New Product Development

By Hitesh Bhasin April 16, 2017

New product development is a task taken by the company to introduce newer products in the
market. Regularly there will arise a need in the business for new product development.

Your existing products may be technologically outdated, you have different segments to target or
you want to cannibalize an existing product. In such cases, New product development is the
answer for the company.

There are 7 stages of new product development and they are

as follows.

1) Idea generation
in this you are basically involved in the systematic search for new product Ideas. A company has
to generate many ideas in order to find one that is worth pursuing. The Major sources of new
product ideas include internal sources, customers, competitors, distributors and suppliers.

Almost 55% of all new product ideas come from internal sources according to one study.
Companies like 3M and Toyota have put in special incentive programs or their employees to
come up with workable ideas.

Almost 28% of new product ideas come from watching and listening to customers. Customers:
even create new products on their own, and companies can benefit by finding these products and
putting them on the market.

Example Pillsbury gets promising new products from its annual Bake-off. One of Pillsburys
four cake mix lines and several variations of another came directly from Bake-Off winners
recipes.

2) Idea Screening
The second step in New product development is Idea screening. The purpose of idea generation
is to create a large pool of ideas. The purpose of this stage is to pare these down to those that are
genuinely worth pursuing. Companies have different methods for doing this from product review
committees to formal market research.

It, is helpful at this stage to have a checklist that can be used to rate each idea based on the
factors required for successfully launching the product in the marketplace and their relative
importance.

Also Read What is the Importance of Marketing Mix and why are the 4 P's important?

Against these, management can assess how well the idea fits with the companys marketing
skills and experience and other capabilities. Finally, the management can obtain an overall rating
of the companys ability to launch the product successfully.

3) Concept Development and Testing

The third step in New product development is Concept Development and Testing. An attractive
idea has to be developed into a Product concept. As opposed to a product idea that is an idea for
a product that the company can see itself marketing to customers, a product concept is a detailed
version of the idea stated in meaningful consumer terms.

This is different again from a product image, which is the consumers perception of an actual or
potential product. Once the concepts are developed, these need to be tested with consumers
either symbolically or physically. For some concept tests, a word or a picture may be sufficient,
however, a physical presentation will increase the reliability of the concept test.

After being exposed to the concept, consumers are asked to respond to it by answering a set of
questions designed to help the company decide which concept has the strongest appeal. The
company can then project these findings to the full market to estimate sales volume.

4) Marketing Strategy Development

This is the next step in new product development. The strategy statement consists of three parts:
the first part describes the target market, the planned product positioning and the sales, market
share and profit goals for the first few years.

The second part outlines the products planned price, distribution, and marketing budget for the
first year. The third part of the marketing strategy statement describes the planned long-run sales,
profit goals, and the marketing mix strategy.

Business Analysis Once the management has decided on the marketing strategy, it can evaluate
the attractiveness of the business proposal.
Business analysis involves the review of projected sales, costs and profits to find out whether
they satisfy a companys objectives. If they do, the product can move to the product development
stage.

Also Read What causes Channel conflict? 6 Reasons for Channel conflict.

5) Product Development
Here, R&D or engineering develops the product concept into a physical product. This step calls
for a large investment. It will show whether the product idea can be developed into a full-
fledged workable product.

First, R&D will develop prototypes that will satisfy and excite customers and that can be
produced quickly and at budgeted costs. When the prototypes are ready, they must be tested.
Functional tests are then conducted under laboratory and field conditions to ascertain whether the
product performs safely and effectively.

6) Test Marketing
If the product passes the functional tests, the next step is test marketing: the stage at which the
product and the marketing program are introduced to a more realistic market settings. Test
marketing gives the marketer an opportunity to tweak the marketing mix before the going into
the expense of a product launch.

The amount of test marketing varies with the type of product. Costs of test marketing can be
enormous and it can also allow competitors to launch a me-too product or even sabotage the
testing so that the marketer gets skewed results. Hence, at times, management may decide to do
away with this stage and proceed straight to the next one:

7) Commercialization
The final step in new product development is Commercialization. Introducing the product to the
market it will face high costs for manufacturing and advertising and promotion. The company
will have to decide on the timing of the launch (seasonality) and the location (whether regional,
national or international). This depends a lot on the ability of the company to bear risk and the
reach of its distribution network.

Today, in order to increase speed to market, many companies are dropping this sequential
approach to development and are adopting the faster, more flexible, simultaneous development
approach. Under this approach, many company departments work closely together, overlapping
the steps in the product development process to save time and increase effectiveness.
Also Read Integrated Marketing

Above was the complete process of New product development. You can also read this related
article on why new product development is necessary for survival.

