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New Products Development Process Summary
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NPD Lecture 1Table of Contents
Introduction and strategic imperatives.............................................................................. 1
Applications ................................................................................................................................... 5
Phase 1 – Opportunity identification and selection ........................................................ 8
The life cycle of a concept ......................................................................................................... 8
Strategic elements ....................................................................................................................... 9
Phase 2 – Concept generation .......................................................................................... 13
Creativity and the product concept .....................................................................................13
Finding and solving Customer’s problems .......................................................................14
Analytical attribute approaches...........................................................................................16
Trade-off analysis and qualitative techniques................................................................18
Templates for creativity ..........................................................................................................18
Relationships analysis .............................................................................................................18
Phase 3 – Concept and project evaluation ..................................................................... 19
Concept evaluation system ....................................................................................................19
Concept testing ...........................................................................................................................21
Full screen ....................................................................................................................................22
Sales forecasting and financial analysis ............................................................................23
Product protocol ........................................................................................................................25
Phase 4 – Development ..................................................................................................... 27
Design ............................................................................................................................................28
Development Team Managament ........................................................................................28
Product Use Testing ..................................................................................................................28
Phase 5 – Launch ................................................................................................................. 29
The impact of simultaneous operations on the product development process .30
NPD = come up with several tastes (for beer in example) based on market research, test the
tastes in the market, do a pilot, and roll out the product.
Introduction and strategic imperatives
What is a new product?
1. New to the world products (10%)
2. New product lines / functions / applications (20%)
3. Improvements and revisions (26%)
4. Additions (26%)
5. Repositioning (7%)
6. Cost reduction (11%)
Newness - 2 perspectives
1. Organization's perspective
a. Product line extension
b. Significant jump in innovation => regular phone to touch screen
c. True innovation (new to the world) => computers, phones, Internet, etc.
, NPD Lecture 1
2. Consumer's perspective
a. Continuous innovation - tooth paste (ingredients, packaging, etc. some
things are changing once in a while, but technically the product will stay the
same) => small changes with small impact
b. Dynamically continuous innovation => small changes, but a bigger effect
c. Discontinuous innovation => new products, big changes, big impact
The degree of ‘newness’ in a new product affects the amount of ‘consumer learning’
needed:
Market risk and execution risk
Market risk - do we actually understand the market; did we ask the correct market? => How
do we understand the market?
, NPD Lecture 1
Execution risk - can we actually create the product, implement it and make money of it? =>
Do we have the right approach to actually sell the product?
Type of consumer product
Very important, all different product types require different market understanding, market
research and marketing approach.
Strategic imperatives
1. Why develop a new product?
a. My competition has one of these (Car manufacturers follow Toyota on
Hybrid cars)
b. The world needs this product (Apple)
c. I have a great idea
d. It’s going to sell millions
e. We have the cash to spend
f. It’s part of our strategic plan
g. Consumers are asking for it
h. We’re losing market share (fast!)
2. Challenges in new product development
a. Shortage in new product ideas
b. Fragmented markets
c. Social and governmental constraints
d. High development costs
e. Shortage of cash/capital
f. Faster development time
g. Shorter product life cycle
h. Top management support
i. Effective organizational arrangement for new product development
, NPD Lecture 1
New product success factors
1. Understand and be close to the market
2. Find a competitive advantage and set a strategic direction
3. Play to your strengths and know when to get out
4. Strong organizational support
5. Timing, speed to market and channel support
6. Tendency to move away from the ‘dead-end’ circle of consumption:
a. Production
b. Acquisition
c. Consumption
d. Disposal
More and more attention is given in the NPD process to include the full circle and the links
between its elements.
In essence, new product and/or service development is the most important strategic
activity of any company! However, it is the most risky venture. Most new products fail!
1. Most common reasons for failure:
a. Failure in market research findings
b. Overestimated demand and size of market
c. Design failure
d. Positioning problem
e. Ineffective communication/promotion
f. High development costs/price
g. Pressure from competitors
h. Poor timing
2. The risks of new products
a. Failure rates => no more than 10% are successful
b. Costs => R&D, branding, promotion, etc.
c. Only 1 in 9 new product ideas are carried to the commercialization phase
3. Cause of new product success
a. Technological superiority
b. Ease of market entry
c. Competitive advantage
d. Size and speed in market growth
e. Identifying needs/wants and good timing
f. Effective promotion/communication
, NPD Lecture 1
g. Uniqueness of the concept/product
h. Marketing and managerial synergy / team effort
The NPD process
Conflicts of NPD
Three inputs to the new products process: the right quality product, at the right time, and at
the right cost. How to optimize this relationship in a new product situation?
Quality, cost, and time in order to create value.
Applications
Chapter 1 – applications (p35)
• “When you were talking a while ago about taking risks, I wondered just whose
money you were talking about. A fellow I know out in California insists that all new product
team members invest their own money (with his) in their projects. Fifty thousand dollars is
not unusual. In that system I’ll bet you would be seeking to avoid risks, not trying to find
them.”
With new product development comes risk, regardless whether you invest your own money
or some else’s. Risk is required to have a substantial return on investment chance. One
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