Developing new products.

This checklist sets down the phased steps of the sequential implementation model and juxtaposes this traditional cycle with emerging models (Accelerating Time-to-Market Models or Integrated Implementation Models).

Traditionally, New Product Development (NPD) has required a phased, sequential process of implementation. In the 1990s, increased competitiveness and 'speed-to-market' has forced it into faster cycles.

Definition

NPD embraces the conception, generation, analysis, development, testing, marketing and commercialisation of new products. This new product development life-cycle is also known as a phased or sequential implementation model.

Alternative models of NPD fall into two broad categories:

* Accelerating time-to-market

* Integrated activities to achieve both flexibility and acceleration of development.

Action checklist--Phased or Sequential Implementation Models

Traditional models of NPD are classified under the heading of Stage-Gate Models. The NPD process is divided into a number of stages, which are themselves composed of a group of pre-determined, related and often parallel activities. At each stage, the details of how to perform each task as well as various best practices are specified. To pass on to the next stage, a potential new product has to pass a decision gate. Each gate forms a set of criteria by which the project is judged. The stage-gates will eliminate all but those projects most likely to succeed. The gates common to phased implementation models usually adopt the following sequence:

1. Generate ideas

Ideas can come from many sources, in many ways, involving different types of people. Sources of ideas may be:

* market research into customer 'wants'

* creativity sessions, eg brainstorming, lateral thinking 

* research and development

* employee ideas, eg from the salesforce or suggestion schemes

* existing, abandoned and discontinued products

* technological developments eg licensing, monitoring the technical literature.

Consider all sources to start with. Research has shown that from a possible seven new ideas aimed at the generation of new products, six will fail during the screening, analysis, R & D, and testing phases.

2. Screen the ideas

Screening involves pitching new ideas against organisational objectives to test whether they are compatible with, support or enhance the overall strategy. Ideas judged unsuitable can be eliminated at this stage. Criteria to use might include:

* technical feasibility

* potential profitability

* corporate fit

* production cost

* product life

* competitive advantage.

Ideas screened out at this stage should not be discarded however--market or technology changes may turn these ideas into possible successes in the future or you may be able to license the idea outside the organisation.

Ideas that are plainly innovative which could have a significant market potential should be protected by filing a patent application. This may require further work with the development of prototypes, but the establishment of ownership is becoming increasingly important in a business environment where knowledge and information are a key source of competitive advantage.

3. Analyse the market

This stage turns an idea into a recognisable product concept and identifies its attributes and market position. It involves testing the concept against possible target markets and customer needs to see if the idea in development could be improved. This analysis should indicate possible sales and production costs, thereby giving a better idea of the risks involved and the product's potential. Customers may also suggest uses for the product that had not been anticipated. It is important that results should be viewed objectively--don't ignore results that seem to contradict original impressions.

Consider consumer and market trends. For example:

* are you entering a growing, established or declining market?

* are population demographics significant?

* has telecommunications technology got a key role to play?

4. Analyse potential competitors

Once an idea has passed the initial market analysis, the next stage is to identify any potential rivals for the market niche you are targeting--competitor analysis.

Competitor analysis may also lead to the identification of possible collaborators who may help to accelerate product development or distribution, or market impact or penetration. Sources of information include:

* market research and stockbroker reports

* trade and consumer publications

* trade associations

* the Internet.

5. Embark on the Research and Development phase

Once a project has cleared the first four stages, the ideas behind it need to be turned into a product that the identified market has helped to define. Design is very important as it can make or break the product.

A first prototype, or laboratory samples, may be used for testing initial customer reaction, leading to possible changes or improvements.

6. Go in for production

A pilot is often carried out to test the feasibility of the manufacturing process before scaling up to full production. Ensure quality in your product. Test every feature separately and then the product as a whole to ensure it conforms to the specifications and performs as it should eg a machine is reliable, food products are not harmful, services are deliverable on the scale required. You may choose to use an independent facility for testing, eg a commercial laboratory or research foundation.

7. Test market

Test marketing of the product in small-scale tests with consumers can provide information about the potential success of the product and marketing programme, thereby limiting the risk involved. Agree on a marketing strategy so that all the elements in the marketing mix can be tested. This stage can identify improvements to be made in advertising, promotion, distribution and pricing, or it may result in a decision to halt the project. Test marketing can be an expensive exercise so use it wisely. Not all products are test marketed, especially where the product involves little risk.

There are three basic test market strategies:

* national replication--the national launch plans are scaled down and tested in a few representative cities. However bear in mind that a test market city is different from a nationwide introduction.

