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NEW PRODUCT DEVELOPMENT AND MANAGING NEW PRODUCT DEVELOPMENT PROCESS. SELMA SARIOĞLU N.NİHAN ÇELİK N. ECE ÖZ F. SÜMEYYE DURAK. NEW PRODUCT DEVELOPMENT (NPD). INNOVATION MANAGEMENT AND NPD.

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New product development and managing new product development process

NEW PRODUCT DEVELOPMENT AND MANAGING NEW PRODUCT DEVELOPMENT PROCESS

SELMA SARIOĞLU

N.NİHAN ÇELİK

N. ECE ÖZ

F. SÜMEYYE DURAK



Innovation management and npd
INNOVATION MANAGEMENT AND NPD PROCESS

  • Tomanypeoplenewproductsaretheoutputs of theinnovationprocess, wherethenewproductdevelopment (NPD) process is a subprocess of innovation.

  • New productdevelopmentconcernsthemanagement of thedisciplinesinvolved in thedevelopment of newproducts.Thesedisciplineshavedevelopedtheirownperspectives on thesubject of NPD.

  • Forexample; theproductionmanagementexaminesthedevelopment of newproductsfrom a manufacturingperspective.

  • Thelack of commonapproachtothedevelopment of newproducts is duetothismultipleperspective.


New products and prosperity
NEW PRODUCTS AND PROSPERITY PROCESS

  • Thepotentialrewards of NPD areenormous.

  • Oneonly has toconsidertherapidsuccess of companiessuch as Microsoft andCompaq in therapidlygrowinghomecomputerindustry.


Considerations when developing a npd strategy
CONSIDERATIONS WHEN DEVELOPING A NPD STRATEGY PROCESS

  • Establishing a directionfor a businessandtheselection of thestrategiestoachieveitsgoals form an on-going, evolvingprocessthat is frequentlysubjecttochange.

  • Thissituation is particularlyevident at theproductionstrategylevel.

  • Theprocess of productstrategy is thecreativeprocess of recognisinggenuinebusinessopportunitiesthatthebusinessmight be abletoexploit.


On going corporate planning
ON-GOING CORPORATE PLANNING PROCESS

  • Inlargeorganisationsthis can be a veryformalactivityinvolvingstrategicplannersandseniormanagerswithresponsibilityforsettingthefuturedirection of thebusiness.

  • Insmallerorganisationsthisactivitymay be undertakenbytheowner of thebusiness.

  • Formanybusinesses it is somewhere in themiddle of thistwoextremes.

  • Theeffects of anycorporateplanningmay be importantandlong-term.


On going market planning
ON-GOING MARKET PLANNING PROCESS

  • Decisionsby market plannersmayhaveequallysignificanteffects.

  • Forexample; therealisationthat a competitor is abouttolaunch an improvedtennisshoemayforcethebusinesstoestablishfivenewproductdevelopmentprojects.Two of theseprojectsmay be establishedtoinvestigatetheuse of newmaterials, onecould be usedtodevelop a series of newmaterials, oneforalternativefasteningandandonecould be usedtoreduceproductioncosts.


On going technology management
ON-GOING TECHNOLOGY MANAGEMENT PROCESS

  • Inmostscienceandtechnologyintensiveindustriessuch as pharmaceuticalandcomputer software industries, thisactivity is probablymoresignificantthan on-going market planning.

  • Technologyawareness is veryhigh

  • Thecontunialanalysis of internal R&D projectsandexternaltechnologytrawlingwillleadtothenumeroustechnicalopportunities.


Opportunity analysis serendipity
OPPORTUNITY ANALYSIS/SERENDIPITY PROCESS

  • Someotherinputsareoftenlabelledmiscellaneousor put downtoserendipity.

  • Thevice-president of 3M remarkedthat ‘ chaos is a necessarypart of an innovativeculture.It’sbeensaidthat 3M’s competitorsneverknowwhatwearegoingtocomeupwithnext.Thefact is neither do we.’


