New Product Development MBAX 6360-800 Spring 2007 Professor Page Moreau.
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Transcript of New Product Development MBAX 6360-800 Spring 2007 Professor Page Moreau.
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