New product development

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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. Companies typically see new product development as the first stage in
generating and commercializing new products within the overall strategic process of product life cycle
management used to maintain or grow their market share.

Contents
 [hide]

1 The process

2 Fuzzy Front

End

3 NPD

organizations

4 NPD strategies

5 Related fields

6 See also

7 References

[edit]The process

1. Idea Generation is often called the "fuzzy front end" of the NPD process

 Ideas for new products can be obtained from basic research using a SWOT
analysis (Strengths, Weaknesses, Opportunities & Threats), Market and consumer trends,
company's R&D department, competitors, focus groups, employees, salespeople, corporate
spies, trade shows, or Ethnographic discovery methods (searching for user patterns and habits)
may also be used to get an insight into new product lines or product features.
  Lots of ideas are being generated about the new product. Out of these ideas many ideas are
being implemented. The ideas use to generate in many forms and their generating places are
also various. Many reasons are responsible for generation of an idea.

 Idea Generation or Brainstorming of new product, service, or store concepts - idea generation
techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your
ideas in the Idea Screening Phase (shown in the next development step).

2. Idea Screening

 The object is to eliminate unsound concepts prior to devoting resources to them.

 The screeners should ask several questions:

 Will the customer in the target market benefit from the product?

 What is the size and growth forecasts of the market segment/target market?

 What is the current or expected competitive pressure for the product idea?

 What are the industry sales and market trends the product idea is based on?

 Is it technically feasible to manufacture the product?

 Will the product be profitable when manufactured and delivered to the customer at
the target price?

3. Concept Development and Testing

 Develop the marketing and engineering details

 Investigate intellectual property issues and search patent data bases

 Who is the target market and who is the decision maker in the purchasing process?

 What product features must the product incorporate?

 What benefits will the product provide?

 How will consumers react to the product?

 How will the product be produced most cost effectively?

 Prove feasibility through virtual computer aided rendering, and rapid prototyping

 What will it cost to produce it?

 Testing the Concept by asking a sample of prospective customers what they think of the idea.
Usually via Choice Modelling.

4. Business Analysis

 Estimate likely selling price based upon competition and customer feedback

 Estimate sales volume based upon size of market and such tools as the Fourt-Woodlock
equation

 Estimate profitability and break-even point

5. Beta Testing and Market Testing

  Produce a physical prototype or mock-up

 Test the product (and its packaging) in typical usage situations

 Conduct focus group customer interviews or introduce at trade show

 Make adjustments where necessary

 Produce an initial run of the product and sell it in a test market area to determine customer
acceptance

6. Technical Implementation

 New program initiation

 Finalize Quality management system

 Resource estimation

 Requirement publication

 Publish technical communications such as data sheets

 Engineering operations planning

 Department scheduling

 Supplier collaboration

 Logistics plan

 Resource plan publication

 Program review and monitoring

 Contingencies - what-if planning

7. Commercialization (often considered post-NPD)

 Launch the product

 Produce and place advertisements and other promotions

 Fill the distribution pipeline with product

 Critical path analysis is most useful at this stage

8. 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

These steps may be iterated as needed. Some steps may be eliminated. To reduce the time that the NPD
process takes, many companies are completing several steps at the same time (referred to as concurrent
engineering or time to market). Most industry leaders see new product development as a proactive process
where resources are allocated to identify market changes and seize upon new product opportunities before
they occur (in contrast to a reactive strategy in which nothing is done until problems occur or the competitor
introduces an innovation). Many industry leaders see new product development as an ongoing process
(referred to as continuous development) in which the entire organization is always looking for opportunities.

For the more innovative products indicated on the diagram above, great amounts of uncertainty and change
may exist, which makes it difficult or impossible to plan the complete project before starting it. In this case, a
more flexible approach may be advisable.

Because the NPD process typically requires both engineering and marketing expertise, cross-functional
teams are a common way of organizing projects. The team is responsible for all aspects of the project, from
initial idea generation to final commercialization, and they usually report to senior management (often to a vice
president or Program Manager). In those industries where products are technically complex, development
research is typically expensive, and product life cycles are relatively short, strategic alliances among several
organizations helps to spread the costs, provide access to a wider skill set, and speeds the overall process.

Also, notice that because engineering and marketing expertise are usually both critical to the process, choosing
an appropriate blend of the two is important. Observe (for example, by looking at the See
also or References sections below) that this article is slanted more toward the marketing side. For more of an
engineering slant, see the Ulrich and Eppinger, Ullman references below. [1][2]

People respond to new products in different ways. The adoption of a new technology can be analyzed using a
variety of diffusion theories such as the Diffusion of innovations theory.

A new product pricing process is important to reduce risk and increase confidence in the pricing and marketing
decisions to be made. Bernstein and Macias describe an integrated process that breaks down the complex task
of new product pricing into manageable elements.[3]

[edit]Fuzzy Front End

The Fuzzy Front End is the messy "getting started" period of new product development processes. It is in the
front end where the organization formulates a concept of the product to be developed and decides whether or
not to invest resources in the further development of an idea. It is the phase between first consideration of an
opportunity and when it is judged ready to enter the structured development process (Kim and Wilemon , 2002;
[4]
 Koen et al., 2001).[5] It includes all activities from the search for new opportunities through the formation of a
germ of an idea to the development of a precise concept. The Fuzzy Front End ends when an organization
approves and begins formal development of the concept.