Npd as a strategy for growth
NPD AS A STRATEGY FOR GROWTH PROCESS

  • Theinterestexpressedbymanycompanies in thesubject of developingnewproducts is hardlysurprisinggiventhatthemajority of businessesareintent on growth.

  • Thedevelopment of thenewproductsprovides an opportunityforgrowingthebusinesses.

  • One of theclearestway of identifyingthevariety of growthoptionsavailableto a business is usingAnsoff’s (1965,1968) directionalpolicymatrix.

  • Thiswell-knownmatrixcombinestwo of thekeysvariablesthatenable a businesstogrow: an increase in market opportunitiesand an increase in productopportunities.

  • Withinthismatrixnewproductdevelopment is seen as one of fouravailableoptions.


NPD AS A GROWTH STRATEGY PROCESS

MarketPenetration:Increasingthe market share of a business’sexistingproductsbyexplotingthefullrange of marketing-mixactivities is thecommonapproachadoptedbymanycompanies.

Thismay be includebrandingdecisions.

Market Development:Inthisinstancethecompanymaintainsthesecurity of itsexistingproducts but optstodevelopandenternewmarkets.Market development can be achievedbyopeningupnewsegments.Similarly, companiesmaydecidetoenternewgeographicareasthroughexporting.


NPD AS A GROWTH STRATEGY PROCESS

ProductDevelopment:Ansoffproposesthatgrowthopportunitiesexistthroughofferingneworimprovedproductstoexistingmarkets.Virtuallyallcompaniestrytoensurethattheirproductsareabletocompetewiththecompetitionbyregularlyimrovingandupdatingtheirexistingproducts.

Diversification:Theselection of thisoptionwould be significant in thatthebusinesswouldmoveintoproductareasandmarkets in which it currentlydoes not operate.Manycompaniestrytoutiliseeithertheirexistingtechnicalorcommercialknowledgebase. Additionalopportunitiesfordiversifiedgrowthexistthroughforward, backwardandhorizontaldiversification.


A PROCESSRange of ProductDevelopmentandOpportunities:

A development of Ansoff’sdirectionalpolicymatrixwasJohnson andJone’smatrixforproductdevelopmentstrategies.ThismatrixreplacesAnsoff’sproductvariablewithtechnology.Itbuilds on Ansoff’smatrixbyofferingfurtherclarification of therange of optionsopento a companycontemplatingproductdecisions. Inparticular, theuse of technology as a variablebetterillustratesthedecisions a companyneedstoconsider.

  • Similarly, the market-newnessscaleoffers a morerealisticrange of alternatives.

  • Therange of productdevelopmentstrategiesthatareopento a companyintroducesthenotionthat a newproduct can takemanyforms.


What is a new product
WHAT IS A NEW PRODUCT? PROCESS

  • Attemptingto define what is andwhat is not a newproduct is not a trivialtask.

  • It is importanttonotethat a product is a multidimensonalconcept.It can be defineddifferentlyand can takemanyforms.Somedimensionswill be tangibleproductfeaturesandothersintangible.Doestheprovision of differentpackagingfor a productconstitute a newproduct? Surelytheanswer is no- or is it?

  • New packagingcoupledwithadditional marketing effort, especially in terms of market communications, can helptoreposition a product.

  • Ifweacceptthat a product has manydimesions, then it mustfollowthat it is theoreticallypossibletolabel a product ‘new’ bymerelyalteringone of thesedimensionsforexamplepackaging.


Defining new product
DEFINING NEW PRODUCT PROCESS

  • Newness is a relativeterm.Inthecase of a newproduct it is relativetowhatprecededtheproduct.

  • Research in thisareasuggeststhatonly 10 percent of newproductsintroducedarenewtoboththe market andthecompany.New tothecompanymeansthatthecompany has not soldthistype of productbefore, but otherfirmscouldhave.New tothe market meansthattheproducths not appearedbefore in the market.


