New Product Development (NPD) is a comprehensive set of multi-disciplinary processes that convert a market opportunity into a marketable new product to satisfy customer requirements.
According to Wheelwright and Clark (1992), NPD can be defined as:
Effective activity organization and management to bring products in the market with fewer development costs and short development times.
It’s sometimes known as New Product Introduction (NPI) or new product planning and development. Furthermore, it applies to tangible products such as laptops, coffee makers, TV, etc., and intangible products like mobile phone apps, websites, etc.
The Necessity of New Product Development
NPD is the driving force of organizations and vital for their organic development. Insatiable consumer appetite, intense worldwide competition, changing consumer behavior, and technology compel companies to invest in new products to succeed or survive.
The importance of introducing new products can be understood by these “Seven reasons why new product development is necessary”
- Changing consumer behaviors
- Growing competition
- Technological development
- New opportunities (growth and development)
- Diversification of risk
- Increased brand reputation
- Utilization of excess capacity
Importance of a New Product Development Strategy
We will learn about the importance of a New Product Development strategy below. Consider the following four statistical facts about how products fair according to data from Mckinsey Global Institute.
- Only 4 in 7 product ideas go in for the product development stage
- Three only products get launched among 14 product ideas
- Only 1 in 7 product ideas will bring a successful product
- Launched products possess a failure rate of 25% to 45%
Research tells us some of the NPD failures can be attributed to the lack of a structured NPD process. According to Wheelwright and Clark (1992), companies approaching NPD structure have more success than those with an ad-hoc approach.
By following a well-planned set of processes & milestones, companies can avoid some of the common pitfalls that lead to the failure of NPD, such as;
- Overestimate market size
- Misinterpretation of Customer requirements
- Launched at the wrong time
- Bad product design
- Target customers requirement mismatch
- Too high price
- Poor advertising and marketing
- Very high product development cost because of overrunning & resource overuse
- Competition risks and threats
New Product Development Models
A well-tailored NPD strategy will enable companies to organize their product planning, understand their customers’ needs, precisely plan and efficiently use its resource for NPD. An NPD strategy will also aid in avoiding the pitfalls mentioned above and increase the chance of product success.
Models
- Roozenburg & Eekels, 1995
- IEC60300-1
- Fox, 1993
- Pahl & Beitz, 1996
- Cooper, 2005
- Blanchard, 2004
- Pugh, 1990
- Andreasen & Hein, 1987
Phases
- Analysis – Concept – Materialisation
- Concept – Design & development – Manufacturing & installation
- Pre-concept – Concept – Design – Display – Production
- Clarification of task – Conceptual design – Incorporation design – Detail design
- Scoping – Build business case – Development – Testing & validation – Launch
- Concept design – Preliminary system design – Detailed design and development – Construction – Manufacturing
- Market – Specification – Concept design – Detail design – Production
- Need recognition – Investigation of need – Product principle – Product design – Product preparation – Execution
There are multiple models proposed by authors before, but all starts with an idea to build a product that meets the customer’s technical specification and ends with a product launch or introduction to the market. The number of stages, phases, and their details vary from model to model depending on the following.
- Product type (tangible/intangible)
- Time and budget
- The degree of innovation (redesign vs routine design).
- Resource availability (manpower) Labour availability?
- Product complexity
- Technology involved
- Production and manufacturing procedure – manual or automated
- Supply chain
As the table above shows, the product development stages can differ. But often, they can be grouped into these 5 key phases which include 8 important activities;
Fuzzy Front End
- Opportunity identification & analysis
- Idea generation & screening
- Concept & technology development
Business Case-Building
- Marketing strategy development & Marketing mix
- Business analysis
The Product Design
- Product design
Product Implementation
- Test marketing
Commercialization / Fuzzy Back End
- Product launch
Ending Notes
New product development (NPD) covers the comprehensive process of bringing a new product to market, renewing an existing product or introducing a product in a new market. The main aspect of NPD is product design, along with various business considerations. New product development is explained broadly as the transformation of a market opportunity into a product available for sale. The products developed by an organization give the means for it to generate income. For many technology-intensive organizations, their approach is based on exploiting technological innovation in a rapidly changing market.
The new product can be tangible (something physical which one can touch) or intangible (like a service or experience). But sometimes services and other processes are distinguished from “products”. NPD requires an understanding of customer needs and wants, the competitive environment, and the nature of the industry. Cost, time, and quality are the main factors that drive customer needs. Aiming at these three variables, innovative companies develop continuous practices and strategies to better satisfy customer needs and to boost their own market share by a regular development of new software and products.
There are many unwanted situations and challenges which companies must face throughout the process. The use of best practices and the elimination of hindrances to communication are the main concerns for the management of the NPD.
