New Product Development

Prof.V.Seshadri
SVKMs NMIMS

New Product Development - Origin

New product development usually
originates from a new technology that is
available/being developed.
The new technology makes it possible to
develop a new product to meet some
customer need
e.g. development of a touch sensitive glass
by Corning gave birth to new smart
phones by Apple and Cameras by
Canon/Sony
NPD- The business Objective - Ref
1 Ch 1

New Product Development - Origin

Very large development programs in Space,
Defense, Nuclear, Aircraft areas result in the
development of several new technologies,
hitherto unknown.
These new technologies are needed for the
sophisticated products needed in these sectors.
However, in course of time, they percolate to
non-strategic application like automobiles, cell
phones, security equipments, safety devices
etc.
NPD- The business Objective - Ref
1 Ch 1

Apollo space program spin offs

Digital Alarm Clock

Integrated Circuit
Specialized insulation materials
Polymerized films
Video Camera, Portable TV camers
Inertial navigation system
Fly-by-wire
Smoke detector
Satellite imaging
Image processing devices
Hand held calculator
Bar code scanners etc. etc.

New Products that changed our

world
Integrated circuits; semiconductors; resistors &
diodes Digital Computing
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
Prof.V.Seshadri NPD Ref 1

New Products that changed our

world

Laser for cutting, operations; metroscopy

Image processing
X- Ray; Gamma Ray
Electronic Calculators;
CNC ; CAD; CAM; CAE
FEM; Rapid prototyping; Virtual designing
and Simulation
Electric lighting; Fluorescent Lights;
Television; Walkman; I-Pods;
Prof.V.Seshadri NPD Ref 1

New Products that changed our

world
Satellite imaging; Satellite weather
forecasting
E- books;
Wireless messaging; Cordless phones;
Audio & Video tapes; VCD; DVD ; Pen drives;
hard disc;
Electric Power for various application
Synthetic fabrics; Thermal wear; fireproof
wear
Robotics; Automation
Prof.V.Seshadri NPD Ref 1

Types of NPDs
1.
2.
3.
4.

New-to the world type products

New product lines
Additions to existing product lines
Improvements and revisions of
existing products
5. Repositioning
6. Cost Reductions
Prof.V.Seshadri NPD Ref 1

Examples
1. New to world: Cell phone; Credit
card; ATM
2. New product lines: Reliances foray
into petrochemicals from textiles;
ITC foray into Hotel business from
cigarettes
3. Additions: MTNL extending from
landline to mobile telephones
4. Improvements: New versions of
digital cameras by Sony
Prof.V.Seshadri NPD Ref 1

Examples contd.
5. Repositioning: Certain brands of
Cereal foods like Oats as Health
foods.
6. Cost reductions: Plastic car fender
(from metal); manual to computer
drafting

Prof.V.Seshadri NPD Ref 1

10

NPD types: features

Ty
pe

Time to Potential Potenti

introdu revenue
al
ce
to
revenue
economy to
compan
y
Longest Highest
Highest

Long

High

High

Medium

Medium

Medium

Short

LittleProf.V.Seshadri NPD
Medium
Ref 1

Company
positioning
strategy

Market
development
Market
development
Line
completion
Market share11

NPD- The business Objective - Ref

1 Ch 1

12

New Product Types

Newness to
company

Hig
h

New
Product
Lines

Improveme
nts/
Revisions
to existing
products
Cost

Reductio
ns

Low

New to
the
world
Additions
to
existing
product
lines

Repositionin
gs

Newness to
Prof.V.Seshadri NPD Ref
market

Warwick

Hig
h
13

Typical ROI of non developer firms

7
6
5
R
e 4
t
u 3
r
2
n
1
%
0

Series 1
Column1
Column2

YEARS

Prof.V.Seshadri NPD Ref 1

14

Typical ROI of developer

firms
25
20
R
E
T
U
R
N

15
10

Column2

%
0

YEARS
Prof.V.Seshadri NPD Ref 1

15

Results of effective NPD

Effective
Product
Developmen
t

Strategic Advantages
Greater NPD
capability
Pre-empting
competition
Setting standards
Initial monopoly
Name recognition

