NEW PRODUCT DEVELOPMENT (NPD) PROCESS

Durfee, NPDBD, Sept. 14, 2009 Lecture notes posted on www.npdbd.umn.edu

Submit1. Project Preference form & resume2. Signed C&IP signature pages (6 sheets)

Today1. Web site access (Williams)2. Lecture (Durfee)

Wednesday1. Lecture: Project Mgmt (Adams)2. Team meeting

Task

Form groups of approximately six

Design Matters

"The Knowledge Economy as we know it is being eclipsed by something new -- call it the Creativity Economy"

Task

List 10 products (not services), introduced in the last 20 years, that have changed people's livesDeliverable: List of 10, pick two to reportTime: 5 minutes

Classic Failures

Optimistic sales ramp up (< 3 yrs)Too far out there (Segway)Focus on features v. benefits

Habits of Effective Product Development Teams

Study the customerCreativityQuick and dirty prototypingObjective evaluationCross-functional teamsEstablished NPD processManage risk, abandon if necessary

Adapted from S. Eppinger, Shocker lecture 2003

New Product Categories

Source: Crawford, New Products Management

New tothe world

New to thecompany

Product lineaddition

Product improvement

New application

Another NP Index

Market pullTechnology push

Where are the six NPDBD projects?

Market driven = customer demands it Technology driven = dot.bomb

Investigative Reporting on Your Client

Medtronic

SEC Edgar

Value Line

UMN Library

Generic NPD Design Process

Source: Ulrich & Eppinger, Product Design and Development, Exhibit 2-2

Planning Concept System-Level Detail Testing and ProductionDevelopment Design Design Refinement and Launch

Baxter Health Care NPD

Source: Axiom Business Concepts

FDA Design Process www.fda.gov

Stage-Gate NPD Process

Stage 3Gate 1 Stage 1 Stage 2Gate

2Gate

3

Ideas Idea screen

Scoping Second screen

Build Business

Case

Evaluate Development

Source: www.stage-gate.com and Cooper, Winning at New Products

Stage 5Stage 4Gate 4

Gate 5

Evaluate Test & Validate

Evaluate Launch Post-Launch Review

Generic Product Development

Opportunity Identification

Concept Development

Detail Design

Launch and Ramp-Up

Test and Refine

Fuzzy Front End

¢ $$$

Opportunity Identification

Discover a needInvent a new technologyUnderstand the competitionFind a gap

1.Define the problem2.Understand the users3.Research the current solutions

Task

Examine the collection of cell phones being used in your group. List what's right and what's wrong with them. List the ideal features of a cell phoneDeliverable: List of 5 ideal features, pick two to reportTime: 6 minutes

The 3 F’s

Market FeasibilityDoes anyone want it?

Technical FeasibilityCan we make it?

Financial FeasibilityWill $ be made?

TechnicalFeasibility

MarketFeasibility

FinancialFeasibility

FULLY REFINEDPRODUCT

Market Feasibility

Understand the Customer

Voice of the Customer (VOC)Who?

Market segmentationPersonas

HowObservationInterviewsSurveyFocus Group

ETHNOGRAPHY

}

Customer-Driven Design

1. Understand needs2. Gather reaction to concept3. Gather reaction to prototype

Task

The team is conducting interviews with customers in the pill reminder target market. Create the interview scriptDeliverable: Report two questionsTime: 5 minutes

Technical Feasibility

Idea Generation

ExternalPatentsReverse engineeringTrade magazines, trade shows, storesExpertsUsers

InternalBrainstorming (many methods)Solo storming

Concept Screening

Define the metricsInclude all stakeholders

Internal screenCustomer screen

Be objectiveStep back and reflect

Ulrich and Eppinger, Product Design and Development, Exhibit 7-4

Engineering Design

Analysis-based designUse equations to ball parkUse computer simulations to fine-tuneShow that you know physics and engineering

Get in the ball park with the prototypeBut don't obsess over the details

VIRTUAL PROTOTYPING

Build Prototypes

Quick and dirty is goodFastCheap

Learn from the prototypes

Internal communicationSolo/Team

External communicationCustomerBoss

If you have many

prototypes, you will

impress your client!

IP is Critical

Value of company is in its intellectual property and the ability of staff to generate IP, not in the productsVCs look at people more than at conceptIP, utility patents

Technology disclosureProvisional patentPatent applicationIssued patent

Financial Feasibility

When Forecasting

Use client's processProvide a framework

The art of assumptionBe explicit

Provide a rangeLikely, Optimistic, Pessimistic

Be realistic about market share, sales volumeCite sources for data (be credible)

Source: Consumer Electronics Association, http://www.ce.org/Research/Sales_Stats/

Adoption Rate of Consumer Electronics

NPDBD Pro Forma Financials

Y1 Y2 Y3 Y4 Y5

Sales(units)

20,000 20,000 20,000 20,000 20,000

0

5000

10000

15000

20000

25000

0 1 2 3 4 5

Measuring NPD Success

ROI, NPVSales, growth rateGrowth in related productsWarranty and returnsCustomer satisfaction

Post-launch evaluation

Source: www.pdma.org

About 40% of new products fail post-launch

Top Ten Risky Assumptions1. We will rapidly gain market share2. We don't have to worry about the competition3. Product will launch on time and on budget4. Retailers will be desperate to stock our product5. It is for everybody6. Product will sell itself7. Customers will find us8. Customers will immediately see that our product

is superior9. Product will sell because it is technologically

superior10. I like the product so the customer will like it!

Take-home messages

NP development is complex and uncertainlearn to manage risk

NP development is an iterative processprototype and evaluate early and often

NP development is interdisciplinaryhave the right team

NP development needs structurehave a process

Market Feasibility

The NPDBD Mantra

Technical Feasibility

Financial Feasibility