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New Product Development

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A variety of perspectives from which to analyse the development of new products

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Some thing to consider…

Figure 9.6 Dropout rates for R&D projectsSource: Adapted from D.L. Babcock (1996) Managing Engineering Technology: An Introduction to Management for Engineers, 2nd edn, Prentice Hall, London.

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Stages in NPDIdea

generation

Idea screening

Concept development

and testing

MarketingStrategy

development

Business strategy

Productdevelopment

Test Marketing

Commercialization>

http://www.tutor2u.net/business/presentations/marketing/newproductdevelopment/default.html

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_________________________

From R&D dept Production team Sales team Employees Customers Competition External sources Market research >

Don’t forget the social determinist and Individualist school of innovation!

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Creativity versus innovation Creativity is the generation

of new ideas. Innovation is the

implementation of creative ideas.

For Example: if a scientist has a number of ideas about how to build a household robot, she is creative.

If she applies those ideas to build a household robot, she is innovative.

http://www.businessinnovationinsider.com/images/2006/05/Creativity%20to%20innovation.jpg

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45% of lucrative business ideas — whether breakthrough products or services, new uses for old ones, or ways to cut costs— come from employees…PricewaterhouseCoopers

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Individual creativity versus organisational creativity

Individual creativity People can learn to be more creative by reading

books, participating in workshops, learning creative thinking techniques etc

Organisational creativity Making an organisation more creative and more

innovative is much more complex, requiring the establishment of a culture of innovation together with tools for creative collaboration;

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Creative collaborationa greater variety of people participating in the

idea generation process equals a higher level of creativity and innovation.

a greater variety of people participating in the idea generation process equals a higher level of creativity and innovation.

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variety of people with different backgrounds and areas of expertise required

at minimum, that teams are made up of people from different divisions within the company. At best, those people will also come from different locations or countries.

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Collaboration can happen in … Creative teams

Management placed for project or Self created by asking for assistance by friends (though usually from

same area of expertise) Brainstorming groups

When appropriate, business partners, customers and others from outside the

company should be brought in to participate. Networking

seek the assistance of a colleague for ideas, advice or help – across company

staff directories and discussion forum tools can help encourage people to network outside their departments and immediate contacts

Open collaboration through web based discussion forums a totally open environment to solve problems.

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2. Screening ideas Screen good ideas

and drop poor ones asap.

Checked for Technical feasibility Financial feasibility and

marketability Evaluate its demand,

marketability, and profit potential

Give ratings to ideas >

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Criteria for evaluating new products

Sufficient demand ? Profitable? Likely payback period? Fit firm’s image ? Lifecycle of the product ? State of market and

competitors ? Capability company to

successfully produce and market product ?

Ease of manufacture ?

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Remember I.Ansoff’s matrix

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Product vs market (extended Ansoff’s growth matrix)

Same product

Extended product range

Incremental change

Totally new product

Same market

Better market coverage

Related market

Totally new market

Product

Mar

ket

pen

etra

tio

n

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3. Concept development Detailed version of new

product (in documented user terms – a user requirements / functional list)

Turing ideas into tangible products – customers perceive as being valuable

Concept testing : with groups of consumers

Nokia has released images of Aeon, a concept phone that combines two touch-sensitive panels mounted on a fuel-cell power pack Devices like this are all part of Nokia's vision of 'wearable technology'. Users could wear the lightweight panels as a badge, or connected to a wrist-strap.

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4. Marketing strategy development

Initial marketing strategy based on product concept

Formal market research for product’s potential

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5.Business analysis

Review of sales, costs, profit projection

Estimate potential sales, income, breakeven point, profit and return on investment from new ideas

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6. Product development

R& D turns idea into product Develop product concept into physical

product, via prototypes or simulations Engineering and production issues

resolved via this process Consider materials, production processes,

quality and safety

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Design mix Formal design –

aesthetics Functional design –

performance, ,does it work is it reliable ?

Economy of manufacture – does design allow manufacture efficiently and cost that allows profit ?

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7. Test marketing

Pilot in small geographical area Field experiment in realistic setting Aims:

Forecast probable results of a national launch Test operational effectiveness of the

marketing plan Identify possible problems Assess customer reactions

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Problems with test marketing:

Test market may not be true indicator Environment may change from test to

national launch Competition may disrupt

By exceptional marketing activity Launching own product

Alerts competition to new product Simulated test marketing is getting more

sophisticated

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8.Commercialisation/ product launch Introducing new

product into the market Timing is critical for

success Heavy promotional

expenditure Choice of introductory

pricing Well targeted and

positioned

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We have already seen organisational creativity and collaboration in the form of :Creative teams Brainstorming groupsNetworkingOpen collaboration

These ideas can be extended to serve a NPD cycle …

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Models of NPD Departmental Activity stage (and

concurrent engineering)

Cross functional Decision stage

models Conversion process Responsive Models

Network models >

Idea generation

Idea screening

Concept development

and testing

MarketingStrategy

development

Business strategy

Productdevelopment

Test Marketing

Commercialization

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Departmental

Each department is responsible for certain tasks and once finished ‘passed over to next dept’ – over the wall’

Ad Each dept ‘knows what IT needs to do’

Disad Forward and backwards Lots of rework

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Departmental

R&D provides interesting ideas Engineering – develop prototypes Manufacturing – viable mass manufacturing Marketing – then plan and conduct the

launch

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Activity stage Similar to departmental Build around the activities Lots of feedback loops Simultaneous nature of activities (varying in

intensity)

Ad Groupings according to activity

Disad Even more passing and therefore, procrastination

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An activity-stage model

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Cross functional (TEAMS) Dedicated team representing people from a

variety of functions

Ad Full representation

Disad Organisation and project management disciplines need

to be well developed

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Decision stage models Set of decisions points or gateways must be

passed. Iterative and uses f/b loops

http://www.stage-gate.dk

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Conversion process Numerous inputs into a black box, converted into

a product output Input’s such as customer requirements,

technical ideas, manufacturing capabilities all provide a product output

Not disciplined , or measurable, or defined

Response model Behaviourist approach to decisions Organisational response to new proposals and

ideas

http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9310.2006.00413.x for articles on innovation (journals)

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Network models – most recent thinking Accumulation of knowledge from

variety of sources eg marketing, manufacturing, R&D

And over the progression of project from initial idea to development PLUS

external linkages (additional information flow into organisation)

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A network model of NPD