BM050-3.5.

3 IMNPD
Innovation Management and New Product
Development

An introduction to New Product

Development (NPD)

New products Development:

Managing the new product
development process
 New Product Development-
Considerations when developing NPD
strategy

Learning Objectives
1. Examine the key activities of the NPD process
2. Explain that a product concept differs significantly from
a product idea or business opportunity
3. Recognize that screening is a continuous rather than a
single activity
4. Provide an understanding of the role of the knowledge
base on an organization in the new product
development process
5. Recognize that the technology intensity of the industry
considerably affects the NPD process
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 NPD Terminology
The fuzzy front end
The messy ‘getting started’ period of new product development
processes. It is 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 future development of an idea
Business Opportunity
A possible technical or commercial idea that may be transformed into a
revenue generating product
Product Concept Screening
A physical form or a technology plus a clear statement of benefit
Specification
Precise details about the product, including features, characteristics and
standards

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 NPD Terminology
Prototype/Pilot
A tentative physical product or system procedure, including features and
benefits
Production
The product produced by the scale up manufacturing process
Launch
The product actually marketed, in either market test or launch
Co-joint analysis
A method for deriving the utility values that consumers attach to varying
levels of a product’s attribute
Commercialization
A more descriptive label would be market introduction, the phase when
the product is launched and hopefully begins to generate sales revenue
Commercial Success
The end product that meets the goals set for it, usually profit
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 The activities that need to be
managed
Assembling Knowledge
 The vast majority of marketing text books fails to
identify the first activity of the NPD process, the
assembling of knowledge (Kotler, 2003)
 Organization’s base that creativity and ideas for
new products will flow
 Continual accumulation of knowledge an
organization that will create new product

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 The activities that need to be
managed
The generation of business opportunities
 Collection of possible business opportunities that could
realistically transform into successful product
1. Competitors products and reverse engineering
2. Technology
3. Unexploited patents
4. Customers and vendors
5. Senior and top management
6. Brainstorming and synectics
7. Individuals
8. Existing products

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 The activities that need to be
managed
Turning business opportunities into product
concepts
 Form: Physical thing to be crease(or in the case
of a service, the sequence of steps by which
service will be created)
 Technology: In most cases, there is one clear
technology that is at the base of innovation
 Needs: The benefits gained by the customer,
give the product value

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 The activities that need to be
managed
The screening of business opportunities
 Do we have the necessary commercial
knowledge and experience?
 Do we have the technical know-how to develop
the idea further?
 Would such a product be suitable for our
business?
 Are we sure there will be sufficient demand?

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 The activities that need to be
managed
Development of product prototypes
 Rapid prototyping- Focus on reducing time needed
is a top priority for firm. E.g. FMCG reduced total
time to market from 18-24 months to 6-9 months.
Technical Testing
 Closely linked to the development of product
prototypes
 An ongoing activity
 E.g. Dummies and simulated car crash used to test
cars on-going basis
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 The activities that need to be
managed
Market Testing and Consumer Research
 Traditional approach to NPD involved a significant stage
devoted to market testing
 Developed products are introduced to a representative
sample of the population to assess the market’s reaction

‘Marketers claim that consumer research techniques are now so

sophisticated that full blown test are no longer necessary. Besides,
once they have invested in R&D plus new plant, and created an
advertising campaign, they might as well go national immediately.
The fixed cost are so high that you might as well get on with it, says
Mark Sherrington of marketing consultancy Added
Value(Management Today, 1995)
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 The activities that need to be
managed
Market Introduction
 Commercialization is not necessarily at this stage where
large sums of money are spent on advertising
campaigns or multi-million production plants
 Companies can still withdraw from a project following the
results of test marketing
 Launch- Advertising in the right channel is a large part of
the cost
 E.g. Microsoft’s new product launch of Soapbox to
compete against YouTube was launched entirely web
based.

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 NPD across different Industries

Classification of new product development activities across

different industry
Industrial Products

Activities
Technological
Pharmaceutical Industry

Electronics Industry

Balance of Activities White Goods and

domestic Appliance
Marketing Industries
Activities FMCG

Good and Drinks

Industries

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 Organizational Structures and
Cross Functional Teams
 Nature of the industry and product being
developed will significantly influence the choice
of structure
 The organizational structure will considerably
affect the way its activities are managed
 E.g. Introduction of concurrent engineering
techniques means that companies will need to
be less reliant on functional operations

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 Organizational Structures and
Cross Functional Teams
Teams and project management
 Small medium sized organization -New product project teams
are usually comprised of staff from different functions who
operate on a ‘part time’ basis. Membership of the project team
may be just one of the many roles they perform.
 Large Organization- Where several projects are in progress at
any one time, there may be sufficient resources to enable
personnel to be wholly concerned with a project
 Ideally to have project team to comprise of people with
necessary skills to work together, share ideas and reach
compromise

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 Organizational Structures and
Cross Functional Teams
Functional Structures
 NPD is a cross disciplinary process and suffers if it is
segregated by function
 Common approach used by large manufacturing companies
to organize by product type with each product having its own
functional activities
 Some functions, are centralized across the whole organization
to improve efficiency or provide common features
 While many organizations have clearly defined company
structures, closer inspection reveal an informal structure that
sits on top of formal structure

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 Functional Company
Organization
Functional Company
Senior
Organization Management

Function 1 Function 2 Function 3

Product A Product B

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 Functional Company
Organization
Diversification by
product with
Senior
centralized functions Management

Product 1 Product 2 Product 3

Function 1 Function 2 Function 1 Function 2

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 Organizational Structures and
Cross Functional Teams
Features and benefits of a matrix
organizational structure
 Provision of additional channels of
communication
 Increase in informal communication channels
 Increase in information loads
 Increase in diversity for individuals

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 Organizational Structures and
Cross Functional Teams

Business
Team 1

Business
Team 2

Business
Team 3

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 Tutorial

1. Explain why there is not one best organization structure

for new product development.
2. What are the way scientists view innovation and the
way marketing people view it?
3. ‘New products are a necessary evil.’ From whose
viewpoint are they necessary and from whose
viewpoint are they evil?

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