3BA6

Computers and Society

The Product Development Process
Objectives
♦ Examine the product development process, with
emphasis on
– Idea generation and selection
– Virtual commercialisation of an innovation
♦ Examine the sources of new product ideas
– Research techniques to identify consumer problems as
sources of new ideas
– Product Design Specifications (PDS) methodology as a
tool for generating and selecting ideas
♦ Look at market analysis
Think of a Product…
…that appeals to you
♦ Does it appeal because it looks good?
♦ Helps you do something not possible
before?
♦ Is fantastic value for money?
♦ Improves your quality of life?
Why is Product Development Important?

♦ To satisfy consumers (Demand)

♦ To create new jobs (Irish Economy)
♦ To maintain margins (Market share)
♦ To expand the business (Growth)
Product Development Process
♦ Aim:
– To convert technology into profitable products
♦ A form of research
– But requires a high degree of co-operation with
other functions
Product Development Process

The Technology Engine

New
Technology
Platforms

Pr elop
ch

D
ev
ar

od m
se

uc e n
Re

t t
New
Profits
Manufacture Products
Sales
Product Development Process
♦ Before product introduced to market, it goes
through a series of steps or phases
♦ Allows individual/firm to
– generate and evaluate ideas
– eliminate the least attractive ones
– develop the product
– test and introduce it to the marketplace
New Product Development Process
Phases
Idea Generation

Idea Screening

Concept Testing

Business Analysis

Product Development

Test Marketing

Commercialisation
Importance of New Products
♦ Product items, no matter how successful
have a certain lifespan (product mortality)
♦ Replacement products need to be constantly
planned
– True across all industries
– Especially IT eg Microsoft’s new versions
Window’s XP, PS-2 etc)
Advantages of New Products
♦ Create differential advantages
♦ Enhance the firm’s image
♦ Support continued growth
♦ Limit risk through diversification
♦ Capitalise on technological breakthroughs (R&D
investment)
♦ Improve the firms’ productivity
♦ Help the firm to:
– Be responsive to environmental issues
– Respond to changing demographics & lifestyles
– Respond to government mandates/regulations
Product Planning Requirements
♦ New product planning requires:
– Systematic research
– Development
– Defensive as well as offensive planning
Product Failure
♦ The failure rate of new products remains high
despite product-planning processes
♦ A recent survey of industrial and consumer goods’
firms revealed a failure rate of 35%
♦ Product Failure can be defined in two ways:
– Absolute Failure occurs if a company incurs a financial
loss
– Relative Failure occurs if a company makes a profit but
does not attain profits or image objectives
Why New Products Fail
♦ There are several reasons for absolute or
relative new-product failure, including
– Lack of differential advantage
– Poor planning
– Poor timing
– Unrealistic expectations and enthusiasm by
product sponsor
Idea Generation
♦ New products are, by their very nature,
innovations
– Result from creative insight and free thinking
– Such creativity is crucial to success
♦ Organisation/innovator must generate ideas
that tap potential of their chosen markets
– These ideas are not the final product
Idea Generation (cont)
♦ Final product will be interactively determined
throughout the development process
♦ Ideas form a base for
– Base for further investigation
– Set of starting points for innovation
♦ While it may be possible to develop ideas in a
vacuum, it is also possible to couple creativity
with information from marketing, R&D and
technology
Idea Stage (Stage 1)
♦ Promising new product ideas identified and
impractical ones eliminated
♦ ‘Systemic Market Evaluation Checklist’
– Evaluate product idea in terms of chief values,
merits and benefits
♦ Determine need for product
– Define potential market needs in terms of
timing, satisfaction, alternative benefits & risks,
future expectations, market size & structure,
economic conditions
♦ Compare and contrast to competition if any
Idea Sources
♦ New products start from initiating forces
that may also act as sources of ideas
Idea Sources (cont.)
♦ Market Needs & User Solutions
– Since new products achieve final success through sales
& profit, consideration of market needs seems most
obvious source of ideas (WPI)
♦ Technological developments
– can present new opportunities to meet consumer need
– Or, can fill needs that were previously unmet
♦ Improvements in Engineering and Production
– Often neglected as sources of innovation as firms use
R&D to find new product ideas
Idea Sources (cont.)
♦ Inventions and Patents
– Consulting companies - ideas that can be
reviewed
– Suppliers - ideas for usage of their raw
materials
♦ Competitors Actions & Other Firms
– Imitation vs innovation
– The reason for competitors’ success and
knowledge about their developmental strategies
are important inputs to idea generation
♦ Management & Employees
Methods of Generating Ideas
♦ Direct Search
– To effectively tap external idea sources, information
collection of what’s out there
♦ Exploratory Consumer Studies
– Observing how people use the product already
– Activity & Product Analysis: what problems do the
consumers have can they be solved with new or
improved products?
♦ Facilitate User Solutions
– Users not only have needs but may possess solutions
Software development companies use User Trials
Methods of Generating Ideas
♦ Technology Information Forecasting
– Careful projection and monitoring of trends in all
environments
♦ Consumer Engineering
– Look at consumer markets and match engineering to
meet the needs of a particular market segment
♦ Creative Group Method/Brainstorming
– Encourage individuals to draw upon their personal
knowledge, to develop creative solutions
♦ New Product Idea Stages
– Concept, Prototype, Product
Concept Stage (Stage 2)
♦ After new product idea has been identified
in the idea stage as having potential
♦ Product idea is:
– Further developed and refined through
interaction with consumers
– Tested to determine consumer acceptance
♦ Look at new product vs competitive
products
– Price, promotion and distribution
 The Product Planning and
Development Process
Idea Concept Product Test
Stage Stage Development Marketing
(1) (2) Stage Stage
(3) Commercialisation stage
Product life cycle
Laboratory Development

