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 products attribute. E.g. Apple (i-Phone).
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)
Organizations 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.
2.
3.
4.
5.
6.
7.
8.

Competitors products and reverse engineering

Technology
Unexploited patents
Customers and vendors
Senior and top management
Brainstorming
Individuals
Existing products

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Turning business opportunities

into product concepts
There are three inputs required for a product idea
to become a new product concept;
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. Companies reduced
total time to market from 18-24months to 69months.

Technical Testing
Closely linked to the development of product
prototypes
An ongoing activity
E.g. Dummies and simulated crashed used in car on
the 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 markets 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. Microsofts 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
Technological
Activities

Pharmaceutical Industry
Electronics Industry

Marketing
Activities

Balance of Activities

Industrial Products

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White Goods and

domestic Appliance
Industries
FMCG
Good and Drinks
Industries

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
Organization

Function 1

Product A

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Senior
Management

Function 2

Product B

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Function 3

Functional Company
Organization
Diversification by
product with
centralized functions

Senior
Management

Product 1

Function 1

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Function 2

Product 2

Function 1

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Product 3

Function 2

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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