UNIT 7: NEW PRODUCT DEVELOPMENT

NEW PRODUCT
▪ New-to-the-world products: products that are first of their kind and
they create a new market, for example, Sony Walkman

▪ New product lines: products that are not new to the market, but
they are new to the company and they allow it to enter a new
market for the first time

▪ Additions to existing product lines: products that are new to the

company, and are added to an existing product line

▪ Revisions/improvements to existing product lines: products that

replace existing com- pany products, offering better performance
or increased perceived value to the customer

▪ Repositionings: existing company products that are targeted to a

new market Booz et al. (1982)

▪ Cost reductions: products that replace existing ones, offering the

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same benefits at a lower cost.
WHY SO MANY NEW PRODUCTS FAIL?
There are several reasons:

▪ Although an idea may be good, the company may overestimate

market size.

▪ The actual product may be poorlydesigned.

▪ Or it might be incorrectly positioned, launched at the wrong time,

priced too high, or poorly advertised.

▪ A high-level executive might push a favorite idea despite poor

marketing research findings.

▪ Sometimes the costs of product development are higher than

expected,

▪ And sometimes competitors fight back harder than expected...

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So, companies face a problem: They must develop new products, but the odds weigh
heavily against success.

To create successful new products, a

company must understand its
consumers, markets, and competitors
and develop products that deliver
superior value to customers!

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SUCCESSFUL NEW PRODUCTS

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7 types of uncertainty
(Tzokas, Hart and Saren, 2001)

Customer need uncertainty Competitive uncertainty

How stable is the need in the long run? What will be the reaction of our immediate competitors?
How strongly is it felt by customers? What would be the new competitive products?
What is the threat of other technologies from other industries?
Market-based uncertainty
Is the market big enough?
Resource-based uncertainty
Do we have access to distribution?
Do we have experience in this market? Do we have the resources to complete the project on time?
Do we have the resources to support the product in the market?
Technological uncertainty
Can the chosen technology deliver the benefit? Product strategy uncertainties
Will the chosen technology become the standard? What would be the effect on other products in the firm?
Do our people have good knowledge of the chosen What would be the effect on resources for other NPD projects?
technology?
Which OEMs and/or suppliers should we Organizational uncertainties
collaborate with?
Do we have the support of top management?
Are there any interdepartmental conflicts?

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NEW PRODUCT DEVELOPMENT MODEL
The most popular new product development model, by far, has been proposed by
the consulting firm Booz, Allen and Hamilton Inc. (BAH)

1 Exploration – the search for new product ideas to meet company objectives.
2 Screening – a quick analysis to determine which ideas are pertinent and merit
a more
detailed study.
3 Business analysis – the expansion of the idea into a concrete business
recommen-
dation including product features and a programme for the product.
4 Development – turning the product idea into a ready-made product,
demonstrable and
producable.
5 Testing – the commercial experiments necessary to verify earlier business
judgements
about the product.
6 Commercialization – full-scale production and launching of the product into the
market place.

In a later study, Booz et al. (1982) added one more step at the beginning of the
process, that of New Product Strategy Development, providing a seven-step
model. During this stage, the company identifies the strategic business
requirements that the new product should satisfy.

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NEW PRODUCT DEVELOPMENT MODEL
A firm can obtain new products in two ways.
• One is through acquisition--by buying a whole company, a patent, or a license to produce someone
else's product.
• The other is through the firm's own new-product development efforts.

Kotler, 2013

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EVALUATION IN NPD

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STAGE-GATE MODEL
A stage-gate system of the second generation is described as a ‘game plan or blueprint’ for improving the
effectiveness and time efficiency of the new product process (Cooper and Kleinschmidt, 1991).

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STAGE-GATE MODEL

▪ The innovation process is broken down into a standard series of stages, with each comprising a number
of activities (namely, a cost/benefit analysis or a market study of user needs and wants).

▪ The stages transcend functions and involve marketing, R&D, manufacturing and others in every stage.
In other words, the development of new products becomes a cross-functional task.

▪ Stages are separated by go/no go decision points (or gates), which serve as review stops for the new
product under development. Quality of execution checks are performed on the basis of a predetermined
list of criteria. If the product meets these criteria then it moves on to the next stage, otherwise it is ‘killed’.

▪ In stage-gate systems of product development, the process is monitored by a cross-functional team

headed by a project leader/champion.

▪ Parallel processing of activities as well as speed in development also characterize these systems.
Timely gate decisions keep the project moving along. Effective project evaluations focus resources on
the promising projects, while quality control checks ensure that the new product project is well executed.

