –
-Customers, Competitors, Distributors, External World , Own R & D or internal creative thinking
Sources of new idea generation:
1) Customers - They discuss their requirements / problems with producers & spur their thought process
to meet the requirement or solve the problem .
Defence authorities worked with TATA & Mahindra closely to help them develop a new product called
“bulletproof vehicle” or “ Armoured Personnel Carrier”
2) Competitors – Systematic comparison or benchmarking with the competition offers good source of new
product idea. Mahindra’s Xylo has been inspired from Toyota’s market leader Innova.
3) Distributors / Sales & service personnel – They know the pulse of the market through their frequent &
constant contacts with the customers & are able to provide valuable ideas. –
- One time use sachets of shampoos, instant coffee, hair oil are marketing innovation through their
- Significant example of contribution of Service engineer which falls more in the category of product
improvement, rather than new product idea is practical problem solving of Nano car.
The problem of few cars catching fire was diagnosed by service team of Tata Motors & they suggested the
remedial measure of fuel pipe relocation.
4) External world – The use of technology deployed by others can lead to new products with improved
features. This is mostly found in auto industry ( aerofoil shape of cars ),consumer durable products (
Fridge, A.C. TV ) pharma industry ( OTC drugs,emergency contraceptive pills 5) Own R & D / Internal
Creative Thinking – Technological forecasting , Brain storming , focused discussions lead to identification
of latent capabilities of research & /or innovations from within the organization.
Screening: The object is to eliminate unsound concepts prior to devoting resources to them.
In this stage the ideas , requirements & proposals are thoroughly scrutinized so that market failures can be
minimized. This involves a thorough analysis of new ideas form the point of view of consumers reactions to
the new products.Its purpose is to translate the requirements of the market, as perceived by the marketing
function, into basic inputs for Design. Since Design function solutionizes the problem faced by the
potential customer, it is essential for it to have true & accurate understanding of the problem. Product
Design Specification ( PDS) is prepared jointly by marketing & Design to meet this need.
PDS document gives the listing of the problems & specifies essential requirements of the solution like -
- Performance requirement
- Reliability & maintainability or serviceability requirements
- Cost, Delivery & quantity requirements
It provides an opportunity to –Design department to understand exactly what the customer needs.
Accordingly the Design Engineer attempts to produce an outline of the solution through conceptual
design(s) .Marketing department to understand the feasibility & cost of the proposed solution. It provides a
platform to approach the potential customer.
The main objective is to see that the new concept can position the product to meet the requirements of the
customer or fit into emerging trend in the society.
In short for successfully passing this stage the new product should
- offer benefits not offered by existing products or
- offer some secondary benefits in addition to major existing benefits.
- remove the negative aspects or drawbacks in the existing products .
The outcome of screening process can be either-
acceptance of the proposal
rejection due to some impracticable aspect (s)
modification by joint participation of Design , marketing & potential customer.
Business analysis and evaluation:
Product ideas that pass the screening process are subjected to Business Analysis.
All the functions of the organization participate in this macro level exercise.
Each functional head tries to express the monetary impact & time frame associated with his operational
R & D or Product Design formulates the product features, specifications, properties, size, dimensions,
weight & other related parameters. Manufacturing indicates the production processes involved, identifies
the resources in terms of facilities, toolings, machinery/ equipment, man hours needed, throughput cycle
time required for completing all the production & assembly processes . Quality stipulates the inspection &
testing requirements, acceptance criteria essential to assure consistency, reliability, dependability
repeatability of the product performance for customer satisfaction
Materials provides inputs on material availability & sourcing, payment terms desired by suppliers , supply
chain, inbound & out bound logistical issues involved, inventories needed etc.
Marketing addresses the points pertaining to customer’s requirements, demand, volumes, price,
distribution, packaging, positioning, promotion, competition etc.
Service talks of methodology of extending service support to get the best out of the product to ensure
trouble free operation at customer’s end.
Accounts & Finance draws attention to requirements of capital expenditure, working capital required,
management of receivables & payables, costs associated with it etc.
In this Evaluation stage , view point of all the functional heads is given due consideration to arrive at
optimal design of the new product i.e. achieving the best combination of product qualities at the lowest per
unit production cost.
Value Analysis or Value Engineering concepts play an important role in this stage.
