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Optimizing New Product Development Strategies: Insights from Pennsylvania State University

This document explores key strategies for optimizing new product development (NPD), emphasizing the trade-offs that companies face when choosing their approaches. It examines the differences in development strategies between digital and non-digital products, the impact of the internet on NPD, and the importance of customer feedback throughout the process. Key strategies include launching products quickly, utilizing parallel development, and testing various approaches simultaneously. The analysis incorporates concepts from decision trees and highlights the relevance of timely market entry and quality.

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Optimizing New Product Development Strategies: Insights from Pennsylvania State University

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  1. New Product Development Min Ding Pennsylvania State University

  2. Topics • What tradeoffs/factors determine the optimal NPD strategy • Contrast development strategies between digital and non-digital products • Impact of internet on NPD for non-digital products

  3. Key Strategies in NPD • Try many different approaches at the same time • Launch a product fast with imperfect profile • Do things in parallel • Use customer feedbacks (understand customer needs) before and during the NPD process (instead of waiting until test market)

  4. 1. Try many different approaches at the same time • Tradeoff between

  5. Funnel: Business Opportunity $ Tunnel I: Business Opportunity $ Tunnel II: Business Opportunity $ NPD Pipelines Structures

  6. Three Critical Drivers • cost • probability of survival • magnitude of the business opportunity (dependency on time to market and quality of the product)

  7. An example: Decision Tree for Three Stage NPDSource: Ding and Eliashberg, 2000 Stage 3 Stage 2 Stage 1 Stage 0 Expected (Phase I) (Phase II) (Phase III) Launch Profit s1 s11 E0(s11) n1=n1* s2n1* s2 s1=0 0 n2=n2* s3n2* s11 E0(s11) s1 s2<n1* n1=s2 s3 n3=n3* s1=0 0 s1 s11 E0(s11) s2n1* n1=n1* s3<n2* Ln3* s2 s1=0 0 n2=s3 s11 E0(s11) s1 s2<n1* n1=s2 s1=0 0 L s11 E0(s11) s1 s2n1* n1=n1* s2 consider all available leads (L) s1=0 0 n2=n2* L<n3* s11 E0(s11) s1 s3n2* s2<n1* n1=s2 s3 s1=0 0 n3=L s11 E0(s11) s1 n1=n1* s2n1* s3<n2* s2 s1=0 0 n2=s3 s1 s11 E0(s11) s2<n1* n1=s2 s1=0 0

  8. 2. Launch a product fast with imperfect profile • Tradeoff between

  9. 3. Do things in parallel • Tradeoff between

  10. 4. Use customer feedbacks before and during the NPD process • Tradeoff between

  11. What’s the big deal about internet NPD? • There should be no such notion of old vs. new ways of NPD. The NPD decision rules (tradeoffs) are still the same. • The NPD strategies are different simply because the parameter values of the three prior discussed tradeoffs are significantly different.

  12. Contrast development strategies between digital and non-digital products Try different approaches at the same time

  13. Contrast development strategies between digital and non-digital products Launch a product with imperfect profile

  14. Contrast development strategies between digital and non-digital products Do Things in Parallel

  15. Contrast development strategies between digital and non-digital products Use Customer Feedbacks

  16. Impact of internet on non-digital product development Let’s go back and revisit the four decision rules

  17. Information Acceleration SystemsSource:Urban, Weinberg, and Hauser, 1996. • Place consumers in a virtual buying environment • IA systems simulate the information that’s available to consumers when they make a purchase decision • Virtual showroom visits • Advertising (TV, magazines, newspapers) • Review articles and consumer-oriented reports • Word of mouth • Are these virtual environments realistic enough to accurately measure behavior? • Early evidence is positive, but mixed Can we use similar approach to simulate new product for customers?

  18. Summary • Key NPD strategies and the tradeoffs involved in each; • Be able to differentiate NPD strategies between digital and non-digital NPD; Sample final question: Propose the best product development strategies for each of the following two cases: • an e-commerce site for our class project • A best selling book for undergraduates

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