Business analysis of new products

A new product idea that survives the screening stage of new product development (NPD)
requires a more sophisticated and detailed business analysis. A business analysis will help you
determine the costs involved in your proposed NPD, and forecast the profits you may make from
the product in future financial years. The costs of developing a product are substantial.

Your business analysis will also help you eliminate inappropriate ideas and avoid unnecessary
costs.

Carry out the following steps to assess the viability of your new product.

Estimate your product price

Review your market and competitor research and your feedback from customers to determine the
selling price of your product, and the profit you are likely to make.

Identify your product's market potential

Review your market research and the sales performance of existing products in your range. Use
your recent sales figures and industry sales figures to help you identify the current level of
market activity and interest in products in the same line as your new product.

Forecast your sales volume

Estimate the volume of the product sales you anticipate based on your research into customer
needs, the size of your existing customer base and your market.

Identify your break-even point

Estimate the profitability of your product, and determine your break-even point - the amount of
product you need to sell to cover your fixed costs (such as rent, electricity and wages).

Determine your minimum sale price

Project your returns based on your anticipated discounted product price to identify your lowest
sales figure per item.
Consider the long term
Forecast the lifespan of your product in the market. How long will it be relevant to your market's
consumers? How long will it take you to realise a decent return on your investment? What
market share percentage does it have the potential to realise?

Scope your marketing strategy

Your marketing strategy will help you determine how to position your new product in the
marketplace. The information you gather, next, in your market testing will help you identify
which market segments to target and how. At this stage, however, you can use the data you have
gathered in your business and market research to start shaping your marketing strategy -
identifying relevant market and product information as well as approaches that will be important
in your product marketing.

The commercialization process

Commercialization of a product will only take place, if the following three issues are satisfied:

Timing of launch: When facing the danger of cannibalizing the sales of the company's other
products, if the product can be improved further, or if the economy is down, the launch should
be delayed.
Launch location: It can be in a single location, one or several regions, a national or the
international market. This decision will be strongly influenced by the company's resources, in
terms of capital, managerial confidence and operational capacities. Smaller companies usually
launch in attractive cities or regions, while larger companies enter a national market at once.
Global roll outs are generally only undertaken by multinational conglomerates, since they have
the necessary size and make use of international distribution systems (e.g., Unilever, Procter &
Gamble). Other multinationals use the "lead-country" strategy: introducing the new product in
one country/region at a time.
Target consumers: The primary target consumer group will have been identified earlier by
research and test marketing. This primary consumer group should consist of innovators, early
adopters, heavy users and/or opinion leaders. This will ensure adoption by other buyers in the
market place during the product growth period.

The company has to decide on an action plan for introducing the product by implementing the
above decisions. It has to develop a viable marketing-mix and create a respective marketing
budget. When a plan is in place for each of these three issues, then the commercialization process
may begin .
8 Step Process Perfects New Product
Development
By Robert Brands | May 21, 2013

Every entrepreneur knows that productivity is one of the key ingredients for successful
product development. One of the two key processes in Roberts Rules of Innovation is the NEW
PRODUCT DEVELOPMENT PROCESS. A formalized, NPD process also referred to and
best practice: the Stage Gate Process is a must, from simple to sophisticated.

The New Product Development process is often referred to as The Stage-Gate innovation
process, developed by Dr. Robert G. Cooper as a result of comprehensive research on reasons
why products succeed and why they fail.

When teams collaborate in developing new innovations, having the following eight ingredients
mixed into your teams new product developmental repertoire will ensure that its overall
marketability will happen relatively quick, and accurately making everyone productive across
the board.

Step 1: Generating

Utilizing basic internal and external SWOT analyses, as well as current marketing trends, one
can distance themselves from the competition by generating ideologies which take affordability,
ROI, and widespread distribution costs into account.
Lean, mean and scalable are the key points to keep in mind. During the NPD process, keep the
system nimble and use flexible discretion over which activities are executed. You may want to
develop multiple versions of your road map scaled to suit different types and risk levels of
projects.

Step 2: Screening The Idea

Wichita, possessing more aviation industry than most other states, is seeing many new
innovations stop with Step 2 screening. Do you go/no go? Set specific criteria for ideas that
should be continued or dropped. Stick to the agreed upon criteria so poor projects can be sent
back to the idea-hopper early on.

Because product development costs are being cut in areas like Wichita, prescreening product
ideas, means taking your Top 3 competitors new innovations into account, how much market
share theyre chomping up, what benefits end consumers could expect etc. An interesting
industry fact: Aviation industrialists will often compare growth with metals markets; therefore,
when Boeing is idle, never assume that all airplanes are grounded, per se.