This phase gets successfully concluded when the Detailed Design is frozen & released for development.
At this stage necessity of producing prototype (s) may be felt
While earlier stages involved desk study, this stage generally involves producing sample or prototype.
Since human brain’s perception is better when it sees, touches or feels an object, for any new product idea,
it is always easier to discuss a model of something, no matter how primitive, than to talk about a bunch of
abstract ideas.This need has given rise to a phrase or concept popularly known as “ Rapid
Prototyping”.When the new ideas & concepts are in nascent stage & have to go through the process of
evolution before the work on their development into a workable or functional product can start, this
technique comes handy.
Fundamentally it involves 3 Rs : Rough, Rapid ,Right.
At this stage the concept is converted into an actual product. A customer value perspective during this
phase means the product is designed to satisfy the needs expressed by consumers. Firms may use quality
function deployment (QFD) as they develop the prototype. QFD links specific consumer requirements such
as versatility, durability, and low maintenance with specific product characteristics (for example, adjustable
shelves, a door-mounted ice and water dispenser, and touch controls for a refrigerator). The customer value
perspective requires the new product to satisfy customer needs and meet desired quality levels at specified
Pre-production & test marketing:
Pre Production Trials / Pilot Run -
After prototype stage , the new product enters pilot production or pre production stage outcome of which
is the basis for Test Marketing. The pilot run generally employs scaled down or modified equipment
although it is desirable to use the specific type of equipment, processes & procedures that will be used for
full scale operations. The pilot run or preproduction trials throw up problem areas that may affect output,
quality cost & delivery time.
Test Marketing -
It is an experimental procedure that provides an opportunity to examine the prospect of the new product
under realistic market conditions. It gives the indication of the potential sales volume when the product is
launched on a bigger scale or at national level. In this stage the new product is marketed on an
experimental basis in a few pockets of the market by selecting some small geographical area or few
The feedback of the test market can bring out deficiency , if any, either in the product itself or its
If the product has any weakness , management can tweak the specifications to improve its acceptance by
If marketing mix throws up some problem , management can alter its marketing mix elements &
marketing strategy to assess their impact on sales
In short it provides a valuable input to ensure a successful launch of the new product at national level.
If the first impression of the new product is not positive it is difficult for it to click.
On successful completion of the pilot run & test marketing the design & specifications are frozen for
commencement of the bulk production or mass manufacturing processes.
Before freezing the specifications a cross check is made to ensure that the product is meeting the criteria of
“ Design for Production” .
This evaluation is concerned with economic review of the design which is carried out on multiple
parameters or characteristics.
Design for production:
Parameters used for re scrutiny of the Design before bulk production begins are-
The product is able to meet the expressed or stated needs as well as implied needs of the customer. The
implied needs of the user have necessarily to be envisaged by the designer.
Customers expect the product to be reliable & should be able to give the trouble free service over its
designated life . Reliability is a design function in that product design & specifications should be robust
enough to withstand some amount of abuse or misuse. However it should not be over designed such that it
would get priced out of the market. Poor manufacturing methods & lack of conformance to specs leads to
deterioration in reliability. But total perfection in manufacturing can not make a product reliable if its
design is not inherently reliable.
Manufacturability / Inspectability -
The design engineer has to pay attention to the availability of raw materials or other input parts as well
as production processes required to manufacture & assemble the final product. Also the final product
quality is obtained through individual component quality. Hence parts should be inspect able by the
producer for their conformance with tolerances & other design call outs. These two characteristics which go
hand in hand ensure that the parts can be produced easily & inspected quickly at reasonable cost.
This parameter is a subset of manufacturability. The simpler the design of the product, the easier it is to
produce, the lesser it costs & more reliable it is.
Use of standard parts & components leads to variety reduction which in turn improves manufacturing
costs through reduction in inventory, rejection, rework & obsolescence. Since probability of failure of the
product with lesser number of parts is lower, it improves the reliability of the performance. However variety
to a large extent depends on market forces. In a competitive market the products have a selling edge if
more variety or customer choice is offered.
For meeting these two contradictory requirements, Design needs to be modularized. Module is the
subassembly made up of several parts that are frequently used in interchangeable manner in a number of
Hence on variety reduction there has to be a careful trade off between the requirements of
Manufacturing & Marketing functions.