Classifications of new product
CLASSIFICATIONS OF NEW PRODUCT PROCESS

  • Therehavebeenmanyattempstoclassifynewproductsintocertaincategories.Veryoftenthedistinctionbetweenonecategoryandanother is one of degreeandattemptingtoclassifyproduct is subjecttojudgment.


  • New- PROCESSto-the-worldproducts:

    Theserepresent a smallproportion of allnew

    productsintroduced.Theyarethefirst of theirkindandcreate a new market.Theyareinventionsthatusuallycontain a significantdevelopment in technology. Forexample; Kodak’sdigitalcamera.

  • New productlines:

    Although not newtothemarketplace, theseproductsarenewtotheparticularcompany.Theyprovide an opportunityforthecompanytoenter an established market forthefirst time.Forexample;Samsungand Sony Ericsonhaveenteredthecellphone market.


  • Additions PROCESStoexistinglines:

    Thiscategory is a subset of newproductlines.Thedistinction is thatwhilethecompanyalready has a line of products in this market, theproduct is significantlydifferentfromthepresentproductoffering but not sodifferentthat it is a newline.Forexample; Hewlett-Packard’scolourink-jet printer was an additiontoitsestablishedline of ink-jet printers.


  • Improvements PROCESSandrevisionstoexistingproducts:

    Thesenewproductsarereplacement of existingproducts in a firm’sproductline.Forexample; Hewlett-Packard’sink-jet printer has receivednumerousmodificationsover time and, witheachrevision, performanceandreliabilityhavebeenimproved. Thisclassificationrepresents a significantproportion of allnewproductintroduces.


  • Cost PROCESSreductions: Thiscategory of productsmay not be viewed as newfrom a marketing perspectivelargelybecausetheyoffer no newbenefitstotheconsumerotherthanpossiblyreducedcosts.Theabilitytooffersimilarperformancewhilereducingproductioncostsprovidesenormousadded-valuepotential.Improvedmanufacturingprocessesandtheuse of differentmaterialsarekeycontributingfactors.


OVERVİEW PROCESS

OF

NEW PRODUCT DEVELOPMENT


New product development is a crucial PROCESSprocessfor the survival of firms


Five PROCESSphasesguidethenewproductdevelopmentprocessforsmallbusinesses.


Some PROCESS of thesourcesfornewproductideasincludethebusinesscustomers, competitors, newspapers, journals, employeesandsuppliers.

IDEA GENERATION


SCREENING PROCESS

Inproductscreening, poor, unsuitableorotherwiseunattractiveideasareweededoutfromfurtheractions.


CONCEPT TESTING PROCESS

Concepttestingpresentstheconsumerwith a proposedproductandmeasuresattitudesandintentions at thisearlystage of development.


BUSINESS ANALYSIS PROCESS

Businessandfinancialanalysisfortheremainingproductconcepts is muchmoredetailedthanproductscreening.

  • Stagesare:

  • Demandprojections

  • Costprojections

  • Competition

  • Requiredinvesment

  • Profitability


PRODUCT DEVELOPMENT PROCESS

Productdevelopmentconverts a product idea into a physical form andidentifies a basic marketing strategy.

Itinvolvesproductconstruction, packagingandusagetesting


TEST MARKETİNG PROCESS

The test market ideally aims to duplicate "everything" - promotion and distribution as well as "product" - on a smaller scale.


COMMERCIALIZATION PROCESS

Commercializationinvolvesimplementing a total marketing plan andfullproduction.


MODELS PROCESS

OF

NPD


Departmental-Stage model based around the linear model of innovation, where each department isresponsibleforcertaintasks.



Cross functional models teams
CROSS-FUNCTIONAL MODELS (TEAMS) PROCESS

Common problems that occur within theproduct development process centre aroundcommunicationsbetweendifferentdepartments.

The cross-functional teams (CFT) approachremoves many of these limitations by having a dedicated project team representingpeople from a variety offunctions.


