New Product Development

the business Objective

Prof. V.Seshadri
NMIMS

Importance of NPD
It is the lifeblood of a company. Must
be a continuum with some
momentum
Plays a leadership role within the
company. Sets the pace for the whole
company.
Progress is measured by NP.
Even failure in NPD is a great
learning exercise.
Innovation as a survival skill
NPD- The business Objective - Ref
1 Ch 1

NPD role in the economy

NPD contributes to the economy by generating
revenue and profits to the company that would
otherwise would not have existed.
The revenue is paid out to vendors which
ultimately results as earnings for personnel which
is in turn spent on purchases from other
companies.
The profits go to fund long term investments for
further growth and also as taxes for funding
infrastructure projects
This represents the economic cycle fueled by NPD
NPD- The business Objective - Ref
1 Ch 1

The Business Objective

Establishing a strategy for NPD starts with
examining the Business Objective
It involves looking at the company, the
marketplace and the competition to
determine how the NPD activity will fit into
the overall company goals and strategy.
The objective is to determine the fit of the
new product, the chances of success and
the organizations ability and desire to
carry it off.
NPD- The business Objective - Ref
1 Ch 1

The Fit
The fit essentially depends on
a) Selecting the right new product opportunity
b) Does it gel with the companys other
products, present market and channel, its
manufacturing and technology base ?
c) How does the opportunity fits into the
companys long term goals and agendas
d) Which department/group within the company
should lead the development? Or should it be
outside the companys existing ambit?
NPD- The business Objective - Ref
1 Ch 1

NPD- The business Objective - Ref

1 Ch 1

The Strategy
1. What is the market strategy? one
time/short term player or here to stay
and grow . Is it targeted to a niche
market or wide range market
2. What is the marketing hook ? What will
be the products USP? What new value
it will add to the market?
3. Strategy if the product wins in the
market & Strategy if it loses.
NPD- The business Objective - Ref
1 Ch 1

Benefits of the strategic planning

process 1/2
1. improves profitability
2. yields a higher growth rate for
the enterprise
3. reduces wasted time, effort,
materials, and resources
4. provides focus on the
marketplace; customer
5. early buy in to the program
from employees
NPD- The business Objective - Ref
1 Ch 1

Benefits of the strategic planning

process 2/2
6. fosters higher personnel commitment
7. provides for a cohesive management team.
8. provides the framework to understand the
competition
9. provides high visibility on quality from a
holistic perspective
10. yields greater customer satisfaction.
11. provides a framework for continuous
improvement.
12. directs a day-to-day vision that is real and
achievable
NPD- The business Objective - Ref
1 Ch 1

The Planning Process ( for NPD)

3 STEPS
1. Introspective Examination of the
companys strength, weaknesses
and historical perspective
2. Creative Decide on what the
company wants to be and its
position in the marketplace
3. Pure Planning - Define the means to
the end (2)
NPD- The business Objective - Ref
1 Ch 1

10

The Planning Framework

The strategic Plan for the new product
should contain the following:
1. Where are we now?
2. Where are we going?
3. How will we get there?

NPD- The business Objective - Ref

1 Ch 1

11

Where are we now?

1. Create a 5 year history of companys
performance in detail
2. Use a narrative to describe the
companys general business health
3. Create a detailed product line wise
analysis Include features, benefits,
trends driving forces, , costs, price,
relative resource utilization,
maintenance issues etc.
NPD- The business Objective - Ref
1 Ch 1

12

Analysis of Business factors

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Sales
Gross margin
Net profit
Expenses
Warranty
Inventory
Return on investment
Return on assets employed
Return on capital
Accounts receivable
Cash reserves
NPD- The business Objective - Ref
1 Ch 1

13

Product line analysis

Product
1

Price levels
Feature/Benefit
Customer base
Technology base
Cost
Market driving forces
% of Sales
Contribution to profit
Life Cycle Stage

Product
2

NPD- The business Objective - Ref

1 Ch 1

Produc
t3

14

Where are we going?

1. Mission statement development
2. Narrative of the dream
3. Narrative of how the plan and reality
will fit together
4. 5 year product line catalog
5. Product scope definition
6. Specific market segments
7. Industry trends
NPD- The business Objective - Ref
1 Ch 1

15

How will we get there?

