In
businessA business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
and
engineeringEngineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
,
new product development (NPD) is the term used to describe the complete process of bringing a new
productIn general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (like a service, experience, or belief). There are two parallel paths involved in the NPD process: one involves the idea generation,
product design-Introduction:Product design is the process of creating a new product to be sold by a business or enterprise to its customers. It is concerned with the efficient and effective generation and development of ideas through a process that leads to new products.Product designers conceptualize and...
and detail engineering; the other involves market research and
marketing analysisMarketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
. Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of
product life cycle managementProduct life-cycle management is the succession of strategies used by business management as a product goes through its life-cycle. The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages.Product life-cycle Like human beings,...
used to maintain or grow their market share.
The process
- Idea Generation is often called the "fuzzy front end" of the NPD process
- Ideas for new products can be obtained from basic research using a SWOT analysis
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a business venture...
(Strengths, Weaknesses, Opportunities & Threats), Market and consumer trends, company's R&D department, competitors, focus groups, employees, salespeople, corporate spies, trade shows, or Ethnographic discovery methods (searching for user patterns and habits) may also be used to get an insight into new product lines or product features.
- Lots of ideas are being generated about the new product. Out of these ideas many ideas are being implemented. The ideas use to generate in many forms and their generating places are also various. Many reasons are responsible for generation of an idea.
- Idea Generation or Brainstorming of new product, service, or store concepts - idea generation techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas in the Idea Screening Phase (shown in the next development step).
- Idea Screening
- The object is to eliminate unsound concepts prior to devoting resources to them.
- The screeners should ask several questions:
- Will the customer in the target market
A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise. A well-defined target market is the first element to a marketing strategy...
benefit from the product?
- What is the size and growth forecasts of the market segment/target market?
- What is the current or expected competitive pressure for the product idea?
- What are the industry sales and market trends the product idea is based on?
- Is it technically feasible to manufacture the product?
- Will the product be profitable when manufactured and delivered to the customer at the target price?
- Concept Development and Testing
- Develop the marketing and engineering details
- Investigate intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
issues and search patentA patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
data bases
- Who is the target market and who is the decision maker in the purchasing process?
- What product features must the product incorporate?
- What benefits will the product provide?
- How will consumers react to the product?
- How will the product be produced most cost effectively?
- Prove feasibility through virtual computer aided rendering, and rapid prototyping
- What will it cost to produce it?
- Testing the Concept
Concept testing is the process of using quantitative methods and qualitative methods to evaluate consumer response to a product idea prior to the introduction of a product to the market. It can also be used to generate communication designed to alter consumer attitudes toward existing products...
by asking a sample of prospective customers what they think of the idea. Usually via Choice ModellingChoice modelling attempts to model the decision process of an individual or segment in a particular context. Choice modelling may also be used to estimate non-market environmental benefits and costs....
.
- Business Analysis
- Estimate likely selling price based upon competition and customer feedback
- Estimate sales volume based upon size of market and such tools as the Fourt-Woodlock equation
The Fourt-Woodlock equation is a market research tool to describe the total volume of consumer product purchases per year based on households which initially make trial purchases of the product and those households which make a repeat purchase within the first year...
- Estimate profitability and break-even point
- Beta Testing and Market Testing
- Produce a physical prototype or mock-up
- Test the product (and its packaging) in typical usage situations
- Conduct focus group customer interviews or introduce at trade show
- Make adjustments where necessary
- Produce an initial run of the product and sell it in a test market area to determine customer acceptance
- Technical Implementation
- New program initiation
- Finalize Quality management system
A quality management system can be expressed as the organizational structure, procedures, processes and resources needed to implement quality management.-Elements of a Quality Management System:# Organizational structure# Responsibilities# Methods...
