1. New Product Development TO spring 2007

2. New Product Developmentdefinition • New product development (NPD) is the process of bringing new products or services to market • NPD is the first stage of the product lifecycle Illustration from the Australian Museum

3. New is the new “new” New products are essential to the growth of any corporation Introduction of new products into a company’s portfolio make up 49.2% (the Best) / 25.2% (the Rest) of sales growth* Newness to market Newness to company New Product Development *Cooper, Winning at New Products, 2001 Image from wikipedia

4. NPD Stage Gate Processbenefits • Creates a baseline against which all new products in development will be evaluated • Streamlines the process • Expedites the process • Competitive advantage in the marketplace • Speed to market enhances profitability • Gives colleagues across an organization common language and goals

5. New Product Development in a consumer-packaged good setting

6. New Product Developmentindustry snapshot • 79% of companies claim to have an NPD process or stage gate system in place but . . . • Most are poorly designed • Don’t include “tried and true” best practices • Badly implemented • Stage gate processes are often built ad-hoc, and not through a formal, defined process review Adam + Boike, PDMA Foundations CPAS Study Reveals New Trends (2004, PDMA study)

7. New Product Developmentroles + responsibilities marketing and project management roles are constant throughout the process % of FTE R+D/Legal Mfg/Comm/Sales project duration

8. BCG Matrix Helps prioritize projects within the product portfolio Illustrates long-term portfolio strategy high-growth products in need of funding (stars) low-growth, but high-value products (cows) New Product Developmentportfolio + strategy BCG matrix product profile

9. NPD Stage Gatego/kill criteria • Go/kill parameters • May be category/region dependent, but should be consistent within the category/region to ensure that the same criteria is used to determine the overall portfolio • Expected profitability, sales • Launch date / timing • Hurdles met: test results • e.g. stability, consumer interest, etc.

10. Stage Gate in a CPG Environment note: activities in this presentation are illustrative + do not represent a single corporation’s NPD process

11. ideate investigate deliberate actuate validate create evaluate NPD Stage Gate Process proposed process

12. Key Activities Research product / portfolio gaps Market trends, customer requests, idea banks Brainstorm possible solutions Review/assess ideas based on: Feasibility, portfolio fit, opportunity Output Select 2 – 3 potential solutions for further testing and review ideate Objective: Generate ideas to fulfill market gaps ideate investigate deliberate actuate validate create evaluate

13. investigate Objective: harmonize voice of customer, confirm feasibility • Key Activities • Conduct qualitative testing (human factors) • representative per target audience • Brief manufacturing review • Research • Determine competitive landscape (if any), patent issues • Output • Select 1 opportunity to refine at the next gate and conduct business case on the selected offering ideate investigate deliberate actuate validate create evaluate

14. deliberate Objective: developing the initial P+L scenarios + manufacturing strategy = business case • Key Activities • Conduct quantitative testing • Define sales pricing strategy • Develop P+L scenarios (create assumptions) • Review manufacturing needs • Identify resources + project timing • Create initial product claims • Conduct focus groups (if needed); obtain feedback to refine • Output • Pricing strategy • P+L • Project Plan : timelines, resources + activities ideate investigate deliberate actuate validate create evaluate

15. create Objective: freeze design / begin to confirm P+L assumptions • Key Activities • Purchase unit tooling, create initial prototypes • Conduct stability, user, stress, drop, consumer acceptance, and claims validation testing • Further define production and marketing plans • Design secondary packaging + labeling • Engage + excite customers • Output • Refined financial assumptions • Clarified timeline and resource allocations • Design freeze ideate investigate deliberate actuate validate create evaluate

16. validate Objective: confirm P+L, manufacturing strategy + timeline • Key Activities • Conduct production trials; confirm outputs • primary + secondary pkg. • Final revision of P+L • Obtain initial products from production tooling • Conduct shake/ship distribution studies • Create marketing support materials • Confirm legal hurdles have been addressed • Output • Confirmed P+L • Validated production equipment • Confirmed shipping architecture and materials • Developed advertising ideate investigate deliberate actuate validate create evaluate

17. actuate Objective: launch products and promotional support • Key Activities • Build launch + pipeline volumes • Ensure execution of distribution plan • Launch marketing support • Advertising • PR • Output • Day 1 Launch ideate investigate deliberate actuate validate create evaluate

18. evaluate Objective: post-launch review • Key Activities • Conduct lessons learned • Confirm project to operations hand-off is completed • Output • Developed “best practices” ideate investigate deliberate actuate validate create evaluate

19. NPD Stage Gate Processes conclusions

20. NPD Stage GateConclusions • Implementing an NPD Stage Gate process requires time and alignment across the organization to be an effective tool • Updating the NPD Stage Gate parameters are critical to the success of the organization • as the competitive landscape changes and accelerates, Stage Gate processes + go/kill criteria should also be revisited • NPD Stage Gate process is most successful in a “core,” cross-functional team environment • If not possible, structured handoffs from stage to stage are imperative in the success of the development

21. NPD Stage Gate + InnovationConclusions • There is no magic bullet to developing new products “that win”: leveraging NPD Stage Gate • ensures that once the idea is cultivated, the organization will have the mechanisms to produce it • Innovation is only as good as the culture • Do it, don’t just say it • Failure will happen • More successes = risk of failure

22. NPD Stage Gate + Innovation Conclusions • Innovation is a reinforcement of a value chain* • product development integral to the chain • Innovation “screens” require non-traditional thinking** • non-conventional market research • variable metrics (e.g. not just COGS) • work outside direct “competencies” ideation project selection product development commercialization *Booz Allen Hamilton Global Innovation 1000 / 2006 **Harvard Business Review, Kanter Innovation: The Classic Traps / November 2006

23. Thank You thankyou!