Why’s & How’s of New Product Development

Why’s & How’s ofNew Product Development

Mercer University AtlantaDr. James E. Coleman

2005

Adoption CurvePe

rcen

t Ado

ptio

n

Time

Innovators(3-5%)

First to try new

products

EarlyAdopters(10-15%)

Usually theopinionleaders

EarlyMajority

(34%)

Deliberatewait forothers totry first--avoid risks

LateMajority

(34%)

Very cautious

about new ideas--only

buy afterthey are

“proven”

Laggards/Nonadopters

(5-16%)

Suspiciousof new--

like things“the old way”

05

20

50

90

$ 0

Development& Introduction

MarketGrowth

MarketMaturity

SalesDecline

+

-Time

Total Industry

Sales

Total IndustryProfit

Product Life Cycle

Product Level

Core benefit Generic product Expected product Augmented product Potential product

Opportunities arise by adding features

to products

And sometimes by eliminating them

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

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

Resource Requirements

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

Organization Structure

Organization Structure

Functional Project

Tech expertise + --Staff efficiency + --Projectefficiency -- +Developmentspeed -- +

New Product Process

EstablishTarget

Specifications

Evaluate &Launch?

RefineSpecifications

Generate Product Concepts

ScreenProduct

Concepts

Identify Customer

Needs

Many iterations may be required

New Product Process

EstablishTarget

Specifications

Evaluate &Launch?

RefineSpecifications

Generate Product Concepts

ScreenProduct

Concepts

Identify Customer

Needs

Many iterations may be required

Identify Customer Needs

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

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

Identify Customer Needs

Define project scope Gather data from customers Interpret customer needs

“What” not “How”

CustomerStatement

Good NeedStatement

Poor NeedStatement

Why don't youput protectiveshields aroundthe batterycontacts?

The battery isprotected fromaccidental shorting.

The batterycontacts arecovered by a plasticsliding door.

Identify Customer Needs

Define project scope Gather data from customers Interpret customer needs

Be Specific

CustomerStatement

Good NeedStatement

Poor NeedStatement

I drop my screwdriver all thetime.

The screwdriver willoperate normallyafter repeateddropping.

The screwdriver isrugged.

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

Quantitative Survey

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?

New Product Process

EstablishTarget

Specifications

Evaluate &Launch?

RefineSpecifications

Generate Product Concepts

ScreenProduct

Concepts

Identify Customer

Needs

Many iterations may be required

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)

Product Specifications

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.

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

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

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)

Positioning Illustrated

high moisturizing

non

deod

oran

theavy

deodorant

low moisturizing

•Tone•Dove

•Lux•Coast

•Zest

•Lever 2000

•Safeguard

•Dial•Lifebuoy

•Lava1. product perceptions

1

2

3

45

6

7

8

2. “ideal” products

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?

New Product Process

EstablishTarget

Specifications

Evaluate &Launch?

RefineSpecifications

Generate Product Concepts

ScreenProduct

Concepts

Identify Customer

Needs

Many iterations may be required

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

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

New Product Process

EstablishTarget

Specifications

Evaluate &Launch?

RefineSpecifications

Generate Product Concepts

ScreenProduct

Concepts

Identify Customer

Needs

Many iterations may be required

Concept Selection

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 Screening

Concept Scoring

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

New Product Process

EstablishTarget

Specifications

Evaluate &Launch?

RefineSpecifications

Generate Product Concepts

ScreenProduct

Concepts

Identify Customer

Needs

Many iterations may be required

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

Competitive Mapping

New Product Process

EstablishTarget

Specifications

Evaluate &Launch?

RefineSpecifications

Generate Product Concepts

ScreenProduct

Concepts

Identify Customer

Needs

Many iterations may be required

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

Questions?

Please access my web site if you’d like a copy of the presentation.

http://ssbea.mercer.edu/coleman