Decision stage models
DECISION-STAGE MODELS PROCESS

Decision-stage models represent the new product developmentprocess as a series ofdecisions that need to be taken in order to progress the project


Conversion process models
CONVERSION-PROCESS MODELS PROCESS

As the name suggests, conversion-process models view new product development asnumerous inputs into a ‘black box’ where they are converted into an output.


Response models
RESPONSE MODELS PROCESS

Response models are based on the work of Beckerand Whistler who used abehaviourist approachto analyse change.




NEW PRODUCTS AS PROJECT PROCESS

The previous chapters have outlined some of the conditions that are necessaryfor innovation to occur and have shown variousrepresentations of the new productdevelopment process. However, while these conditions are necessary, they are insufficientin themselves to lead to the development of new products. This is because, aswith any internal organisational process, it has to be managed by people. The concepts ofstrategy, marketing and technology all have to be coordinated and managed effectively.This is where the attention turns from theory

and representation to operationandactivities.


NEW PRODUCTS AS PROJECTS PROCESS

We have seen that a product idea may arise from a variety of sources. We have alsoseen that, unlike some internal operations, NPD is not the preserve of one single department.And it is because a variety of different functions and departments are involvedthat the process is said to be complicated and difficult to manage. To be successful new product development needs to occurwith the participation of a variety of personnel drawn from across the organisation.




Assembling knowledge
ASSEMBLING KNOWLEDGE PROCESS

Without the continual accumulation of knowledge, anorganisationwill be hindered in its ability to create new product ideas. Figure showsa wide range of activities that together help to maintain a company’s knowledge base.


The generation of business opportunities
THE GENERATION OF BUSINESS OPPORTUNITIES PROCESS

You should be aware of the concept, even if the process is not fully clear. This stage in theNPD process is also referred to as opportunity identification (OI). It is the process ofcollecting possible business opportunities that could realistically be developed by thebusiness into successful products. This definition contains several caveats, which helpsto explain the difficulty that faces businesses.


Developing product concept
DEVELOPING PRODUCT CONCEPT PROCESS

This activity involves transforming a list of ideas into potential product concepts. For a product idea to become a new product concept, three inputs are required: form, technology and need.

Form: This is the physical thing to be created . It may still be vague and not preciselydefined.

Technology: In most cases there is one clear technology that is at the base of theinnovation.

Need: The benefits gained by the customer give the product value.


A new product concept
A NEW PRODUCT CONCEPT PROCESS

In this case, the product concept could be an opportunity in theyellow spreads market for a low-fat spread that can be applied like soft margarine(an emulsion of fat droplets in water), which has a buttery taste.


The screening of business opportunities
THE SCREENING OF BUSINESS OPPORTUNITIES PROCESS

  • Do wehavethenecessarycommercialknowledgeandexperience?

  • Do wehavethetechnicalknow-how todevelopthe idea further?

  • Wouldsuch a product be suitableforourbusiness ?

  • Arewe sure therewill be sufficientdemand ?


Development of product prototypes
DEVELOPMENT OF PRODUCT PROTOTYPES PROCESS

This is the phase during which the item acquires finite form and becomes a tangiblegood. It is at this stage that product designers may develop several similar prototypeswith different styling. Manufacturing issues will also be discussed such as what typeof process to use. During this activity numerous technical developments will occur.



Market introduction
MARKET INTRODUCTION PROCESS

Commercialisation is not necessarily the stage at which large sums of money are spenton advertising campaigns or multi-million-pound production plants, since a companycan withdraw from a project following the results of test marketing.



Teams and project management
TEAMS AND PROJECT MANAGEMENT PROCESS

New product project teams in small to medium-sized organisations are usuallycomprised of staff from several different functions who operate on a ‘part-time’ basis.

Membership of the project team may be just one of the many roles they perform.Inlarger organisations, where several projects are in progress at any one time, there maybe sufficient resources to enable personnel to be whollyconcerned with a project.

