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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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New Products that changed ourworld
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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New Products that changed ourworld
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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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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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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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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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