Product Development Process

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									This Product Development Process document describes the process of bringing a new
product or service to the market. It provides a template for a company to devise and
execute a successful product development plan. Some of the topics covered include:
generating the idea, gauging the market, measuring the investment, engineering the
product, and launching the new product. This document provides a helpful tool to any
company or business that is launching a new product.
[Product Name] Product Development Process

[Product Name]

[Product Development Manager Name]

[Product development is an ongoing process required by all types of companies, from companies based
in innovation, to service, to infrastructure. There is no single process for new product
development, no tried and true method that works for everyone. There are concepts however
that benefit a company, and fundamentals of business that need to be considered in the
product development process. Utilizing this template as an exercise, it will help you to start a
process, or review a product along a methodology, but there is no guarantee for success.]

© Copyright 2013 Docstoc Inc.                                                           2
[Product Name] New Product Development Process

Understanding your Business

Business Definition
[Begin by defining your business. What is it that you do, what is your core mission to accomplish in
business? This may come from marketing statements, or it may come from executive vision and mission
statements. Consider how your company is positioned within your industry: does it deliver products
vertically within an industry silo, or deliver services horizontally across industries?]

Industry Drivers
[Note the industry drivers. What are customers asking for, what is on the horizon that customers are
not yet asking for? What industry trends are presenting themselves, and what is research reporting,
either academic or consultant based? Consider your own products and how they meet current industry
needs. Are there opportunities to evolve a product, redesign a product, or replace a product with a new
design? Look at competitors: can your company do what they do cheaper, more efficiently, or if it is
worth going head-to-head with competitors on a product?]

New Product Development
Generating the Idea
[Generating the idea is the most challenging area. Brainstorming has always been a recommended
option, however often times with product managers so entrenched in what they do, it may be difficult
to be creative. Consider requesting ideas from across the organization, from support staff to production
staff. Roll the ideas together and create a special cross-functional team to review the ideas. Consider
ideas both within the existing product portfolio, or ideas where existing or slightly modified products
can be used in other industries.

Anecdote: An excellent example of this comes from the California power outages of early 21st century.
Fuel prices were low and rail transport was looking for ways for greater revenue. Jumping across
industries they negotiated using unused engines as generators of power aiding utilities in addressing the
power constraints.

Based on the cross-functional teams’ review, create a short-list of ideas to evaluate. The next tasks may
be performed simultaneously or sequentially, however they should be performed by members of your
company specialized in the tasks.]

Gauging the Market
[Purchase or perform your own market assessment. What is happening in the industry, what drivers are
present? What is the justification for the company to take on the risk of producing a new product?
Assess the market value and project sales for the next 5-10 years. Look at what the market penetration

© Copyright 2013 Docstoc Inc.                                                                3
would have to be to be successful: will existing customers find value in the new product, or will new
customers have to be pursued? Does the new product cannibalize existing sales, or represent new sales
opportunities? Understand the cost of marketing and selling the product to: what is the optimal price

Measuring the Investment
[Every new product requires a financial investment, representing risk. What has to be measured is how
quickly will the risk be overcome by the return on the investment; how many years before profitability?
The financial team will have to evaluate not only the project sales, but research and development, and
production costs too. How much will prototypes and development cost? Is it optimal to outsource the
development to another company, or have another company prototype the new product? Is
manufacturing or production of the product best done externally or internally? Are capital investments
necessary to upgrade production facilities to accommodate the new products? There are many financial
questions to be answered, but once they are, spreadsheets can become powerful tools to understand
the financial viability of the new product.]

Engineering the Product
[Even though marketing and finances may be determined for the new product, engineering the product
may be the most important component. An idea may be great, however if engineering the product
costs too much or the product cannot be manufactured at a price lower than what the market can bear,
then it may not be financially viable. Consider the costs of raw materials, manufacturing and shipping.
Are there further costs of ongoing support, installation and configuration? Do these represent
additional areas of income, or cost only?]

Launching the New Product
Referenced Article: Project Management Plan

[With an understanding of the market, investment and engineering of the new product, now it’s time to
execute the plans. Whether execution is performed as a project, or performed ad hoc, it is important to
stick to the fundamental research that was originally performed in the development stages. It’s
important to avoid scope creep, which is the continual modification of requirements to meet ever
changing expectations. This scenario has failed many companies who forwent the incremental value of
new products brought to market and then further refined. If you await the perfect product, you may
quickly find yourself reacting to competitors who have taken the lead. New product development
should be an ongoing process too, regularly scheduled as part of the corporate calendar. And new
product development is a skill that with practice can be refined and improved organizationally. With a
regularly scheduled process, involvement from diverse parts of the organization, and constant lookout
for new ideas, your organization will remain much more healthy than otherwise.]