Commercialization, the final stage, is when the product is introduced full scale. The level of investment and
risk are highest at this stage. Consumer adoption rates, timing decisions for introduction, and coordinating
efforts with production, distribution, and marketing should be considered.
New product pricing:
Impact of new product on the entire product portfolio
Value Analysis (internal & external)
Competition and alternative competitive technologies
Differing value segments (price, value, and need)
Product Costs (fixed & variable)
Forecast of unit volumes, revenue, and profit
In NPD parlance Prototype( PT), as a concept has broad significance.This generic term is used as a noun,
verb & an adjective e,g.
- Design Engineer needs prototype to test his concept.
- Engineers prototype a design.
- Software developers write prototype programs.
In the context of NPD, prototype is an approximation of the product along one or more dimensions of
interest. Thus Prototype can be any entity exhibiting at least one aspect of the product that is of interest to
the development team. It includes such diverse forms of prototypes as concept sketches, mathematical
models, fully functional production versions of the product.
Prototyping is the process of developing such an approximation of the product.
Rapid prototyping draws attention to the time dimension involved in prototyping.
Since human brain’s perception is better when it sees, touches or feels an object, for any new product idea,
it is always easier to discuss a model of something, no matter how primitive, than to talk about a bunch of
This need has given rise to a phrase or concept popularly known as “ Rapid Prototyping”.
When the new ideas & concepts are in nascent stage & have to go through the process of evolution before
the work on their development into a workable or functional product can start, the technique of Rapid
Prototyping comes handy.
Fundamentally it involves 3 Rs : Rough, Rapid ,Right.
Classification of prototype:
For Practical purpose PTs are classified along two dimensions or axes viz. the degree to which PT is ,
Physical or Analytical ( Y axis ), Comprehensive or focused ( X axis )
This classification gives rise to 4 quadrants or 4 cell matrix. Each cell may have different forms of PT for
different end uses
First 3 quadrants are practically useful in development activity while the fourth one has no practical
Physical prototypes- They are tangible artifacts created to approximate the product.
Aspects of the product, of interest to development team, are actually built into an artifact for testing &
experimentation. They include three distinctly different types for different end uses–
- “models” which look & feel like the product.( to communicate the form & style of the product)
“proof of concept” entity made to test an idea quickly. ( for checking user friendliness or ascertaining
user’s convenience & his acceptance)
“experimental hardware” used to validate the functionality of the product ( used in aircraft industry for
testing the strength of the product)
Unlike physical PTs, analytical prototypes are non tangible and represent the product in mathematical or
graphical manner.They are not built physically but are simulated for analyzing some aspects of its working
They include –
2D computer drawings
3D solid models on computers,
systems of equations encoded within a spreadsheet.
They implement most, if not all, of the attributes of the product.They are full scale, fully operational
versions of the product & hence correspond closely to the everyday use of the word prototype.
They are used for-laboratory testing, rigorous checking , field trials for identifying any flaw / deficiency,
customer feedback for improvement suggestions before formal test marketing & /or committing to mass
Focused prototypes –
They implement one, or a few of the attributes of the product and are used when the performance of only
few critical characteristics is to be studied.
They include -
form models for exploring various forms / shapes / contours of the product.
Hard wired circuits instead of PCBs for investigating electrical / electronic performance of the products.
Since making of comprehensive PT is more expensive & time consuming compared to focused PT , the
common industry practice is to produce two or more focused PTs together to investigate the overall
performance of the product.
Generally one is a “looks like” PT & the other is a “works like “ PT. These two focused PTs which can be
made separately quickly & cheaply are studied together to get the valuable inputs by the development team
In NPD context, PTs are mainly used for four different purposes-
PTs are used for learning when they answer two basic questions-
Will it work? , How well does it meet the intended purpose or the customer’s needs?
Mostly these questions pertain to few characteristics which may be getting addressed in the Product Design
for the first time.PTs belonging to third quadrant viz. focused analytical PTs are generally used to throw
more light on these doubts.
- Prototypes enrich communications with all concerned like –
-Members of Development team,
Each of these stakeholders have interest in different features or characteristics of the product. The PTs
falling in the second quadrant viz. physical & focused prototype- a visual, tactile, three dimensional
representation of the product highlighting a particular aspect ( looks like & works like) is a powerful
communication aid than a verbal description or drawing / sketch of the product.
