04_05 How to Organize New Product Development Process PDF

1 Image credits: http://www.pimcy.nl/wp-content/uploads/2017/07/5-ways-to-build-ecosystem-750x313.png?x89635 How to organize the new product development process: sequential engineering, concurrent engineering and the stage gate...

1 Image credits: http://www.pimcy.nl/wp-content/uploads/2017/07/5-ways-to-build-ecosystem-750x313.png?x89635 How to organize the new product development process: sequential engineering, concurrent engineering and the stage gate model. Silvia Zamboni New product Development & Open Innovation  2 Product innovation Product innovation refers to the company capability to introduce new products and new features. Firms operating in high change environments have to develop new products: quickly (respecting the planned Time To Market) and on an ongoing basis decreasing costs with high level of quality standards Reduction in time to market at decreasing costs allows firms to develop new products on a continuous basis, because new resources are available for new innovation projects. Silvia Zamboni New product Development & Open Innovation  3 The NPD process: phases The new product development process consists in different phases that we can ideally separate. Flexibility to changes SCOPING & PROCESS DEVELOP- IDEA STAGE TESTING DEVELOP- LAUNCH BUSINESS MENT Uncertainity Market opportunities Prototype MENT Commercial CASE Detailed identification and development Product launch and Concept design ideas generation and selection approval ramp up development and and evaluation and process development development Toll gate Stage – Gate model: at the end of each phase, a control mechanism verifies if the project can continue or it has to be stopped. 4 alternatives: GO, KILL, REVIEW, FREEZE Silvia Zamboni New product Development & Open Innovation  4 At each gate… …the project could receive a feedback of GO to the next stage, if it respects the criteria of selections of that particular gate (in consistency with the strategy and the culture of the company) KILL: the project has to be stopped, because it does not respect the criteria established by the company (for example: not interesting, not aligned with the strategy, not feasible, not enough profitable …) REVIEW: the project is interesting but do not satisfies all the criteria to pass to the next stage. It needs to be refined and improved. Then, it will be re‐analyzed FREEZE: the project is interesting but it is too early to develop it (technology is not stable yet or the market is not yet prepared to accept it in terms of consumers habits or complementary products availability) Silvia Zamboni New product Development & Open Innovation  5 Example of evaluation criteria at each gate A. Corporate objectives, strategy, policies and values Is it compatible with the company’s current strategy and long range plan? Is it consistent with the corporate “image”? Is it consistent with the corporate attitude to risk? Is it consistent with the corporate attitude to innovation? … B. Marketing criteria (follows) Source: Adapted from Twiss, 1985 Does it meet a clearly defined market need? Estimated total market size Estimated market share Estimated market life Probability of commercial success …. Silvia Zamboni New product Development & Open Innovation 5  6 B. Marketing criteria Likely sales volume Time scale and relationship to the market plan Effect upon current products (or brands) Pricing and customer acceptance Competitive position Compatibility with existing distribution channels Estimated launching cost … C. Research and development criteria Is it consistent with the company’s R&D strategy? Does its potential warrant a change to the R&D strategy? Source: Adapted from Twiss, 1985 Probability of technical success Development cost and time Patent position Availability of R&D resources Possible future development of the product and future applications of the new technology generated Effect upon other projects (synergies or conflicts) …. Silvia Zamboni New product Development & Open Innovation 6  7 D. Financial Criteria Research and development costs (capital, revenue) Manufacturing investment Marketing investment Availability of finance related to time scale Effect upon other projects requiring finance Time to break‐even and maximum negative cash flow Potential annual benefit and time scale Expected profit margin Does it meet the company’s investment criteria? …. E. Production criteria New processes involved Source: Adapted from Twiss, 1985 Availability of manufacturing personnel – numbers and skills Compatibility with existing capability Cost and availability of raw material Cost of manufacture Requirements for additional facilities Manufacturing safety 1. … Silvia Zamboni New product Development & Open Innovation 7  8 Concept Design focuses on providing design solutions and technical innovation. A wide variety of creative directions are explored and all product elements communicated through sketches, illustrations and specifications ready for prototype development. Silvia Zamboni New product Development & Open Innovation  9 Example of a idea conceptualization prototype and a functional prototype Idea conceptualization prototype Functional prototype Silvia Zamboni New product Development & Open Innovation  10 Building and testing prototypes Silvia Zamboni New product Development & Open Innovation  11 Cost of changes Project technical life cycle Final product cost committed by the Out of pocket design (Budget of the project) Concept generation Production phase Launch and screening Concept development Evaluation and and detailed design improvement Silvia Zamboni New product Development & Open Innovation Source: March, M.M., 2006 11  12 Cost of changes Cost of changes increases every Project technical life cycle time you pass in the next phase Final product cost committed by the Out of pocket design (Budget of the project) The early phases cost less then the later phases Cost decided in the early phases is 80- 90% of the entire project budget Silvia Zamboni New product Development & Open Innovation Source: March, M.M., 2006 12  13 Engineering change order costs The flexibility to product or engineering change orders is higher at the beginning of the process, where the costs spent on the project are still low and characteristics of the product are not frozen yet. Ideally, any change at every stage can be avoid if it would be designed in the