New Product Development

1. New Product Development by Fazaila Ali Qazi

2. Level 3 Level 2 Level 1 What is a Product?

3. NewProducts Defining Newness • New-to-the-Company • New-to-the-Market Place Categories of New Products: • New to the World (or Market Place) • New Product Line • Additions to Existing Product Lines • Improvements & Revisions to Existing Products • Re-positionings • Cost Reductions

5. 1. New to theWorld • First of their kind---- ‘Inventions’ • Create entirely new market • Represent 10% of all new products Examples: Sony Walkman, Microwave oven, the first home CD/DVD player, 3M’s yellow Post-It Notes, Doodh patti Sachet,

6. 2.New ProductLine • New to the company but not new to the market place • Allow a company to enter an established market for the first time • Sometimes a firm may simply want to capture part of an existing market with a ‘me-too’ product • About 20% of all new products fit into this category Examples:Petrosin’s Pak Oil,PTC’s Sun Drop cooking oil, PTCL’s Broadband net service (DSL), Waqt / Dawn News, IBM’s office version of a laser printer (Hewlett Packard’s was the first to offer to the market), AT&T’s universal cards etc.

7. 3.Additions to ExistingProduct Lines • Line extensions in the firm’s current markets • May also represent a fairly New product to the market place, but fit within an existing product line the firm makes • One of the largest categories of new products-----about 26% Examples:Hewlett Packard’s Office Jet ----novel to the market, but taken as an addition to laser jet printers family), Telenor’s mobile TV, wireless connectivity etc., newer versions of mobile phone sets/Sony Ericsson’s PDA, Other examples include LG Flatron, Robin Neel liquid, addition of Dettoll Extra to Dettoll Family etc.

8. 4. Improvements & Revisions toExisting Products • Not-So-New---------current Products made better • Essentially the replacements of existing products in a firm’s product line • Usually taken in view of product differentiation strategy, for managing product life cycle • Offer improved performance or greater perceived value over the ‘old’ product • Objective is to make (both cosmetic and technical) changes to existing products, that respond to a changing customer requirements or a competitive threat • Takes a significant percentage of R&D efforts • ‘New & Improved’ products also make up 26% of new product launches Examples:Surf Excel (from Surf), Fair & lovely advanced formula, Head n Shoulders Black, Santro club etc

9. 5. Repositionings • Existing products retargeted for a new use or applications, in order to appeal to new market segments • Account for about 7% of all new products Examples: • Ufone’s repositioning by targeting the upper segment • Aspirin originally known as standard headache & fever reliever. Now, aspirin is positioned, not as a headache pill, but as a blood clot, stroke and heart attack preventer. • Arm & Hammer Baking soda is another example, which was repositioned several times as drain deodorant, refrigerator deodorant, a new carpet freshener, and more------and all in the same package of baking soda • Rin (later, Vim) is a classic example of repositioning, which, several years back, was repositioned from laundry soap to a dish wash bar

10. 6. Cost Reductions • Products modified to provide similar performance but at a lower cost • Least ‘new’ of all new product categories • Could represent a significant change to the firm, from design and production view point • Represent 11% of all new product launches Examples: • LG’s energy saving split unit • Lu’s tiger biscuit in Rs.2

11. According to a Study: • Most firms feature a mixed portfolio of new products • The most popular categories, common to all firms are: • Additions to the line • Product improvements and revisions • The step-out products (new-to-the-world & new-to-the-firm’s product line) constitute only 30% of all new product launches, out of which 60% are viewed as ‘most successful’ • 50% of firms introduce no new-to the-world products • Another 25% develop no new product lines • High tech industries launch proportionately more ‘innovative’ products

12. The New Product Process begins….

13. Opportunity Identification & Selection • Ongoing marketing planning • Ongoing Corporate Planning • Special Opportunity Analysis

14. Sources of NPD opportunities External Mandate • Customer needs • Market Demand • Market Growth • Market Gap • Consumer Behavior • Raising the market entry barrier • Market for existing products is saturated • Competitive threat • Serving untapped market / segment • Entering new segment / Market • New Technology available

15. Internal Mandate • Corporate Objectives • Excess Production Capacity • A new resource available • Under utilized resource(s) • Dependable sales team & infrastructure • Taking first mover advantage • Competitive advantage through innovation • Brand Extension • Brand Re-positioning • Pursuing Cost leadership strategy • Other (non-corporate sources)

16. Organizing for NPD • Acknowledging it as a Process Sequential Product Development (departmentalization) Simultaneous Product Development (team-based)

17. Quality Value Time Cost The New Product Process Challenge • The new product process must respond to the three unique • inputs-----the right quality product, at the right time and at the right cost • The three inputs tend to conflict with each other, though there are synergies too • The three inputs contribute to the value of new products, but in different ways • and in different amounts from project to project • Challenge: How to optimize the set of relationships in each new product situation?

