New product development
process
Overview
New product development is a
vital part of any business. It doesn't matter whether the product is for
consumers or other businesses, whether it is a tangible object or a service.
The constant change in markets and technology require that companies take steps
to meet new challenges. Developing new products and improving existing products
is an important step in meeting this challenge. New product development can be
just what it sounds like—the creation of a completely new product that fills a
previously unaddressed niche in the economy. Product development also includes
re-examining an existing product to maximize its market potential through
adding features, a design change or maybe just tweaking the marketing.
Fortunately, product innovation
is not a completely hit or miss proposition. There are steps a company can take
to improve the likelihood of a successful development process. There is no one
"best" method for developing products, and what works for one segment
of a particular industry may not work for another industry, or maybe not even
for another segment of that industry. The mix of elements will be different for
every product development project, but companies can look to a basic framework
to help keep all the different elements on track.
The goal of the productdevelopment process is to end up with the best possible product. One
that is well suited for the intended audience and contains features that are
needed and desired. No matter how great the new product may seem, if the market
rejects it, it's a failure. Taking the product development process seriously
can go a long way toward making the end result a success.
Outline
I. What is New Product Development
II. Categories of Products
III. The Stage-Gate Process
IV. The Importance of Market Research
V. Types of Research
VI. Choosing the Research Firm
VII. The Customer Experience
VIII. Managing the Process
IX. Portfolio Management
X. Resources
I.
What is New Product
Development
The new product begins as an
idea or a concept. Maybe even hastily scribbled on a napkin at lunch. Product
development is the process that takes that idea through a series of stages
until the concept emerges at the end of the process as a completed product
ready for the market.
New products drive progress and
can be seen as the lifeblood of business. They can create new companies and
entirely new industries. The automobile is an example of a product that has
spawned a huge industry with constantly changing design of the core product, a
wide range of accessories that reflect ongoing innovation and a huge host of
industries, like petrochemicals, that were directly affected by the creation of
that one product.
New product development can
allow companies to reinforce or change their strategic direction, they prevent
companies from becoming stagnant and new products can be a rallying point to
create excitement and commitment at companies. A strong new product can also
help a company's entire product line with a "pull-through" effect.
It is important for companies
to remember that product innovation is not a static process. Abbie Griffin,
editor of the Journal of Product Innovation Management says that "there's
no silver bullet" in product development. There's no perfect process that
a company can find and use over and over again. Each project requires its own
set of objectives and mix of elements to be successful. What worked with the
last project may not work for the next development process.
"Product development goes
in cycles at every single company," says Griffin. "It's almost like
there's a reversion to the mean. You do well for a while, you get cocky, you
forget how to do it and then you lose it."
Companies should remember that
the goal of the entire process is to end up with a successful product. A
product that improves on the competition or fills a new niche in the
marketplace.
"I think that the best
products are really for an individual--a clear, real person with real needs,
aspirations, goals (and) values. And the more that products can be conceived
and designed to address the needs of real people, the more they are going to
resonate with, or excite consumers at the end of the day," states Darrel
Rhea, principal at Cheskin Research. "So I think that it's incredibly
important to have product developers, all the people involved in product
development including the technical and engineering side of the equation, to
have a deep appreciation for who they are designing for"
No controllable factors in product development:
Market potential, size and
growth rate
The availability of resources
How competitive the market is
The external environment
surrounding the product
Controllable factors in product development:
The proficiency of marketing
and technological activities
Whether the end user is
involved in decisions throughout the process
The support of top management
The new product strategy and
process
Some questions to ask about the development process:
Are we increasing our research
and development effectiveness?
Are we improving the
utilization of our manufacturing operations?
How are we leveraging our
marketing effectiveness?
Are we effectively utilizing
our human resources?
Are we including the consumer
in our development process?
Questions to ask about the new product:
Will this new product enhance
our corporate image?
Are we reinforcing or changing
our strategic direction with this product?
Will this development help us
achieve a strategic advantage over a competitor?
How will this product improve
our financial return?
Does this new product create
excitement at our company?
II.
Categories of Products
New products come in many
guises, but almost all of them can fit into one of five categories:
The breakthrough product is
something that is entirely new. The first telephone is an example of a
breakthrough product. So is the first tennis racket made of a graphite
composite and not wood or metal. These are the most dramatic of new products
and they are what most people think of when they hear the words product
innovation.
