BM050-3.5.

3 Innovation Management and New

Product Development (IMNPD)

An introduction to New
Product Development (NPD)

New Product Development (NPD) :

Considerations when developing a
NPD strategy
 New Product Development- Considerations
when developing NPD strategy

Learning Objectives
 Examine the relationship between new products
and prosperity
 Recognize the range of product development
opportunities that can exist
 Recognize that a new product is a multi-
dimensional concept
 Indentify the different types of NPD
 Provide an understanding of the importance of
external linkages in the new product development
process
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 Innovation Management & NPD
 Managing innovation concerns in conditions
that have to be in place before the organization
as a whole is given the opportunity to develop
new products.
 NPD concerns the management of the
disciplines involved in the development of new
products from the various perspectives
 Design & engineering, marketing, economics
 The lack of a common approach is due to the
multiple perspectives.
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 New Products and prosperity

 On average, new products are

increasingly taking a larger slice of
company sales.
 Life cycles of products are becoming
increasingly shorter eg mobile phones less
than 3 years old.

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 Considerations for NPD Strategies

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 Considerations when
developing NPD strategy
Ongoing Corporate Planning
 Setting future direction of business
 Large organization – Formal activity involving
strategic planners and senior managers
 Small organization- Activities undertaken by the
owner of business in an informal, even ad hoc
way.
 E.g. Decision by a sports footwear manufacturer
to exit the tennis market and concentrate on
basketball market due to social change
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 Considerations when
developing NPD strategy
Ongoing Market Planning
 Decisions by market planners may have
significant effects
 E.g. Realizing that competitors is about to launch
an improved tennis shoe may force existing
business to establish five new product
development projects.
 Two of these projects may be to investigate the
use of new materials for the sole and 3 to look at
alternative fastening and reduce production cost
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 Considerations when
developing NPD strategy
Ongoing Technology Management
 Science and technology intensive industries such as
pharmaceutical and computer software industries this
activity more significant.
 Continual analysis of internal R & D projects and external
technology scanning, may lead to new technical
opportunities.
 E.g. Recent review of patent literature has identified a
patent application by competitors, this forces the business
to investigate this area to ensure it is aware of any future
developments.

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 Considerations when
developing NPD strategy
Opportunity Analysis / Serendipity
 Unexpected discovery/luck as a result of
innovation
 V-P of 3M : “Chaos is a necessary part of an
innovative culture. 3M’s competitors never know
what we are going to come up with next. The
fact is neither do we.”

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 NPD as a Strategy for Growth

 Development of new products, is one of he

many options available that, provides an
opportunity for growing the business.
 One of the clearest ways to identify is by using
Ansoff directional policy matrix. Combining two
variables that enable a market to grow:
 Increase market opportunities, and
 increase in product opportunities

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 Ansoff’s growth matrix

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 NPD as a Strategy for Growth
Market Penetration
 Opportunities within a business’s existing
markets by increasing volume of sales
 Increasing market share through exploiting full
range of marketing mix activities.
 Using advertising, low price, volume discounts
 Eg. branding decisions, Kellogg’s increased use
of cornflakes product by promoting it as a snack.

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 NPD as a Strategy for Growth

Market Development
 Making products available to new markets
 Company maintains the security of its existing
products but opts to enter new markets
 Opening up new segments or exporting
 Converting non-users into users,
 Increasing usage per user.
 E.g. Mercedes enter small car market (previously
they had always concentrated on the executive or
luxury segment)
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 NPD as a Strategy for Growth

Product Development
 Growth opportunities exist through offering new
or improved products to existing markets.
 Companies try to ensure that products are able
to compete with competition by regular
improvement and update of their existing
products.
 Ongoing activity for most companies..

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 NPD as a Strategy for Growth
Diversification
 Opportunities for growth exist beyond a
business’s existing products and markets
 Moving away from product areas and markets
away from existing products
 Diversification through acquisition
 Through forward, backward and horizontal
diversification.
 eg;. Producer opening retail outlets, restaurant chain
buying up a farm, or, buying up competitors
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 What is a ‘new product’ ?
.

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 What is a ‘new product’ ?
 A product is a multi-dimensional
concept. It can be defined differently
and can take many forms.
 Some dimensions will be tangible
product features and others intangible.
 Difficult to offer a single definition for a
new product. Theoretically possible to
label a product ‘new’ by changing one
of the dimensions.
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 What is a ‘new product’ ?
Different Examples of Newness
1. Changing the performance capabilities of
the product e.g. A new improved washing
detergent
2. Changing the application advice for the
new product e.g. Use of Persil ball in
washing machine
3. Changing the after-sales service for the
new product e.g. Frequency of service for a
motor car
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 What is a ‘new product’ ?

