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New product

development

In business and engineering, new product


development (NPD) covers the complete
process of bringing a new product to
market. A central aspect of NPD is product
design, along with various business
considerations. New product development
is described broadly as the transformation
of a market opportunity into a product
available for sale.[1] The product can be
tangible (something physical which one
can touch) or intangible (like a service,
experience, or belief), though sometimes
services and other processes are
distinguished from "products." NPD
requires an understanding of customer
needs and wants, the competitive
environment, and the nature of the
market.[2] Cost, time and quality are the
main variables that drive customer needs.
Aiming at these three variables,
companies develop continuous practices
and strategies to better satisfy customer
requirements and to increase their own
market share by a regular development of
new products. There are many
uncertainties and challenges which
companies must face throughout the
process. The use of best practices and the
elimination of barriers to communication
are the main concerns for the
management of the NPD .

Process structure
The product development process
typically consists of several activities that
firms employ in the complex process of
delivering new products to the market. A
process management approach is used to
provide a structure. Product development
often overlaps much with the engineering
design process, particularly if the new
product being developed involves
application of math and/or science. Every
new product will pass through a series of
stages/phases, including ideation among
other aspects of design, as well as
manufacturing and market introduction. In
highly complex engineered products (e.g.
aircraft, automotive, machinery), the NPD
process can be likewise complex
regarding management of personnel,
milestones and deliverables. Such projects
typically use an integrated product team
approach. The process for managing
large-scale complex engineering products
is much slower (often 10-plus years) than
that deployed for many types of consumer
goods.

The product development process is


articulated and broken down in many
different ways, many of which often
include the following phases/stages:

1. Fuzzy front-end (FFE) is the set of


activities employed before the more
formal and well defined requirements
specification is completed. Requirements
speak to what the product should do or
have, at varying degrees of specificity, in
order to meet the perceived market or
business need.
2. Product design is the development of
both the high-level and detailed-level
design of the product: which turns the
what of the requirements into a specific
how this particular product will meet those
requirements. This typically has the most
overlap with the engineering design
process, but can also include industrial
design and even purely aesthetic aspects
of design. On the marketing and planning
side, this phase ends at pre-
commercialization analysis stage.
3. Product implementation often refers to
later stages of detailed engineering design
(e.g. refining mechanical or electrical
hardware, or software, or goods or other
product forms), as well as test process
that may be used to validate that the
prototype actually meets all design
specifications that were established.
4. Fuzzy back-end or commercialization
phase represent the action steps where
the production and market launch occur.

The front-end marketing phases have been


very well researched, with valuable models
proposed. Peter Koen et al. provides a five-
step front-end activity called front-end
innovation: opportunity identification,
opportunity analysis, idea genesis, idea
selection, and idea and technology
development. He also includes an engine
in the middle of the five front-end stages
and the possible outside barriers that can
influence the process outcome. The
engine represents the management driving
the activities described. The front end of
the innovation is the greatest area of
weakness in the NPD process. This is
mainly because the FFE is often chaotic,
unpredictable and unstructured.[3]
Engineering design is the process whereby
a technical solution is developed iteratively
to solve a given problem[4][5][6] The design
stage is very important because at this
stage most of the product life cycle costs
are engaged. Previous research shows
that 70–80% of the final product quality
and 70% of the product entire life-cycle
cost are determined in the product design
phase, therefore the design-manufacturing
interface represent the greatest
opportunity for cost reduction.[7] Design
projects last from a few weeks to three
years with an average of one year.[8]
Design and Commercialization phases
usually start a very early collaboration.
When the concept design is finished it will
be sent to manufacturing plant for
prototyping, developing a Concurrent
Engineering approach by implementing
practices such as QFD, DFM/DFA and
more. The output of the design
(engineering) is a set of product and
process specifications – mostly in the
form of drawings, and the output of
manufacturing is the product ready for
sale.[9] Basically, the design team will
develop drawings with technical
specifications representing the future
product, and will send it to the
manufacturing plant to be executed.
Solving product/process fit problems is of
high priority in information communication
design because 90% of the development
effort must be scrapped if any changes
are made after the release to
manufacturing.[9]