Step 3: Testing The Concept

As Gaurav Akrani has said, Concept testing is done after idea screening. And it is important to
note, it is different from test marketing.

Aside from patent research, design due diligence, and other legalities involved with new product
development; knowing where the marketing messages will work best is often the biggest part of
testing the concept. Does the consumer understand, need, or want the product or service?

Step 4: Business Analytics

During the New Product Development process, build a system of metrics to monitor progress.
Include input metrics, such as average time in each stage, as well as output metrics that measure
the value of launched products, percentage of new product sales and other figures that provide
valuable feedback. It is important for an organization to be in agreement for these criteria and
metrics.

Even if an idea doesnt turn into product, keep it in the hopper because it can prove to be a
valuable asset for future products and a basis for learning and growth.

Step 5: Beta / Marketability Tests

Arranging private tests groups, launching beta versions, and then forming test panels after the
product or products have been tested will provide you with valuable information allowing last
minute improvements and tweaks. Not to mention helping to generate a small amount of buzz.
WordPress is becoming synonymous with beta testing, and its effective; Thousands of
programmers contribute code, millions test it, and finally even more download the completed
end-product.
Step 6: Technicalities + Product Development

Provided the technical aspects can be perfected without alterations to post-beta products, heading
towards a smooth step 7 is imminent. According to Akrani, in this step, The production
department will make plans to produce the product. The marketing department will make plans
to distribute the product. The finance department will provide the finance for introducing the
new product.

As an example; In manufacturing, the process before sending technical specs to machinery

involves printing MSDS sheets, a requirement for retaining an ISO 9001 certification (the
organizational structure, procedures, processes and resources needed to implement quality
management.)

In internet jargon, honing the technicalities after beta testing involves final database preparations,
estimation of server resources, and planning automated logistics. Be sure to have your
technicalities in line when moving forward.

Step 7: Commercialize

At this stage, your new product developments have gone mainstream, consumers are purchasing
your good or service, and technical support is consistently monitoring progress. Keeping your
distribution pipelines loaded with products is an integral part of this process too, as one prefers
not to give physical (or perpetual) shelf space to competition. Refreshing advertisements during
this stage will keep your products name firmly supplanted into the minds of those in the
contemplation stages of purchase.

Step 8: Post Launch Review and Perfect Pricing

Review the NPD process efficiency and look for continues improvements. Most new products
are introduced with introductory pricing, in which final prices are nailed down after consumers
have gotten in. In this final stage, youll gauge overall value relevant to COGS (cost of goods
sold), making sure internal costs arent overshadowing new product profits. You continuously
differentiate consumer needs as your products age, forecast profits and improve delivery process
whether physical, or digital, products are being perpetuated.

Remember: The Process Is Loose

The entire new product development process is an ever evolving testing platform where errors
will be made, designs will get trashed, and loss could be recorded. Having your entire team
working in tight synchronicity will ensure the successful launch of goods or services, even if
reinventing your own wheel. Productivity during product development can be achieved if, and
only if, goals are clearly defined along the way and each process has contingencies clearly
outlined on paper.
For more tips and guidelines on developing the right implementation strategy, see Roberts
Rules of Innovation: A 10-Step Program for Corporate Survival.

For more another version, and more information on the 8-step process, go to http://kalyan-
city.blogspot.com/2012/02/stages-process-steps-of-new-product.html

Stage-Gate is a registered TM of Stage gate International, Inc.

How to Write a Business Analysis Report

September 20, 2016 madams Uncategorized

So your boss (or client) has asked you to do a full review of a business area before presenting
your findings and recommendations?

OR

Youve completed your investigation and now need to present your findings and
recommendations to your stakeholders.

If that sounds like you, then this is the post for you.

Why?

Because today Im telling you everything you need to know about writing your Business
Analysis report.

Including how to CHANGE your presentation or documentation structure depending on your

stakeholders.

AND

Giving you ideas on how to present your recommendations so they ALWAYS get accepted.
Start with the end in mind What are you trying to say in
your BA Report?
This is KEY.

A strong Business Analyst will be thinking about their solution recommendations from the very
beginning and right throughout any project.

And if your investigation is conducted thoroughly, it wont be difficult to form an opinion on the
best way for the business to move forward effectively.

If youve studied business you will know this already, but its true for BAs as well.

So heres what I would do:

When I get allocated a project, I tend to set up my final presentation meetings at the start of the
project.

The benefit:

I have a clear deadline, which increases my productivity.

I am able to secure the diaries of extremely busy people especially managers
Sometimes I am able to get a whole team into one session because the manager is able to
prepare.

