New Product Development (NPD) refers to the process or steps needed to produce a new product and introduce it in the market. In order to improve customer satisfaction and to increase market share, firms use strategies such as regularly introducing new products and improving upon variables such as cost, time and quality.
Managing new products or service is a fine balancing act between the costs of continuing with projects which may not succeed and the danger of closing down too soon and eliminating potentially fruitful options.
Linear Product Development
In the past, for a long time, the product development process was linear and went through various stages such as idea generation, idea screening, business analysis, product development, testing, and commercialization.
1. Idea generation- this is a systematic search for new product ideas. Major sources of idea generation come from customers, competitors, are close to the market and can inform the form about the latest demand or change in fashion. They an also pass information about consumer problems for modification. Suppliers can tell the firm about new concepts, techniques and materials to enhance or invent a new product. The company can analyse customer questions or problems to help come out with new products. Lastly firms watch competitor ads to get an idea about their new products.
2. Idea screening: This stage is about screening new product ideas to spot good ones and drop poor ones as soon as possible. As NPD is very expensive, firms need to select the nest product for highest profitability. Selection and screening need to be done with growth, profit and customer goodwill objective. The firm needs to describe R-W-W. R is real, if there is a real need or want of the product. W is win which is about if the product provides enough competitive advantage. W is worth doing. This is about the product, if its worth and will fit in company’s overall growth strategy and profitability.
3. Concept development and testing: this is a detailed version of new product ideas stated in meaningful consumer terms. The attractive idea must be converted into a product concept. This development can be categorised in two ways: Product positioning map which can be utilised in communication and promoting the concept to the world. Brand positioning map where the product concept has to be turned intro a brand concept. Concept testing is testing of the new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal. This is testing the new product in a small scale to know whether to make it an actual product or no. This should also fulfil the need and gap level along with the purchase intention.
4. Business analysis: This is a review of the sales, costs and profit projections for a new product to find of these factors satisfy the company’s objective. It is essential to carry market surveys to predict sales forecast. Estimation of all cost like R&D, marketing, operation, and also the profits need to be done which can state if its profitable enough to shift to the product development stage or no.
5. Product development: Developing the product concept into a physical product to ensure that the product idea can be turned into a workable thing. Large investment is done here and the R&D develops one or more physical version of the product concept. Functional tests and consumer testing is carried in laboratory conditions.
6. Test marketing: Here the product is proposed to its marketing program and are tested in realistic market settings. This gives marketers experience of marketing the product before investing large sums for introduction.
7. Commercialisation: This is the stage of introduction of a new product into the marketplace, question of when where to whom and how are crucial at this stage. When is the timing to gain first mover advantage or parallel entry. Where is the geographical strategy and to whom is the target market prospecting. How is the introduction of the market strategy to enter the market and grow it.
Later, the Stage-Gate model was developed by Cooper to make the development more efficient. It is more of a project management methodology used to take a project from idea inception to the launch stage. This is a structured development method where there are several decision-making points, known as gates, in the development process; these gates allow senior managers to take important decisions about the next course of action.
The decision is usually made on forecasts and information available at that moment, including the business case, risk analysis, and availability of necessary resources. Similar to above model, traditional stage gate model has 5 stages with 4 gates.
Firms dedicate significant resources on innovation efforts hence they would prefer to know early in the cycle if the new product is likely to be a success. In this model, before any stage of the project begins, the project has to go through a gate where the senior managers decide whether to proceed or abort the project taking into account factors such as quality, business rationale, and resources required.
When implemented properly, Stage-Gate is advantageous as it accelerates speed-to-market, increases likelihood of product success, introduces discipline into an ordinarily chaotic process, reduces re-work and other forms of waste, improves focus via gates where poor projects are killed, achieves efficient and effective allocation of scarce resources.
The stage gate model was considered an improvement over the traditional linear method and was used in various industries with several big firms adopting the model. Studies suggest that since the stage gate model was introduced several years ago, it lacked the flexibility and agility needed in the modern competitive business environment.