NPD Process
1. New Product Strategy – Innovators
have clearly defined their goals and
objectives for the new product.
2. Idea Generation – Collective
brainstorming through internal and
external sources.
3. Screening – Condense the number of
brainstormed ideas.
4. Concept Testing – Structure an idea
into a detailed concept.
5. Business Analysis – Understand the
cost and profits of the new product and
determining if they meet company
objectives.
6. Product Development – Developing the
product.
7. Market Testing – Marketing mix is
tested through a trial run of the product.
8. Commercialization – Introducing the
product to the public.

Models
Conceptual models have been designed in
order to facilitate a smooth process. The
concept adopted by IDEO, a successful
design and consulting firm, is one of the
most researched processes in regard to
new product development and is a five-
step procedure.[10] These steps are listed
in chronological order:
1. Understand and observe the market, the
client, the technology, and the limitations
of the problem;
2. Synthesize the information collected at
the first step;
3. Visualise new customers using the
product;
4. Prototype, evaluate and improve the
concept;
5. Implementation of design changes
which are associated with more
technologically advanced procedures and
therefore this step will require more time.

One of the first developed models that


today companies still use in the NPD
process is the Booz, Allen and Hamilton
(BAH) Model, published in 1982.[11] This is
the best known model because it underlies
the NPD systems that have been put
forward later.[12] This model represents the
foundation of all the other models that
have been developed afterwards.
Significant work has been conducted in
order to propose better models, but in fact
these models can be easily linked to BAH
model. The seven steps of BAH model are:
new product strategy, idea generation,
screening and evaluation, business
analysis, development, testing, and
commercialization.
A pioneer of NPD research in the
consumers goods sector is Robert G.
Cooper. Over the last two decades he
conducted significant work in the area of
NPD. The Stage-Gate model developed in
the 1980s was proposed as a new tool for
managing new products development
processes. This was mainly applied to the
consumers goods industry.[13] The 2010
APQC benchmarking study reveals that
88% of U.S. businesses employ a stage-
gate system to manage new products,
from idea to launch. In return, the
companies that adopt this system are
reported to receive benefits such as
improved teamwork, improved success
rates, earlier detection of failure, a better
launch, and even shorter cycle times –
reduced by about 30%.[14] These findings
highlight the importance of the stage-gate
model in the area of new product
development.
Over the last few years, the Lean Startup
movement has grown in popularity,
challenging many of the assumptions
inherent in the stage-gate model.

Marketing considerations
There have been a number of approaches
proposed for analyzing and responding to
the marketing challenges of new product
development. Two of these are the eight
stages process of Peter Koen of the
Stevens Institute of Technology, and a
process known as the fuzzy front end.

Fuzzy Front End

The Fuzzy Front End (FFE) is the messy


"getting started" period of new product
engineering development processes. It is
also referred to as the "Front End of
Innovation",[15] or "Idea
Management".[16][17]

It is in the front end where the organization


formulates a concept of the product to be
developed and decides whether or not to
invest resources in the further
development of an idea.[18] It is the phase
between first consideration of an
opportunity and when it is judged ready to
enter the structured development process
(Kim and Wilemon, 2007;[19] Koen et al.,
2001).[15] It includes all activities from the
search for new opportunities through the
formation of a germ of an idea to the
development of a precise concept. The
Fuzzy Front End phase ends when an
organization approves and begins formal
development of the concept.

Although the Fuzzy Front End may not be


an expensive part of product development,
it can consume 50% of development time
(see Chapter 3 of the Smith and
Reinertsen reference below),[20] and it is
where major commitments are typically
made involving time, money, and the
product's nature, thus setting the course
for the entire project and final end product.
Consequently, this phase should be
considered as an essential part of
development rather than something that
happens "before development," and its
cycle time should be included in the total
development cycle time.