Company
performance
Growth &
Profitability

Operational
advantages
Lower costs
Skill/capability
development
Potential economies
Brand image
Prof.V.Seshadri NPD Ref 1

16

Effect of weak product development

on a firms performance

Increasing cost of sales

Decreasing profits
Degraded financial strength
Reducing market share
Downward spiral leading to
closure/bankruptcy

Prof.V.Seshadri NPD Ref 1

17

Product Life Cycle

a) Introduction
b) Growth
c) Maturity
d) Saturation
e) Decline

Prof.V.Seshadri NPD Ref 1

18

Introduction stage
Also referred as Incubation stage
Expenses for promoting,
manufacturing and producing the
product are high
Profit margins are low
Survival probability is low

Prof.V.Seshadri NPD Ref 1

19

Growth stage
Incentives of greater cost reduction,
improved performance combines to
stimulate demand
Demand often outstrips supply
Profit margins increase due to costs
being spread over enhanced volumes
Profit margins peak in this stage

Prof.V.Seshadri NPD Ref 1

20

Maturity stage
More competitors enter the market
Sales Volumes continue to rise
steadily
Profits tend to take negative trend
because prices start dipping
Product has entered a commodity
market

Prof.V.Seshadri NPD Ref 1

21

Saturation stage
Rate of demand is almost constant
initially and later starts dropping
There is more of a replacement
market due to deterioration of
products
Competiton is focused on price

Prof.V.Seshadri NPD Ref 1

22

Decline stage
Demand for the product actually
declines, because the product is
substituted by other another product
Volumes dip, profits turns to losses.
The product is said to have reached
the end of its life.

Prof.V.Seshadri NPD Ref 1

23

Product Life Cycle - features

The shape of the curves may be different
depending on :Type of industry, Type of
competitors; quality, price, introduction
time, customer requirements etc.
PLC is also influenced by technological
advancements
Closer the company is to consumer goods
and the market the shorter the PLC. Closer
the company to basic industry or producers
goods, the longer the cycle.
Prof.V.Seshadri NPD Ref 1

24

Prof.V.Seshadri NPD Ref 1

25

Prof.V.Seshadri NPD Ref 1

26

PLC Semi-conductor
industry
The Product Life Cycle for semiconductor equipment
typically has an accelerated rate of accent in
comparison to the conventional model.
The strategy begins in the Product introduction Plan
(PIP) with a clear understanding of your customer's
requirements and expectations.
For semiconductor equipment, products typically
mature in two to three years.
Companies have been successful taking equipment and
materials originally developed for semiconductor
manufacturing and offering them to the printed circuit
board or disc drive industry.
Prof.V.Seshadri NPD Ref 1

27

Prof.V.Seshadri NPD Ref 1

28

Product Life Cycle - features

PLC of a product has dramatically
reduced for practically all product
types in recent years.
e.g.
Mechanical type writers: 30 yrs
Electromechanical: 10 yrs
Electronic Typewriters: 5 yrs

Prof.V.Seshadri NPD Ref 1

29

Life Cycle changes with

time
Household appliances:
Introductory stage: 12.5 yrs TO 2 yrs
Growth stage: 33.8 yrs TO 6.8 yrs
PLC :
Analytical instruments: 10 yrs to 4 yrs
Video games: 9 months
Therefore it is important to introduce a new
product just after the existing product has
completed the growth phase.
Prof.V.Seshadri NPD Ref 1

30

Vol/Profit vs Time Product Life

Cycle
10
9
8
7
6

Sales Volume
Profit Margin
New product profit

5
4
3
2
1
0
Introduction Growth

Maturity Saturation Decline

Technological Life Cycle

PLC of consumer goods &
consumables are governed by
Fashion, Technology and the benefits
sought by the market place
In case of Industrial goods: the PLC
depends largely on the impact of
Technology and fashion plays lesser
role.
TLC is the evolution of technology
through the marketplace.
Prof.V.Seshadri NPD Ref 1

32

Technological Life Cycle

1.
2.
3.
4.
5.
6.

