BSB311: Semester 2, 2010

Week 5: New Product Development

Strategies
What are the most important things that
should be remembered when
formulating a product development
strategy?
Objectives of the New Product
Development Process
 For new product development (NPD) to be
successful, it must achieve three goals:
1. Maximize fit with customer requirements in terms
of quality, feature, pricing, etc.
2. Minimize development cycle time in order to bring
product to market early and begin amortizing costs.
3. Control development costs so that the project
earns a positive return.
 Management of new product
development
New to the
High New product
world
lines
products
Newness Improvements Additions to
to of existing existing
firm products product lines
Repositioning
Low of existing
products
Low High
Newness to market
Primary causes of New Product Failure
(based on empirical studies)
 Poor market analysis
 Product defects
 Weak marketing effort
 NPD costs too high
 Strong competitor reaction
 Poor timing of product launch
 Production problems
 Other causes
Critical success factors (NPD)
 A superior product with unique benefits
and value for the customer
 The company chooses an attractive
market where there is a great need
 The development team understands the
customer’s need (in-depth market
analysis)
 The goals of the NPD project are aligned
with company’s strategic goals
 Competitors analysis (how competitors
meet customers’ needs)
 All regulatory and IP issues are identified and
addressed
 Project decision criteria are identified and
prioritised (e.g. time to market, cost, …)
 The project leverages the company’s technical
capabilities
 The company positions the product correctly
 The most effective distribution channel is chosen
 Endorsement by upper management
 The company executes the NPD process with
high levels of quality
The New Product Development Process (Cooper’s stage-gate
& platform development by Miller and Morris)
 Management of NPD
 Two key issues -
 1) Product effectiveness, i.e., are the firm producing the right
new products
 2) Process performance, i.e., the speed and productivity of
NPD
 Three related key problems -
 1) The integration of customers demands and marketing in
NPD
 2) The integration of manufacturing in NPD
 3) Measure the effectiveness of the NPD process and make
continual improvement
Tools for Measuring New Product
Development Performance
 New Product Development Process Metrics include:
1. What was the average cycle time (time-to-market) for
development projects? How did this cycle time vary for
projects characterized as breakthrough, platform, or
derivative projects?
2. What percentage of development projects undertaken within
the last five years met all or most of the deadlines set for the
project?
3. What percentage of development projects undertaken within
the last five years stayed within budget?
4. What percentage of development projects undertaken within
the last five years resulted in a completed product?
Time compression in the NPD
 In biotech and other science-based industries an
issue
 Document the workflow associated with the
product development process (eliminate non-
critical steps
 Set goals for completion times (e.g. Procter &
Gamble reduced its 80-week drug research cycle
to under 15 weeks)
 Make the team accountable for its performance
 To simplify things
 Don’t add more people and don’t ask for more
hours
Case Study: BTF Decisive
Microbiology
Disease causing Microbes (Bugs) have
always threatened human health

Threat will continue and intensify due to the rapid

emergence of Bugs due to a number of factors
• Genetic change and evolution
• Resistance to treatments
• Modern processing techniques
• More susceptible population
• Rapid population growth
Big Bug Threats

Aeromonas
E.Coli
E.Coli 0157
Heliobacter
Legionella
Listeria
Staphyloccus
Salmonella
Streptococcus
Pseudomonas
BSE
HIV
Hepatitis
Cryptosporidium
Cyclospora
 The BTF Opportunity

First Internal Quality Control for

Microbiology

Broad Applications in Multiple High

Growth Markets

Proven Success with Initial Product

Release
 Substantial Industrial Markets

Clinical (approx 1.7 billion tests pa)

Pharmaceutical (approx 300m tests pa)
Food & Beverage (approx 670m tests pa)
Environmental (approx 44m tests pa)
Research & Other (approx 150m tests pa)
BTF – Decisive Microbiology
 Incorporated - March 1999
 Directors
 Mark Gauci – Optoelectronics (CEO, Founder)

 Graham Vesey – Microbiology (CTO, Founder)

 …

 Employees (2001)
 11 full-time

 2 part-time

 Turnover
 July 2000 - $500K PA

 July 2001 - $1M PA

Platform Technologies
Absolute Numbers of microorganisms for
Analytical Microbiology

Internal Quality Control for

Analytical Microbiology
 Products
• Original focus was the Cryptosporidium and Giardia water testing
market.

 EasySeed C&G – Exactly 100

Cryptosporidium and 100 Giardia in a test
tube

 ColorSeed C&G - Exactly 100 red

Cryptosporidium and 100 red Giardia in a
test tube

 EasyStain C&G FITC –

immunofluorescent antibody Kit

 C&G IMS – specialised test reagent

Before BTF
 Mark Gauci and Graham Vesey
performing R&D at Macquarie University

 Frustrated with lack of

commercialisation of R&D outcomes

 Career paths uncertain

 How did BTF start?

 March 99 - requirement for someone to manufacture IMS C&G

specialised reagents for water testing

 Started BTF

 Proteome Systems Ltd (PSL) allowed BTF access to laboratory

space

 Sold testing reagents to Macquarie University for on-sale to testing

laboratories
EasySeed C&G
 Identified a demand for EasySeed product
 Domestic

 Global

 EasySeed production required a flow cytometer (cost

$120,000)
$120K needed to purchase a
flow cytometer
 Banks would not loan BTF money

 Turned down by lease companies

 Saved all revenue

 Purchased cytometer

 Developed a method for producing EasySeed C&G

 EasySeed C&G sales took off – Australia and US

ColorSeed
 Use revenue from contract and EasySeed C&G sales
to develop a new product

 ColorSeed C&G an internal quality control for

Cryptosporidium and Giardia testing

 The first ever internal quality control for microbiology

testing.

 Applied to AusIndustry for an R&D START

 Used our sales revenue projections as matching money

ColorSeed R&D
 $400K project

 Appointed an experienced research scientist

 12 months of R&D whilst running business and ensuring

sufficient sales revenue

 R&D very successful

 A robust method for ColorSeed C&G production

Commercialisation of
ColorSeed
 Submitted application to AusIndustry for a Concessional loan

 Application successful
 $700K project

 Recruit commercialisation staff

 Submitted application to Yellow Pages small business ideas

awards program and won NSW division!
Commercialisation to date
 EasySeed C&G
 “Gold” Standard

 Sales in 14 countries

 ColorSeed C&G
 Production plant scale-up

 Product Released Sept 1 2001

 Sales immediately

 EasyStain C&G FITC

 Product sales (US, Japan)

 Worldwide released 2001

 EasyPC
 BioBall
Commercialisation & NPD Strategy
 Release Product
 Leaders

 Regulatory Approval
 ISO

 Method

 Target influential people

 Scientists

 Regulators

 Potential customers

 Contact customers directly, frequently

 Telephone

 Email

 Travel

 Distribution
 Direct sales from Sydney

 Suitable distributors
 Example : Biomedical Devices
Cost Cost/Function

Product Design,
Simplicity and
Technology Prototype development, ease of use
and Testing

Quality Expandability
Biomedical Devices
 Medical equipment and products usually
require extensive testing (testing is very
complex)
 Some equipments used in operating theatres
must follow rigorous electrical safety
standards and may use special materials
 Design and manufacturing process are not
different from other products (extensive
testing and quality control required, also may
need special environments, e.g. clean rooms,
or additional process, e. g. sterilization,
packaging)
 Regulatory requirements must be met
Next Week: Guest Speaker
Dr Nicky Milsom, Deputy CEO,
Magnetica Limitedz Magnetica Ltd