- Resource
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
estimation
- Requirement publication
- Publish technical communication
Technical communication is a method of researching and creating information about technical processes or products directed to an audience through media. The information must be relevant to the intended audience. Technical communicators often work collaboratively to create products for various...
s such as data sheets
- Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
operations planning
- Department scheduling
- Supplier collaboration
- Logistics
Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and...
plan
- Resource plan publication
- Program review and monitoring
- Contingencies - what-if planning
- Commercialization (often considered post-NPD)
- Launch the product
- Produce and place advertisements
Advertising is a form of communication used to persuade an audience to take some action with respect to products, ideas, or services. Most commonly, the desired result is to drive consumer behavior with respect to a commercial offering, although political and ideological advertising is also common...
and other promotionPromotion is one of the four elements of marketing mix . It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision....
s
- Fill the distribution
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
pipeline with product
- Critical path analysis is most useful at this stage
- New Product Pricing
- Impact of new product on the entire product portfolio
- Value Analysis (internal & external)
- Competition and alternative competitive technologies
- Differing value segments (price, value, and need)
- Product Costs (fixed & variable)
- Forecast of unit volumes, revenue, and profit
These steps may be iterated as needed. Some steps may be eliminated. To reduce the time that the NPD process takes, many companies are completing several steps at the same time (referred to as
concurrent engineeringConcurrent engineering is a work methodology based on the parallelization of tasks . It refers to an approach used in product development in which functions of design engineering, manufacturing engineering and other functions are integrated to reduce the elapsed time required to bring a new product...
or
time to marketIn commerce, time to market is the length of time it takes from a product being conceived until its being available for sale. TTM is important in industries where products are outmoded quickly...
). Most industry leaders see new product development as a
proactive process where resources are allocated to identify market changes and seize upon new product opportunities before they occur (in contrast to a
reactive strategy in which nothing is done until problems occur or the competitor introduces an innovation). Many industry leaders see new product development as an ongoing process (referred to as
continuous development) in which the entire organization is always looking for opportunities.
For the more innovative products indicated on the diagram above, great amounts of uncertainty and change may exist, which makes it difficult or impossible to plan the complete project before starting it. In this case, a more
flexible approachFlexible product development is the ability to make changes in the product being developed or in how it is developed, even relatively late in development, without being too disruptive...
may be advisable.
Because the NPD process typically requires both engineering and marketing expertise,
cross-functional teamA cross-functional team is a group of people with different functional expertise working toward a common goal. It may include people from finance, marketing, operations, and human resources departments. Typically, it includes employees from all levels of an organization...
s are a common way of organizing projects. The team is responsible for all aspects of the project, from initial idea generation to final commercialization, and they usually report to senior management (often to a vice president or Program Manager). In those industries where products are technically complex, development research is typically expensive, and product life cycles are relatively short, strategic alliances among several organizations helps to spread the costs, provide access to a wider skill set, and speeds the overall process.
Also, notice that because engineering and marketing expertise are usually both critical to the process, choosing an appropriate blend of the two is important. Observe (for example, by looking at the
See also or
References sections below) that this article is slanted more toward the marketing side. For more of an engineering slant, see the Ulrich and Eppinger, Ullman references below.
People respond to new products in different ways. The adoption of a new technology can be analyzed using a variety of
diffusion theoriesDiffusion is the process by which a new idea or new product is accepted by the market. The rate of diffusion is the speed that the new idea spreads from one consumer to the next. Adoption is similar to diffusion except that it deals with the psychological processes an individual goes through,...
such as the
Diffusion of innovationsDiffusion of Innovations is a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures. Everett Rogers, a professor of rural sociology, popularized the theory in his 1962 book Diffusion of Innovations...
theory.
A new product pricing process is important to reduce risk and increase confidence in the pricing and marketing decisions to be made. Bernstein and Macias describe an integrated process that breaks down the complex task of new product pricing into manageable elements.
The Path to Developing Successful New Products points out three key processes that can play critical role in product development: Talk to the customer, Nurture a project culture,and Keep it focused.
Fuzzy Front End
The Fuzzy Front End is the messy "getting ended" period of new product engineering development processes. It is in the front end where the organization formulates a concept of the product to be developed and decides whether or not to invest resources in the further development of an idea. It is the phase between first consideration of an opportunity and when it is judged ready to enter the structured development process (Kim and Wilemon , 2002; Koen et al., 2001).
It includes all activities from the search for new opportunities through the formation of a germ of an idea to the development of a precise concept. The Fuzzy Front End ends when an organization approves and begins formal development of the concept.
