class 10 managing the npd process

8/4/2019 Class 10 Managing the NPD Process

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MANAGING THE NEW

PRODUCT DEVELOPMENTPROCESS

Rajshree Agarwal


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Agenda

What are the objectives of the new productdevelopment process?

What are the different stages in new product

development? What are some ways to increase the

efficiency of the NPD process?

How might NPD differ over the differentstages of the industry life-cycle?


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Some dismal facts

Despite the intense attention paid toinnovation, failure rates are still very high.

More than 95% of new product

development projects fail to earn aneconomic return.


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The objectives of NPD

Maximize fit with customer requirements

Value proposition should be clear

Better features or lower costs

Minimize development cycle time First mover advantages

Reduced costs and risk of preemption

Controlling development costs

To make profits, costs of development cannotexceed potential revenues!

Higher margins


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3. Business Analysis

The NPD Process

1. IdeaGeneration

2. Idea

Screening

4. Development5. Test marketing

6. Commercialization


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Where do ideas come from?

Employees

Customers (users)

Suppliers

Competitors/Complementors

Ideas often evolve due to interactionamong the above groups


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NPD Process

1. IdeaGeneration

2. Idea

Screening



Employees, customers, suppliers, competitors


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NPD Process

1. IdeaGeneration

2. Idea

Screening



Many -- employees, customers, suppliers, distributors, competitors

Reduce # quickly


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Back to decision making under

uncertainty

At early stages of idea development,significant uncertainty about potentialsuccess

Use of both qualitative and quantitativemethods are important

Qualitative methods may help yield insights,while quantitative methods validate

Strategic, Financial, and Customer focus

All three need to be examined


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NPD Process

1. IdeaGeneration

2. Idea

Screening




Reduce # quickly

S/F/C criteria; decision makingunder uncertainty


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Sequential versus Party Parallel

Development Processes

Before mid-1990s, most US companies usedsequential NPD process; now many use partlyparallel process.

Partly parallel process shortens overalldevelopment time, and enables closercoordination between stages.

In some situations, however, a paralleldevelopment process can increase risks.


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Real optionsuse of stage gate

process

Utilize tough go/kill decision points in the developmentprocess help filter out bad projects.


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NPD Process

1. IdeaGeneration

2. Idea

Screening




Reduce # quickly


Processes for reducing costs


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Test Marketing

StandardTest Market

+Costs+Brand Equity-Jamming-Duplication

Introduction in a small market supported by a full-fledged

marketing campaign


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NPD Process

1. IdeaGeneration

2. Idea

Screening




Reduce # quickly


Processes for reducing costs

Experiment with small numbers

Launch new product!!


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Product Life Cycles

Time

Dollars

Introduction Growth Maturity Decline

IndustrySales

IndustryProfits

0


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Sales

Costs

Profits

Innovtn Objectives

Product vs process

Price

Low sales

High cost per customer

Negative or low

Build product awareness & stimulate trialprimary demand

Offer a basic product; mainly product

Usually is high

Distribution High distribution expenses

Promotion Build product awareness among earlyadopters thro mass-media

Summary of Characteristics, Objectives, & Strategies

Introduction Stage of the PLC


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Sales

Costs

Profits

Innovtn Objectives

Product vs. process

Price

Rapidly rising sales

Decreasing cost per customer relative tointro stage

Rising profits - Highest

Maximize sales

Both product and process

Lower price (relative to intro stage)

Distribution Increase number of distribution outlets

Promotion Mass market advertising & word of mouthfrom adopters in the intro stage.


Growth Stage of the PLC


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Sales

Costs

Profits

Innovtn Objectives

Product vs. process

Price

Peak sales (growth slows, levels off)

Low cost per customer

Decreasing profits

Defending market share

Diversify brand (many line extensions);More usage; More uses

Lower price to match or best competitors

Distribution Build more intensive distribution

Promotion

Stress brand differences and benefits; Sales

promotions


Maturity Stage of the PLC


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Some misconceptions about product

life cycles

At the level of the category and not thebrand Cell phones not CINGULAR wireless.

Different products go through the stagesdifferently.

Timing of stages may vary substantially.


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Tools for Measuring New Product Development

Performance

Measuring performance of NPD process canhelp company improve its innovationstrategy and process.

Measures of NPD performance can helpmanagement: identify which projects met their goals and why,

benchmark the organizations performance compared to thatof competitors, or to the organizations own prior

performance, improve resource allocation and employee compensation,

and

refine future innovation strategies

Important to use multiple measures to provide fair

representation


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Some yardsticks of overall innovation

performance

What is the firms return on innovation?

ratio of the firms total profits from new products tototal costs (including R&D costs, the costs of retoolingand staffing production facilities, and initial

commercialization and marketing costs.) What is the percentage of projects that achieve

their sales goals?

What percentage of revenues are generated by

products developed within the last five years? What is the firms ratio of successful projects

to its total project portfolio?


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Key Takeaways

New product development is risky, but canprovide high returns

Not engaging in NPD will surely result in failure

Managing the various stages of the NPDprocess is critical

NPD projects should be cognizant of theindustry life cycle

NPD initiatives should be evaluated usingmultiple yardsticks

class 10 managing the npd process

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