The "new to us"
product is one that is already on the market, but a company is developing their
own version for the first time. There are many reasons a company may want to
develop a product that already exists. They may be able to improve upon what is
available, or can make a comparable product at a cheaper price. Or possibly
they are looking to grab a share of a profitable market segment. A danger of
overusing this approach is to be seen as a non-innovative copy cat company
within the industry.
The next generation product
falls under the new and improved umbrella. That is, taking a successful product
and adding some new benefit, reducing the cost or enhancing the overall design
to improve the product.
Many companies use a simple
line extension product for much of their product development. This approach may
not be too exciting, but it can be very profitable by tweaking a good product
to meet different segments of the market. Some examples would be the creation
of an economy model of a product, or conversely a higher-end model with more
features. This approach should be carefully researched to avoid the
over-segmentation of the market with a large and confusing assortment of
product choices.
The final product category is
the three Rs--repackaging, repositioning and recycling. A new package design
can invigorate and draw attention to an existing product. By repositioning a
product, companies can open new and profitable markets to that product. The
recycled product can find new life in a new role.
A good example would be the old, mechanical push lawn mower. Gas and electric
power mowers dominate the market, but there is an increasing demand for the
simple and environmentally friendly push mower.
III.
The Stage-Gate Process
The traditional product
development process is referred to as sequential new product development and consists
of five basic steps: idea generation, screening and evaluation, business
analysis, development, testing and commercialization. Each step is overseen by
a manager who makes the determination whether or not to proceed to the next
step.
Robert G. Cooper founded the
Stage-Gate ™ product development process that refines the basic framework and
provides the development team a blueprint for managing the process. The
Stage-Gate process defines the cross-functional and parallel activities that
each stage should engage in. Between the stages are gates which control the
process and serve as go/kill checkpoints for the project as well as offer
quality-control of the process.
This process breaks the
development cycle into a number, usually four, five or six, of identifiable
stages. Each stage includes the various activities that each functional area
undertakes in parallel while working together as a team under the project team
leader.
The design is set up where each
stage gathers information to drive down uncertainty about the success of the
project. Each successive stage is also more costly than the previous stage. The
idea is to allow an increase in spending on the development of projects as the
uncertainty goes down. Another aspect of the Stage-Gate process is a built-in
level of flexibility to help accelerate the development process. Stages can
overlap each other, or a Go decision can be made on the next stage although the
current stage is not completed yet. Stages can even be combined if that is
found to be necessary.
A generic example of a five-part Stage-Gate
process:
Stage 1: The Preliminary
Investigation--This should be undertaken by a basic team from the technical and
marketing functions to investigate the scope of the project. Some of the
activities include the preliminary market, technical and business assessments.
Stage 2: Detailed
Investigation--The activities of this stage should lead to a business case.
They include market research studies like user needs and wants, competitive
analysis and concept testing. The activities also include in-depth business and
financial analyses. This stage should involve the technical, marketing and
manufacturing functions and should yield a defined product and a framework for
the following stages.
Stage 3: Development: Here is
where is the product is designed and prototyped. At this stage some customer
research is conducted to refine the design, but much of the testing involves
the manufacturing requirements and processes. The marketing plan for the new
product is also created. The entire cross-functional team, including the
marketing, technical, manufacturing functions as well as the purchasing, sales,
quality assurance and finance functions, should be in place by the development
stage.
Stage 4: Testing and
Validation--This stage is where the proposed new product endures extensive
testing of the production, the marketing and the product itself. This stage
determines if the product is ready to actually go to the market.
Stage 5: Market Launch and
Production: The full commercialization of the new product. The marketing plan
is fully engaged and the project team now should take on the role of monitoring
and making refining adjustments on the launched product as necessary.
Built into the Stage-Gate
process is the gate between each stage. This gate is a go/kill decision point
that determines if the project continues. The gate also serves a
quality-control checkpoint and helps determine the resource commitment the
project receives from the company.
The gate meeting should be attended
by the senior members of each of the functions represented on the development
team. Gates have three aspects that are evaluated during the meeting. The input
is what the previous stage delivered to the meeting. The criteria are the
questions that the meeting members use to make their go/kill and resource
allocation decisions. The criteria involve both quantitative figures, like
financial return forecasts, and qualitative data, like market attractiveness.
Each of the criteria are judged on mandatory or desirable merits to determine
the outcome of the meeting. The output of the gate meeting is the decision that
the participants end up with. If the decision is a "go" the
participants set a resource allocation level to the next stage and a deadline
for the next set of deliverables.
