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MANAGING THE NEW PRODUCT DEVELOPMENT PROCESS

2. Agenda. What are the objectives of the new product development 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 different stages of the industry life-cycle? . 3. Some dismal facts

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MANAGING THE NEW PRODUCT DEVELOPMENT PROCESS

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    1. MANAGING THE NEW PRODUCT DEVELOPMENT PROCESS Rajshree Agarwal

    2. 2 Agenda What are the objectives of the new product development 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 different stages of the industry life-cycle?

    3. 3 Some dismal facts… Despite the intense attention paid to innovation, failure rates are still very high. More than 95% of new product development projects fail to earn an economic return.

    4. 4 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 cannot exceed potential revenues! Higher margins

    5. 5 The NPD Process

    6. 6 Where do ideas come from? Employees Customers (users) Suppliers Competitors/Complementors Ideas often evolve due to interaction among the above groups

    7. 7 NPD Process For competitors being idea generators: Always find the soft underbelly, the mirror weakness—sprinters vs. marathoners. IBM was a B2B marketer; Compaq operated like a retail marketer;Dell identified the soft underbelly—cost of change is high—60 days vs. less than a week. Starbucks turned commodity market of coffee by taking advantage of the emotional aspects. Body shop focuses on utilitarian aspects as opposed to emotional aspects of cosmetic marketing. For competitors being idea generators: Always find the soft underbelly, the mirror weakness—sprinters vs. marathoners. IBM was a B2B marketer; Compaq operated like a retail marketer;Dell identified the soft underbelly—cost of change is high—60 days vs. less than a week. Starbucks turned commodity market of coffee by taking advantage of the emotional aspects. Body shop focuses on utilitarian aspects as opposed to emotional aspects of cosmetic marketing.

    8. 8 NPD Process

    9. 9 Back to decision making under uncertainty At early stages of idea development, significant uncertainty about potential success Use of both qualitative and quantitative methods are important Qualitative methods may help yield insights, while quantitative methods validate Strategic, Financial, and Customer focus All three need to be examined

    10. 10 NPD Process

    11. 11 Sequential versus Party Parallel Development Processes Before mid-1990s, most US companies used sequential NPD process; now many use partly parallel process. Partly parallel process shortens overall development time, and enables closer coordination between stages. In some situations, however, a parallel development process can increase risks.

    12. 12 Real options—use of stage gate process Utilize tough go/kill decision points in the development process help filter out bad projects.

    13. 13 NPD Process

    14. 14

    15. 15 NPD Process

    16. 16 Product Life Cycles

    17. 17 Introduction Stage of the PLC

    18. 18 Growth Stage of the PLC

    19. 19 Maturity Stage of the PLC

    20. 20 Some misconceptions about product life cycles At the level of the category and not the brand – Cell phones not CINGULAR wireless. Different products go through the stages differently. Timing of stages may vary substantially.

    21. 21 Tools for Measuring New Product Development Performance Measuring performance of NPD process can help company improve its innovation strategy and process. Measures of NPD performance can help management: identify which projects met their goals and why, benchmark the organization’s performance compared to that of competitors, or to the organization’s own prior performance, improve resource allocation and employee compensation, and refine future innovation strategies Important to use multiple measures to provide fair representation

    22. 22 Some yardsticks of overall innovation performance What is the firm’s return on innovation? ratio of the firm’s total profits from new products to total costs (including R&D costs, the costs of retooling and 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 firm’s ratio of successful projects to its total project portfolio?

    23. 23 Key Takeaways New product development is risky, but can provide high returns Not engaging in NPD will surely result in failure Managing the various stages of the NPD process is critical NPD projects should be cognizant of the industry life cycle NPD initiatives should be evaluated using multiple yardsticks

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