Cutting edge
State of the art
Advanced
Mainstream
Mature
Decline

Prof.V.Seshadri NPD Ref 1

33

TLC stage effects on industry

population and profits
10
9
8
7
6
5
4
3
2
1
0

No of firms
Column1

Cutting edge technology

The cutting edge phase of the TLC is
charecterized by technology advancements
that is well ahead of the most sophisticated
applications in the market place. They
involve more of research than
development. The researches can be:
a) Pure research
b) Applied research
c) Product research
Prof.V.Seshadri NPD Ref 1

35

Cutting edge technology

firms
They develop the technology with a
specific application in mind.
The success for the technology is
determined by finding additional
applications
e.g. LEDs for electronic equipments.

Prof.V.Seshadri NPD Ref 1

36

Relative effort
allocation

Stages of Technology
100
90
80
70
60
Engineering
50
effort
40
30
20
10
0

Marketing
effort

Prof.V.Seshadri NPD Ref 1

37

Types of NPD projects

d)
Research
and
Advanced
Developm
c) Radical
ents

Breakthro
ughs

Extent of process
change

Hig
h

b)Next
Generat
ion or
Platfor
m
a)Enhancem
ents/hybrids
/derivatives

Lo
w

Extent of product
change e) Alliances/
Partnered
Prof.V.Seshadri NPD projects
Ref Warwick

Hig
h

NPD Projects 1/2

a) Enhancements, Derivatives & Hybrid Projects:
They are aimed at refinement and improvement of
selected performance dimensions e.g use of
coated plastics in place of metals in car/watch
etc.
b) Platform/Generational Projects:
They represent new system solutions to
customers involving significant product and/or
process changes. They provide a base for a
family of products/processes. E.g Wave soldering
technology; music in mobile phones
Prof.V.Seshadri NPD Ref 1

39

NPD Projects contd. 2/2

c) Breakthrough/Radical Projects:
These projects establish new core products and processes
that have a potential of creating whole new category for
Business e.g. Integrated Circuits; Internal Combustion
engine; Electric Bulb; mobile phone; amorphous magnets;
nano technology; lasers; stem cells
d) Advanced development projects/R&D: These projects lie
outside the boundaries of introduction of immediately viable
projects. Focus is on creation of a knowledge as a precursor
to commercial development e.g. Conducting Polymers;
superconductivity;
e) Alliance or Partnered projects: Critical set of expertise for a
project may be outsourced reducing financial risk and costs
Prof.V.Seshadri NPD Ref 1

40

Breakthrough and Follow-on

products
Breakthrough
Products

Follow-on products

Complete 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
protection

Technology and innovation

driven

Cost and market drive

Thrives in un-coordinated
processes

Requires a systematic
process

Many competing designs

Dominant or proven design
Prof.V.Seshadri NPD
41

Type of NPD Projects

Products

Processes

Derivatives &
Enhancements

Tuning
/Incremental
Changes

Additions to
product family

Single
development
upgrade
Next generation
Next generation
core products
processes
New core products
Prof.V.SeshadriNew
NPD Ref 1 core

42

Generic Product Design and

Development process

Prof.V.Seshadri NPD Ref 1

43

Definition- ( Ref.Wikepedia)
In business and engineering, new product
development (NPD) is the term used to describe the
complete process of bringing a new product or
service to market. There are two parallel paths
involved in the NPD process: one involves the idea
generation, product design and detail engineering;
the other involves market research and
marketing analysis. Companies typically see new
product development as the first stage in generating
and commercializing new products within the overall
strategic process of product life cycle management
used to maintain or grow their market share
Prof.V.Seshadri NPD Ref 1

44

NPD- the process

1.Idea Generation
2.Idea Screening
3.Concept Development and Testing
4. Business Analysis
5. Beta Testing and Market Testing
6. Technical Implementation
7. Commercialization
8. New Product Pricing
Prof.V.Seshadri NPD Ref 1

45

1.Idea Generation
Idea Generation is often called the "fuzzy front
end" of the NPD process
Ideas for new products can be obtained from basic
research using a SWOT analysis
Market and consumer trends,
company's R&D department,
competitors,
focus groups, employees, salespeople,
corporate spies,
trade shows, or Ethnographic discovery methods
(searching for user patterns and habits
Prof.V.Seshadri NPD Ref 1

46

Idea Generation
Idea generation techniques can
begin when you have done your
OPPORTUNITY ANALYSIS to support
your ideas in the Idea Screening
Phase (shown in the next
development step).