1. Market Segment strategy:
2. Implementation: ( Internal or
External)
3. Investment/Return
4. Requirements (Internal and
External)
5. Recommendation
6. Action Plan
NPD- The business Objective - Ref
1 Ch 1

16

Fit ability Study

HOW MUCH OF A STRETCH IS THIS
FOR SALES, ENGINEERING, AND
MANUFACTURING INFRASTRUCTURE?

NPD- The business Objective - Ref

1 Ch 1

17

Radar Chart

NPD- The business Objective - Ref

1 Ch 1

18

R&D as a vital tool for NPD

R&D is the most vital element in the NPD
strategy. It is the source of technology for
the new product as well the source for the
processes which go in to make the product.
There is a unique and interesting difference
between Research and Development in an
organization. R establishes the lead
position to establish the Intellectual
property which is then handed over to D for
exploiting.
NPD- The business Objective - Ref
1 Ch 1

19

DIFFERENTIATING RESEARCH
AND DEVELOPMENT
The two disciplines are diverse and separate
RESEARCH GATHERS AND EXERCISES TECHNOLOGIES
AND PROCESSES
DEVELOPMENT ORGANIZES AND APPLIES THESE
TECHNOLOGIES AND PROCESSES TO A SPECIFIC END

the two must function as a relay race, with

research establishing the lead position and
handing off the intellectual property and
know-how to the development people to
apply and create new products
NPD- The business Objective - Ref
1 Ch 1

20

DIFFERENTIATING RESEARCH
AND DEVELOPMENT
Development must have a
manufacturing focus: bills of material,
specifications, consistency, traceability,
costs, performance, and testability.
Research is more focused on
performance, core technology
development, technological
capabilities, and eventual cost curves.
NPD- The business Objective - Ref
1 Ch 1

21

DIFFERENTIATING RESEARCH
AND DEVELOPMENT
RESEARCH SPENDS MONEY AND
CONTRIBUTES INTELLECTUAL PROPERTY
AS AN ASSET ON A FUTURE BALANCE SHEET
DEVELOPMENT CONTRIBUTES AND MAKES
MONEY THROUGH PRODUCT SALES
DEVELOPMENT IS MUCH MORE
MEASUREABLE
RESEARCH EXPENSES AND GOALS SHOULD
BE TIED TO OPERATIONAL GOALS
NPD- The business Objective - Ref
1 Ch 1

22

Research and Development

Types of research and development
Incremental, Radical, and
Fundamental.
These need different levels of R & D
Incremental = low R & Low D
Radical
= High R & High D
Fundamental= High R & No D
NPD- The business Objective - Ref
1 Ch 1

24

THE Model for

Development
Other
operational
inputs

Marketing

Core
technology

Developm
ent Group

New Marketable
Products
NPD- The business Objective - Ref
1 Ch 1

25

Cooperativ
e
agreement
s

Model for R&D

University

Other
Sources

Corporate
Research

Developme
nt1

Developme
nt 2

Developme
nt1

NPD- The business Objective - Ref

1 Ch 1

26

Research Sequence A
Goals &
Objectiv
es

Strateg
y

Developm
ent

Operatio
ns

NPD- The business Objective - Ref

1 Ch 1

Researc
h

Profit

27

Research Sequence B
Research
Needs
Definiti
on

Product
Concept

Core
Developm
ent

Feasibility
Productioni
zing

Industrializ
ation

Commercia
lize

Research
NPD- The business Objective - Ref
1 Ch 1

28

Leverage
Each new product development effort
should leverage vertically and horizontally
within the organization
successive development programs can be
thought of as developing concentric rings
around a base of core technology
Each activity then pushes the outer
envelope in terms of technology,
purchasing, sales and marketing, and
manufacturing systems.
NPD- The business Objective - Ref
1 Ch 1

29

Radar Chart

NPD- The business Objective - Ref

1 Ch 1

30

Leverage
As new opportunities are evaluated, the
leveragability of the product within the
organization for the successive programs
needs to be addressed
Each product generates growth for the
company, starts out small, and builds
momentum in the marketplace. As the
company then structures the programs in
succession (and does this for several product
lines), the revenue and profits grow
exponentially.
NPD- The business Objective - Ref
1 Ch 1

31

Leverage
This philosophy will allow the
organization to recover from a single
failure easier than other strategic
philosophies
Consequently, this will better the
companys chance of success in a
fast-paced, changing marketplace.

