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BSB311: Semester 2, 2010Week 5: New Product DevelopmentStrategies

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What are the most important things that

should be remembered whenformulating a product developmentstrategy?

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Objectives of the New Product

Development Process

For new product development (NPD) tobe successful, it must achieve threegoals:

1. Maximize fit with customer requirements interms of quality, feature, pricing, etc.

2. Minimize development cycle time in orderto bring product to market early and beginamortizing costs.

3. Control development costs so that the

project earns a positive return.

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Management of new product

development

New product

lines

New to the

world

products

Repositioning

of existing

products

Additions to

existing

product lines

Improvements

of existing

products

Newness

to

firm

Newness to market

Low

Low

High

High

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Primary causes of New Product Failure

(based on empirical studies) Poor market analysis

Product defects

Weak marketing effort NPD costs too high

Strong competitor reaction

Poor timing of product launch Production problems

Other causes

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Critical success factors (NPD)A superior product with unique benefits

and value for the customer

The company chooses an attractive

market where there is a great need The development team understands the

customers need (in-depth marketanalysis)

The goals of the NPD project are alignedwith companys strategic goals

Competitors analysis (how competitors

meet customers needs)

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All regulatory and IP issues are identified andaddressed

Project decision criteria are identified and

prioritised (e.g. time to market, cost, ) The project leverages the companys technical

capabilities

The company positions the product correctly

The most effective distribution channel is chosen Endorsement by upper management

The company executes the NPD process withhigh levels of quality

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The New Product Development Process (Coopers stage-gate& platform development by Miller and Morris)

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Management of NPD Two key issues -

1) Product effectiveness, i.e., are the firmproducing the right new products

2) Process performance, i.e., the speed andproductivity of NPD

Three related key problems -

1) The integration of customers demands andmarketing in NPD

2) The integration of manufacturing in NPD

3) Measure the effectiveness of the NPD

process and make continual improvement

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Tools forMeasuring New Product

Development Performance

New Product Development Process Metrics include:

1. What was the average cycle time (time-to-market) fordevelopment projects? How did this cycle time varyfor projects characterized as breakthrough, platform,or derivative projects?

2. What percentage of development projects undertakenwithin the last five years met all or most of the

deadlines set for the project?3. What percentage of development projects undertakenwithin the last five years stayed within budget?

4. What percentage of development projects undertakenwithin the last five years resulted in a completed

product?

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Time compression in the NPD

In biotech and other science-based industries anissue

Document the workflow associated with the

product development process (eliminate non-critical steps Set goals for completion times (e.g. Procter &

Gamble reduced its 80-week drug research cycleto under 15 weeks)

Make the team accountable for its performance To simplify things Dont add more people and dont ask for more

hours

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Case Study: BTF Decisive

Microbiology

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Disease causing Microbes (Bugs) havealways threatened human health

Threat will continue and intensify due to the rapidemergence of Bugs due to a number of factors

Genetic change and evolution Resistance to treatments

Modern processing techniques More susceptible population

Rapid population growth

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Big Bug Threats

AeromonasE.Coli

E.Coli 0157HeliobacterLegionella

ListeriaStaphyloccusSalmonella

StreptococcusPseudomonas

BSEHIV

HepatitisCryptosporidium

Cyclospora

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First Internal Quality Control for

Microbiology

Broad Applications in Multiple High

Growth Markets

Proven Success with Initial ProductRelease

The BTF Opportunity

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Substantial Industrial Markets

Clinical (approx 1.7 billion tests pa)

Pharmaceutical (approx 300m tests pa)

Food & Beverage (approx 670m tests pa)

Environmental (approx 44m tests pa)

Research & Other (approx 150m tests pa)

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BTF Decisive Microbiology

Incorporated - March 1999

Directors

Mark Gauci Optoelectronics (CEO, Founder)

Graham Vesey Microbiology (CTO, Founder)

Employees (2001)

11 full-time

2 part-time

Turnover July 2000 - $500K PA

July 2001 - $1M PA

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PlatformT

echnologiesAbsolute Numbers of microorganisms for

AnalyticalMicrobiology

Internal Quality Control forAnalytical Microbiology

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Products

EasySeed C&G Exactly 100Cryptosporidium and 100 Giardia in a testtube

ColorSeed C&G - Exactly 100 redCryptosporidium and 100 red Giardia in atest tube

EasyStain C&G FITC

immunofluorescent antibody Kit

C&G IMS specialised test reagent

Original focus was the Cryptosporidium and Giardia water testingmarket.

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Before BTF

Mark Gauci and Graham Veseyperforming R&D at Macquarie

University

Frustrated with lack of

commercialisation of R&D outcomes

Career paths uncertain

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March 99 - requirement for someone to manufactureIMS C&G specialised reagents for water testing

Started BTF

Proteome Systems Ltd (PSL) allowed BTF accessto laboratory space

Sold testing reagents to Macquarie University for on-sale to testing laboratories

How did BTF start?

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Identified a demand for EasySeed product

Domestic

Global

EasySeed production required a flow cytometer (cost

$120,000)

EasySeed C&G

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$120K needed to purchase a

flow cytometer Banks would not loan BTF money

Turned down by lease companies

Saved all revenue

Purchased cytometer

Developed a method for producing EasySeed C&G

EasySeed C&G sales took off Australia and US

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ColorSeed

Use revenue from contract and EasySeed C&Gsales to develop a new product

ColorSeed C&G an internal quality control forCryptosporidium and Giardia testing

The first ever internal quality control for microbiologytesting.

Applied to AusIndustry for an R&D START

Used our sales revenue projections as matching

money

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ColorSeed R&D

$400K project

Appointed an experienced research scientist

12 months of R&D whilst running business andensuring sufficient sales revenue

R&D very successful

A robust method forColorSeed C&G production

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Commercialisation of

ColorSeed

Submitted application to AusIndustry for aConcessional loan

Application successful

$700K project

Recruit commercialisation staff

Submitted application to Yellow Pages smallbusiness ideas awards program and won NSW

division!

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Commercialisation to date

EasySeed C&G Gold Standard

Sales in 14 countries

ColorSeed C&G

Production plant scale-up Product Released Sept 1 2001

Sales immediately

EasyStain C&G FITC

Product sales (US, Japan)

Worldwide released 2001

EasyPC

BioBall

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Commercialisation & NPD Strategy

Release Product

Leaders

RegulatoryApproval

ISO

Method

Target influential people

Scientists

Regulators

Potential customers

Contact customers directly, frequently

Telephone

Email

Travel

Distribution

Direct sales from Sydney

Suitable distributors

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Example : Biomedical Devices

Product Design,Prototype development,and Testing

Cost Cost/Function

Simplicity andease of use

ExpandabilityQuality

Technology

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Biomedical Devices

Medical equipment and products usuallyrequire extensive testing (testing is verycomplex)

Some equipments used in operating theatres

must follow rigorous electrical safetystandards and may use special materials

Design and manufacturing process are notdifferent from other products (extensive

testing and quality control required, also mayneed special environments, e.g. clean rooms,or additional process, e. g. sterilization,packaging)

Regulatory requirements must be met

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Next Week: Guest SpeakerDr Nicky Milsom, Deputy CEO,Magnetica Limitedz Magnetica Ltd