An introduction to New Product Development

(NPD)

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Lecturer

• Goh Boon Gee• E-mail: gohboongee@apiit.edu.my• Master Degree in Business Administration -

International University of Japan(IUJ)• Bachelor Degree in Finance – University of

Nebraska Lincoln (UNL)• 7 years working experience in

International Financial Institution & Franchise Management (USA, Malaysia, Japan)

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Introduction

Personal Introduction- Please tell me alittle bit about yourself including your

– Name(by which you like to be called)– Working Experience if any– Nationality– Tools or skills you would like to gain from this

class

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Class Structure

Course Level– Semester 1 Year 3

Prerequisites– Creativity and Innovation

Course assessment overview– In course assignment (50% subject to change)– Final Exam(50% subject to change)

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Learning Outcome

1. Demonstrate knowledge and understanding of the widely recognized attributes necessary in developing and successfully commercialising a new product.

2. Develop coherent lines for argument and suggested informed solutions to innovation management scenarios.

3. Apply and evaluate innovation management and new product development techniques for launch planning, implementation and management

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Learning Objectives

• Recognise the importance of innovation

• Explain the meaning and nature of innovation management

• Provide an introduction to a management approach to innovation

• Recognise the need to view innovation as a management process

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Class 1- Introduction

Why is New Product Development important?

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New Product Development- Introduction

“ New Product development is one of the riskiest, yet most important, endeavors of the modern corporation. Certainly the risks are high. You and your colleagues have seen as large amounts of money spend on new product disasters in your own firm. But then, so too are the rewards.

New product currently account for a staggering 33% of company sales on average. That is one third of the revenues of corporations are coming from products, they did not sell five years ago. In some dynamic industries, the figures is as high as 100%!!!”

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New Product Development- Introduction

Research in this area suggest that 65% of new product launches succeed– And this is only the success rate of those

products that actually make it to their actual launch

– Some researchers have found that only 20% of all products upon which development has begun actually succeed.

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New Product Development- Introduction

Rewards from Successful New Product Development– Astounding ROI: The average ROI for

successful new products is 96.9%– Payoff very quickly: The average payback

period is 2.49 years– Excellent market positioning: The average

market share in their defined target markets is 47.3%

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New Product Development- Introduction

2006 Rank CompanyMargin growth %1995-2005

Stock Returns%1995-2005

1 Apple 7.1 24.6

2 Google NA NA

3 3M 3.4 11.2

4 Toyota 10.7 11.8

5 Microsoft 2.0 18.5

6 General Electric 5.7 13.4

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New Product Development- Introduction

“Innovation is not a single action but a total process of interrelated sub process. It is not just the conception of a new idea, not the invention of a new device, nor the development of a new market. The process is all these things acting in an integrated fashion”

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New Product Development- Introduction

Rewards from Successful New Product Development(median value)– 50% of successful new products achieve 33%

ROI or better– Half of successful new products have a

payback period of two years or less– Half of successful new products achieve a

market share in excess of 35%

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New Product Development- Introduction

Why is there a need for organization to innovate?– Technology Advances– Changing Customer Needs– Shortening Product Life Cycles(PLC)– Increased World Competition

Will these reasons be no longer relevant in the next 40 or 50 years?

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New Product Development- Introduction

Different Type of innovation

• Product Innovation

• Process Innovation

• Organization Innovation

• Management Innovation

• Production Innovation

• Commercial/Marketing innovation

• Service Innovation

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New Product Development- Introduction

Why New Product Development?– Increasing level of innovation in competitive

environment settings– More resources are being dedicated into

innovating products– Success of such resource allocation is

inconsistent at best– A structured approach to new product

development is require to enhance success rate

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New Product Development- Introduction

Winning at New Products– Speed yields competitive advantage?

– Speed yields higher profitability?

– Speed means fewer surprises?

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New Product Development- Introduction

Categories of New Products1. New to the world products

2. New product lines

3. Additions to existing product lines

4. Improvements and revisions to existing products

5. Repositioning

6. Cost reduction

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Questions?

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Tutorial

1. What is wrong with the popular view of innovation in which eccentric scientist develop new products?

2. What is the difference between an unsuccessful innovation and an invention?

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Answers• Q1• Quite simply it is damaging to the reputation of science

and scientists in particular. One can understand why it is popular with film makers and tabloid press editors and that is because much of science is not understood and also because people live in hope that scientists can do anything. The truth is very different, and virtually all scientific progress is slow and takes many years of many people’s considerable efforts. Progress is also largely down to teamwork, with considerable size groups of scientists often working on particular projects.