New Product Development: Definition & Process PDF

# New Product Development: Definition | Term | Definition | |---|---| | Product | Something sold by organization to customers. Can be "Product" or "Service" | | Product Development | Set of activities to bring product to market. Market opportunity → Product launch | # New Product Development: Succ...

# New Product Development: Definition | Term | Definition | |---|---| | Product | Something sold by organization to customers. Can be "Product" or "Service" | | Product Development | Set of activities to bring product to market. Market opportunity → Product launch | # New Product Development: Success Criteria | Success Criterion | Definition | |---|---| | Profit | Product revenue exceeds product cost. Primary measurement in for-profit organizations. | | Product Quality | Performance: Ability to perform expected functions. Finish, Reliability, Durability, Serviceability, Style. | | Product Cost | Capital cost: Cost of machinery, tooling. Unit cost: Cost of producing each additional unit. | | Development Cost | Labor cost and prototype cost to create product. Measures efficiency of development process | | Development Time | Quickness of product team in delivering product. Measures responsiveness to market demands | | Development Capability | New skills learned to develop future products. Potential new competitive advantages | # New Product Development: Key Functions | | |---|---|---| | **Marketing:** | **Product** | **Engineering/Dev:** | | - Identify opportunities | | - Define physical form | | - Define market segments | | - Do technical design | | - Identify customer needs | | - Do industrial design | | **Manufacturing:** | | | | - Design production system | | **Other Functions:** | | - Make products | | - Sales | | - Purchase parts | | - Finance | | | | - Legal | # New Product Development: Duration & Cost | Metric | Screwdriver | Printer | Airplane | |---|---|---|---| | Annual Volume | 100K/yr | 4M/yr | 50/yr | | Sales Price | $6 | $130 | $200 M | | Product Life Cycle | 40 yr | 2 yr | 30 yr | | Part Count | 3 parts | 200 parts | 130K parts | | Team Size | 3 people | 100 people | 6,800 people | | Development Time | 1 yr | 1.5 yr | 4.5 yr | | Development Cost | $150K | $50M | $3 B | | Production Investment | $150K | $25M | $3 B | # Challenges in New Product Development Process | Challenge | Description | |---|---| | Trade-Offs | Cost vs. weight? Cost vs. performance? Tesla electric car; Lithium-ion batteries; $109,000. Prius hybrid electric car; NiMH batteries; $33,000 | | Market Dynamics | New technologies. Competitor products. Changing customer preferences. | | Details | 1000s of details to resolve in new product. Provide tool-less access to replace batteries? Is feature X worth 3 extra months of development? | | Time Pressure | Additional development time can cost market share. | | Economics | Significant investment to develop new product. Additional investment to market new product. Product must be profitable to provide ROI. | # Personal Appeals of New Product Development | Appeal | Description | |---|---| | Act of Creation | Idea → Prototype → Market Success. Few activities as creative. | | Societal Needs | New products can satisfy needs of society. Great products can delight & even save lives. | | Team Diversity | Different perspectives from different team members. Opportunity to broaden one's horizons. | | Team Energy | Focused, committed teams are exciting. Working together to create something new. | # Personal Pitfalls of New Product Development | Appeal | Description | |---|---| | No Autonomy | Meddling by upper management. | | Organizational Conflict | Functional (vs. project) organizational structure. Project members might get pulled to other areas. Worse yet: Matrix structures with 2 bosses. | | Low Resources | Lack of staff, Lack of skills. Lack of money, Lack of equipment. | | No Collaboration | Over-emphasis on only one function, eg Engineering. Little input from Marketing or Production. |