NPD- The business Objective - Ref

1 Ch 1

32

Continuity
Continuity is important in NPD. It is as important as
the development itself. The momentum gained by
uninterrupted development results in a geometric
progression of rewards
Conversely, the developers nightmare is a
management structure that issues on again/off again
orders and constantly changes priority on projects
Each program and action must be deliberate and
have a payoff. There can be no voids in the
continuum because this wastes time and dollars;
hence the pursuit is as important as the initial attack
on a market opportunity.
NPD- The business Objective - Ref
1 Ch 1

33

FLOW The Agile Way

1. TAKE AND EXECUTE MANAGEABLE
CHUNKS OF DEVELOPMENT.
2. GET GREAT AT EXECUTING SMALL,
INCREMENTAL IMPROVEMENTS VERSUS
LARGE PROGRAMS THAT ARE LONG AND
FROUGHT WITH UNCERTAINTY.
3. SMOOTH THE PROGRESS AND MAKE IT
MEASURABLE AND PREDICTABLE

NPD- The business Objective - Ref

1 Ch 1

34

KEY TO SUCCESS- THE AGILE

WAY
SMALL, INCREMENTAL, DEFINABLE,
MEASURABLE, PREDICTABLE, FAST,
AND RELENTLESS

NPD- The business Objective - Ref

1 Ch 1

35

SYMBIOSIS
An operational perspective should govern
the members of the team to work for the
project
Should one of the members falter, there is
enough strength and cognizance such that
the other members fill in the void without
affecting the performance.
The program manager should take the time
to build this into the temperament of the
development group
NPD- The business Objective - Ref
1 Ch 1

36

SINGULARITY VERSUS PLURALITY

A NEW PRODUCT SHOULD FIT INTO A
CONTINUUM OF NEW PRODUCTS: A FAMILY
SUPPORTED BY A STRATEGY
PRODUCT DEVELOPMENT SHOULD NOT BE AN
ISLAND, TOO EASY TO KNOCK OFF BY
COMPETITORS
THE FAMILY OF PRODUCTS RETAINS
MOMENTUM AND THEREFORE STRENGTH
Combine efforts to serve a strategic goal or use
a single effort to serve related, multiple goals
NPD- The business Objective - Ref
1 Ch 1

37

MARKET INVESTIGATION- in a
new product development program.
PRIMARY - surveys, interviews, and
demonstrations.
SECONDARY - Trade shows, Trade
literature search, Articles, News
pieces, Observation of trends,
Financial reports, Textbooks, Patent
search, Lost sales reports, Internet
INTERVIEWING
SURVEYS AND CUSTOMER FEEDBACK
NPD- The business Objective - Ref
1 Ch 1

38

MARKET INVESTIGATION- in a
new product development program.
EXTRACTING THE OPPORTUNITY
WITHIN THE COMPLAINT
ENGAGING THE CUSTOMER

NPD- The business Objective - Ref

1 Ch 1

39

DEFINING THE
MARKETPLACE
WHO IS THE CUSTOMER?
DEMOGRAPHICS
COLLECTION OF USERS, OEMS
RESELLERS, AGENTS, SIMILAR
APPLICATIONS, ETC.
WHAT ARE THE CUSTOMER
ALTERNATIVES VERSUS YOUR
SOLUTION?
HOW IS YOUR COMPETITIVE
ADVANTAGE EMBODIED IN THE
NPD- The business Objective - Ref
1 Ch 1

40

IMPERATIVES FOR SUCCESS IN

NPD PROCESS

Clear objectives
A cross-functional team approach
Upper management support
Customer-supplier involvement
Robust design and product
A structured process methodology
Economic justification
NPD- The business Objective - Ref
1 Ch 1

41

List of potential projects for Pan

Europa Foods S.A.
1. Expand Truck Fleet
2. New Plant
3. Expanded Plant
4. Artificial Sweeteners
5. Automation and Conveyor System
6. Effluent Treatment Program (which has no NPV)
7. Eastward Expansion
8. Southward Expansion
9. Snack Foods
10.Inventory Control System

NPD- The business Objective - Ref

1 Ch 1

43