New Product Development1

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New Product Development

Prof.V.Seshadri

SVKMs NMIMS


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Prof.V.Seshadri NPD Ref 1 2

New Product Development -Perspective

New product development (NPD) is theterm used to describe the completeprocess of bringing a new product orservice to market.

NPD is said to be the lifeblood of a company

Companies must now evolve new productseven to survive. There are no safe nichesthat can be harvested for long periods oftime.

Products need to keep pace with the hecticpace of growth of the I.T. andCommunication technologies.

Companies must grow its own core


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Types of NPDs

1.New-to the world type products

2.New product lines

3.Additions to existing product lines4.Improvements and revisions of

existing products

5.Repositioning6.Cost Reductions


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Examples

1.New to world: Cell phone; Creditcard; ATM

2.New product lines: Reliances forayinto petrochemicals from textiles;ITC foray into Hotel business fromcigarettes

3.Additions: MTNL extending fromlandline to mobile telephones

4.Improvements: New versions of

digital cameras by Sony


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Examples contd.

5. Repositioning: Certain brands ofCereal foods like Oats as Healthfoods.

6. Cost reductions: Plastic car fender(from metal); manual to computerdrafting


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NPD types: features

Type Time tointroduce

Potentialrevenue toeconomy

Potentialrevenue tocompany

Companypositioning strategy

1 Longest Highest Highest Market development

2 Long High High Market development

3 Medium Medium Medium Line completion

4 Short Little Medium Market share5 Shortest Little Medium Market share

6 Shorter Little Medium Raise margin


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Typical ROI of non developerfirms


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Typical ROI of developerfirms

ff f k d


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Effect of weak productdevelopment on a firms

performance Increasing cost of sales Decreasing profits

Degraded financial strength Reducing market share

Downward spiral leading to

closure/bankruptcy


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New Products that changed ourworld

Integrated circuits; semiconductors;resistors & diodes DigitalComputing

Advanced insulation systems Composite materials and anaerobic

bonds Jet engines

Mobile telephones; palm computers E-mails; Key hole surgery; laparoscopy Bar code scanners Refrigerators; Air conditioners


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Laser for cutting, operations;metroscopy

Image processing

X- Ray; Gamma Ray Electronic Calculators;

CNC ; CAD; CAM; CAE

FEM; Rapid prototyping; Virtualdesigning and Simulation

Electric lighting; Fluorescent Lights;

Television; Walkman; I-Pods;


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Satellite imaging; Satellite weatherforecasting

E- books;

Wireless messaging; Cordless phones;

Audio & Video tapes; VCD; DVD ; Pendrives; hard disc;

Electric Power for various application

Synthetic fabrics; Thermal wear;fireproof wear

Robotics; Automation


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Results of effective NPD

Effective Product Development

Strategic AdvantagesGreater NPD capability

-Pre empting competitionSetting standardsInitial monopoly

Name recognition

Company performance&Growth Profitability

Operational advantagesLower costs

/Skill capability developmentPotential economiesBrand image


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Product Life Cycle

a)Introduction

b)Growth

c)Maturityd)Saturation

e)Decline


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Introduction stage

Also referred as Incubation stage

Expenses for promoting,manufacturing and producing theproduct are high

Profit margins are low

Survival probability is low


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Growth stage

Incentives of greater cost reduction,improved performance combines tostimulate demand

Demand often outstrips supply

Profit margins increase due to costsbeing spread over enhanced

volumes Profit margins peak in this stage


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Maturity stage

More competitors enter the market

Sales Volumes continue to risesteadily

Profits tend to take negative trendbecause prices start dipping

Product has entered a commoditymarket


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Saturation stage

Rate of demand is almost constantinitially and later starts dropping

There is more of a replacementmarket due to deterioration ofproducts

Competiton is focused on price


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Decline stage

Demand for the product actuallydeclines, because the product issubstituted by other another

product Volumes dip, profits turns to losses.

The product is said to have reached

the end of its life.


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Product Life Cycle - features

The shape of the curves may bedifferent depending on :Type ofindustry, Type of competitors; quality,

price, introduction time, customerrequirements etc.

