New Product Development Process

Home , New product development

Yao-wen Huang Professor University of Georgia Shanghai Jiao Tong University Shanghai Ocean University [email protected] NEW PRODUCT DEVELOPMENT AND INNOVATION Definition of New Product

. Either the development and introduction of a product not previously manufactured by a company into the marketplace, or

. The presentation of an old product into a new market not previously explored by a company

Why New Product?

. Product life cycles

. Company reasons (Demand and Supply)

. Marketplace reasons (Consumers’ trend)

. Technological reasons

. Government regulations Product Development Cash Flow Product Development Cash Flow Product Development Cash Flow Product Development Cash Flow Life Cycle of a Product in 5 Periods

. (1) Introductory . (2) Strong growth . (3) Decline in growth . (4) Maturity . (5) Decline in volume Marketing Strategy for Product Life Cycle . Understand that profits have a predictable pattern

 Early stages: focus is on product information  Later stages: focus is on brand promotion

. Use market segmentation in maturity stage to maintain strong core customer basis Is a “New-to-World” Product? Is A “Never before” Product? However, A New Product needs:

. To meet the definition

. To meet the market trend

. To meet consumer’s need

. To meet company’s image Classifications of New Product

. 1. Line extension . 2. Reposition . 3. New form . 4. Reformulation . 5. New packaging . 6. Innovative or value-added products . 7. Creative products General Stages of New Product Development Process

. Intention . Ideation . Prototyping . Development . Test market . Production . Launch New Product Development Process

A disciplined and defined set of tasks and steps that describe the normal means by which a company repetitively converts embryonic ideas into salable products or services

Ref: PDMA Product Development Stages in Nabisco Co.

. 1. Concept development  Ideation: brainstorming and screening  Market research + R&D

. 2. Protocept development  Transformation: from concept to prototype  Bench top to pilot plant  Consumer Focus group  Multifunctional team: Marketing, R&D, production, etc Product Development Stages in Nabisco . 3. Pilot plant scale up  Prototyping  Modification of formulations  Optimization  Shelf life study  In-home use test  Logistics  Engineering involvement . 4. Production development  Full scale running  Commercialization  Fine tuning process NDP Process involve Technology and Marketing

Gates: Where project is evaluated and dispositioned Technology Technology Technology Planning Investigation Comm.

Build Full Full Launch Market Business Dev Dev Preparation Launch

Case Alpha Beta

Idea Evaluation Idea Concept Scoping/

Stages: Where the work gets done

One of the big benefits of the process is to get engineers to focus on what is most important – not necessarily stuff that is urgent. Operating Without a Process?

- Technology Driven - R&D Driven - Build it they will come

- Marketing Driven - I love the idea, let’s do it -The CEO asked me to do it - I had this idea and other two persons are OK with it

Ref: Delifer 2010 We Need A Structured NPD Process

Discovery Scoping Business Case Development Testing Launch

1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5

Commonly referred to as the original NPD Process that made popular by Dr. Robert G. Cooper:

The Stage-Gate® Product Development Process Stage

Activities/Work take Place During a Stage

- Cross functional work in parallel - Early definitions get fine tuned as project advances - Must have a plan to follow - Ensure communication/collaboration - No one team owns the stage - Market research + Early product definition ensure reduced cycle time Gate

Individual Project Review and Decisions are made at Gate

- Individual projects reviewed - Decision Point: Go/ No Go/ Hold/ Recycle - Scoring based on criteria - Gatekeeper meeting - Project Decisions - Resources Allocated - Quality evaluation of deliverables How Stages Work?

A Go Decision Stage 1 Deliverables for next Gate from the Gate Scoping

Action Plan Team decides how to A deliverables pack “work the stage” A recommendation: Approved Maps out the details of Go / Kill resources the Forward Plan Use the recommended Date for next list of best practice If Go, a proposed gate set activities “Forward Plan” Apply sound PM List of Resources methods Deliverables requested for next Updates/Input - Senior stage Team engaged and Ref: Delifer 2010 informed How Stages Work?