Koen et al. (2001), distinguish five different


front-end elements (not necessarily in a
particular order):[15]

1. Opportunity Identification
2. Opportunity Analysis
3. Idea Genesis
4. Idea Selection
5. Idea and Technology Development
The first element is the opportunity
identification. In this element, large or
incremental business and technological
chances are identified in a more or less
structured way. Using the guidelines
established here, resources will
eventually be allocated to new
projects.... which then lead to a
structured NPPD (New Product &
Process Development) strategy.
The second element is the opportunity
analysis. It is done to translate the
identified opportunities into implications
for the business and technology specific
context of the company. Here extensive
efforts may be made to align ideas to
target customer groups and do market
studies and/or technical trials and
research.
The third element is the idea genesis,
which is described as evolutionary and
iterative process progressing from birth
to maturation of the opportunity into a
tangible idea. The process of the idea
genesis can be made internally or come
from outside inputs, e.g. a supplier
offering a new material/technology or
from a customer with an unusual
request.
The fourth element is the idea selection.
Its purpose is to choose whether to
pursue an idea by analyzing its potential
business value.
The fifth element is the idea and
technology development. During this
part of the front-end, the business case
is developed based on estimates of the
total available market, customer needs,
investment requirements, competition
analysis and project uncertainty. Some
organizations consider this to be the
first stage of the NPPD process (i.e.,
Stage 0).

A universally acceptable definition for


Fuzzy Front End or a dominant framework
has not been developed so far.[21] In a
glossary of PDMA,[22] it is mentioned that
the Fuzzy Front End generally consists of
three tasks: strategic planning, idea
generation, and pre-technical evaluation.
These activities are often chaotic,
unpredictable, and unstructured. In
comparison, the subsequent new product
development process is typically
structured, predictable, and formal. The
term Fuzzy Front End was first popularized
by Smith and Reinertsen (1991).[23] R.G.
Cooper (1988)[24] it describes the early
stages of NPPD as a four-step process in
which ideas are generated (I), subjected to
a preliminary technical and market
assessment (II) and merged to coherent
product concepts (III) which are finally
judged for their fit with existing product
strategies and portfolios (IV).

Other conceptualisations
Other authors have divided
predevelopment product development
activities differently.

The Phase Zero of the Stage-Gate


Model of New Product
Development

The Stage-Gate model of NPD


predevelopment activities are summarised
in Phase zero and one,[25] in respect to
earlier definition of predevelopment
activities:[26]

1. Preliminary
2. Technical assessment
3. Source-of-supply assessment: suppliers
and partners or alliances
4. Market research: market size and
segmentation analysis, VoC (voice of the
customer) research
5. Product idea testing
6. Customer value assessment
7. Product definition
8. Business and financial analysis

These activities yield essential information


to make a Go/No-Go to Development
decision. These decisions represent the
Gates in the Stage-Gate model.

Early Phase of the Innovation


Process

A conceptual model of Front-End Process


was proposed which includes early phases
of the innovation process. This model is
structured in three phases and three
gates:[27]

Phase 1: Environmental screening or


opportunity identification stage in which
external changes will be analysed and
translated into potential business
opportunities.
Phase 2: Preliminary definition of an
idea or concept.
Phase 3: Detailed product, project or
service definition, and Business
planning.