Prof.V.Seshadri NPD Ref 1

47

2.Idea Screening
The object is to eliminate unsound concepts prior to
devoting resources to them.
The screeners should ask several questions:
Will the customer in the target market benefit from the
product?
What is the size and growth forecasts of the market
segment/target market?
What is the current or expected competitive pressure for the
product idea?
What are the industry sales and market trends the product
idea is based on?
Is it technically feasible to manufacture the product?
Will the product be profitable when manufactured and
delivered to the customer at the target price?
Prof.V.Seshadri NPD Ref 1

48

Idea Generation stage

Koen et al. (2001, pp.4751)[5]
distinguish five different front-end
elements (not necessarily in a
particular order):
Opportunity Identification
Opportunity Analysis
Idea Genesis
Idea Selection
Concept and Technology
Development
Prof.V.Seshadri NPD Ref 1

49

3. Concept Development and Testing

Develop the marketing and engineering details
Investigate intellectual property issues and search patent data
bases
Who is the target market and who is the decision maker in the
purchasing process?
What product features must the product incorporate?
What benefits will the product provide?
How will consumers react to the product?
How will the product be produced most cost effectively?
Prove feasibility through virtual computer aided rendering, and
rapid prototyping
What will it cost to produce it?
Testing the Concept by asking a sample of prospective
customers what they think of the idea. Usually via Choice
Modelling.
Prof.V.Seshadri NPD Ref 1

50

4. Business Analysis
Estimate likely selling price based upon
competition and customer feedback
Estimate sales volume based upon size
of market and such tools as the
Fourt-Woodlock equation
Estimate profitability and break-even
point

Prof.V.Seshadri NPD Ref 1

51

5. Beta Testing and Market Testing

Produce a physical prototype or mock-up
Test the product (and its packaging) in
typical usage situations
Conduct focus group customer
interviews or introduce at trade show
Make adjustments where necessary
Produce an initial run of the product and
sell it in a test market area to determine
customer acceptance
Prof.V.Seshadri NPD Ref 1

52

6. Technical Implementation
New program initiation
Finalize Quality management system
Resource estimation
Requirement publication
Publish technical communications such
as data sheets

Prof.V.Seshadri NPD Ref 1

53

6. Technical
Implementation
Engineering operations planning
Department scheduling
Supplier collaboration
Logistics plan
Resource plan publication
Program review and monitoring
Contingencies - what-if planning

Prof.V.Seshadri NPD Ref 1

54

7. Commercialization (often considered post-NPD)

Launch the product

Produce and place advertisements and
other promotions
Fill the distribution pipeline with product
Critical path analysis is most useful at
this stage

Prof.V.Seshadri NPD Ref 1

55

8. New Product Pricing

Impact of new product on the entire
product portfolio
Value Analysis (internal & external)
Competition and alternative competitive
technologies
Differing value segments (price, value,
and need)
Product Costs (fixed & variable)
Forecast of unit volumes, revenue, and
profit
Prof.V.Seshadri NPD Ref 1

56

Prof.V.Seshadri NPD Ref 1

57

NPD
Most industry leaders see new product
development as a proactive process where
resources are allocated to identify market
changes and seize upon new product
opportunities before they occur (in contrast to a
reactive strategy in which nothing is done until
problems occur or the competitor introduces an
innovation). Many industry leaders see new
product development as an ongoing process
(referred to as continuous development) in which
the entire organization is always looking for
opportunities.
Prof.V.Seshadri NPD Ref 1

58

 Below gives the growth of food

processing equipment sector in India.