New Product Development

1
New Product Development
2
Failure to innovate

• 40 of Major American Corporations that existed
  in 1975
• No longer exist today
• In a global war product innovation is
  everything.
• HP, 3M, Chrysler, Microsoft

3
Common denominators in todays business

• Speed and Change
• Markets and technologies are changing quickly
• Speed becomes the pivotal weapon
• The ability to accelerate product innovation-to
  get new products to market ahead of competition
  and
• within the window of opportunity

4
Payoffs for Speeding Products to Market

• Yields competitive advantage if ahead of
  competitor
• Yields higher profitability
• Sooner/time value of s, longer span
• Speed means fewer surprises
• Meets market requirements that havent yet
  changed
• General Motors has 7 year development cycle

5
But youve got to do it right.

• Never, never take shortcuts on product
  development to achieve speed/time to market
• Results are just too costly

6
Failure is likelyOdds are against you

• 35-90 of all new products FAIL and dont include
  all the products killed along way
• 1 improvement since 90 so new ideas may not be
  much better
• For every 11 new ideas, 3 make it to dev phase,
  and only 1 is a commercial success.
• Bottom line is most new product teams fail

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Whats a new Product?The categories

• 10 new to the world first of kind/new mkt
• 20 new product line new to firm
• 26 additions to existing lines
• 26 improvements/revisions replacements
• 7 repositionings
• 11 cost reductions of old products

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The top reasons for failure

• Percentage sited as most deficient activity in
  the ENTIRE new product dev process for failed
  projects
• Detailed market study 74
• Test Marketing 58
• Product Launch 54
• Financial/Biz Analysis 52

9
And by contrast

• The technically oriented activities
• Preliminary tech assessment
• Product development
• In house product testing
• Pilot production
• Production startup
• Are about 45 less likely to be the cause of
  failure

10
Did you know?

• That 78 of all effort (person-days) on NPD teams
  goes to technological and/or production
  activities
• Only 16 goes to marketing and nearly 7 is at
  launch
• Pre launch marketing is only about 9 of activity

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13 key steps in NPD process

• Initial screening
• (idea and early commit of resources)
• Preliminary market assessment
• (quick and dirty with in-house resources)
• Preliminary technical assessment
• (can we do it?, both dev and manufacturing)
• Detailed market study
• (needs/wants, positioning, comp, interviews)

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Next 4 steps

• Predev Business/Financial Analysis
• (financial, risk, market opp, comp advantage)
• (this is also the time for Go/No Go commits)
• Product Development
• (devs the physical product)
• In-House Product Testing
• (alpha, lab testing)
• Customer Product Testing
• (Field, beta, preference testing, etc)

13
Final steps

• Trial Production
• Trial Selling
• (test market in limited geo or other,soft launch)
• Precommercialization Business Analysis
• (final biz and financial analysis before launch)
• Production/Operations Startup
• (full scale production)
• Market Launch
• (execute the launch plan)

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Typical NPD AllocationVery little up front

• Idea screen 1.4
• Prelim mkt assessment 1.2
• Prelim tech assesment 2.9
• Detailed mkt study 0.8
• Biz analysis 0.7
• Product development 29.3
• In house product testing 6.6

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allocation continued

• Customer testing 3.1
• Trial sell/test mkt 0.5
• Pilot production 5.6
• Prelaunch biz analysis 1.1
• Production startup 20
• Market launch 26.8