Although the Fuzzy Front End may not be an expensive part of product development, it can consume 50% of
development time (see Chapter 3 of the Smith and Reinertsen reference below), [6] and it is where major
commitments are typically made involving time, money, and the product’s nature, thus setting the course for the
entire project and final end product. Consequently, this phase should be considered as an essential part of
development rather than something that happens “before development,” and its cycle time should be included
in the total development cycle time.

Koen et al. (2001, pp. 47–51)[5] distinguish five different front-end elements (not necessarily in a particular
order):

1. Opportunity Identification

2. Opportunity Analysis

3. Idea Genesis

4. Idea Selection

5. Concept and Technology Development

The first element is the opportunity identification. In this element, large or incremental business and
technological chances are identified in a more or less structured way. Using the guidelines established here,
resources will eventually be allocated to new projects.... which then lead to a structured NPPD (New Product &
Process Development)strategy. The second element is the opportunity analysis. It is done to translate the
identified opportunities into implications for the business and technology specific context of the company. Here
extensive efforts may be made to align ideas to target customer groups and do market studies and/or technical
trials and research. The third element is the idea genesis, which is described as evolutionary and iterative
process progressing from birth to maturation of the opportunity into a tangible idea. The process of the idea
genesis can be made internally or come from outside inputs, e.g. a supplier offering a new material/technology,
or from a customer with an unusual request. The fourth element is the idea selection. Its purpose is to choose
whether to pursue an idea by analyzing its potential business value. The fifth element is the concept and
technology development. During this part of the front-end, the business case is developed based on estimates
of the total available market, customer needs, investment requirements, competition analysis and project
uncertainty. Some organizations consider this to be the first stage of the NPPD process (i.e., Stage 0).

The Fuzzy Front End is also described in literature as "Front End of Innovation", "Phase 0", "Stage 0" or "Pre-
Project-Activities".

A universally acceptable definition for Fuzzy Front End or a dominant framework has not been developed so
far.[7] In a glossary of PDMA[8], it is mentioned that the Fuzzy Front End generally consists of three tasks:
strategic planning, concept generation, and, especially, pre-technical evaluation. These activities are often
chaotic, unpredictible, and unstructured. In comparison, the subsequent new product development process is
typically structured, predictable, and formal. The term Fuzzy Front End was first popularized by Smith and
Reinertsen (1991)[9] R.G.Cooper (1988)[10] describes the early stages of NPPD as a four step process in which
ideas are generated (I),subjected to a preliminary technical and market assessment(II) and merged to coherent
product concepts(III) which are finally judged for their fit with existing product strategies and portfolios (IV). In a
more recent paper, Cooper and Edgett (2008) [11] affirm that vital predevelopment activities include:

1. Preliminary market assessment.

2. Technical assessment.

3. Source-of-supply-assessment:suppliers and partners or alliances.

4. Market research : market size and segmentation analysis,VoC (voice of the customer) research.
5. Product concept testing

6. Value-to-the customer assessment

7. Product definition

8. Business and financial analysis.

These activities yield vital information to make a Go/No-Go to Development decision.

In the in-depth study by Khurana and Rosenthal[12] front-end activities include:

 product strategy formulation and communication,

 opportunity identification and assessment,

 idea generation,

 product definition,

 project planning, and

 executive reviews.

Economical analysis, benchmarking of competitive products,and modeling and prototyping are also important
activities during the front-end activities.

The outcomes of FFE are the

 mission statement

 customer needs

 details of the selected concept

 product definition and specifications

 economic analysis of the product

 the development schedule

 project staffing and the budget, and a

 business plan aligned with corporate strategy.

In a paper by Husig, Kohn and Huskela (2005) [13] was proposed a conceptual model of Front-End Process
which includes early Phases of Innovation Process. This model is structured in three phases and three gates:
 Phase 1: Environmental screening or opportunity identification stage in which external changes will be
analysed and translated into potential business opportunities.

 Phase 2: Preliminary definition of an idea or concept.

 Phase 3: Detailed product, project or concept definition, and Business planning.

The gates are:

 Opportunity screening;

 Idea evaluation;

 Go/No-Go for development.

The final gate leads to a dedicated new product development project . Many professionals and academics
consider that the general features of Fuzzy Front End (fuzziness,,ambiguity, and uncertainty) make difficult to
see the FFE as a structured process,but rather as a set of interdependent activities ( e.g.Kim and Wilemon ,
2002).[14] However, Husig et al.,2005 [10] argue that front-end not need to be fuzzy,but can be handled in a
structured manner. Peter Koen[15] argue that in the FFE for incremental,platform and radical projects,three
separate strategies and processes are typically involved. [15] The traditional Stage Gate (TM) process was
designed for incremental product development,namely for a single product.The FFE for developing a new
platform must start out with a strategic vision of where the company wants to develop products and this will
lead to a family of products. Projects for breakthrough products start out with a similar strategic vision,but are
associated with technologies which require new discoveries.It is worth mentioning what are
incremental,platform and breakthrough products. Incremental products are considered to be cost reductions,
improvements to existing product lines,additions to existing platforms and repositioning of existing products
introduced in markets. Breakthrough products are new to the company or new to the world and offer a 5-10
times or greater improvement in performance combined with a 30-50% or greater reduction in costs. Platform
products establish a basic architecture for a next generation product or process and are substantially larger in
scope and resources than incremental projects [15].

[edit]NPD organizations

 Product Development and Management Association (PDMA)

 Association of International Product Marketing & Management

[edit]NPD strategies

 Design for six sigma

 Stage-Gate model

 Quality function deployment

 Flexible product development