Part of the flexibility of the
Stage-Gate process is that decisions can be made with incomplete information--a
provisional go decision can be made depending on positive results occurring
early in the next stage. The Stage-Gate process is a cross-functional approach
that involves many different business function areas throughout the entire
product innovation cycle.
The traditional product
development cycle does not involve market research until close to the end of
the process. This view looks at research as a mean to "market" the
new product, not allow market research to drive the actual development
decisions. An important aspect of the Stage-Gate process is that the marketing
function is involved in every step of the development cycle. Following is
breakdown of some specific marketing functions that should be employed at
specific stages of the process.
The Preliminary Market
Assessment: This study is used at the onset of the development cycle to
determine the market attractiveness and acceptance of the concept
User Needs and Wants: These
face-to-face interviews and in-depth surveys provide important user information
to the design team
Competitive Analysis: Just as
it sounds, this study looks at the competition within the targeted marketplace
Concept Testing: This tool uses a prototype
or representation of the proposed product to test market
Customer Reaction: This should
be employed throughout the various steps of development to keep the project
team focused on the end user.
User Tests: This is the final
test before the actual onset of marketing where consumers use the product under
customer conditions to confirm the market attractiveness and acceptance.
Test Marketing: The new product
is launched on a limited basis to test every element of the marketing and
product before the full launch.
Market Launch: The full release
of the new product, backed up by a sound development process and the resources
necessary for market success.
IV.
The Importance of Market
Research
Traditionally product
development has used market research at the end of the process to validate the
new design or product. Market research is actually an important aspect of every
stage of development. The earlier a company spends market research dollars in
development, the more return they will see on those dollars. The problem with
utilizing validation research at the end of the process is that the research
itself becomes a "disaster check." The best result a disaster check
can come back with is that you have a viable product that the market will
embrace. More likely the research will uncover areas where the development team
made incorrect assumptions about some aspect of the new product, maybe a
configuration issue or a tone of the brand, that turns out to be incorrect and created
a weaker product than was possible. The worst-case scenario has the research
uncovering an actual "disaster", that is, a product that is not
suited for the target audience in the least. At that point the development
process must start over, losing valuable time and wasting money. A problem that
could have been averted by effective research early in the development process.
Rhea explains the value of
using research early in the development game, "If you take the time to
really do serious planning of the process, if (you) take the time to focus your
efforts, to aim before you fire, you're going to have a much more efficient
development process." By utilizing research to help conceptualize the
direction of the product development, companies can increase the return on
their development investment. The best way to accomplish this is to really
understand who the user of the new product is and bring that product to life
for that user. By doing this the development team has a powerful shared vision
and understanding of whom they are solving the problem for.
"Ultimately research
should help provide the fundamental material to create a vision for a brand or
product," says Rhea. "And that vision should be based on a really
deep, intuitive clear understanding of human beings as real people, not as
statistics and data."
Market research can also help
the development team realize that they are not just creating a product. They
are creating a customer experience. A relationship with the customer that goes
beyond the product or service created at the end of the development process.
This requires a deep understanding of brand and that brand is the promise and
relationship that the customer has with the company.
"Ultimately, in the
market, it (product development) creates products that people just don’t buy,
they buy into," states Rhea. He goes on to cite the Body Shop, Patagonia
and Nike as companies whose products consumers buy in part because of the
philosophy, values and sensibilities of their brands.
V.
Types of Research
Market research encompasses a
wide variety of types of research. The two basic categories are quantitative
and qualitative. Quantitative research includes the collection of demographic
and psychographic information, like the target age and gender of the product,
the hobbies of the target group, how strongly they feel about various issues.
Qualitative research goes more deeply into the actual problems that the
customer may want solved by the new product.
The trend in product
development has been moving toward more qualitative tools. One of these is
cultural ethnology which borrows skills from visual anthropology to observe the
consumer in various settings and develop deep, contextual insights about the
end user from these observations. This process can allow the researcher to
learn what is going on in the consumer's life which the consumer may not want
to tell the researcher or may not even be aware of themselves. Using this along
with other tools allows a skilled researcher to define specific problems that
can be solved through the product innovation process.
An important aspect of research
is to utilize the entire toolbox of research skills to define the consumer and
the problems that need to be solved—using the correct methodology at the right
time to solve the right problem. By not doing this, the development team risks
ending up with a product that is less than optimal. Most companies will not
have this highly specialized skill in-house in the marketing department. The
solution is to hire a market research firm that can provide worthwhile market
research to the development team.
VI.