As the business environment became competitive, firms were looking for capabilities to introduce new products faster and in an efficient manner (Trott, 2017). From the beginning of the 1990s, several firms started seeing time-compression as a major issue in new product development. The aforementioned models were mostly linear in nature and were not efficient enough for the new business environment.
It was the Japanese car makers who first challenged these models and started using a concurrent model that helped them produce new cars in half the time compared to their US and European competitors and these cars also had better quality.
Simultaneous Engineering, also known as “Concurrent Engineering” or “collaborative design” model was developed as the pace of change in the market had increased, and firms were looking for a better model to develop new products quickly. The basic idea behind this model is that by executing the major design components parallelly, projects will be delivered faster.
There are several benefits of the concurrent engineering model compared to the earlier models of product development.
Using the concurrent engineering model, firms can design as well as develop in parallel with the various other stakeholders, thereby eliminating several of the drawbacks seen in sequential development.
The various teams, that usually work on different stages, work simultaneously because of which the various issues are revealed and fixed earlier, the design process becomes faster as production related issues are known earlier and decisions are made earlier in the cycle, there is reduction in repetition of tasks, excessive testing is not needed due to fewer design revisions, there is better collaboration between various teams, and a firm is able to come up with a high-quality product in a much shorter time.
The structure of the overall process is much flatter, and all the steps are interlinked enabling all the stakeholders to have all the relevant information and to understand the impact of design changes or issues on their area of development. Technology plays an important role in this model in order to integrate the various teams and processes, to ensure free flow of information, and to ensure that design changes are quickly received by the shop floor.
While not every task may be executed simultaneously, the focus is on achieving maximum overlap between all the activities, that otherwise would need to be done sequentially.
Using these Models
Here are the situations where each of these models would be suitable.
As the concurrent engineering model has been known to reduce the cycle time and the related costs, this model has been growing in popularity with firms in several industries now adopting this model to release new products in the market; leading firms in automotive, aviation, ship building, processors (semiconductors), telecommunication and home appliances industries are making use of this model.
One of the more popular examples of concurrent engineering was the development of a Boeing commercial aircraft in which geographically distributed teams worked using digital product definitions without building physical prototypes, resulting in saving of few months (Tomiyama, 1998).
Many consider the Stage-Gate model to be more suited for project portfolio management where a firm is working on several business ideas. This model can help firms effectively assess projects to understand if they are shaping up nicely or need to be aborted.
The traditional linear model of product development could still be suitable in smaller firms with simpler products, where the workers are comfortable with the well-practiced development processes, and where setting up a structure to do things parallelly could be too demanding.
There are other factors contributing to success of product development, such as market knowledge, clear definition of the products, risk assessments, project organisation, support from top management, product differentiation. Such factors have been found to contribute to new product success and therefore should form basis of any formal process for new product development.
Tools to Improve Product Design
There are several tools available to help firms improve the design of products before they move to final design and prototyping. It is also important to note that major changes to the product is more difficult after the product has been launched (however, these techniques can be equally applied to mature products):
1. Quality function deployment (QFD) is a relatively new technique for giving voice to customer needs. QFD uses a particular matrix technique called ‘the house of quality’ to evaluate customer preferences identified from market research, against proposed or existing product characteristics. The house of quality technique also allows a comparative evaluation to be made against competitor products and is employed by a cross functional team representing marketing, design, engineering, manufacturing etc. charged with assessing the strengths and weaknesses of an existing or proposed product design.QFD is a comprehensive planning and control system which integrates the requirements of the customer with every stage of planning and control from product design to manufacture.
2. Value analysis– seeks cost reduction but without impairing quality (conformance with the specifications), reliability, safety and aesthetic appearance.
Tauchi loss function- By estimating the amount of loss resulting from certain levels of quality, a design can be examined to determine the profitability. The loss function allows engineers to estimate the depth of study needed to give a product a level of reliability which gives the optimum returns. The estimates allow the amount of design work to be optimised based on the losses resulting from quality issues.
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