Why’s & How’s of New Product Development

1. Why’s & How’s ofNew Product Development Mercer University Atlanta Dr. James E. Coleman 2005

2. Innovators (3-5%) Early Adopters (10-15%) Early Majority (34%) Late Majority (34%) Laggards/ Nonadopters (5-16%) 90 First to try new products Usually theopinionleaders Deliberatewait forothers totry first--avoid risks Suspiciousof new-- like things“the old way” Percent Adoption 50 Very cautiousabout new ideas--only buy afterthey are “proven” 20 5 0 Time Adoption Curve

3. Development & Introduction Market Growth Market Maturity Sales Decline + Total Industry Sales Total Industry Profit Time - Product Life Cycle $ 0

4. Opportunities arise by adding features to products And sometimes by eliminating them Product Level • Core benefit • Generic product • Expected product • Augmented product • Potential product

5. Key Success Criteria • Product fit with market need • Product fit with capabilities • Product superiority • Cross-functional team approach • Clear vision of future market based on customer feedback • Continuous, quality-based process

6. Key Challenges • Managing trade-offs (cost vs. features) • Dynamics of customer preferences, technologies & competitive products • Details: thousands of minor choices - each with significant cost & customer consequences • Time pressure • Organizational realities: • Lack of team empowerment • Functional allegiances & politics • Inadequate resources

7. Resource Requirements

8. Key Challenges • Managing trade-offs (cost vs. features) • Dynamics of customer preferences, technologies & competitive products • Details: thousands of minor choices - each with significant cost & customer consequences • Time pressure • Organizational realities: • Lack of team empowerment • Functional allegiances & politics • Inadequate resources • Lack of cross-functional representation

9. Organization Structure

10. Organization Structure

11. Identify Customer Needs New Product Process Screen Product Concepts Establish Target Specifications Generate Product Concepts Many iterations may be required Evaluate & Launch? Refine Specifications

12. Identify Customer Needs New Product Process Screen Product Concepts Establish Target Specifications Generate Product Concepts Many iterations may be required Evaluate & Launch? Refine Specifications

13. Identify Customer Needs • Define project scope • brief description of product idea • key business goals • target market(s) • assumptions & constraints • stakeholders

14. Identify Customer Needs • Define project scope • Gather data from customers • identify lead users • qualitative research • interviews (25-30) • focus groups • observe products in use environment

15. Identify Customer Needs • Define project scope • Gather data from customers • Interpret customer needs “What” not “How”

16. Identify Customer Needs • Define project scope • Gather data from customers • Interpret customer needs Be Specific

17. Identify Customer Needs • Define project scope • Gather data from customers • Determine customer needs • Organize the needs • print need statements on index cards • have lead users group similar needs • conduct quantitative research to determine relative importance of needs

18. Quantitative Survey

19. Identify Customer Needs • Define project scope • Gather data from customers • Determine customer needs • Organize the needs • Evaluate the conclusions • Have we missed any important customer groups? • Have we uncovered any new or latent needs? • What areas should be followed up in later research?

20. Identify Customer Needs New Product Process Screen Product Concepts Establish Target Specifications Generate Product Concepts Many iterations may be required Evaluate & Launch? Refine Specifications

21. Establish Product Specs • Product specifications • precise description of what the product must do or how it should perform • consists of a metric and a value • example: • average time to assemble (metric) • less than 75 seconds (value)

22. Target Established just after identifying customer needs. Represent aspirations for the product. Not constrained by current product category technology. Refined Determined after significant product & market analysis. Product expectations that are economically & technologically feasible. Follow hard trade-offs among desirable features. Product Specifications

23. Establish Product Specs • Prepare needs-metrics matrix • Should be performed by those involved in identifying needs • Determine metric for each significant customer need • Metrics should be practical • Address methods for measuring subjective needs

24. Establish Product Specs • Prepare needs-metrics matrix • Benchmark competitors • objective measures require purchase, disassembly & analysis • subjective measures require collection of customer perceptions • both are expensive and time consuming, but essential

25. Establish Product Specs • Prepare needs-metrics matrix • Benchmark competitors • Set ideal & marginally acceptable target values for each metric • ideal represents the best possible result (rarely attained) • marginally acceptable is the value at which the product is just barely commercially viable (minimum)

26. Tone • Zest 1 3 • Dove • Lever 2000 high moisturizing 2 6 • Coast • Safeguard • Lux heavy deodorant 5 non deodorant 4 7 • Dial • Lava • Lifebuoy 8 1. product perceptions 2. “ideal” products low moisturizing Positioning Illustrated

27. Establish Product Specs • Prepare needs-metrics matrix • Benchmark competitors • Set ideal & acceptable target values for each metric • Reflect on the results • are project team members “gaming”? • are multiple products/levels needed? • will these specs lead to commercial success?

28. Identify Customer Needs New Product Process Screen Product Concepts Establish Target Specifications Generate Product Concepts Many iterations may be required Evaluate & Launch? Refine Specifications

29. Concept Generation • Suspend judgment • If you don’t like an idea, suggest alternatives, don’t criticize • Focus on quantity, not quality • Welcome the infeasible or “boundary stretching” ideas • Use graphical & physical media

30. Class Exercise • Customer needs: • ability to drink hot coffee while driving to work • drive time is usually 30 minutes, but may be longer in heavy traffic • not fond of hot liquids in lap • wants hands free to talk on phone, adjust radio & send “friendly & helpful” signals to poor drivers

31. Identify Customer Needs New Product Process Screen Product Concepts Establish Target Specifications Generate Product Concepts Many iterations may be required Evaluate & Launch? Refine Specifications

32. Screening a quick approx-imate evaluation aimed at producing a few viable alternatives Scoring a more careful analysis of the remaining concepts designed to select the one(s) most likely to be most successful Concept Selection

33. Concept Screening

34. Concept Scoring

35. Concept Selection • point of no return • group consensus is critical • whole product may be different than the sum of the parts • if significant criteria are subjective, seek customer input • verify economic viability

36. Identify Customer Needs New Product Process Screen Product Concepts Establish Target Specifications Generate Product Concepts Many iterations may be required Evaluate & Launch? Refine Specifications

37. Refine Specifications • convert acceptable ranges to proposed point estimates • feature trade-offs • smooth ride vs. sporty handling • cost trade-offs • leather seats vs. affordability • competitive mapping may help

38. Competitive Mapping

39. Identify Customer Needs New Product Process Screen Product Concepts Establish Target Specifications Generate Product Concepts Many iterations may be required Evaluate & Launch? Refine Specifications

40. Economic Analysis • Build an NPV model of most likely set of expectations • Perform sensitivity analysis of all key assumptions & variables • Revise trade-off analysis • Consider qualitative factors • Remember: costs to date are SUNK • Market testing

41. Questions? Please access my web site if you’d like a copy of the presentation. http://ssbea.mercer.edu/coleman