New Product Development

MBAX 6360-800

Spring 2007

Professor Page Moreau

Introduction to New Product Development

Introduction to NPD

Why is NPD an exciting topic? What separates winners from losers? Why does NPD matter? The NPD Process NPD in Perspective

Diffusion of Innovations Rogers Bass

Are all New Products the Same?

Introduction to NPD

Why is NPD an exciting topic?

Why is NPD an exciting topic?

The Dilemma:Risky but Critical

Risky

Failure Rate of 40% “I think there is a world market for maybe five computers.”

- Tom Watson, chairman of IBM 1943

“The radio craze will die out in time.” -Thomas Edison, 1922

“Video won’t be around more than 6 months; people will soon get tired of staring at a plywood box.” -Daryl Zanuck, President of 20th Century Fox 1946

“There is no reason anyone would want a computer in their home.” Ken Olsen, DEC founder 1977

Risky

High Cost of Entire NPD Process Crystal Pepsi (1992) Gillette Mach III (1998) P&G’s Olestra (“Olean”) Job’s Next Computer/Apple Newton RJR Nabisco - Premier Smokeless Cigarettes (and

their follower, Eclipse) Cadillac Allanté

Risky

To avoid failure, everything has to be right: Concept Design Pricing Positioning Packaging Advertising and Promotion

Risky

New Products Showcase and Learning Center Largely for consumer products that tend to have higher

failure rates: http://www.newproductworks.com

Critical

High Tech Mixed Low TechNumber of Firms 127 152 91% Successes 60.50% 60.00% 55.20%% Sales from NPs 42.30% 28.70% 23.70%% Profits from NPs 38.80% 26.90% 24.50%# New Products/5 yrs 41.8 25.9 49.5

Source: 1997 PDMA Report

Critical

Source: Product Leadership - Creating and Launching Superior New ProductsRobert G. Cooper

Introduction to NPD

Why is NPD an exciting topic? Introductions

Introduction to NPD

Why is NPD an exciting topic? Introductions What separates winners from losers?

Winners vs. Losers

Success DriversCorrelation with

Profits Timeliness

A unique, superior, differentiated product .53 n/s

A strong market orientation w/voice of customer .44 .41

Early fact-based product definition prior to development .39 .24

Effective implementation of front-end activities .37 .41

Use of true cross-functional teams .33 .48

Leverage – project builds on firm’s core competencies .32 n/s

Market attractiveness – size, growth, margins .31 .22

Quality of launch effort – planning and resources .29 .20

Tech. competencies and execution of technical activities .26 .32

Winners vs. Losers

The Cornerstones of Performance:

1) A High-Quality NPD Process

2) A Defined NPD Strategy for the Business

3) Resource Commitment

Introduction to NPD

Why is NPD an exciting topic? What separates the winners from the losers? Why does NPD matter?

Well-managed NPD processes are a significant source of performance improvement

Decrease Development Time by 30-70% Reduce # of Engineering Changes by 65-90% Reduce Time-to-Market by 20-90% Increase Overall Product Quality by 200-600% Increase White Collar Productivity by 20-110% Increase Dollar Sales by 5-50% Increase Return on Assets by 20-120%

Source: Product Leadership (2000) Robert Cooper

PDMA Best Practices Survey

The Best: average 49% of sales from products < 5 yrs old have a success rate over 80% Use stage/gate processes more extensively (& more stages) reward team non-financially in public and private ways innovate in their use of market research and engineering design tools

Source: Drivers of NPD Success: The PDMA Report

Introduction to NPD

Why is NPD such an exciting topic? Introductions Why does NPD matter? The NPD Process

The NPD Process

Phase 1:Opportunity

Identificationand Selection

Phase 2:Concept

Generation/Ideation

The NPD Process

Phase 1:Opportunity

Identificationand Selection

Phase 2:Concept

Generation/Ideation

Phase 3:Concept

Evaluation &Screening

Phase 4:Development

Call My Agent The personal digital assistant of the future will do a lot more than organize our schedules and plan

our days. In an overwhelming sea of data and messages, the Agent will use

rudimentary artificial intelligence to sort, store, and forward info and messages based on in- dividual priorities,preferences, and interests. It will

interact with the earphone and all digi-

tal devices at work and at home, con-necting them to the Net and in-

stantly updating them. Think Palm'sHotSync times 10. Say goodbye to

money, keys, credit cards, beepers,

and TV remotes.

BUSINESS WEEK / MARCH 6, 2000 105

The NPD Process

Phase 1:Opportunity

Identificationand Selection

Phase 2:Concept

Generation/Ideation

Phase 3:Concept

Evaluation &Screening

Phase 4:Development

Phase 5:Testing &

Launch

“Fuzzy” Front End

The NPD Process

The NPD Process

Introduction to NPD

Why is NPD an exciting topic? Introductions Why does NPD matter? The NPD Process NPD in Perspective

Diffusion of Innovations Rogers Bass

NPD in Perspective

Diffusion of Innovations Rogers (1962, 1983, 1995)

NPD in Perspective

Diffusion of Innovations Rogers (1962, 1983, 1995):

Product Factors Influencing Diffusion Speed: Relative Advantage (+) Compatibility (+) Complexity (-) Trialability (+) Observability (+) Risk (Ostlund) (-)

NPD in Perspective

Diffusion of Innovations Rogers (1962, 1983, 1995)

People Factors Influencing Diffusion Speed:

Crossing the Chasm by Geoffrey Moore

NPD in Perspective

Diffusion of Innovations Rogers (1962, 1983, 1995) Bass (1969)

NPD in Perspective

Diffusion of Innovations Rogers (1962, 1983, 1995) Bass (1969):

The Model:

P(T) = p + (q/m) Y(T)

An Example of the Bass Model: Corn Adoption by Iowa Farmers

NPD in Perspective

Are all new products the same? Continuity Continuum (Robertson ‘71) Commonly accepted categories:

New-to-the-World New Category Entries (New Lines for Co.)

Additions to Product Lines Product Improvements Cost Reductions Repositionings

NPD in Perspective

NPD in Perspective

New-to-the-world (“Really New”) 1. Personal Computer 14. Touch-Tone Phone 2. Microwave Oven 15. Laser Surgery 3. Photocopier 16. Computer Disk Drive 4. Pocket Calculator 17. Organ Transplanting 5. Fax Machine 18. Fiber-Optic Systems 6. Birth Control Pill 19. Disposable Diaper 7. Home VCR 20. MS-DOS 8. Communication Satellite 21. MRIs 9. Bar Coding 22. Gene-Splicing 10. Integrated Circuit 23. Microsurgery 11. ATM 24. Camcorder 12. Answering Machine 25. Home Smoke Alarm 13. Velcro Fastener ** Source: R&D Magazine 1992