© Copyright 2013 Docstoc Inc.                                                              4
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te in the practice of constantly looking for new opportunities.

For some of the more innovative products, it may not be possible to completely plan a process
before it is started. In situations like this, a more flexible approach is advised.

The SWOT Analysis
The SWOT analysis lists the most important strengths (S), weaknesses (W), opportunities (O) &
threats (T) that are happening presently. S & Ws are internal to the business and O & Ts are
external. All SWOTs are one-sided, for example, something is either an S or a W; it but cannot
be both.

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                 The New Product Development Process

Str e n gths an d Weak n esses
Strengths and weaknesses are relative to the internal functioning of the organization. They
include the issues surrounding resources, programs and organization in the major areas. They
would include:

    Costs      Finances      Management Operations            Products         R&D           Sales         Systems
Productivity   Resources        Systems        Efficiency      Services          Effort    Marketing      Organization
Purchasing     Performance     Expertise       Capacity         Quality        Direction   Distribution    Structure
                               Resources       Processes        Pricing        Resources   Promotion
                                                               Features                     Support

New Product Design
Because the new product design process usually requires both engineering and marketing
expertise, a more common way of organizing projects is to develop cross-functional teams and
include members from both areas. The team is responsible for all aspects of the project, from
initial idea generation to final commercialization. Usually they will report to senior
management, most often to a Vice President or Program Manager. In industries where products
are technically complex, development research is usually expensive, and product life cycles are
relatively short. Strategic alliances among several organizations will help to spread out the costs
and give access to a wider skill set, which speeds up the process overall.

End users respond to new products differently. How a new technology will be adopted can be
analyzed using a number of diffusion theories like the Diffusion of Innovations theory.1

    Information source:

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             The New Product Development Process

Market Potential/Target Demographic
Develop informed target marketing strategies by including, at a minimum, demographic data on
consumer behaviors, a breakout of your consumer’s geographical demographics, consumer
spending habits, employment, household demographics, population characteristics, as well as US
and International demographics.

Market Research Analysis
Market research cost analyses are carried out to establish how well or how poorly a planned
venture will wind up. Cost analyses involve adding positive factors and subtracting negative
ones to determine a net result.

A market research cost analysis finds, quantifies, and adds all of the positive factors which are
the benefits. Then it identifies, quantifies, and subtracts all the negatives, the costs. The
difference between the two indicates whether the market research plan is advisable. The real
trick to doing an accurate analysis well is making sure that you include all of the costs and all of
the benefits; and that you properly quantify them.

Kinds of Market Research
B uy Re por ts
These are target profiles that are used by developers, investors, and lenders for making decisions
to buy, hold, or sell. The data is often incorporated into appraisals and reports on financial
viability. It contains the most recent sales data, and allows you to identify the sectors that are
driving growth. It lists the leading brands and companies, and offers a strategic analysis of the
key factors that influence the market like new product development, or matters with distribution
or pricing. They may also forecast potential changes in the market. The data includes historic
and forecasted market sizes as well as company and brand shares. These reports are ideal for
executives who want to understand the key drivers in the market, and who want to stay abreast of
marketing developments for the upcoming year. It allows them to see the market in its global
context with international market comparisons.

Run Sur veys
Surveys are used to collect data about populations as a whole. We use them to learn about what
numbers and proportions of people think 'X' or agree with 'Y'. These surveys collect and evaluate
information from a large number of people. They are not suitable for obtaining a specific
understanding of the underlying principle behind people's opinions and attitudes. Qualitative
approaches like interviews and workshops should be used to accomplish this.

