Introduction to NPD Flashcards
What are New Products?
- New-to-the-world (really-new) products: Inventions that create a whole new market. Ex.: Polaroid camera, iPod and iPad, HP laser printer, Rollerblade inline skates, P&G Febreze and Dryel.
- New-to-the-firm products: Products that take a firm into a category new to it. Ex.: P&G’s first shampoo or coffee, Hallmark gift items, AT&T Universal credit card, Canon laser printer.
- Additions to existing product lines: Line extensions and flankers that flesh out the product line in current markets. Ex.: P&G’s Tide Liquid, Bud Light, Special K line extensions (drinks, snack bars, crystals).
- Improvements and revisions to existing products: Current products made better. Ex.: P&G’s continuing improvements to Tide detergent, Ivory soap.
- Repositionings: Products that are retargeted for a new use or application. Also includes retargeting to new users or new target markets. Ex.: Arm & Hammer baking soda sold as a refrigerator deodorant; aspirin repositioned as a safeguard against heart attacks; Marlboro retargeted as a man’s cigarette.
- Cost reductions: New products that provide the customer similar performance but at a lower cost. May be more of a “new product” in terms of design or production
Why Studying New Products?
- It is big business—billions of dollars annually on technical development alone.
- The challenge of creating radical innovation (totally new product categories) is viewed by business consultant Gary Hamel as “the most important business issue of our time.”
- Accelerating innovation and business growth through innovation are the top business challenges according to the Industrial Research Institute.
The Basic NPD Process
But new product process is difficult; 25% of initial ideas make it to the launch phase, but in the end, only 15% will be successful
The Basic NPD Process, Focus on Evaluation Tasks:
Phase 1: Opportunity Identification and Selection
Active and passive generation of new product opportunities as spinouts of the ongoing business operation.
- New product suggestions,
- Changes in marketing plan,
- Resource changes,
- New needs/wants in the marketplace.
Research, evaluate, validate, and rank them (as opportunities, not specific product concepts), and give major ones a preliminary strategic statement to guide further work on it.
Spinout = Type of corporate realignment involving the separation of a division to form a new independent corporation.
Phase 2: Concept Generation
Select a high potential/urgency opportunity, and begin customer involvement.
Collect available new product concepts that fit the opportunity and generate new ones as well
Required Inputs to the Concept Generation Process: Form, Technology, Benefit/Need
Phase 3: Concept/Project Evaluation:
Evaluate new product concepts (as they begin to come in) on technical, marketing, and financial criteria. Rank them and select the best two or three.
Request project proposal authorization when having product definition, team, budget, skeleton of the development plan, and final Product Innovation Charter (PIC)
Phase 4: Development
Technical domain: Specify the full development process, and its deliverables. Undertake to design prototypes, test and validate prototypes against protocol, design and validate production process for the best prototype, slowly scale up production as necessary for product and market testing.
Marketing domain: Prepare strategy, tactics, and launch details for the marketing plan, prepare proposed business plan and get approval for it, stipulate product augmentation (service, packaging, branding, etc.) and prepare for it.
Phase 5: Launch
Commercialise the plans and prototypes from the development phase, begin distribution and sale of the new product (maybe on a limited basis) and manage the launch program to achieve the goals and objectives set in the PIC (as modified in the final business plan).
Why Does a Firm Need a New Products Strategy?
- To chart the new product team’s direction.
- What technologies?/what markets?
- To set the team’s goals and objectives.
- Why does it exist?
- To tell the team how it will play the game.
- What are the rules?/constraints?
- Any other key information to consider?
What is a PIC?
It is the new product team’s strategy
- It is for Products (not processes).
- It is for Innovation (think of the definition of new product).
- It is a Charter (a document specifying the conditions under which a firm will operate).
Typically, it is a document prepared by senior management designed to provide guidance to the strategic business units (SBUs) on the role of innovation.
According to an independent study:
- The more detailed and specific the PIC, the higher are the firms’ innovation rates.
- The more specific the corporate mission and senior management direction is spelt out in the PIC, the better is the performance of the firms new products.
PIC Components:
PIC - A Concrete Example - Apple:
Focus: Technology strengths include Apple’s operating system, hardware, applications, and services, product design and development skills. Marketing requirements include products on the “cutting edge” that offer seamless integration and high performance, yet are intuitive, simple, and fun to use.
Goals: Revolutionary new products should also be platforms for future products, due to the cost of “really new” product development. New products should occupy the leadership position in the market.
Special Guidelines: Apple aims to be the best, not necessarily the first, in new product categories.
The Result: Apple’s first “tablet computer” a revolutionary new product seen by many at the time as the “next big thing” No one tablet computer had established a dominant position yet, so Apple could be the standard-bearer with the iPad. The plan for the future was to add capabilities and applications to future iPads.
Risk of Poor PIC:
Scope creep: Product definition keeps changing: who is the customer? Is it a standalone product or a platform?
Unstable product specifications: Required performance level keeps changing.
Product Portfolio: The New Product’s Strategic Fit
- Strategic goals (defending current base of products versus extending the base).
- Project types (fundamental research, process improvements, or maintenance projects).
- Short-term versus long-term projects.
- High-risk versus low-risk projects.
- Market familiarity (existing markets, extensions of current ones, or totally new ones).
- Technology familiarity (existing platforms, extensions of current ones, or totally new ones).
- Ease of development.
- Geographical markets (North America, Europe, Asia).
Product Portfolio Example—Market and Product Newness:
Product Portfolio Example—Product and Process Issues
Product Portfolio Example—Risk Vs. Pay-off
Apple’s PP in 2015 VS Apple PP possible trajectory:
