Chapter 6:

A Look at the
Importance, Nature,
and Management of
the NPD Process
 Provides a brief
resume of what
Ways in which
has become a
History of NPD the models
Introduction Models
vast area of
might be
academic and
developed
practitioner
research

2
 Usually templates or NPD Process
maps which can be
used to describe and Focusing on the
guide those activities departments or
New Product required to bring a functions that hold
Development new product from an responsibility for
(NPD) Models idea or opportunity, various tasks carried
through to a out.
successful market
launch.

3
 Company Objective

Exploration

Screening

Business Analysis

Development

The Booz, Allen and

Hamilton Model of Testing

NPD (1982)
Commercialization

Product Success
 Overview of the
Stages of the NPD
Process
5

Strategy
“Most companies have
difficulty in controlling
their product
development activities…
a lack of a strategic
focus on product
innovation.”
- Beerens et al. (2004) in a report for
Booz, Allen Hamilton
Stage of • Explicit statement of new product
Development
strategy, budget allocation
Nature of • Preliminary market and technical
Information
analysis; company objectives
Source
• Generated as a part of continuous
MIS and corporate planning
• Identification of market opportunities
Output
to be exploited by new products
6
 Stage of Idea generation or gathering
Development

Nature of Customer needs and technical

Idea Information
developments in previously identified
Generation markets
Source Inside the company: Outside the company:
 Involves •Technical departments•Competitors
identifying sources •Commercial functions •Customers
of the ideas and
•Company employees •Distributors
developing means •Inventors
by which these •Universities
sources can be
activate

Output Body of initially acceptable ideas

7
 Stage of Screening ideas: finding those with most potential
Development

Nature of Assessment of:

Information
•Whether there is a market for this type of product
Screening and whether the company can make it
•Financial implications, market potential and costs
•Company goals and fit

 Involves an initial
assessment of the Source Main internal functions:
extent of demand •R&D
for the ideas •Sales
generated •Marketing
•Finance
•Production
Output Ideas which are acceptable for further
development
8
 Stage of Concept development: turning an idea into a
Concept Development
recognizable product concept, with attributes and
Development market position identified

and Testing Nature of

Information
Explicit assessment:
 Turning a more •Customer needs to appraise market potential
clearly specified •Technical and design requirements
concept and testing
this concept for its Source Initial research with customers. Input from
fit with the
marketing and technical functions.
company capability
and its fulfillment of
customer Output Identifications of key attributes that need to be
expectations. incorporated in the product, major technical costs,
design, target markets and potential.

9
 Stage of Business analysis
Development

Nature of Fullest information thus far:

Information
Business •Detailed market analysis
•Explicit technical feasibility and costs
Analysis •Production implications
•Corporate objectives

 Full analysis of the Source Main internal functions and customers

proposal in terms of
its business
Output Major go- no go decision: company needs to be
potential
sure that the venture is worthwhile as expenditure
dramatically increases after this stage. Initial
marketing plan, development plan and budget
specification

10
 Stage of
Develop
Product development:
ment crystallizing the product
Product into semi- finalized shape
Development and
Testing
Nature of
Informati
Customer research with
 Prototypes are physically made. Tasks on product.
related:
 Assessed regarding its level of Source
functional performance. Customers and Production
 Alterations to the specifications or
to manufacturing configurations
can be designed and put into place.
 Tested with potential customers to Output Explicit marketing plans
assess the overall impression of the
test product.

11
 Stage of Test marketing: small- scale tests with
Development
customers
Test Marketing Nature of Profile of new product performance in light of
Information
 The appeal of the
competition, promotion and marketing mix
product is tested amidst variables.
the mix of activities
compromising the
market launch:
 Salesmanship Source Market research; production, sales, marketing,
 Advertising technical people
 Sales promotion
 Distributor Output Final go- no go for launch
incentives
 Public relations
12
 Stage of Commercialization
Developme
Commercialization nt
or Launch Nature of
Information
Test market result and
report
 Important considerations include:
 Seasonality of the product Source As for test market
 Whether the launch should fit
any trade or commercial event
Output
 Whether the new product is a Incremental changes to test
replacement for the old one
launch then full- scale launch
 Whether it is advantageous to be
first to market.