previous stage. In terms of costs this relationship can be roughly defined by the 10x “rule” that means: To correct a defect of a product launched on the market costs at least 10 times more than its removal in the operation plant (in field defects vs in house defects) To rectify something in the mass‐production costs 10 times more than rectify it in the previous phase of process engineering To correct something during the process engineering stage costs 10 times more than modify it during the design phase. ….and so on… Silvia Zamboni New product Development & Open Innovation  14 Silvia Zamboni New product Development & Open Innovation 14  15 Silvia Zamboni New product Development & Open Innovation Source: http://www.thinkinc.com/wp‐content/uploads/2013/08/think_prototyping_ideo‐300x225.jpg 15  16 The business model canvas (…out of the scope of this course…) Key Key Value Customer Customer partners activities propositions relationships segments Key resources Channels Cost structure and financial needs Revenue Model For more info: https://www.strategyzer.com/canvas/business-model-canvas Silvia Zamboni New product Development & Open Innovation  17 Towards the innovation factory: The Sequential Engineering approach Physical flow of the innovation project Time to market New product concept Concept development Information flow of Prototyping the Engineering and Change Orders testing Process Development Pre- production Basic elements: and testing Commercial  Strict definition of characteristics launch at the end of each phase Ramp up  High specialization of each phase  Sequential work on different phases of NPD process Silvia Zamboni New product Development & Open Innovation  18 The sequential approach Traditional engineering, also known as sequential engineering, is the process of new product development where each stage of the development process is carried out separately, and the next stage cannot start until the previous stage is finished. The information flow is only in one direction. This model is focused on a clear definition of the activities that have to be run in each phase along the process and it is based on a strong functional specialization at each stage. The main goal of this model is to reduce the degree of uncertainty at every phase (i.e. in the pharmaceutical industry), but if there is a need to change something into the project time and costs are higher than in the concurrent approach, because of the lack of communication among different functions before that the output of each activity is delivered to the next step. Silvia Zamboni New product Development & Open Innovation  19 Towards the innovation factory: The Concurrent Engineering approach (1/2) New product concept Physical flow of the innovation project Concept Time to market Information flow of the Engineering change orders development Prototyping and Basic elements: testing  Early involvement of participants Process Development  Team approach  Simultaneous work on different phases of Pre-production and testing product development Commercial launch Ramp up Silvia Zamboni New product Development & Open Innovation  20 Towards the innovation factory: The Concurrent Engineering approach (2/2) New product concept Physical flow of the innovation project Concept Time to market development Basic elements: Information flow of the Engineering change orders Prototyping and  Early involvement of testing participants  Team approach Process Development  Simultaneous work on different phases of product development Pre-production and testing Commercial launch Ramp up Silvia Zamboni New product Development & Open Innovation  21 The overlapping approach (or concurrent or parallel approach) In the concurrent approach each phase of the process can be overlapped, because the execution of one phase does not imply that the previous one has to be completed. Each activity is managed by an cross functional team that coordinate and control all the process, from the idea generation phase to the production of the product. Therefore, the time to market can be reduced by the partial overlapping of the phases and the higher communication along the process and the different roles / functions involved. Indeed, in this model the information flows are bidirectional between upstream and downstream phases of the process, anticipating potential improvement, changes, problems, constraints and enhancing the collaboration among the different functions involved in the new project. Silvia Zamboni New product Development & Open Innovation  22 Financial impact of S.E. and C.E. Cash Time to market of S.E. Time to market of C.E. flow Pay back period of S.E. Pay back period of C.E. + Time ‐ Silvia Zamboni New product Development & Open Innovation  23 ICT support in NPD process Product configurators New product concept CAD systems (CAD, CAE, CAM) Concept development Rapid and virtual prototyping Prototyping and testing Process Development Pre- production and testing Digital mock-up Commercial launch Ramp up Silvia Zamboni New product Development & Open Innovation  24 ICT support in NPD process Product configurators New product concept CAD systems (CAD, CAE, CAM) Concept development Rapid and virtual prototyping Prototyping and testing Process Development Pre- production and testing Digital mock-up Commercial launch Ramp up Silvia Zamboni New product Development & Open Innovation  25 The design process Source: www.italdesign.it Silvia Zamboni New product Development & Open Innovation  26 The virtual reality center Source: www.italdesign.it Silvia Zamboni New product Development & Open Innovation  27 Rapid prototying Source: www.italdesign.it Silvia Zamboni New product Development & Open Innovation  28 Source: www.italdesign.it Silvia Zamboni New product Development & Open Innovation  29 New Product Development process evolution thanks ICT  costs of different phases of  Time To Market new product development process  collaboration with supply chain actors  interaction with customer (reciprocal exploitation of competence) ( products / solutions more coherent with needs) Silvia Zamboni New product Development & Open Innovation 29  30 Customization of products through product configurators https://www.miteam.adidas.us/ Silvia Zamboni New product Development & Open Innovation  31 Collaborative innovation: how to get in contact with a company for new potential collaborations Silvia Zamboni New product Development & Open Innovation 31