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New Product Development. The first steps in the process to success

Feb 24, 2015

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Survival as a minimum.

Intense global competition, rapid technology change and changing patterns of market opportunities means companies have to continually invest in New Product Development (NPD), if not for profit then for survival.

 

New products and their development is widely recognised as one of the most important sources of competitive advantage, but despite the importance of NPD, a high percentage-around 40%- of new products fail when released onto the market.

 

With so much at stake for future business prosperity, adoption of a formal NPD process can have a significant impact in securing a positive commercial outcome.

 

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Ideas, lots of them.

There is no NPD process without ideas.  Creating a constant flow is the first step, achieving that means eliciting contributions from inside and outside your business.

 

Employees are an obvious source and should be actively encouraged to contribute, wherever they work. Indeed, those employees that work in seemingly less obvious roles for providing product innovation can provide those nuggets of insight that lead to a real advance.

 

Any successful company is already talking and listening to their customers, either directly or via social media channels. Customers will give insight into their needs and those of the markets they trade in, along with trends and developments. New products derived from customer and marketing sources have, in general, the most commercial success.

 

Suppliers provide another source for new products. They might develop a new product or technology to make yet another product and then go to the makers of those products to suggest new versions of them. As with customers, build a two-way working relationship to learn about their plans and understand how they could be used to benefit both businesses.

 

Finally, competitors also provide valuable data for NPD. This does not mean slavishly following whatever they do, as they can inform you what not to do as well as potential new developments. However, they can point to emerging market trends or technologies that you cannot afford to ignore.

 

Bear in mind that idea generation is usually the least expensive step in the process. Ideas do not come in a regular stream to order, making them difficult to control.  This is why an effective capture and review process is required.

 

Moving through the NPD process, each step gets more expensive than the last. Ideas are relatively cheap and easy to generate; what is difficult and expensive is making them a reality.

 

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Pass the Sieve

With a flow of ideas, suggestions and insights coming in, they now need to be screened. The sooner poor ideas are discarded, the less the investment made and lost.

 

In this screening stage, evaluate new proposals by answering the following questions:

  • Does the proposed product add value for the customer? Does it satisfy a market need?
  • Can the product be made within a stated time period to get it to market when needed?
  • How many units of it will sell and at what price?
  • Can it be manufactured and sold within budget and still make money?
  • Does the product require after-sales service? If so, are the resources available to do that?
  • Does the product fit our image and corporate strategy?

 

At this point, concept testing can be undertaken, putting the proposals to existing and potential customers and getting feedback. There are a number of ways to do this but the concepts must be evaluated by the target market, otherwise the feedback is not relevant.

 

As screening considers the feasibility of making and servicing a product, price and cost are important considerations. If the product cannot be sold in sufficient quantities to make a profit, the idea must be scrapped. Equally, if the value the customer receives from the product is less than the price paid for it, they will not buy it, so the idea must be scrapped.

 

As part of the screening exercise is process feasibility, which is the degree to which the company can actually make and service the product which affects financial feasibility. If costs cannot be controlled during manufacture or servicing, the financial objectives will not be met. Without the skills and expertise to design and manufacture a reliably functional product, warranty costs and brand damage will again affect the financial returns.

 

Strategic fit is more difficult. It is possible to overlook the potential and moneymaking opportunity of an idea, simply because it does not fit within the current strategy.  Therefore, when asking the final question in the list above, make sure that the financial merits of the proposal have been fully considered. Then look at strategic fit and ask if the strategy needs amending to take advantage of the opportunity being presented. 

 

Stop, I want to get off!

At this point two types of risk are being assessed, investment and opportunity.  Investment risk is failing to earn a sufficient return on the money and effort expended on getting the product to market. Opportunity risk is the possibility that by pursuing one opportunity, a better one gets overlooked or ignored.

 

When a company is assessing fit, it is assessing its opportunity risk and when assessing feasibility, it is assessing its investment risk.  This process continues throughout the entire new product development process and at any stage a proposal can and should be terminated, if these risk equations shift from a positive to negative outcome.

 

When you have invested time and money in a project it is tempting to keep going in an effort to recover that investment. However, by ignoring the outcomes of the ongoing risk assessments will most likely lead to the product joining the list of heroic failures touched on at the start of this post.

 

Visit our pages again in the coming weeks as we continue our look at the new product development journey.




 
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