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The New Product Development Process

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            The New Product Development Process

Market Research Types
Q uan titative Rese ar ch
   1. Identify & define the problem
   2. Develop the approach
   3. Research the design
      a) Strategy Questionnaire
      b) Acquiring Samples
      c) Offering Incentives
   4. Data collection
      a) Cleaning the data
      b) Editing & coding open ended responses

Q ual itative Resear ch
   1. Identify & define the problem
   2. Develop the approach
   3. Research the design
   4. Perform the data analysis
   5. Report & present on the findings using one or all of the following tools:
      a) Executive summary
      b) Detailed report
      c) Online report
      d) Formal presentation

Developing the Cost Analysis
      Develop a line-item budget that shows all expenditures.
       This is the minimal level of budgeting and accounting that is necessary.

      Determine the total amount for research costs
       The total cost is the sum of the direct costs, and the portion of indirect costs that is
       allocated to the market research cost analysis.

      Define the Scope or Perspective of the Analysis
       Describe the alternative(s) to be evaluated. Look at the monetary costs and benefits.

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            The New Product Development Process

     Conduct Cost Analysis
      Identify and estimate the monetary value of all resources used in the intervention, not just
      the budgetary costs. Some costs, such as salaries of direct service staff, rental of office
      space, or program supplies, are obvious and simple to determine. Indirect costs of
      supervision and administration need to be included as well. Other resources and costs
      may go well beyond the items that are usually included in an agency budget.

     Estimate the value of the results
      This is one of the hardest parts of the analysis. You may want to obtain assistance from a
      consultant. Some cost-savings are easier to estimate than others.

     Address qualitative residual information
      There are almost always some things that cannot be quantified or given monetary values.
      It is important to include some discussion of these issues when reporting. A frank
      description of some of these qualitative issues in your report can help round out your
      conclusions, and reduce the chances of your cost analysis being used inappropriately.

Sample Cost Analysis Worksheets
                            Mai l S u rveys                                 Cost

      Printing questionnaires


      Postage for mailing questionnaire & return postage

      Incentives for response

      Staff time & cost for analysis & presentation of results

      Independent researcher cost

      Other costs not included elsewhere

                                           Total Mail Survey Costs

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     The New Product Development Process

                       Ph on e S u rveys                       Cost

Preparation of the questionnaire

Interviewer’s fee

Phone charges

Staff time & cost for analysis & presentation of results

Independent researcher cost

Other costs not included elsewhere

                                   Total Phone Survey Costs

                    Pe rson al In tervi ew s                   Cost

Printing of questionnaires & prompt cards

Interviewer’s fee & expenses

Incentives for questionnaire response

Staff time & cost for analysis & presentation of results

Independent researcher cost (if applicable)

Other costs not included elsewhere

                              Total Personal Interview Costs

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     The New Product Development Process

                   Grou p Di scu ssi on s                          Cost

Interviewer’s fee & expenses in recruiting & assembling the

Facility rental

Recording costs (if applicable)

Incentives for group participation

Staff time & cost for analysis and presentation of results

Independent research costs (if applicable)

Other costs not included elsewhere

                              Total Group Discussion Costs

        G r a n d To t a l M a r k e t R e s e a r c h C o s t s

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             The New Product Development Process

Supporting Documentation
   The term Fuzzy Front End was first made popular by Smith and Reinertsen (1991). R.G.
    Cooper (1988) describes the early stages of NPPD as a four step process:
    1. Ideas are generated
    2. Subjected to a preliminary technical and market assessment
    3. Merged to coherent product concepts (III)
    4. Judged for their fit with existing product strategies and portfolios.

   In a more recent paper, Cooper and Edgett (2008) affirm that vital predevelopment activities
    1. Preliminary market assessment
    2. Technical assessment
    3. Source-of-supply-assessment:
        a) suppliers
        b) Partners or alliances
    4. Market research
        a) Market size and segmentation analysis
        b) VoC (voice of customer) research.
    5. Product concept testing
    6. Value-to-the customer assessment
    7. Product definition
    8. Business and financial analysis

   These activities yield vital information to make a Go/No-Go to Development decision. In the
    in-depth study by Khurana and Rosenthal (1998) front-end activities include:
       1. Product strategy formulation and communication,
       2. Opportunity identification and assessment,
       3. Idea generation,
       4. Product definition,
       5. Project planning, and
       6. Executive reviews.

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             The New Product Development Process

   Economical analysis, benchmarking of competitive products, and modeling and prototyping
    are also important activities during the front-end activities. The outcomes of FFE are:
       1. The mission statement
       2. Customer needs
       3. Details of the selected concept,
       4. Product definition and specifications,
       5. Economic analysis of the product,
       6. The development schedule,
       7. Project staffing and
       8. The budget,
       9. A business plan aligned with corporate strategy.

