An introduction to New

Product Development (NPD)

New products Development:

Considerations when
developing an 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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Considerations when developing

an NPD strategy
1. Ongoing Corporate Planning
Set future direction
Large organization Formal activity involving strategic
planners and senior managers with responsibilities
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

an NPD strategy
2. 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.
to investigate the use of new materials for the
sole and to look at alternative fastening and
production cost
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Considerations when developing

an NPD strategy
3. Ongoing Technology Management
Technology awareness is high
Significant application to science and technology
intensive industries such as pharmaceutical and
computer industry
E.g. Recent review of patent literature has identified a
patent application by competitors
New patent has force the business to establish the
impact of this development and its effect on its position

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Considerations When Developing

a NPD Strategy
4. Opportunity Analysis/Serendipity
Unexpected discovery/luck as a result of
innovation
chaos is necessary part of an innovative culture
3Ms competitors never know what is coming
next. Neither do we 3M-vice president

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NPD as a Strategy for Growth

1. Market Penetration
Opportunities existing within a business existing
markets
Increasing market share through exploiting full
range of marketing mix activities
E.g. Kelloggs has increased usage of cornflakes
product by promoting it as a snack

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NPD as a Strategy for Growth

2. Market Development
Making products available through new markets
Company maintains the security of its existing
products but opts to enter new markets
Opening up new segments
E.g. Mercedes enter small car market which they
have previously concentrated on the executive
or luxury segment

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NPD as a Strategy for Growth

3. Product Development
Growth opportunities exist through offering new
or improved products to existing
markets~~Ansoff
Companies try to ensure that products are able
to compete with competition
Regular improvement and update of their
existing products
Ongoing activities
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NPD as a Strategy for Growth

4. Diversification
Opportunities for growth exist beyond a
business existing products and markets
Moving away from product areas and
markets away from existing products
Diversification through acquisition
Opportunities for growth through forward,
backward and horizontal diversification.
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What is 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 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
The Fuzzy front end
Messy getting started period of new product
development processes
Beginning of the process/ front end load
Concept of product to be developed
Decision to invest resources in the further development
of an idea
Fuzzy ends when organization approves and begins
formal development of the concept
Can consume 50% of development time& resources

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Customer Roles in NPD

Customer
Role

NPD
Phase

Key Issues/Managerial Challenges

Customer as
resource

Ideation

Appropriateness of customer as a resource of

innovation
Selection of customer innovator
Infrastructure for capturing customer knowledge
Differential role of existing and potential customers

Customer as
co-creator

Design
and
Develop
ment

Involvement in a wide range of design and

development tasks
Nature of the NPD context: Industrial/consumer
products
Tighter coupling with internal NPD teams
Managing the attendant project uncertainty
Enhancing customer diversity
Enhancing customers product/technology
knowledge

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Customer Roles in NPD

Customer
Role

NPD
Phase

Key Issues/Managerial Challenges

Customer as
user

Product
Testing

Time-bound activity
Ensuring customer diversity

Product
Support

Ongoing activity
Infrastructure to support customer-customer
interactions

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Models of New Product Development

Departmental-Stage Models
Each department is responsible for certain task
E.g. R&D provides interesting technical ideas;
Engineering department will take the ideas and
develop possible prototypes; marketing
department will plan and conduct business
launch
Insular department view hinder innovation
Characterized by great deal of reworking and
consultation between functions
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Models of New Product Development

Activity-Stage Models and Concurrent
Engineering

Similar to departmental-stage but with

emphasis on activities conducted
Active use of feedback loops
Received fierce criticism for perpetuating
the over-the-wall phenomenon

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Models of New Product Development

Star-Gate Approach

Divides effort into distinct time-sequenced

stages separated by management decision
gates
Multifunctional teams must successfully
complete a prescribed set of related cross
functional task before proceeding to the
next step
Ensure smooth operation of the process

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Models of New Product

Development
Star Gate Process:
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
Cross-Functional Models (teams)

Common problems of product development

process revolve around communications
Projects would frequently be passed back and forth
between functions
Assign a dedicated project team
Requires a fundamental modification to an
organization structure

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Models of New Product

Development
Decision-Stage Models

A series of decision need to be taken in order to

progress the project
Active use of feedback loops
Criticism of these models is that such feedback is
implicit rather than explicit
The use of feedback loop emphasize on the
importance of interactions.

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Models of New Product

Development
Conversion-Process Models

Numerous inputs into a black box where they are

converted into an output
E.g. inputs could be customer requirements,
technical ideas and manufacturing capability and
the output would be the product
The concept of variety of information inputs leading
to a new product is difficult to critics
Lack of detail elsewhere is the biggest limitation

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Models of New Product

Development
Response Models

Behaviorist approach to analyze change

Focus on individuals or organizations response to
a new project proposal or new idea
Reveal additional factors that influence the
decision to accept or reject new product proposal
at screening stage

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Models of New Product

Development
Network Models

Emphasize the external linkages coupled with the

internal activities
Substantial evidence to suggest that external
linkages can facilitate 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 roles 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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