BM050-3.5.

3 Innovation Management and New

Product Development (IMNPD)

An introduction to New Product

Development (NPD)

Lec 1 & 2 Introduction

 Class Structure
Course Level
 Semester 1 Year 3

Prerequisites
 Creativity and Innovation

Course assessment overview

 In course assignment (50% subject to change)
 Final Exam (50% subject to change)

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 Learning Outcome

1. Demonstrate knowledge and understanding of

the widely recognized attributes necessary in
developing and successfully commercialising a
new product.
2. Develop coherent lines for argument and
suggested informed solutions to innovation
management scenarios.
3. Apply and evaluate innovation management
and new product development techniques for
launch planning, implementation and
management
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 Learning Objectives

 Recognise the importance of innovation

 Explain the meaning and nature of
innovation management
 Provide an introduction to a management
approach to innovation
 Recognise the need to view innovation as
a management process

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 Class 1- Introduction

Why is New Product Development

important?

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 New Product Development-
Introduction
“ New Product development is one of the riskiest, yet
most important, endeavors of the modern corporation.
Certainly the risks are high. You and your colleagues
have seen as large amounts of money spend on new
product disasters in your own firm. But then, so too are
the rewards.
New product currently account for a staggering 33%
of company sales on average. That is one third of the
revenues of corporations are coming from products, they
did not sell five years ago. In some dynamic industries,
the figures is as high as 100%”

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 New Product Development-
Introduction
Research in this area suggest that 65% of
new product launches succeed
 And this is only the success rate of those
products that actually make it to their actual
launch
 Some researchers have found that only 20%
of all products upon which development has
begun actually succeed.

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 New Product Development-
Introduction
Rewards from Successful New Product
Development
 Astounding ROI: The average ROI for
successful new products is 96.9%
 Payoff very quickly: The average payback
period is 2.49 years
 Excellent market positioning: The average
market share in their defined target markets is
47.3%

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 New Product Development-
Introduction
“Innovation is not a single action but a
total process of interrelated sub process.
It is not just the conception of a new idea,
not the invention of a new device, nor the
development of a new market. The
process is all these things acting in an
integrated fashion”

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 Innovation vs Invention
 Innovation is concerned with the commercial
and practical application of ideas or
inventions.
 Invention is the conception of the idea into a
tangible new product or process. Innovation
is the subsequent translation of that idea into
the economy
 Innovation = theoretical conception +
technical invention + commercial exploitation.
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 Innovation as Management
process
 Innovation is the management of all the
activities involved in the process of idea
generation, technology development,
manufacturing and marketing of a new (or
improved) product or manufacturing
process or equipment.

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 New Product Development-
Introduction

Rewards from Successful New Product

Development (median value)
 50% of successful new products achieve 33%
ROI or better
 Half of successful new products have a
payback period of two years or less
 Half of successful new products achieve a
market share in excess of 35%

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 New Product Development-
Introduction

Why is there a need for organization to

innovate?
 Technology Advances
 Changing Customer Needs
 Shortening Product Life Cycles(PLC)
 Increased World Competition
Will these reasons be no longer relevant in
the next 40 or 50 years?

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 New Product Development-
Introduction

Different Types of innovation

 Product Innovation: development of a new or
improved product.. IPAD, digital camera
 Process Innovation: new manufacturing
process.. Pilkington float glass
manufacturing process
 Organization Innovation: new venture
division, new internal communication system,
new accounting procedure
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 New Product Development-
Introduction

Different Types of innovation

 Management Innovation: TQM, Business
process reengineering
 Production Innovation: quality circles, JIT,
new production software: MRP (materials
requirement planning)
 Commercial/Marketing innovation: new
financing, new sales approach
 Service Innovation: phone banking, Uber
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  Hammer and Champy suggested seven reengineering
principles to streamline the work process and thereby
achieve significant levels of improvement in quality, time
management, speed and profitability:
 1. Organize around outcomes, not tasks.
2. Identify all the processes in an organization and prioritize
them in order of redesign urgency.
3. Integrate information processing work into the real work
that produces the information.
4. Treat geographically dispersed resources as though they
were centralized.
5. Link parallel activities in the workflow instead of just
integrating their results.
6. Put the decision point where the work is performed, and
build control into the process.
7. Capture information once and at the source.
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 New Product Development-
Introduction

Categories of New Products

1. New to the world products
2. New product lines
3. Additions to existing product lines
4. Improvements and revisions to existing
products
5. Repositioning
6. Cost reduction

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 New Product Development-
Introduction

Why New Product Development?

 Increasing level of innovation in competitive
environment settings
 More resources are being dedicated into
innovating products
 Success of such resource allocation is
inconsistent at best
 A structured approach to new product
development is require to enhance success
rate
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 New Product Development-
Introduction

Winning at New Products

 Speed yields competitive advantage?
 Speed yields higher profitability?
 Speed means fewer surprises?

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 Questions?

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 Tutorial

1. What is wrong with the popular view of

innovation in which eccentric scientist develop
new products?

2. What is the difference between an

unsuccessful innovation and an invention?

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