A Go Decision Stage 1 Deliverables for next Gate from the Gate Scoping

Action Plan Team decides how to A deliverables pack “work the stage” A recommendation: Approved Maps out the details of Go / Kill resources the Forward Plan Use the recommended Date for next list of best practice If Go, a proposed gate set activities “Forward Plan” Apply sound PM List of Resources methods Deliverables requested for next Updates/Input – stage Senior - Team engaged Ref: Delifer 2010 and informed How Stages Work?

A Go Decision Stage 1 Deliverables for next Gate from the Gate Scoping

Each stage is preceded by a Gate

Discovery Scoping Business Case Development Testing Launch

1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5

Gates = Decision Points or Go / Kill Points

Gates are where projects get resources & are prioritized – get on management’s radar screen Gates are the quality control check points in the process

Ref: Delifer 2010 Gates ensure that only the right projects move forward

GATE Prescribed list of Decision: deliverables Go / Kill / Hold / Recycle Forward Plan approved Gatekeepers

Decision based upon…  activities of the Readiness check: previous phase  Quality of execution?  based on a standard  Deliverables in place? list or menu Decision Business rationale:  key information for criteria  Is it an attractive investment opportunity? efficient decision Action plans: making  Is the “Forward Plan” a good one?  Are the resources available? Ref: Delifer 2010 Benefit: Make better gate decisions, based on consistent, market-based criteria.

GATE SCORECARDS Used by decision-makers to ensure assessment of projects on standardized, best-practice criteria.

[email protected] July 16, 2010 30 Flyover from A to Z

Discovery Scoping Business Case Development Testing Launch

0 1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Purpose

To gather input A relatively quick, To conduct a To develop a To provide final and Implement for new or qualitative detailed prototype product, total validation of production and enhanced assessment to investigation to validated with the entire project: marketing launch develop a product the commercial product ideas determine customers. plans. whether the definition and a product, its business case. production, and its project is worth marketing. further Key Deliverablesinvestigation.

• Inquiry Form • Preliminary • Business Case • Prototype •Validated • Commercialization • Screened Idea Business Case • Product Definition • Testing & Product • Post Launch Validation Plan •Launch Plan Review • Business Case

Ref: Delifer 2010 Flyover from A to Z

Discovery Scoping Business Case Development Testing Launch

0 1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Purpose

A relatively quick, To conduct a detailed To develop a prototype To provide final and total Implement production To gather qualitative assessment investigation to develop product, validated with validation of the entire and marketing launch input for new to determine whether a product definition and customers. project: the commercial plans. the project is worth a business case. product, its production, or enhanced further investigation. and its marketing. product ideas Key Deliverables • Preliminary • Business Case • Prototype •Validated • Commercialization • Inquiry Form Business Case • Product Definition • Testing & Product • Post Launch • Screened Idea Validation Plan •Launch Plan Review • Business Case

Ref: Delifer 2010 Flyover from A to Z

Discovery Scoping Business Case Development Testing Launch

0 1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Purpose

To gather input for To conduct a detailed To develop a prototype To provide final and total Implement production new or enhanced A relatively investigation to develop product, validated with validation of the entire and marketing launch product ideas quick, a product definition and customers. project: the commercial plans. a business case. product, its production, qualitative and its marketing. assessment to determine Key Deliverables whether the project is • Inquiry Form worth further • Business Case • Prototype •Validated • Commercialization • Screened Idea investigation. • Product Definition • Testing & Product • Post Launch Validation Plan •Launch Plan Review • Business Case • Preliminary Business Case

Ref: Delifer 2010 Flyover from A to Z

Discovery Scoping Business Case Development Testing Launch

0 1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Purpose

To gather input for A relatively quick, To develop a prototype To provide final and total Implement production new or enhanced qualitative assessment To conduct a product, validated with validation of the entire and marketing launch product ideas to determine whether detailed customers. project: the commercial plans. the project is worth product, its production, further investigation. investigation and its marketing. to develop a product Key Deliverables definition and a business case. • Inquiry Form • Preliminary • Prototype •Validated • Commercialization • Screened Idea Business Case • Testing & Product • Post Launch Validation Plan •Launch Plan Review • Business Case • Business Case • Product Definition