Pilot production run

Semi commercial
Evaluate
Evaluate
Evaluate

plan trials
Evaluate
Idea

Introduction Growth Maturity Decline

Product Development Stage
(Stage 3)
♦ Consumer reaction to physical product
– Comparison of product vs competitor products
♦ Methods used (e.g. by marketing firms):
– Consumer panel
– Multiple brand comparisons
– Risk analysis
– Level of repeat purchases
– Intensity of preference analysis
Product Screening
♦ In product screening, poor, unsuitable, or
otherwise unattractive ideas are weeded out from
further consideration
♦ With a new-product screening checklist, an
individual lists the new-product attributes that are
most important and compare each idea with those
attributes
♦ An example of how an individual/firm could
develop overall rating for two new-product ideas
is given
♦ The potential product patentability is determined
Market Analysis
♦ Success likely in markets that
– Have high sales potential
– Can be easily entered and penetrated
– Require small investments for large rewards
– Are low risk (IT?)
Desirable Characteristics of Markets
♦ Characteristic Measure
♦ Potential Size of market
Sales growth rate
♦ Penetration Vulnerability of competitors
♦ Scale Share of market
Sales volume
♦ Input Investment in € and technology
♦ Rewards Profits
♦ Risk Stability
Probability of losses
Market Analysis
♦ Potential
– Market potential measured by size of market in
€ sales and growth of market
♦ Penetration
– Although a market is growing, it may not be a
good opportunity unless it can be penetrated
♦ Scale
– Potential & penetration critical to achieving
large-scale operation (market share & sales
volume)
Market Analysis (cont)
♦ Input
– The more investment required by a market for
entry and penetration, the less attractive it is
♦ Reward
– Large scale is not enough to select a market – if
administrative overheads are prohibitive
♦ Risk
– Markets characterised by instability of demand
and uncertainty of supply can be very risky
Market Environment Factors
♦ Regulation
♦ Competition
Marketing
♦ Politics Mix
♦ Society
♦ Technology
♦ Economic Conditions
Intellectual Property (IP)
(Regulation Factor)
♦ IP
– Any patents, trademarks, copyrights, or trade secrets
held by the entrepreneur
♦ Patents
– Once product is designed – patent it!
– Grants holder protection from others making, using, or
selling similar idea
♦ Disclosure Document
– Statement by inventor disclosing intent to patent idea
♦ The patent application
♦ Registering the trademark
Market Segmentation
♦ The concept underlying market segmentation is
the identification of a group of consumers who
have needs or responses that are different from
other consumers
♦ The best segmentation strategy will be one that
identifies a group of consumers likely to purchase
a new product at a price and quantity sufficient to
satisfy profit goals
♦ Market Segmentation helps to dictate sales and
distribution strategy
Market Segmentation
♦ Criteria Measures
♦ Demographics & Age, income, sex, race,
Socioeconomic martial status,
family size,
geographic,
education, occupation,
life cycle
♦ Attitudes Personality, life
style,
♦ product
Post Project Appraisal
(Project Management)
Technical Events 2nd Breakthrough
First Breakthrough Scale up Technical
Feasibility Funding Patent Completion
Project Report
Patent Request Filing
Starts 1 Approach Filing
st
Time Fails
Line
Business New Competitor Product Decision
Request Customer Product Specification Not to launch
Requirement Launch Change Product

Business Events