Ideally, a project team will have a group of people with the necessary skills, who areable to work together, share ideas and reach compromises.Thismay include externalconsultantsorkeycomponentsuppliers.


Functional structures
FUNCTIONAL STRUCTURES PROCESS

Commonapproach used by many large manufacturing companies is toorganisethe company by product type. Each product has its own functional activities.

Some functions, however, are centralised across the whole organisation. This is toimprove efficiency or provide common features.This type of structuresupports the notion of product platforms where a generic group oftechnologies are used in a variety of products. Sony, Philips and Nokia all have centralisedR&D activities where the majority of products are developed allowing for a high degreeof technology transfer between product groups.


Matrix structures
MATRIX STRUCTURES PROCESS

The matrix structure is an organizational design that groups employees by both function and product.

  • Provision of additional channels of communication.

  • Increase in informal communication channels.

  • Increase in information loads.

  • Increase in diversity for individuals.


Matrix structure
MATRIX STRUCTURE PROCESS

Strengths of a matrix structure:

  • The cross functional teams of a matrix structure reduce the functional barriers between departments, and increase the integration of functions.

  • The matrix structure makes it possible to assign specialized resources to projects when needed.

    Weaknesses of a Matrix Structure:

  • A matrix structure lacks the effectiveness of bureaucracy, and will potentially not work if the organization does not need to react swiftly to changes

  • The flat hierarchy may be the cause of conflict, and different stakeholders may pursue entirely different goals.

  • The great focus on integration between functional areas requires a great amount of lateral communication, and it may require great resources to get information distributed efficiently between team members.


Corporate venturing
CORPORATE VENTURING PROCESS

  • Corporate venturing offers interesting options, from investment to partnerships. Ideally, theyshould be given high-level sponsorship from senior management, but must be able tomanage their own relationships with other companies.Many large organisations such asNokia, IBM and General Electric have a long experience of corporate venturing stretchingback to the 1960s. However, following some high-profile failures, most notablyby Shell in the mid-1980s, corporate venturing fell out of favour.


Project management
PROJECT MANAGEMENT PROCESS

Project management is the discipline of planning, organizing, motivating, and controlling resources to achieve specific goals.


Project management1
PROJECT MANAGEMENT PROCESS

The Process Champion is universallyknownthroughout the organization and is respectedand admired by company personnel. He or she

pushes the NPD Process as avehicle forProduct, Service, and Program innovation.

Process Sponsors are typically pulled from theranks of Divisional or Departmental Managers.He or she delivers resources (time, money,

people, and/or equipment) to the NPD Projects

The keeper of the NPD Process is the

Process Manager. He or she is a processexpert with primaryresponsibility to promote andimprove the NPD Processes.


Reduc i ng product development t i mes through computer aided design
REDUC PROCESSING PRODUCT DEVELOPMENT TIMES THROUGHCOMPUTER-AIDED DESIGN

  • For example, the aerospace and automobile industrieshave been using computer-aided design (CAD) for more than 15 years.


The marketing r d i nterface
THE MARKETING/R&D PROCESSINTERFACE

  • This introduces a commondifficulty: the need to manage communication flows across themarketing and R&Dboundaries. This problem was first recognised as important in the 1970sand remains a critical issue in new product development.


REASONS FOR NEW PRODUCT FA PROCESSILURE

  • Product offers nothing new or no improved performance

  • Inadequate budget to develop ideas or market the product

  • Poor market research, positioning, misunderstanding consumer needs

  • Lack of top management support

  • Did not involve customer

  • Exceptional factors such as government decision

  • Market too small, either forecasting error with sales or insufficient demand

  • Poor match with company’s capabilities, company has insufficient experience ofthetechnologyor market

  • Inadequate support from channel

  • Competitive response was strong and competitors were able to move quickly toface the challenge of the new product Internal organisational problems, often associated with poor communication

  • Poor return on investment forcing company to abandon

    project

  • Unexpected changes in consumer tastes/fashion


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