Ref: Delifer 2010 Flyover from A to Z

Discovery Scoping Business Case Development Testing Launch

0 1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Purpose

To gather input for A relatively quick, To conduct a detailed To provide final and total Implement production new or enhanced qualitative assessment investigation to develop To develop a validation of the entire and marketing launch product ideas to determine whether a product definition and prototype project: the commercial plans. the project is worth a business case. product, its production, further investigation. product, and its marketing. validated with customers. Key Deliverables

• Inquiry Form • Preliminary • Business Case •Validated • Commercialization • Screened Idea Business Case • Product Definition • Prototype Product • Post Launch • Testing & •Launch Plan Review Validation Plan • Business Case

Ref: Delifer 2010 Flyover from A to Z

Discovery Scoping Business Case Development Testing Launch

0 1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Purpose

To gather input for A relatively quick, To conduct a detailed To develop a prototype Implement production new or enhanced qualitative assessment investigation to develop product, validated with To provide and marketing launch product ideas to determine whether a product definition and customers. final and total plans. the project is worth a business case. further investigation. validation of the entire project: the Key Deliverables commercial product, its • Inquiry Form • Preliminary • Business Case • Prototype production, • commercialization • Screened Idea Business Case • Product Definition • Testing & and its • Post Launch Validation Plan marketing. Review • Business Case •Validated Product •Launch Plan

Ref: Delifer 2010 Flyover from A to Z

Discovery Scoping Business Case Development Testing Launch

0 1 2 3 4 5

Gate 1 Gate 2 Gate 3 Gate 4 Gate 5 Purpose

To gather input for A relatively quick, To conduct a detailed To develop a prototype To provide final and total new or enhanced qualitative assessment investigation to develop product, validated with validation of the entire Implement product ideas to determine whether a product definition and customers. project: the commercial production the project is worth a business case. product, its production, further investigation. and its marketing. and marketing launch plans. Key Deliverables

• Inquiry Form • Preliminary • Business Case • Prototype •Validated • Screened Idea Business Case • Product Definition • Testing & Product Validation Plan •Launch Plan • Commercialization • Business Case • Post Launch Review

Ref: Delifer 2010 From Ideas to a Winning Product From Ideas to a Winning Product Generic Stage-Gate Process

Build Testing and Discovery Scoping Business Case Development Validation Launch

• Brainstorm with • Expert Opinions on • Identification and • Evaluation of • Assessment of • Identification of New Industry and Concept Feasibility Investigation of Alternative Production Critical Test Criteria Markets and Market Technical Experts • Research on Potential Strategic Processes / Procedures • Expert Review of Segments • Intellectual Property Standards and Partners • Expert Problem-solving Test Findings • Ongoing, Automatic Analysis Regulations • Detailed Market and Decision-making • Research on Intelligence • Preliminary Market • Examination of Studies Support Optimal Test Gathering Related Assessment Aftermarket • Channel Research • Sourcing of Testing, Methods To: - Scientific and Environmental Issues • Trademark Research Measurement and • Benchmarking Monitoring Equipment Technical • Competitor Profiles • Detailed Technical Studies Advances • Examination of Assessment • Supplier Research - Competitor Activities Industry Situation and • Business Model • Packaging Research Trends - Market Assessment • Materials Research Conditions and • Preliminary • Positioning Research Trends Technology - Patent Activity • Pricing Research Assessment - Changes in • Investigation of • Identification and Standards and Licensable Profiling of Target Regulations Technologies Markets • Identification of New • Research on Product • Assessment of “Make” Users in Current Requirements vs. “Buy” Options Segments • Concept Testing • Research on Opportunities for Product Improvement

Ref: Delife 2010 Stage-Gate Process: Stage 0

Discovery Build Testing and Scoping Business Case Development Validation Launch 0

•Opportunities identification •Search for existing products in market •Look back the products invented/developed in history •Brainstorm with Industry and Technical Experts •Intellectual Property Analysis •Preliminary Market Assessment