Choosing the Research Firm
When searching for a market
research firm to add to the development team, the company should be aware that
not all market research companies will be able to provide the type of results
that product development demands. A large portion of the market research field
specializes in quantitative data collection, which is very worthwhile for many
purposes, but these companies will not provide the skill sets that the
development team requires. The company should seek out a research firm with
experience with the appropriate skills for product development. This means
finding someone who can help you understand your target consumer and
understands the product development process. Each area of the development team,
like the engineer or the industrial designer or the advertiser, needs something
different from the research. The effective market researcher will be able to
translate their research into usable insight for each different group and put
that insight into each group's language.
Speed of development is often
an issue, and good market research can help streamline the process. Christopher
Ireland, CEO of Cheskin explains, "We think people can really get things
developed faster if they just spend a little time up front listening to their
customer. Because more often than not, what happens is they start developing
something and halfway through they got to test it, they find that they've made
a lot of mistakes and then they have to go back and reinvent for a while. And
they lose a lot of time."
Research Firm Checklist
___Does the firm understand the
product innovation process?
___Does the firm have
experience with market research for product development?
___Can the firm provide usable
information for each functional area in the language of that area?
___Is the research firm willing
to be integrated into the development process as a member of the project team,
or will they just provide reports and information to the team?
VII.
The Customer Experience
The current marketplace is a
radically changed arena. The needs and concerns of customers from even five
years ago may no longer be valid which underscores the importance of
understanding what the end user wants today to product development. Companies
that rely on the traditional methods of allowing technology or existing
products drive development may find themselves left behind. Research is finding
that benefits, or perceived benefits, drive consumers to make purchase decisions.
Learning what the customer finds beneficial can be a critical element in a new
product design. Cheskin Research has developed a the Cheskin Research Design
Experience Model to pull together the elements of customer's everyday
interactions with products by observing customers as they experienced many
hundreds of commercial designs.
Stage one of this model is
"life context." This refers to the background of the consumer's
life—what the consumer thinks, feels and does. It also includes elements such as
beliefs, attitudes and perceptions. Life context does not remain static, as new
innovations such as the Internet change the consumer's behavior. As the
behavior changes, the needs of the customer changes. This element should be
reinvestigated for every new product or idea as it is in a constant state of
flux.
Examples of research used to
explore life context:
Ethnographic Studies—observing
people in their natural context.
Expert Interviews—learning what
experts in the field of interest have to say.
Identity Studies—determining
how and why people feel a certain way about products and companies.
Customers must make a
transition that Cheskin calls "involvement" before entering the
second stage of "engagement." Engagement is the customer's first
interaction with the new design. What makes this stage important is that the
design itself should be interesting enough to engage the customer without the
help of a specific brand, company or product category.
The successful design will
accomplish three tasks at this stage. The product will have a cognitive
presence which triggers one of the five senses and causes customers to make a
distinction between the new product and its competitors. The design will grab
the customer's interest through attraction, and the customer will receive
communication about the product's key attributes. This stage may last only a
few seconds, but it is vital that the consumer completes the three tasks of
cognitive presence, attraction and communication.
Examples of research used to
explore engagement:
Physiological Response
Studies—tracking consumer's physical response to the design elements.
Visual Mapping Studies—tracking
what design elements attract the consumer's eye. This bridges physiological
responses and more emotional responses.
Communications Studies—these
explain how the design elements impact consumer's perception of the product.
The third stage is
"experience." At this stage the consumer actually uses the new
product and continually assesses the quality of their experience with the
product. The task is to create a product that "delivers", that is,
meets the customer's expectation and then goes a little further to give the
customer something extra. You want the customer to go beyond being merely
satisfied with the new product to seeing it as something great.
Examples of research used to
examine experience:
Attitudes and Usage
Studies—track how people interact with products and provide insights about this
usage.
Usability Perception
Tests—measure how consumers feel about the products functionality.
In-Use Testing—or "beta
testing". Allowing a select group of consumers to use prototypes of the
product and report on the strengths and limitations that they find.
The final stage is
"resolution." This stage occurs when the product is no longer used by
the consumer. It is preceded by a transition process that Cheskin calls
"disengagement." Marketers and designers have traditionally
considered disengagement the end of their products interaction with the
customer, but new environmental standards have changed this view. Product
disposal has become an issue that companies must enter into the product
development process. Companies must become aware of how the product is disposed
of whether it is returned to the manufacturer, recycled or just sent to the
local landfill.