13
 The Usefulness of
the Process Models

14
 “
BAH lies in the way in which
they provide an indication of
the magnitude of the project
required in order to develop
and launch a new product

15
Criticisms of Process
Models

16
 Idiosyncrasy Iteration A new idea

Despite its
usefulness, the
BAH model, and,
by implication, its
derivatives have
been criticized on a A new Related strands
number of counts. customer of development

17
 Factors Affecting
Success and Failure
of NPD
18
 Management

Major themes in Information Process

the NPD success

literature Successful
New Product

Organizational
Strategy Structure

People

19
 Corporate •Technology and Marketing
Strategy
•Product Differentiation
•Synergy
•Risk Acceptance
Strategic A balanced managerial orientations which combines
Management
technical and design commitment with marketing inputs
is found to be most closely associated with superior
competitive performance.
Strategic Issues Important
Cultural
•Encourage experimentation
Factors to •Make specialists generalists
Encourage •Breakdown hierarchies
NPD •Unstick information
•Make time to think
Organizational •Free from rigid rules, participative and informal
Structure
•Many views aired and considered, little ‘red tape’
•Interdisciplinary teams, emphasis on creative
interaction and aims
•Outward looking, flexible, non hierarchical
•Information flowing downwards as well as upwards
20
Project- (task-) related issues

The brief review of strategic issues discussed shows how the

way in which the whole organization functions can have an
effect on the success or failure of new products. However, the
way in which an one specific project is executed, the people
involved and the role information are instrumental in its
outcome.
NPD Process

Over the past 25 years or so, much research has been conducted to
identify what steps comprise the efficient execution of the
development process which are critical to the new product success.
Some companies have specified processes guiding the development
of new products and believe that payback from following the
guidelines has improved their success rates.
While it may be desirable to have a complete process of NPD, each
additional activity extends overall development time and may lead
to late market introduction.
There can be a price to pay for late market introduction, as it allows
the competitors to establish foothold in the market.
Trade-off has to be made between completing all the suggested
activities in the NPD process and the time which these activities
take.
In the 1980’s the concept of ‘parallel processing’ was put forward
with advantages such as reduction of time-to market, smoother
transition between phases and therefore avoidance of the
bottlenecks with often occur in a sequential process and a number
of ‘soft’ advantages:
– Shared responsibilities
– Cooperation
– Involvement
– Commitment
– Sharpened problem solving focus
– Initiative
– Diversified skills
– Etc.
People

People involved in the NPD process and the way in which they are
organized are critical factors in the outcome of new product
developments.
To avoid disharmony with the employees and management, there
are seven ways in which the managers should try to achieve
integration, they should:
– Make personnel aware that interface problems naturally occur
– Make personnel sensitive to the characteristics of disharmony
– Give equal praise to both functions
Information

The role which information can play in facilitating an efficient NPD

process and achieving functional co-ordination is implicit in the
literature on success in NPD.
The NPD process is often viewed as one in which uncertainties are
inherent. These uncertainties require information inputs which are
then converted by those involved into information outputs which
are deemed to reduce the uncertainty if the process is to proceed
further.
Types of uncertainty:
 Customer need uncertainty
 How stable is the need in the long run?
 How strongly is it felt by customers?

 Market-based uncertainty
 Is the market big enough?
 Do we have access to distribution?
 Do we have experience in this market?
 Competitive uncertainty
 What will be the reaction of our immediate competitors?
 What would be the new competitive products?

 Resource-based uncertainty
 Do we have resources to support the product in the market?
 Do we have resources to complete the project on time?
 Organizational uncertainties?
 Do we have a support of the top management?
 Are there any interdepartmental conflicts?
Implications of the success and failure
literature for the process: Focusing on
the process and the people
Why process and the people involved are crucial?
1. The need for interdisciplinary inputs
2. The need to develop product advantage
3. The need for speed in the process
Managing the people in the NPD

Our understanding of what makes products successful suggests that

developing product advantage is crucial. Product advantage is achieved not
merely by technological progress, but by making technologies relevant to
user needs.
 Bureaucratic control – this is the most formalized and centralized and the
least participative mechanism, where high level general manager
coordinates activities across functions and is the arbiter of conflicts among
functions.
 Individual liaisons – individual within one functional department have to
communicate directly with their counterparts in other departments.
 Integrating managers- in this coordination structure, an additional
manager is added to the functional structure, responsible for
coordinating the efforts of the different functional departments,
but without the authority to impose decisions on those
departments.
 Matrix Structure – whereas all the previous mechanism maintain
the primary of the functional departmental structure, a matrix
organization structures activities not only according to product or
market focus, but also by function.
 Design teams – like the matrix structure, design teams are
composed of set of functional specialist who work together on a
specific NPD product. The difference is that such teams tend to be
more self-governing and have greater authority to choose their
own internal leader who have autonomy to establish their own
operating procedures and to resolve internal conflicts.