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Published by: Pawan_shukla29 on Sep 12, 2009
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 A ‘new product’ can be a product or aservice. It can be the next revolutionarycomputer chip, or a new holiday packageput together by a travel agent. The point is,it is new, so it is often risky.
 This briefing will not help you generatethe ideas for completely new products, orrecognise a winner when you see one. Itfocuses on the next stage — turning an ideainto a new product, once you have decided togo ahead with it. It covers:
Reducing the risks as early as possible.
Setting a spec, a price and a schedule.
Running the project team and keepingcosts under control.
1 Can you complete it?
 Apart from having the right product idea in thefirst place, there are three essential ingredientsfor successful new product development.
You need the relevant
For example, if you are developing a newfood product, having a technician who cancreate the right look and taste is only thestarting point.Other issues include sourcing ingredients,the mass production process, qualitycontrol, packaging, customer trials, costingand pricing, and so on. You may need to include several peoplefrom outside your business (see
You need to commit sufficient
If you can only afford a half-heartedattempt, do not even begin. Without thecritical mass of people, time and moneyinvested, your project will be doomed tofailure.
If you commit too many resources, the restof your business may suffer.
You may need finance.
You need
personal commitment
to thesuccess of the project.
Though teamwork is important (see
 ), ina smaller business it is often the owner-manager who must drive the project.In practice, most new product developmentis incremental — improving on an existingproduct. Compared with starting a productfrom scratch, this is relatively straightforward.
New productdevelopment
England Reviewed 01/04/09
StrategyDirectors’ Briefing
2 Reducing the risks
Identify major risks early on, so you can decideif the overall risk is worth the potential reward.
Analyse all the
market risks
. For example:
Establish the likely volume of sales, and themarketing and sales cost of achieving eachsale.
Is your target market growing or shrinking? Are there any foreseeable changes inyour market that could affect the successof your product launch — such as newproduct safety legislation.
Are there any competing products alreadyin the market that may block your routeto entry? What are the strengths andweaknesses of the product? Can youoffer something different and unique? The killer blow for a new product willoften be something you have not evenconsidered.
Analyse the
technical risks
For example, do you need in invest innew equipment or technology make theproduction of the new product possible?
It is extremely helpful to have a
to test out. But this need not bean expensive process.
For mechanical devices you may needboth a ‘works-like model’ and a ‘looks-likemodel’. If you are improving on an existingproduct, you may only need to model thenew features.
Start with a simple prototype such as adrawing. Good feedback at this stage cansave time and money.Potential customers, suppliers andmembers of the development team can giveextremely valuable feedback once they seewhat the product is and how it works.
Avoid being the pioneer, who has to learneverything the hard way. Look for
 of what others have achieved before you.
Look at recent developments in relatedproducts. Visit trade shows to get apreview of forthcoming products and trendsbefore they hit the market.
Work out how to
reduce each risk
to anacceptable level.
For example, can your new design bepatented or protected in some other way?
3 Know what you are doing
 You need to know the what, when and howmuch of your new product before you can turnyour idea into a project.
Start by defining a basic
 (‘spec’) for the product. List the features,and how they translate into specificrequirements.
Make sure you have a
unique sellingproposition
(‘USP’) — a reason forcustomers to switch over to your product.
Ask yourself what will make customerschoose your product over a rival's.
While a good product idea is no guaranteeof success, a bad product idea is aguarantee of failure.Here are some of the fatal flaws.
 You cannot sell at the
price or volume
 necessary to make a profit.
For example, UK shoe manufacturersface cut-throat price competition fromfirms at home and abroad. Even themost stylish new line may have to bediscounted.
 Your product can easily be
For example, you may invest heavily todevelop a brand new type of service andbuild up a market for it. Competitors canlaunch me-too services at lower prices,as they have not incurred all the costs.
 You lack
market power
For example, a new piece of softwaremay be the best in the market, but itcould be doomed to failure if you lack aneffective route to market.
 Your product is
For example, a new methane car wouldrequire breakthroughs on several fronts— engineering the car itself, persuadingpetrol stations to offer methane fuel,persuading consumers to buy the car,and persuading someone to finance theproject in the first place.
Innovation RelayCentres (IRCs)pass on the resultsof research in theEU and can helpsmall firms wantingto take part. Fordetails of your localIRC, visithttp://irc.cordis.lu / 
Plan the
of your product. This canbe crucial to its success.
Use in-house or external designers and getthem to sign confidentiality agreements if necessary.
Pencil in a
launch date
When should the product be ready? If it isdelayed, how will that affect pricing, salesvolumes and profitability?Unless you and a competitor are racing tolaunch similar products, hitting a particularlaunch deadline may not be vital.
Plan to launch a pilot version of the productwith a few favoured customers, to identifyand sort out the inevitable problems beforethe main launch. This also helps you build up your orderbook before the launch.
If you need any approvals or certification(eg for any electrical product), book theproduct tests. Ask if the approvals bodycan also test your prototype to identify anyproblems early on.
Decide on the likely
selling price
for theproduct. Based on this, work out what yourmaximum unit cost of production can be.
Many new products are based on achievingcost reduction. The aim is to provide thesame quality of product at a lower priceand with better profit margins.
Other products rely on superior design ortechnology to win market share, and canbe priced at a premium.But you still need to build to a price, toavoid pricing your product out of themarket.
and delivery demands.
How many will you make and sell eachmonth? What will typical order sizes be?How quickly will customers need delivery?
If you will sell the new product in volume,it is important to achieve a low unit cost of production. To do this, you may have toinvest heavily in the development stage.
4 Your team
Hand pick your team to suit the project.
Every new product needs a
to lead the team. This individual should regard the product ashis or her ‘baby’.
Without such a champion, the project willlack the passion and perseverance neededto overcome the inevitable setbacks.
Give the team leader the authority to runthe project (within an agreed budget andtimetable), without continual interference.
Create a team with all the
needed tomake the project a success (see
Involving a complete team from the startallows people to work in parallel, reducingthe overall development lead time.Without this approach, problems canremain hidden until late in the day.
Involve key customers, if appropriate.
Involve any suppliers that will provide keycomponents of the product.
Make sure all the team members areagreed about the main
, whichare based on the basic spec (see
Be prepared for
and keep theteam motivated.
If anyone is unco-operative or has a ‘can’tdo’ attitude, this will have a corrosiveinfluence on the rest of the team. Avoidincluding such a person in the first place.
Most projects go through a honeymoonperiod, while you are generating ideas.Putting these ideas into practice can be a
Efficient manufacturing
Develop manufacturing plans at the sametime as developing a new product design.
Test proposed designs to see if they canbe manufactured
Design new products with an eye to
the number of components.
Try to reduce the complexity of assembly.
standard parts
wherever possible,so they are inexpensive and easy tosource.
Standardisation is especially important if production volumes will be low.
Consider using parts that you alreadyuse in existing products.
Avoid reinventing the wheel. Wherepossible,
buy in components
that canbe sourced at competitive prices. Thiscan slash development costs and leadtimes.

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