Examples of research used to
explore resolution:
Customer Satisfaction
Surveys—track customer's ongoing reactions to products and companies
Point-Use Studies—track the
strategies and processes that consumers use to dispose of products.
These studies can tell
companies whether their customers can move through the next transition of
"integration" which will allow the customer to weave their product
perception back into life context and begin the cycle again.
The following questions taken
from the Cheskin Research document, "A new perspective on design: focusing
on customer experience", can help you think about your company's products
in relation to this customer-based model.
1. How deeply does your company
seek to understand customers before engaging in design? What might you do to
deepen this understanding?
2. How might it benefit your
company's design process to start with a focus on customers and their concerns
rather than on existing technology or products?
3. Are there any model stages
your company is not presently evaluating during the product development process
or marketing efforts? If so, how might greater evaluation benefit your
customers? Your products? Your company?
4. Think about how customers
experience your product—from initial exposure to disposal. Does anything in the
design distract customers from addressing their concerns? Are there any
unnecessary points of effort, induced awareness, inconvenience, or irritation?
5. How might you improve
customer's experience of your product so that they will be favorably
predisposed toward repurchasing it? Toward accepting your company's other
product offerings?
VIII.
Managing the Process
The traditional view of product
development has a single project team leader overseeing the individual project
and each of the functional areas, like technical, marketing, manufacturing,
finance and logistics. Many companies are now moving toward a team-based
approach with each functional area represented by a leader. These are commonly
called cross-function or mulit-functional teams and are a representation of the
corporate trend of reducing the hierarchical structure of the firm, or creating
a "flat" organization. Although more companies are only paying lip
service to the idea of a flat organization than are actually implementing the
idea, the use of cross-functional teams can be very effective in product
innovation. The Stage-Gate process demands a cross-functional team with players
from every function and a team leader to represent them. Although the team
structure is dynamic with members entering and leaving the team as necessary,
the project retains a core group of members and team leader that are involved
and responsible through the entire development process.
With the management and
responsibility of the individual projects covered by the project team leader
and the core members from the different functional areas involved in product
innovation the management issue becomes more one of the entire scope of product
development of the company.
IX.
Portfolio Management
Portfolio management is defined
as a dynamic process which a company uses to regularly review the list of
product development projects and allocate resources to the projects in a
prioritized manner. The activities involved in portfolio management include
reviewing the entire portfolio and comparing the individual projects against
each other, making go/kill decisions on individual projects, developing a
product strategy for the business and making the strategic resource allocation
decisions. This approach is not unlike concept of managing a portfolio of
stocks where you constantly evaluate the entire group to maximize your return
and weed out the weak links.
Without a good portfolio
management system in place a company risks spreading their resources too thinly
over a group of weak projects and not making effective go/kill decisions by
allowing the weaker projects progress through the development process. Done
correctly, the management of the project portfolio should be a funnel that
keeps the effective projects in the stream and weeds out the weaker projects on
a regular basis. This gives the strong projects more resources to help maximize
their effectiveness. The difficulty in portfolio management is the fact that
the process is dynamic and focuses on what might be and compares projects at
differing stages of completion.
To implement a portfolio
management system, a company should approach the process as though they were
designing a new product (the new management system) for an end user (the company.)
By doing this the process is broken into steps with particular goals in mind to
ensure that the result will be successful. The first step is to define the
requirements for implementing a portfolio management system. This step involves
learning about what portfolio management entails by researching literature on
the subject and taking a look at what other firms are doing with portfolio
management. This step also includes creating a task force within the company to
act as the "project team" that develops the process.
The second step is to design
the portfolio management process itself. The first stage should provide a frame
of reference to work from and should have defined problem areas that need to be
addressed, like having a development process that is easily reviewable such as
the Stage-Gate process. This step also involves creating a new product strategy
and a portfolio review process. The result of this stage should be a portfolio
management process that is down on paper and has been reviewed by the task
force, users and top management within the company.
The last step is to implement
the process itself. A portfolio process manager should be chosen to cover the
day-to-day management of the system and there should be training for the
project team members on the new process. All new and existing projects should
be put into the new system as quickly as possible and performance measures, or
metrics, should be defined to allow for evaluation of the entire process.
The result of the time and
resources spent to develop a good portfolio management system is a more
effective and accountable process of new product development.
You will want to practice answering the following questions when you are on the Power of Marketing TV Show. Preparation is crucial to the success of your product selling on TV. Remember that the opportunity to sell on national television could mean thousands of units selling during airtime.