Different Examples of Newness

4. Changing the promoted image of the
product e.g. the use of “green” image
5. Changing the availability of the product
e.g. the use of chocolate-vending
machines
6. Changing the price of the product e.g.
The newspaper industry has experienced
price war
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 NPD Theories - overview
 Many activities from formation and development of
an idea before taking any physical form : idea
generation, idea screening, concept development,
concept testing.
 From this point onwards, costs will rise. With inputs
from manufacturing engineers, product designers,
marketers decide how best to manufacture the
product, what materials to use, designs and
potential market.
 Many models developed to capture the key
activities involved in the process from idea to
commercialization..
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 NPD Theories
The Fuzzy ‘front end’
 Messy ‘getting started’ period of new product
development processes
 Beginning of the process / the ‘front end’.
 Company develop concept of product to be
developed and decide whether or not to invest
resources in further development of idea
 Fuzzy end when organization approves and begins
formal development of the concept
 Can consume 50% of development time &
resources. Commit time, money, product nature,
setting course for product.
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 Customer Roles in NPD
Need to involve customers at an early stage, and integrate
them into the product development process in order to fully
capture ideas, improve connection between consumers and
producers. Eg allows consumers to create own products
which is then produced by manufacturer.

Customer NPD Phase Key Issues/Managerial Challenges

Role
Customer Ideation Appropriateness of customer as a resource of
as innovation
resource Selection of customer innovator
Infrastructure for capturing customer knowledge
Differential role of existing and potential
customers

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 Customer Roles in NPD
Customer NPD Key Issues/Managerial Challenges
Role Phase
Customer Design Involvement in a wide range of design and
as co – and development tasks
creator Develop Nature of the NPD context:
ment Industrial/consumer products
Tighter coupling with internal NPD teams
Managing the attendant project uncertainty
Enhancing customer diversity
Enhancing customers’ product/technology
knowledge
Customer Product Time-bound activity
as user Testing Ensuring customer diversity

Product Ongoing activity

Support Infrastructure to support customer-customer
interactions
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 Models of New Product Development

1. Departmental-Stage Models
2. Activity-Stage Models and Concurrent
Engineering
3. Cross-Functional Models (teams)
4. Decision-Stage Models
 Stage-Gate Approach
5. Conversion-Process Models
6. Response Models
7. Network Models
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 Models of New Product Development
1. Departmental-Stage Models
 Each department is responsible for certain task
 E.g. R&D provides interesting technical ideas; Engineering
department take the ideas and develop possible prototypes;
manufacturing explore ways to mass produce, marketing
department plan and conduct business launch. Each
department carry out tasks then passes project over to next
department.
 Insular department view, characterized by great deal of
reworking and consultation between functions.
 Control of project depends on which department is currently
engaged in it.

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 Source C. Lorenz 1990. The Design Dimension, Blackwell Publishing Ltd. Oxford.
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 Models of New Product Development
3. Cross-Functional Models (teams)
 Common problems of product development process
revolve around communications between different
departments (marketing & R&D)
 Projects would frequently be passed back and forth
between functions with increased changes at each
interface.
 Assign a dedicated project team with people
representing different functions
 Requires a fundamental change to organization’s
structure to project management and
interdisciplinary teams
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 Models of New Product Development
Stage gate process limitations:
1. The processes is sequential and can be slow
2. The whole process is focused on end gates
rather than customer
3. Product concepts can be stopped or frozen too
early
4. The high level of uncertainty that accompanies
discontinuous new products makes the stage-
gate process unsuitable for these products
5. Low level of knowledge held by gatekeeper in
each stage leads to poor judgment.
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 Models of New Product Development
7. Network Models
 Process of accumulating knowledge from different
inputs. Knowledge builds up as project progresses.
 Emphasize the external linkages coupled with the
internal activities provide additional knowledge
flows.
 NPD should be viewed as a knowledge
accumulation process that requires inputs from a
wide variety of sources
 e.g. Snowball gaining in size as it rolls down a
snow covered mountain.
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 Questions ?

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 Tutorial

1. Discuss how the various groups of NPD

models have contributed to the
understanding of the subject of NPD?
2. What are some of the strengths and
weakness of each network models of
NPD?

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