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STAGE-GATE SYSTEM

▪ Development activities are executed in parallel only within each

stage. In that sense, projects must wait at each gate until all
tasks have been completed and overlapping of stages is
impossible. As a consequence, the projects must go through all
stages and gates which may lead to unnecessary resources
spending when a shortcut is more appropriate

▪ It does not allow for project prioritization and focus as they pay
little attention to resource allocation questions.

▪ It has been accused as being highly detailed and bureaucratic,

causing conceptualization problems to managers.

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STATE-GATE SYSTEM
A third generation model has four fundamental
characteristics:

▪ Fluidity: it is fluid and adaptable, with overlapping and

fluid stages for higher speed

▪ Fuzzy gates: it features conditional Go decisions, rather

than absolute ones, which are dependent on the
situation.

▪ Focused: it builds on prioritization methods that look at

the entire portfolio of projects, rather than one project at
a time, and also allocates resources on the meritorious
ones.

▪ Flexible: it is not a rigid stage-gate system, as each

project is considered unique and has its own routing
through the process.

This process is also more sophisticated and therefore,

it requires a more experienced, professional approach.

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DESIGN THINKING

▪ The term “Design Thinking” rose to prominence in

the 2000’s when it was made popular by David M.
Kelley and Tim Brown of IDEO.

▪ Design thinking is a human-centred approach to

innovation that draws from the designer’s toolkit
to integrate the needs of people,
the possibilities of technology, and the
requirements for business success (Tim Brown).

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https://www.youtube.com/watch?v=KUaSL0y8BTg

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DESIGN THINKING PROCESS

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WATERFALL & AGILE METHODOLOGY?

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UNIT 8: IDEA GENERATION & SCREENING
WHAT IS A PRODUCT NEW IDEA?

▪ A new product idea is, at this first stage

in the process, a hypothetical
suggestion which links a potential
bundle of attributes with a potential
market.

▪ Throughout the process these potential

attributes will become more clearly
specified and designed to a point where
the potential of the market can be
realized into sales and profits. Thus
ideas, from the outset, must relate to
the eventual benefits they will deliver to
a set of specified potential customers.

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 SOURCES OF INFORMATION FOR NEW PRODUCT IDEAS
New ideas, better ideas reformulated may fall out of every
stage. They do not conveniently appear in the idea generation
stage only.

The whole process of selling corporate and new product

strategies sets out ideas for development. Technologists and
scientists working in research laboratories are working with ideas
constantly, designers are at the creative – idea generation – heart
of the organization, sales and marketing personnel are in
constant contact with new ideas both from competitors and from
customers. This means that, far from being ‘generated’, as if they
do not already exist, many ideas really have to be managed.

Managing new ideas involves two central themes: locating

sources of new ideas and activating those sources.

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SOURCES OF INFORMATION FOR NEW PRODUCT IDEAS

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CREATIVITY & INNOVATION
Although the term ‘innovation’ covers a plethora of associated concepts, any single innovation can be
viewed as a result of creativity, the physical expression of creativity. Creativity management happens at
two levels: the individual and the organization.

The relationship between creativity and innovation (source: Majaro, 1992, p. 7)

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SCAMPER MODEL

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SCAMPER MODEL

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IDEA SCREENING
▪ The screening stage of new product development comprises the activities
of selecting the new product ideas that will be forwarded to the
following phases of the NPD process. During this stage, new product
ideas go through a screening process by considering whether they can
satisfy their strategic goals with the available corporate resources and
know-how.

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IDEA SCREENING
▪ The purpose of idea generation is to create a large number of ideas. The
purpose of the succeeding stages is to reduce that number. The idea-
reducing stage is idea screening, which helps spot good ideas and drop
poor ones as soon as possible. Product development costs rise greatly in
later stages, so the company wants to go ahead only with those product
ideas that will turn into pro table products.

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SCREENING CRITERIA

The criteria used to screen new product ideas usually refer to the technical capabilities of the new
product and its market potential (for example, market attractiveness, availability of necessary resources,
existence of competitive advantage).

1 economic performance/financial potential: assessment of the project’s market potential; expected

sales growth, market growth and market share; ROI; and probability of success);

2 corporate/internal synergy: utilization of the company’s experiences, capabilities, and already

established marketing facilities;

3 technological synergy/production-design synergy: utilization of current production facilities and

methods and engineering/design resources);

4 product differential advantage: product uniqueness and superiority achieving a competitive and/or
technological edge.

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SCREENING CRITERIA

▪ Criteria in the screen must be related to the goal

the company is seeking to achieve. For example,
if the new product strategy is principally
concerned with maintaining market share or
tackling a competitor, should return on investment
be used as a primary screening criterion?

▪ More complex screening should take place at the

next stage of the NPD process.

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The influence of risk in screening

There are two basic types of error in

screening which entail risks:

• killing off product ideas which may

have potential

• developing product ideas which

might fail

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