Different PTs can be used to communicate effectively with different segments of stakeholders.
For a complex product comprising of assembly of many parts & subsystems , the PT falling in first quadrant
viz. physical & comprehensive prototype is most effective as integration tool to establish that all the parts &
subsystems fit perfectly & work together as expected.
This type of PT is the replica of the product itself in that it needs the assembly & physical interconnection
of all the components & systems.
Production of this type of PT brings about co-ordination between different members of the cross
functional development team.
If the combination of any of the components of the product interferes with the overall function of the
product, the problem can be detected only through physical integration in the comprehensive prototype.
In industry these prototypes are termed as “experimental” “alpha” “beta” or “preproduction” PTs & play
very important role in field proving.
Mile stones in development process:
In advanced stages of product development process, prototypes are used to demonstrate that the product
has achieved a desired level of functionality.
They are designated as “Milestone Prototypes” because they provide tangible goals to establish the progress
made & in turn help in enforcing the NPD schedule.
Senior Management & customers often demand prototypes to prove that certain functional requirements
have been fulfilled. Then only they give clearance for NPD project to proceed further.
Majority of the government /defence procurement contracts make it mandatory for prototype to pass “first
article test’” before bulk production can start.
Developmental products like Bulletproof jackets for police, splinter proof cooling system & bulletproof gun
mount in battle tank insist on Milestone Prototypes to pass these stringent tests.
Different types of PTs seen in classification matrix are used for these purposes.
Classification of Prototypes gives rise to 4 quadrants or 4 cell matrix.
Also there are 4 principal uses for which prototypes are deployed.
However there is no one to one correlation between classifications & uses.
Relative appropriateness of different types of prototypes for different purposes in different phases of NPD
can be summarized in a tabular form.
The characteristic features of different prototypes provide the guiding principles about which type of
prototype to be built & how to incorporate it into the New Product Development Plan.
Applications of PT
Guiding Principles of Prototyping:
Analytical PTs are more flexible than Physical PTs
Physical PTs are required to detect unanticipated phenomenon
A PT may reduce the risk of costly interactions
A PT may expedite other development steps
A PT may restructure task dependencies
Flexibility- Analytical & Physical PT:An analytical prototype is a mathematical approximation of the product
which generally contains parameters that can be varied in order to represent design alternatives.In most
cases changing a parameter in an analytical prototype is much easier than changing an attribute of a
physical prototype.The analytical prototype also allows larger changes than could be made in a physical
prototype.For this reason an analytical prototype frequently precedes a physical prototype .The analytical
prototype is used to narrow the range of feasible parameters, and then the physical prototype is used to fine
tune or confirm the design.
Detecting Unanticipated Phenomena: A physical prototype often brings out unpleasant surprises completely
unrelated to the original objective of the prototype. Hence it serves as a tool for detecting unanticipated
detrimental phenomena that may arise in the final product. Analytical prototype in contrast can never
reveal phenomena that are not part of the underlying analytical model on which the prototype is based.For
this reason at least one physical prototype is almost always built in a new product development effort.
Reduction in Iterations :Designing & developing a totally new product from grass root level or from scratch
entails lot of risk.In many situations the outcome of a trial or test may dictate whether a development task
will have to be changed or modified or repeated.Building and testing a prototype is fully justified if likely
iterations in downstream development stages get substantially reduced.The anticipated benefits of a
prototype in reducing risk & iterations are weighed against the time and money required to build and
evaluate it. Products that are high in risk or uncertainty due to high costs of failure, new technology, or the
revolutionary nature of the product, benefit from such prototypes.Products for which failure costs are low
and the technology is well known do not derive as much risk reduction benefit from prototyping.Most NPD
situations fall within these two extremes.
Expedite Other Development Steps:Sometimes the addition of a short prototyping phase may allow a
subsequent activity to be completed more quickly than if the prototype were not built.If the required time
for the prototype phase is less than the savings in duration of the subsequent activity, then this strategy is
appropriate.The existence of a physical model of a geometrically complex part allows the mold or die
designer to more quickly visualize and design the mold or die cavity.
3D computer modeling:The advantages of 3 D computer modeling –
- ability to easily visualize the three dimensional form of the design from which other more focused
descriptions such as the cross sectional views can be created.
- ability to automatically compute physical properties such as mass and volume.