By starting with the end in mind, you will have a clear idea of what you want to get out of the
presentation.

Sometimes I even go to the extremes of writing down my recommendations FIRST and working
backwards from there.

Who are you writing your Business Analysis Report for?

If youre at the start of the project you need to do your stakeholder analysis.

If youre presenting and havent done one yet DO IT NOW

Use my article Stakeholder Mapping Tool How to engage 15 business areas so you can be sure
youve done it right.
Why should you do one of these?

The main reason is because it will help you identify who are the powerful people that you need
to convince

AND

Who are the most project interested people that you need to convince of your findings.

The general rule of thumb:

Powerful people are usually high up and dont need to hear about the detail of the current issues.
No! They want to hear what they need to do to make the company better. So in this situation
make sure your focus is mainly on the recommendations and NOT the problems.

However:

Less powerful people that are interested tend to be the team members that your future changes
will impact.

SO in this scenario, they probably want to see if you agree with what they think or know is the
problem. Most of the time the problems will have come from those SMEs during the
investigation.

So its a great opportunity to make them feel listened to by spending a bit more time going
through and discussing their problems.

Whether its a document or a presentation

You need to bear these people in mind and present your business analysis report in the right way
depending who you are presenting to.

HOW will you deliver your business analysis report?

If youre at the start of the project. Now is a good time to decide how you will present your
findings and recommendations to your stakeholders.

Usually one of the below

1. In a document
2. A Presentation
3. Both documentat and presentation
Build up your recommendations throughout the
presentations
Have you heard the saying?

Tell them what youre going to say

Tell them
Then tell them what you said.

Thats the 3 step process to a high impact presentation. And its exactly what you should be
doing with your findings and recommendations.

How to structure your report

The structure of your report could be the ultimate reason as to why the people you need to
convince will take your recommendations.

So heres the key areas to consider

1. The intro

Start with a bang.

Explain the background of the project.

For a document report:

You may wish to use BOSCARD (read my BOSCARD article if your response to that is
WHAT?). Thats where youre terms of reference from the beginning of the project will come in

Make sure you keep it short and sweet. Ask yourself Would I continue reading if I read this
intro?

For a presentation

DONT use BOSCARD in its entirety.

DO NOT go over more than one page.

Dont write down in detail on the presentation.

Put bullet points for the project reasons and why youre standing here today.

2. Report The approach

You need to get this bit absolutely spot on.

Because theres a fine line between being BORING and being INFORMATIVE.

Ask yourself why am I telling them my approach?

Well the reason is so that you can get them to understand how you came to your
recommendations.

Dont go to the nth degree of detail especially if youre presenting to highly powerful
stakeholders just a simple explanation of the steps you took throughout the project.

So what did you do during the project?

Voice of the Employee? To obtain feedback from those that KNOW.

Statistical Analysis? To ensure findings are accurate and logical.

Process Mapping? To gain an understanding.

List the tools AND explain why they are beneficial.

3. Report the outcome of each technique used

This is where you can begin to slot in your recommendations slowly in order to gauge an early
response.

The outcome of each technique you used to gather information will allow you to show in a bit
more detail why you are making these recommendations.

DONT go through your process maps in minute detail.

DO pick out the important aspects of the process map. Remember this isnt an opportunity to
verify that your process knowledge is accurate. You should have already done that. Its an
opportunity to make people aware that you can spot problems within a process.

Use the 7 wastes TIMWOOD rule when reviewing your processes and use these as examples to
highlight any issues.
If you undertook feedback workshops with SMEs, its always a good idea to explain the
outcomes and blue sky ideas from those workshops.

DONT say WHO gave the ideas you dont need to.

Why?

Because you dont know how each of your stakeholders respect each others ideas and if one
person doesnt respect another (trust me it happens), you may have lost them before the
improvements have even begun.

Instead focus on the why an idea is worth implementing.

4. Summarise your findings

Theres 2 opportunities here:

The first is the ability to win round the employees who will be affected by your
recommendations.

The second is make business leaders accept the recommendations by the impact of the issues you
describe here in your findings.

Keep them short but solid.

And use figures! Nothing tells a better story than the impact of space, time and money.
Especially to leaders.

5. Summarise your recommendations

When writing your summary recommendations, make sure you categorise them.

A good categorisation is by People, Process and System

That way you can clearly explain whether its a culture issue or a technology issue.

Remember Culture issues can be very difficult to fix but if done right and fast can be a whole lot
cheaper than implementing a system that may not even fix the issue.

You should have already won round your audience by this point.
So all you are trying to do is to tell them what youve been telling them for the last hour.

If youre having difficulty wording your recommendations, download my Business Analyst

Report for some inspiration.