   In a paper by Husig, Kohn and Huskela (2005) was proposed a conceptual model of Front-
    End Process which includes early Phases of Innovation Process. This model is structured in
    three phases and three gates:

    Phase 1: Environmental screening or opportunity identification stage in which external
    changes will be analyzed and translated into potential business opportunities.

    Phase 2: Preliminary definition of an idea or concept.

    Phase 3: Detailed product, project or concept definition, and Business planning. The gates
         1) Opportunity screening;
       2) Idea evaluation;
       3) Go/No-Go for development.

    The final gate leads to a dedicated new product development project. Many professionals and
    academics consider that the general features of Fuzzy Front End (fuzziness, ambiguity, and
    uncertainty) make it difficult to see the FFE as a structured process, but rather as a set of
    interdependent activities (e.g. Kim and Wilemon, 2002). However, Husig et al., 2005 argue
    that front-end not need to be fuzzy, but can be handled in a structured manner.

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             The New Product Development Process

   Peter A. Koen (2004) argues that in the FFE for incremental, platform and radical projects,
    three separate strategies and processes are typically involved.

    1. The traditional Stage Gate™ process was designed for incremental product development,
       namely for a single product.

    2. The FFE for developing a new platform must start out with a strategic vision of where the
       company wants to develop products and this will lead to a family of products.

    3. Projects for breakthrough products start out with a similar strategic vision, but are
       associated with technologies which require new discoveries.

    It is worth mentioning what are incremental, platform and breakthrough products:

    1. Incremental products are considered to be cost reductions, improvements to existing
       product lines, additions to existing platforms and repositioning of existing products
       introduced in markets.

    2. Breakthrough products are new to the company or new to the world and offer a 5-10
       times or greater improvement in performance combined with a 30-50% or greater
       reduction in costs. Platform products establish a basic architecture for a next generation
       product or process and are substantially larger in scope and resources than incremental
       projects (Koen, Peter A., 2004).

    3. Platform products establish a basic architecture for a next generation product or process
       and are substantially larger in scope and resources than incremental projects (Koen, Peter
       A., 2004).

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            The New Product Development Process

   1. Ulrich, Karl T. and Eppinger, Steven D (2004) Product Design and Development, 3rd
      Edition, McGraw-Hill, New York, 2004
   2. Ullman, David G. (2009) The Mechanical Design Process, Mc Graw-Hill, 4th edition
   3. Kim, J. and Wilemon, D. (2002), Sources and assessment of complexity in NPD projects.
      R&D Management, 33 (1), pp. 16-30.
   4. Koen et al. (2001), Providing clarity and a common language to the ‘fuzzy front end’.
      Research Technology Management, 44 (2), pp.46-55
   5. Smith, Preston G. and Reinertsen, Donald G. (1998) Developing Products in Half the
      Time, 2nd Edition, John Wiley and Sons, New York, 1998.
   6. Husig and Kohn (2003), Factors influencing the Front End of the Innovation Process: A
      comprehensive Review of Selected empirical NPD and explorative FFE Studies,
      Brusell,Juni 2003,p.14.
   7. Smith, Preston G., Reinertsen Donald G. (1991) Developing products in half the time,
      Van Nostrand Reinhold, New York
   8. Cooper, R.G. Predevelopment activities determine new product success, in: Industrial
      Marketing Management,Vol.17 (1988), No 2,pp. 237-248
   9. Cooper R.G., Edgett, S. J.(2008), Maximizing productivity in product innovation, in:
      Research Technology Management, March 1,2008
   10. Khurana, A., and Rosenthal, S. R. (1988): Towards Holistic "Front Ends" in New Product
       Development, in: Journal of Product Innovation Management, 15 (1998), 1, pp. 57-75.
   11. Husig, S., Kohn, S., Poskela, J.(2005): The Role of Process Formalization in the early
       Phases of the Innovation Process, 12th Int. Prod. Development Conf.,Copenhagen,2005
   12. Kim, J., Wilemon, D.(2002) : Accelerating the Front End Phase in New Product
       Development [http://]
   13. Koen, Peter A.(2004), The Fuzzy Front End for Incremental, Platform, and Breakthrough
       Products. In: PDMA Handbook of New Product Development, 2nd Ed., N.Y., 2004,

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