Although the Fuzzy Front End may not be an expensive part of product development, it can consume 50% of development time (see Chapter 3 of the Smith and Reinertsen reference below), and it is where major commitments are typically made involving time, money, and the product’s nature, thus setting the course for the entire project and final end product. Consequently, this phase should be considered as an essential part of development rather than something that happens “before development,” and its cycle time should be included in the total development cycle time.
Koen et al. (2001, pp. 47–51) distinguish five different front-end elements (not necessarily in a particular order):
- Opportunity Identification
- Opportunity Analysis
- Idea Genesis
- Idea Selection
- Concept and Technology Development
The first element is the opportunity identification. In this element, large or incremental business and technological chances are identified in a more or less structured way. Using the guidelines established here, resources will eventually be allocated to new projects.... which then lead to a structured NPPD (New Product & Process Development)strategy.
The second element is the opportunity analysis. It is done to translate the identified opportunities into implications for the business and technology specific context of the company. Here extensive efforts may be made to align ideas to target customer groups and do market studies and/or technical trials and research.
The third element is the idea genesis, which is described as evolutionary and iterative process progressing from birth to maturation of the opportunity into a tangible idea. The process of the idea genesis can be made internally or come from outside inputs, e.g. a supplier offering a new material/technology, or from a customer with an unusual request.
The fourth element is the idea selection. Its purpose is to choose whether to pursue an idea by analyzing its potential business value.
The fifth element is the concept and technology development. During this part of the front-end, the business case is developed based on estimates of the total available market, customer needs, investment requirements, competition analysis and project uncertainty. Some organizations consider this to be the first stage of the NPPD process (i.e., Stage 0).
The Fuzzy Front End is also described in literature as "Front End of Innovation", "Phase 0", "Stage 0" or "Pre-Project-Activities".
A universally acceptable definition for Fuzzy Front End or a dominant framework has not been developed so far.
In a glossary of PDMA, it is mentioned that the Fuzzy Front End generally consists of three tasks: strategic planning, concept generation, and, especially, pre-technical evaluation. These activities are often chaotic, unpredictable, and unstructured. In comparison, the subsequent new product development process is typically structured, predictable, and formal.
The term
Fuzzy Front End was first popularized by Smith and Reinertsen (1991)
R.G.Cooper (1988) describes the early stages of NPPD as a four step process in which ideas are generated (I),subjected to a preliminary technical and market assessment(II) and merged to coherent product concepts(III) which are finally judged for their fit with existing product strategies and portfolios (IV).
In a more recent paper, Cooper and Edgett (2008) affirm that vital predevelopment activities include:
- Preliminary market assessment.
- Technical assessment.
- Source-of-supply-assessment:suppliers and partners or alliances.
- Market research : market size and segmentation analysis,VoC (voice of the customer
Voice of the customer is a term used in business and Information Technology to describe the in-depth process of capturing a customer's expectations, preferences and aversions...
) research.
- Product concept testing
- Value-to-the customer assessment
- Product definition
- Business and financial analysis.
These activities yield vital information to make a Go/No-Go to Development decision.
In the in-depth study by Khurana and Rosenthal front-end activities include:
- product strategy formulation and communication,
- opportunity identification and assessment,
- idea generation,
- product definition,
- project planning, and
- executive reviews.
Economical analysis, benchmarking of competitive products,and modeling and prototyping are also important activities during the front-end activities.
The outcomes of FFE are the
- mission statement
- customer needs
- details of the selected concept
- product definition and specifications
- economic analysis of the product
- the development schedule
- project staffing and the budget, and a
- business plan aligned with corporate strategy.
In a paper by Husig, Kohn and Huskela (2005) was proposed a conceptual model of Front-End Process which includes early Phases of Innovation Process. This model is structured in three phases and three gates:
- Phase 1: Environmental screening or opportunity identification stage in which external changes will be analysed and translated into potential business opportunities.
- Phase 2: Preliminary definition of an idea or concept.
- Phase 3: Detailed product, project or concept definition, and Business planning.