- detecting geometric interference among parts - they serve as starting point for more focused analysis
of advance aspects of design like kinematics or stress.
The trend of using 3D computer models as prototypes is fast gaining popularity because it can eliminate
one or more physical prototypes.
In the development of the Boeing 777, the development team was able to avoid building a full scale wooden
prototype of the plane, which had historically been used to detect geometric interferences among structural
elements and the components of various other systems such as hydraulic lines
A 3D computer model of an entire product is known depending on the industry setting as a digital “mock
up”, “digital prototype” or “virtual prototype”.
Free from fabrication: The latest developments in rapid prototyping involve the emerging technology of
stereo lithography and dozens of competing technologies which followed it.
They create physical objects directly from 3D computer models, and can be thought of as three dimensional
Most of the technologies work by constructing an object, one cross-sectional layer at a time, by depositing a
material or by selectively solidifying a liquid. The resulting parts are most often made from plastics, but
other materials are also sometimes used , including wax, paper, ceramics and metals.
The part (s) made by using these technologies are used directly –
- for visualization or in working prototypes.
- as patterns to make molds or dies.
Free form fabrication technologies enable realistic three-dimensional prototypes to be created earlier and
less expensively than was possible before. When used appropriately these prototypes can reduce product
development time and/ or improve the resulting product.
In addition to enabling the rapid construction of working prototypes, these technologies can be used to
embody product concepts quickly and inexpensively, increasing the ease with which concepts can be
communicated to other team members, senior managers , development partners or potential customers.
Planning for Prototypes:
A potential pitfall in product development is the “hardware swamp”.The swamp is caused by misguiding
prototyping efforts, the building and debugging of prototypes that do not substantially contribute to the
goals of the overall product development project. To avoid this swamp, NPD team has to carefully define
the purpose for which prototype needs to be built.
The four step method of planning the prototype is commonly used in developing complex products.
Step 1 Define the purpose of PT
Step 2 Establish the level of approximation of PT
Step 3 Outline an experimental plan.
Step 4 Create a schedule for procurement, construction & testing.
The method applies to all of prototypes. 1)The purpose of prototypes can be either one or more of the :
Learning, Communication, Integration, Milestones
2) The degree to which the final product is approximated needs to be defined.
3) In most cases the use of a prototype in product development can be thought of as an experiment.
The experimental plan includes the identification of the variables of the experiment( if any), the test
protocol, an indication of what measurements will be performed, and a plan for analyzing the resulting
data.When many variables must be explored, efficient experimental design greatly facilitates this process.
4) In preparing the schedule of PT, three dates are particularly important
a ) “Bucket of parts” date ( when all the parts required for assembly are available)
b) “ Smoke test “ date ( first testing of PT)
c) “ Final date” ( completion of testing)
Planning for milestone PT
NPD team prefers to build as few milestone prototypes as possible because designing, building, and testing
prototypes consume a great deal of time and money.However in reality few highly engineered products are
developed with fewer than two milestone prototypes and many efforts require four or more.As a base case,
the team should consider using alpha, beta, and preproduction prototypes as milestones. The team should
then consider whether any of these milestones can be eliminated or whether in fact additional prototypes
Alpha prototypes are typically used to assess whether the product works as intended. The parts in alpha
prototypes are usually similar in material and geometry to the parts that will be used in the production
version of the product, but hey are usually made with prototype production processes.
Beta prototypes are typically used to assess reliability and to identify remaining bugs in the product.
Theses prototypes are often given to customers for testing in the intended use environment .The parts in
Beta prototypes are usually made with actual production processes or supplied by the intended parts
suppliers, but the product is usually not assembled with the intended final assembly facility.
Technology continues to change and create new opportunities and threats. Customer requirements and
expectations continue to shift and create new demands. Old channels of distribution are becoming obsolete
and new channels are opening new opportunities. Some competitors are falling by the wayside while others
are surging to the forefront by making new and unexpected moves to gain advantage. The very structure of
industry is changing. A key to success in this tumultuous environment will continue to be the ability to
sustain a competitive advantage through innovation. However, speed, efficiency, and quality in product
development will be paramount. Building capabilities in all aspects of product creation and
implementation, overcoming uncertainty and facilitating decision-making, ensuring these innovations are
strategically linked to the firm's vision, and doing this on a continuous basis is the challenge of new product
development in the next century.