PLC is also influenced by technologicaladvancements

Closer the company is to consumergoods and the market the shorter thePLC. Closer the company to basicindustry or producers goods, the

longer the cycle.


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Product Life Cycle - features

PLC of a product has dramaticallyreduced for practically all producttypes in recent years.

e.g.Mechanical type writers: 30 yrsElectromechanical: 10 yrsElectronic Typewriters: 5 yrs


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Life Cycle changes withtime

Household appliances:Introductory stage: 12.5 yrs TO 2 yrsGrowth stage: 33.8 yrs TO 6.8 yrsPLC : Analytical instruments: 10 yrs to 4 yrs

Video games: 9 months

Therefore it is important to introduce anew product just after the existingproduct has completed the growthphase.


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Vol/Profit vs Time Product LifeCycle


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Technological Life Cycle

PLC of consumer goods &consumables are governed byFashion, Technology and the

benefits sought by the marketplace

In case of Industrial goods: the PLC

depends largely on the impact ofTechnology and fashion plays lesserrole.

TLC is the evolution of technology


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Technological Life Cycle

1.Cutting edge

2.State of the art

3.Advanced

4.Mainstream

5.Mature

6.Decline


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TLC stage effects on industrypopulation and profits


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Cutting edge technology

The cutting edge phase of the TLC ischarecterized by technologyadvancements that is well ahead of

the most sophisticated applicationsin the market place. They involvemore of research thandevelopment. The researches can

be:a) Pure researchb) Applied research

c) Product research


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Cutting edge technologyfirms

They develop the technology with aspecific application in mind.

The success for the technology is

determined by finding additionalapplications

e.g. LEDs for electronic equipments.


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Stages of TechnologyRelati

ve

effo

rt

allocati

on

Engineeringeffort

Marketingeffort


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Prof.V.Seshadri NPD Ref Warwick 30

New Product Types

High

Low High

New Product Lines New to the world

/ImprovementsRevisions to existing productsAdditions to existing product lines

Cost Reductions -Re positionings

Newness tocompany

Newness tomarket


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Prof.V.Seshadri NPD 31

Breakthrough and Follow-onproducts

Breakthrough Products Follow-on productsComplete development process Mostly development phase required

Long total dev cycle ( in years) Short cycle ( in months)

Large impact on profits Competitive positioning and market

share protectionTechnology and innovation driven Cost and market drive

Thrives in un-coordinated processes Requires a systematic process

Many competing designs Dominant or proven design

High development risks Risks are much smaller

Types of development


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Prof.V.Seshadri NPD Ref Warwick

Types of developmentprojects

High

Low High

)c Radical Breakthroughs

)b Next Generation or Platform

Extentofprocesschange Extent of productchange

) /a Enhancements hybrids/derivatives

)d Research and Advanced De

) /e Alliances Partnered projects


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Generic Product DevelopmentProcess

Requirements capture Concept developmentProduct definition and approval

Product design Prototyping Product test and approaval

Process design .Process dev &Process test Approv

Supply Chain Development

Product Lau

&R D .Tech Dev Tech Acquisition Capability Acquisition .Project Mgmt


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Definition- ( Ref.Wikepedia)

In business and engineering, new productdevelopment (NPD) is the term used todescribe the complete process of bringinga new product or service to market. There

are two parallel paths involved in the NPDprocess: one involves the idea generation,product design and detail engineering; theother involves market research andmarketing analysis. Companies typically

see new product development as the firststage in generating and commercializingnew products within the overall strategicprocess ofproduct life cycle managementused to maintain or grow their market

share
http://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Engineeringhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Product_designhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Product_life_cycle_managementhttp://en.wikipedia.org/wiki/Product_life_cycle_managementhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Product_designhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Engineeringhttp://en.wikipedia.org/wiki/Business


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Prof V Seshadri NPD Ref 1 35

NPD- the process

1.Idea Generation2.Idea Screening3.Concept Development and

Testing4. Business Analysis5. Beta Testing and Market

Testing6. Technical Implementation7. Commercialization

8 N P d t P i i

Documents

New Product Development1