The gates are:
- Opportunity screening;
- Idea evaluation;
- Go/No-Go for development.
The final gate leads to a dedicated new product development project. Many professionals and academics consider that the general features of Fuzzy Front End (fuzziness, ambiguity, and uncertainty) make it difficult to see the FFE as a structured process,but rather as a set of interdependent activities ( e.g. Kim and Wilemon, 2002). However, Husig et al., 2005 [10] argue that front-end not need to be fuzzy, but can be handled in a structured manner. Peter Koen argues that in the FFE for incremental,platform and radical projects,three separate strategies and processes are typically involved. The traditional Stage Gate (TM) process was designed for incremental product development,namely for a single product.The FFE for developing a new platform must start out with a strategic vision of where the company wants to develop products and this will lead to a family of products. Projects for breakthrough products start out with a similar strategic vision, but are associated with technologies which require new discoveries. It is worth mentioning what are incremental, platform and breakthrough products.
Incremental products are considered to be cost reductions, improvements to existing product lines, additions to existing platforms and repositioning of existing products introduced in markets.
Breakthrough products are new to the company or new to the world and offer a 5-10 times or greater improvement in performance combined with a 30-50% or greater reduction in costs.
Platform products establish a basic architecture for a next generation product or process and are substantially larger in scope and resources than incremental projects.
NPD organizations
- Product Development and Management Association
The Product Development and Management Association is a non-profit professional society that organizes and publishes information about the development of new products....
(PDMA)
- Association of International Product Marketing & Management
The Association of International Product Marketing & Management is a professional association for product managers founded in 1998. It has approximately 8,000 members worldwide. It runs certification courses for product managers and product marketing managers in addition to running educational...
NPD strategies
- Design for six sigma
Design for Six Sigma is a separate and emerging business-process management methodology related to traditional Six Sigma. While the tools and order used in Six Sigma require a process to be in place and functioning, DFSS has the objective of determining the needs of customers and the business, and...
- Flexible product development
Flexible product development is the ability to make changes in the product being developed or in how it is developed, even relatively late in development, without being too disruptive...
- Quality function deployment
Quality function deployment is a “method to transform user demands into design quality, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process.”, as...
- Stage-Gate model
A stage–gate model, also referred to as a phase–gate process, is a project management technique in which an initiative or project is divided into stages separated by gates. At each gate, the continuation of the process is decided by a manager or a steering committee...
- User-centered design
In broad terms, user-centered design or pervasive usability is a design philosophy and a process in which the needs, wants, and limitations of end users of a product are given extensive attention at each stage of the design process...
Related fields
- Brand management
Brand management is the application of marketing techniques to a specific product, product line, or brand.The discipline of brand management was started at Procter & Gamble as a result of a famous memo by Neil H...
- Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
- Industrial design
Industrial design is the use of a combination of applied art and applied science to improve the aesthetics, ergonomics, and usability of a product, but it may also be used to improve the product's marketability and production...
- Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- Product management
Product management is an organizational lifecycle function within a company dealing with the planning, forecasting, or marketing of a product or products at all stages of the product lifecycle....
See also
- Choice Modelling
Choice modelling attempts to model the decision process of an individual or segment in a particular context. Choice modelling may also be used to estimate non-market environmental benefits and costs....
- Conceptual economy
Conceptual economy is a term describing the contribution of creativity, innovation, and design skills to economic competitiveness, especially in the global context.- History and background :...
- Product
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
- Product lifecycle
- Pro-innovation bias
In diffusion of innovation theory, a pro-innovation bias reflects a personal bias toward a new innovation that someone is trying to implement or diffuse among a population...
- Requirements management
Requirements management is the process of documenting, analyzing, tracing, prioritizing and agreeing on requirements and then controlling change and communicating to relevant stakeholders. It is a continuous process throughout a project...
- Social design
Social design has many definitions and the term is put to very different uses across the globe. Some definitions exist within the design world and refers to design in its traditional sense, meaning the shaping of products and services...
- Time to market
In commerce, time to market is the length of time it takes from a product being conceived until its being available for sale. TTM is important in industries where products are outmoded quickly...
(TTM)