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An introduction to New Product Development (NPD)

Lecturer
Goh Boon Gee E-mail: gohboongee@apiit.edu.my Master Degree in Business Administration International University of Japan(IUJ) Bachelor Degree in Finance University of Nebraska Lincoln (UNL) 7 years working experience in International Financial Institution & Franchise Management (USA, Malaysia, Japan)

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Introduction
Personal Introduction- Please tell me a little bit about yourself including your
Name(by which you like to be called) Working Experience if any Nationality Tools or skills you would like to gain from this class

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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 DevelopmentIntroduction


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 DevelopmentIntroduction


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 DevelopmentIntroduction


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 DevelopmentIntroduction


2006 Rank 1 2 3 4 Company Apple Google 3M Toyota

Margin growth % 1995-2005


7.1 NA 3.4 10.7

Stock Returns% 1995-2005


24.6 NA 11.2 11.8

5
6

Microsoft
General Electric

2.0
5.7

18.5
13.4

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New Product DevelopmentIntroduction


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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New Product DevelopmentIntroduction


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 DevelopmentIntroduction


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 DevelopmentIntroduction


Different Type of innovation Product Innovation Process Innovation Organization Innovation Management Innovation Production Innovation Commercial/Marketing innovation Service Innovation
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New Product DevelopmentIntroduction


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 DevelopmentIntroduction


Winning at New Products
Speed yields competitive advantage? Speed yields higher profitability? Speed means fewer surprises?

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New Product DevelopmentIntroduction


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

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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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Answers
Q1 Quite simply it is damaging to the reputation of science and scientists in particular. One can understand why it is popular with film makers and tabloid press editors and that is because much of science is not understood and also because people live in hope that scientists can do anything. The truth is very different, and virtually all scientific progress is slow and takes many years of many peoples considerable efforts. Progress is also largely down to teamwork, with considerable size groups of scientists often working on particular projects.

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