18. New Product Development Team S Support Team Team Leader Core Members R&D Team Leader New Product Manager Design manufacturing Market Research marketing Finance

19. Types of NPD Organizations • Product Planning Committee • New Product Department • Venture Teams • Product Manager/Brand Manager • New Product Manager

20. Product Innovation Charter(PIC) • A document that gives the conditions under which an organization will operate • An agreed upon scope of activity • A pre-technical definition of the product: • What benefits to what end-users • CUFs (Critical Utility Factors) • A strategic document ----a New Product guideline

21. NPP through PIC • Helps in New Product planning by Identifying, evaluating, rating & ranking the opportunity • Charting the NP group’s direction • Defining the boundaries and setting the directions & parameters • Defining the NP goals & Objectives and setting the rules of the road

22. PIC Benefits • It allows: • Delegation • Permits financing • Calls for personnel Assignments

23. PIC Format • Background: • Key idea from the situation analysis • Reasons for preparing the PIC • FOCUS: • At least one clear technology dimension & one clear market dimension • They match and have a good potential (Core competencies: technology driven? Or market driven?) (cont…)

24. PIC Format (cont…) • Goals-Objectives: • Profit • Growth • Market Status • Guidelines • Degree of innovativeness • First to market • Adaptive product • Imitation/emulation • They match and have a good potential (Core competencies: technology driven? Or market driven?)

25. PIC Format • Timing • First (pioneers) • Quick (quick second) • Slow (Safer Option) • Late (usually a price entry keyed to manufacturing skills) • Misc. Guidelines • Product which do not require strong marketing • Competition (direct / indirect) • Must be patentable

26. IDEATION(Idea Generation)

27. Ideation(every one’s job & no one’s responsibility ) • Establishing a focal point • Identifying the sources of ideas • Internal and external • Stimulating idea generation from each source • Establishing flow lines or mechanisms to solicit ideas

28. Sources of Ideas • Internal Sources • External Sources

29. Internal Sources • Employees • Across the Functions • Sales • Design / R&D • Production Methodologies • Suggestion Schemes • Possible formats of Suggestion Scheme: • On-going suggestion scheme • ‘Idea of the month’ type contests • Targeted Effort • Tips for Internal Suggestion Schemes: • Publicize the scheme widely • Handling ideas promptly and provide timely feedback to the submitter • Welcome all ideas • Provide guidance & assistance • Offer incentives • Manage the suggestion scheme

30. Group Creativity Methods: • Brainstorming • Invite an eclectic group • Run the session off-site • Have a pre-session mailing • Ensure that the ‘rules’ of brainstorming all well understood by everyone • Have a moderator who runs the session • Reverse Brainstorming • Focus Groups • Attribute Listing etc. • Scouting Time • The Idea Bank

31. External Sources • Customers • Group Discussions • Customer Panels • Customer Surveys • Working with Lead Users • Competitors • Trade Shows • Trade Publications • Patents—the universal clearing house • Idea Brokers—the idea middlemen

32. Suppliers • Trade Partners • Private Inventors • Universities—a brain trust in your back yard

33. Roadblocks to Creativity • “It simply won’t work.” • “Are you sure of that?” • “You can’t be serious” • “It’s against our policy.” • “Let’s shelve it for the time being.” • “That won’t work in our market.” • “Let’s think about that some more” • “I agree, but……..” • “We’ve done it the other way for a long time.” • “Where are you going to get the money for that?” • “We just can’t do that.”

34. “Who thought of that?” • “It’s probably too big for us.” • “ I believe we tried that once before.” • “We don’t usually do things that way.” • “It seems like a gimmick to me.” • “It’s good, but impractical.” • “ That sounds awfully complicated.” • Production won’t accept that.” • “People will think we’re crazy.” • “Engineering can’t do that.” • “You could never sell that downstairs.” • “But who is going to drive that idea?” • “ OK, but let’s slow down a bit.” • “I’m afraid there’s precedent in this.” • “We’ve too many projects now.” • “We’ll need more background on that.”

35. IDEA SCREENING

36. IDEA SCREENING • Once you’ve generated plenty of ideas, you’ll need to evaluate them for viability, score them, and decide which ones you’ll want to further investigate. • Objective is to eliminate unsound concepts prior to devoting resources to them • First, you’ll want to establish criteria to judge each idea against.

37. Guidelines for developing Screening Criteria • Alignment with your Product Innovation Strategy • Degree of compatibility with the company’s values & principles (ex: moral, health, environmental) • Market attractiveness / opportunity • Project feasibility • Degree of product advantage over other options • Ability to leverage existing company resources

38. Guidelines for developing Screening Criteria • Does the product represent something completely new and different from anything out there in the marketplace? Would it likely appeal to a specialty/niche segment of people? • Does the idea have a unique design to it, that’ll make it appeal to more people than a comparable product does now? • Will this idea offer a noticeably superior quality in comparison to competitive offerings? If so, can it remain in the same price range as those competitive products? • If it’s a popular item (in terms of category volume), would you be able to noticeably lower its price without affecting its quality? • Is the idea able to offer enough new features to differentiate it from the competition? If so, to what degree would these additional features be of value or seen as advantageous?