The gates are:

Opportunity screening
Idea evaluation
Go/No-Go for development

The final gate leads to a dedicated new


product development project. Many
professionals and academics consider
that the general features of Fuzzy Front
End (fuzziness, ambiguity, and uncertainty)
make it difficult to see the FFE as a
structured process, but rather as a set of
interdependent activities ( e.g. Kim and
Wilemon, 2002).[28] However, Husig et al.,
2005 [10] argue that front-end not need to
be fuzzy, but can be handled in a
structured manner. In fact Carbone [29][30]
showed that when using the front end
success factors in an integrated process,
product success is increased. Peter
Koen[31] argues that in the FFE for
incremental, platform and radical projects,
three separate strategies and processes
are typically involved.[31] The traditional
Stage Gate (TM) process was designed for
incremental product development, namely
for a single product. The FFE for
developing a new platform must start out
with a strategic vision of where the
company wants to develop products and
this will lead to a family of products.
Projects for breakthrough products start
out with a similar strategic vision, but are
associated with technologies which
require new discoveries.

Activity view on Fuzzy-Front End

Predevelopment is the initial stage in NPD


and consists of numerous activities, such
as:[32]

product strategy formulation and


communication
opportunity identification and
assessment
idea generation
product definition
project planning
executive reviews

Economical analysis, benchmarking of


competitive products and modeling and
prototyping are also important activities
during the front-end activities.

The outcomes of FFE are the:

mission statement
customer needs
details of the selected idea
product definition and specifications
economic analysis of the product
the development schedule
project staffing and the budget
a business plan aligned with corporate
strategy

Incremental, platform and breakthrough


products include:[31]

Incremental products are considered to


be cost reductions, improvements to
existing product lines, additions to
existing platforms and repositioning of
existing products introduced in markets.
Breakthrough products are new to the
company or new to the world and offer a
5–10 times or greater improvement in
performance combined with a 30–50%
or greater reduction in costs.
Platform products establish a basic
architecture for a next generation
product or process and are substantially
larger in scope and resources than
incremental projects.

Strategies
Lean product development
Design for six sigma
Quality function deployment
Phase–gate model
User-centered design

Management
[33] Companies must take a holistic
approach to managing this process and
must continue to innovate and develop
new products if they want to grow and
prosper.

CUSTOMER CENTERED New Product


Development. Focuses on:
Finding new ways to solve
customer problems.
Create more customer-satisfying
experience
Companies often rely on technology,
but the real success comes from
understanding customer needs and
values.
The most successful companies were
the ones that:
Differentiated from others
Solved major customer problems
Offered a compelling customer
value proposition
Engaged customer directly
TEAM BASED New Product
Development
An approach:
To deserving new products in which
various company's departments
work closely together overlapping
the steps in the product
development process in order to:
Save time
Increase effectiveness
Company departments work closely
together in cross functional teams
overlapping the steps in the product
development process (to save time
and increase effectiveness).
Those departments are: legal,
marketing, finances, design and
manufacturing, suppliers and
customer companies.
If there is a problem, all the
company can work.
SYSTEMATIC New Product
Development
Development process should be
holistic (alternative) and systematic
not to good ideas die.
This process is installed on
Innovation Management System
that collect, review, evaluate new
product ideas and manage
the company appoints to a
senior person to be the
Innovation Manager who
encourage all the company
employees, suppliers,
distributors and dealers to
become involved in finding and
developing new products.
Then, there is a Cross-Functional
Innovation Management Committee
which:
Evaluate new products ideas
Help bringing good ideas
To sum up, New-Product success
requires:
New ways to create valued
customer experience, from
generating and screening new
product ideas to create and roll out
want-satisfying products.
New Product Development IN
TURBULENT TIMES
When we are in a tough economic
situation usually management
reduces spending on: new-product
development. Usually it is done
from a short-sighted point of view.
Tough times might even call for:
Greater new-product
development, offering
solutions for changing
customer needs and tastes.
Innovation helps
Making the company more
competitive
Positioning it better for future.
Virtual product development
Uses collaboration technology to
remove need for co-located teams
Reduces G&A overhead costs of
consulting firms
Advent of 24-hour development
cycle

Related fields
End user
Brand management
Engineering
Industrial design
Marketing
Product management

See also
Choice modelling
Commercialization
Conceptual economy
Product lifecycle
Pro-innovation bias
Requirements management
Social design
Soft launch
Market penetration

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