Ref: Delife 2010 Stage-Gate Process: Stage 1

Build Testing and Discovery Scoping Business Case Development Validation Launch

•Expert Opinions on Concept Feasibility •Research on Standards and Regulations •Examination of Aftermarket Environmental Issues •Competitor Profiles •Examination of Industry Situation and Trends •Preliminary Technology Assessment •Investigation of Licensable Technologies •Research on Product Requirements •Concept Testing Ref: Delife 2010 Stage-Gate Process: Stage 2

Build Business Case Testing and Discovery Scoping Development Validation Launch

•Identification and Investigation of Potential Strategic Partners •Detailed Market Studies •Channel and Trademark Research •Detailed Technical Assessment •Business Model Assessment •Positioning Research •Pricing Research •Identification and Profiling of Target Markets •Assessment of “Make” vs. “Buy” Options •Project establishment Ref: Delife 2010 Sample Stage-Gate Process: Stage 3

Build Development Testing and Discovery Scoping Business Case Validation Launch

•Evaluation of Alternative Production Processes/ Procedures •Expert Problem-solving and Decision-making Support •Sourcing of Testing, Measurement and Monitoring Equipment •Supplier Research •Packaging Research •Materials Research

•Refinement Ref: Delife 2010 Stage-Gate Process: Stage 4

Testing and Build Validation Discovery Scoping Business Case Development Launch

•Assessment of Critical Test Criteria •Expert Review of Test Findings •Research on Optimal Test Methods •Benchmarking Studies

Ref: Delife 2010 Sample Stage-Gate Process: Stage 5

Build Testing and Launch Discovery Scoping Business Case Development Validation

•Identification of New Markets and Market Segments •Ongoing, Automatic Intelligence Gathering Related To: -Scientific and Technical Advances -Competitor Activities -Market Conditions and Trends -Patent Activity -Changes in Standards and Regulations •Identification of New Users in Current Segments •Research on Opportunities for Product Improvement •Review

Ref: Delife 2010 Success Rate Entirely New Products

125 beginning 3000 raw 300 submitted ideas projects ideas .8% .03% .3%

1.7 launches 4 major 9 large 60% developments developments 25% 11%

1 commercial

Stevens and Burley, success RTM May-June 1997 Familiarity Matrix: A Guide Place Your Project in One of the Nine Boxes

Familiar Familiar familiar New, New , unfamiliar Familiar New , familiar New , unfamiliar Decreasing knowledge of the market the of knowledge Decreasing

Decreasing knowledge of the technology Familiarity Matrix: A Guide Place Your Project in One of the Nine Boxes

Market Business New Business Expansion Expansion Model

Market Business Business Extension Extension Expansion

Market Product Product

Penetration Extension Expansion Decreasing knowledge of the market the of knowledge Decreasing Decreasing knowledge of the technology Familiarity Matrix: A Guide Place Your Project in One of the Nine Boxes

Probability of Success

New Product with unrelated technology Market Business New Business Model in existing market: Expansion Expansion 50% Market Business Business Extension Extension Expansion

Market Product Product Penetration Extension Expansion Familiarity Matrix: A Guide Place Your Project in One of the Nine Boxes

Market Business New Business Expansion Expansion Model

Probability of Success Market Business Business Extension Extension Expansion

Existing product in a new market: Market Product Product 15% Penetration Extension Expansion Familiarity Matrix: A Guide Place Your Project in One of the Nine Boxes “Suicide Square” .03%

Probability of Success Market Business New Business Expansion Expansion Model

Improved product in existing Market Business Business market: Extension Extension Expansion 75% Market Product Product Penetration Extension Expansion Familiarity Matrix: A Guide Place Your Project in One of the Nine Boxes

Market Business New Business Expansion Expansion Model

Market Business Business Extension Expansion Probability of Extension Success Market Product Product New Product in Penetration Extension Expansion a New Market: 5% Causes of New Product Failure

Inadequate Market Analyses

Product Problems or Defects

Lack of Effective Marketing

Higher costs than anticipated

Competitive Strength Percentage Poor Timing of Introduction of companies who indicated Technical or Production Problems