Chapter 11 = midterm Flashcards
What are the three sometimes-conflicting goals New product development must achieve to be successful?
- Maximizing fit with customer requirements
- Minimizing development cycle time
- Controlling development costs
Why may NPD projects fail to offer what the customers require (compelling features, quality, attractive pricing)?
- No clear sense of which features customers value the most, resulting in overinvesting in some features at the expense of features that customers value more.
- Overestimating the customers’ willingness to pay for particular features; produce feature-packed products that are too expensive to gain significant market penetration.
- Difficulties resolving heterogeneity in customer demands; if customer groups have conflicting desires of features, the firm may produce a product that compromises between these desires, resulting in the product failing to attract any of the customer groups
What is Development cycle time?
The time elapsed from project initiation to product launch, usually measured in months or years.
Why is it good to bring a product early to market?
- can help build brand loyalty, preemptively capture scarce assets, and build customer switching costs.
- more time to develop (or encourage others to develop) complementary goods that enhance the value and attractiveness of the product.
- A firm that brings a new product to market late may find that customers are already committed to other products.
What are three connections between development cycle times, and cost of development/shorter product life cycles?
- Many development costs are directly related to time. Employee expenses and the firm’s cost of capital increases as the development cycle lengthens.
- Slow to market with a particular generation of technology = unlikely to be able to fully amortize the fixed costs of development before that generation becomes obsolete. Particularly vivid in dynamic industries such as electronics, where product life cycles are very short.
- Short development cycle -> quickly revise or upgrade its offering as design flaws are revealed or technology advances. Short development cycles means that firms can take advantage of both first-mover and second-mover advantages.
What are some costs of shortening the development cycle and rushing new products to market?
- Consumers regretting past purchases, or wary of new purchases for fear that they should rapidly become obsolete.
- Speed may come at the expense of quality or result in sloppy market introductions.
- The development team may be overburdened, causing them to overlook certain problems or sacrificing product testing to keep on schedule.
Describe the sequential development process that was commonly used before the mid-1990s.
Proceed from one development stage to another sequentially. Gates where managers decide whether to proceed to the next stage, send it back for revision, or kill the project.
One problem of this system emerges at the product design stage when R&D engineers fail to communicate directly with manufacturing engineers; product design proceeds without manufacturing requirements in mind. There are no early warning systems to indicate that planned features are not manufacturable, so cycle times can lengthen as the project iterates back and forth between product and process design stages.
What are 5 steps of product development processes?
- Opportunity identification
- Concept development
- Product design
- Process design
- Commercial production
What is a Partly parallel development process?
A development process in which some (or all) of the development activities at least partially overlap. Activity B might commence before activity A is completed.
Enables close coordination between stages, and minimises risk that R&D design products that are difficult or costly to manufacture.
What is concurrent engineering?
A design method in which stages of product development and planning for later stages of the product life cycle (e.g. maintenance, disposal and recycling) occur simultaneously.
When can parallel development processes substantially increase the risks or costs of the development process?
Especially in markets with rapid change and uncertainty.
If variations in product design require significant changes to the process design, beginning process design before product design is finalized can result in costly rework or the production process. Once process design has commenced, managers can be reluctant to alter the production design even if testing reveals that it is suboptimal (later discussed stage-gate model attempts to minimize these risks).
What is a project champion?
Senior executive who has power and authority to support and fight for a project.
- facilitate allocation of human and capital resources to the development effort, ensuring that the cycle time is not extended by resource constraints
- stimulate communication and cooperation between the different functional groups involved in the development process.
- > necessary to compress cycles and to achieve a good fit between product attributes and customer requirements.
What are some risks of championing in projects?
Systematic upward bias of future cash flow estimates.
- unable/unwilling to admit a project should have been killed a long time ago (reputation)
Seniority of the champion can make others less willing to challenge their views.
What are five myths about project champions?
- Projects with champions are more likely to be successful in the market. (equally likely to be market failure)
- Champions get involved because they are excited about the project, rather than from self-interest. (more likely to benefit projects that benefit their own department)
- Champions are more likely to be involved with radical innovation projects. (equally likely with incremental)
- Champions are more likely to be from high levels in the organization. (may arise from any level)
- Champions are more likely to be from marketing. (Can arise from many functions of the firm.)
Why and how can customers be involved in the product development process?
Can help the firm focus development efforts on projects that benefit customer needs; the end customer can identify maximum performance capabilities and minimum service requirements. Distributors can also be valuable as they are the first to know who is buying the product, how they are using it and are the first to hear complaints or improvement suggestions.
Customers can be involved as co-developers or as information sources. Beta-testing (early prototype) is commonly used.