39. Guidelines for developing Screening Criteria • For popular products, will your idea enable you to produce and distribute it faster than the competition? Importantly, will this matter? Popular competitive products may carry a strong brand appeal which may be too high a hurdle. However, if the product category is a bit more commoditized, then speed to market will definitely be a strong advantage. • How much longevity does your product idea have? Is it part of an established category of products, a trend, or a fad? Having a grip on this is crucial. I’m not saying some product categories are no-growth, sometimes it depends on the sales channel. But obviously you don’t want to base a lot of business on a me-too product whose lifespan may only last a few years. • How new is this idea compared to existing products in your portfolio or pipeline? Buyers are likely to be approached next season by similar products with the additional features and attributes you’ll be pitching. If you’re redesigning a SKU to extend its lifespan, that may be fine. But ultimately, you should try and have additional, newer concepts in your development pipeline.

40. The Idea Review Session • Allow transparency into the presentations and foster open discussion. The more people that feel they are a part of the process, the larger the buy in will be. Personnel from Sales, Marketing, R&D, and PDD (Product Design and Development) are the key attendees to these sessions. Communicate to them the decision-making criteria and the primary aspects of the Product Innovation Strategy. • Create standardized idea forms for presenters to fill-out and distribute. Fields include: product definition, target market, explanation of user benefits, and criteria against which the ideas are judged, and a sketch (if applicable). • With a large number of ideas and participants, create voting schemes. This could involve having idea cards/boards set up around the presentation room, and giving every participant a number of votes. Voting by raised hands can work, but perhaps it might be best to give people post-its to place on the ideas they like, then tally the votes. Techniques may vary - the idea is that participation is important. • Once you’ve selected your winning ideas, place them into an idea portfolio. • Any ideas leftover that had some terrific potential, but for some reason couldn’t make the cut, should be stored in an idea bank for future review.

41. Screening Criteria

42. ConceptDevelopment&Testing

43. Concept A Detailed version of the possible / new product idea: • stated in meaningful consumer terms • that a company can see itself offering to the market • presentable to the customers • can be commercialized • that offers the most quality, performance & features

44. Concept • A printed or filmed representation of a product or service. It is a promise a product makes to resolve an unmet consumer need, the reason why it will satisfy the need, and a description or portrayal of any key element that will affect the perception of the product.

45. What anEffective Product Conceptshould be: • A statement of the problem that the product is meant to solve. • A definition of the type of solution that the product requires. • Supporting attributes (physical and communications) that adds credibility to product’s ability to solve the problem.

46. GUIDELINESfor writingCONCEPTS • Need Driven NOT Technology Driven • Use Consumer Language • Keep Statement Clear and Single-Minded • Be Realistic • Avoid Idle Superlatives

47. From Idea to Concept GM’s Electric Car Case Idea: An electric car which can go as fast as 80 miles/hr & as far as 90 miles before needing to be re-charged. GM estimates electric car’s operating costs to be about half those of a regular car The Concept: An efficient, fun-to-drive, electric powered subcompact car that seats 4; great for shopping trips & visits to friends, costs half as much to operate as similar gasoline-driven cars. Goes up to 80 miles per hour and does not need to be recharged for 90 miles. Priced, fully equipped, at $14,000.

48. CONCEPT for a NEW CEREAL • Introducing new Nuggets, the high nutrition cereal that combines three grains - oat, barley and wheat - with the vitamins , minerals and fiber you need to start your day. Simply top with cream or milk, and enjoy. Nuggets can also be served warm, simply by heating in your microwave. New Nuggets, the healthy cereal that gives you the total and balanced nutrition you need. BETTER CONCEPT for a NEW CEREAL • Introducing new Nuggets, the delicious and nutty-tasting high nutrition cereal that combines the natural sweetness of crunchy oat, barley and wheat - with all the vitamins , minerals and fiber you need to start your day. Simply top with cream or milk, and enjoy. Nuggets can also be served steaming hot, simply by heating in your microwave. With Nuggets, you can have both high nutrition and great taste. New Nuggets. the healthy cereal that really tastes great.

49. Concept Development & TestingTechniques

50. Concept Development & Testing Formats/Techniques • Written • Simulations • Virtual Reality • Computer aided Design & Manufacturing (CAD/CAM) • Rapid Prototyping / Mock-ups • 3-D Animations / Graphics • Conjoint/Trade Off Analysis • Perceptual Maps