* experimentation--the product is tried out in specific retail outlets but this allows for few variations in marketing strategies.

* behavioural model-based analysis--this approach collects the information necessary to compensate for problems in national replication and an analysis is made using a detailed model of consumer behaviour to enable forecasts of the effects of modifying marketing strategies.

A variety of analysis methods exist, such as panel data projection models and continuous flow models. It is important to select the most appropriate model for the specific test market analysis and budget.

8. Go to Market

The test marketing phase will have helped to refine the marketing campaign involving the 4 Ps of Product and Price definition, Place (target market) and Promotion. The marketing policy should specify the long-term objectives as well as the broad outline of how these are to be achieved. The timing of the launch must be planned carefully and the business environment should be monitored so that the launch plan can be revised to take into account any changes.

9. Distribute

The product must be available where and when the customer may want it but the extent of availability must be balanced against the cost. There are a number of approaches (channels) that a company can employ, such as distribution direct to the customer or via intermediaries eg agents, wholesalers and retailers. Distribution channel design will depend on:

* the product--eg whether it is perishable; an industrial or consumer product

* the customers for the product

* the geographical spread

* the cost.

10. Reinvent 

With product obsolescence generated by demanding customers and increasing competition, what was once an original and premium-priced innovation all too rapidly becomes an off-the-shelf commodity. The cycle therefore begins again with product generation.

There are a number of models which follow this Phased or Sequential Implementation pattern, the most established of which include the Booz, Allen and Hamilton Model and Kotler's Model.

It is an open question whether the activities in the NPD process need to be followed in a step-by-step sequence. In the development of some high-tech products it may be beneficial to undertake the tasks in parallel--for example steps 6 and 7--in order to reduce risk on the one hand and time-to-market on the other. The creative nature of NPD may also undermine the validity of the sequential approach.

Stages 5-8 will overlap, but critically it is these stages which have possibly slowed down the NPD lifecycle and led to the emergence of alternative, faster models described below.

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Accelerating Time-to-Market Models

These provide an overall timescale for NPD that incorporates both development time and time to launch. There are eight 'time' elements so that opportunities for maximum efficiency and improvement can be identified. These comprise the time needed to:

1. understand the market needs

2. harness appropriate technologies

3. understand a concept that is technically and commercially sound

4. develop concepts to a functioning and producible design

5. mobilise the manufacturing facilities and processes

6. ramp up production volumes

7. deliver and fulfil orders

8. maintain or service a product.

The Product and Cycle-time Excellence (PACE) Model

PACE incorporates elements of all three categories--sequential, time-to-market and integration.

This version of a Stage-Gate model was developed by Pittiglio Rabin Todd and McGrath (PRTM) in 1992. Elements of the model include the phase review process, core teams, structured development, process, product strategy, technology management, design techniques and development tools, and cross project management. The first three elements represent the tools that are required for each product development project; the last four are process support elements. The advantages of PACE include:

* the use of a structured new product methodology, allowing review points to be inserted between the various phases in the process

* blurred divisions between the phases and review points, so that phases can overlap

* the strategic direction of the company being taken into account at each stage of the process

* the use of cross-functional teams to increase flexibility and save time

* the opportunity for senior management to balance the risk to the company resulting from breakthrough projects, against the lesser risk of derivative projects.

Integrated Implementation Models

Integrated models are often based upon traditional phased development models, but have been modified to suit individual organisations and to speed up the development process. Practices that slow down product development, such as mandatory phase reviews, are often abandoned.

The Design for Manufacturability and Assembly (DFMA) Model

Design for manufacturability and assembly is a cross-functional team approach to NPD. Representatives from each function involved in the product development and launch process are included in a development team from the product's inception.

The product development process is divided into six stages with overlap and parallel processing built into the model:

1. Product design

2. Process design/engineering

3. Manufacturing

4. Marketing

5. Sales and distribution

6. Related functions, such as customer care.

The contribution of manufacturing and assembly personnel from the beginning of the project enables the early identification of time, labour and materials saving measures and avoids delays due to inadequate process design. DFMA also provides a number of design guidelines that can simplify product manufacture and decrease the time and costs involved.

The Multi-function Project Management Model

The multi-function project management model was developed to enable shorter time-to-market and market driven research and development. This model identifies four project phases to be conducted in parallel, with considerable overlap between phases 3 and 4:

1. Market requirement specification phase

2. Feasibility study and project preparation phase

3. Development and test phase

4. Market introduction.

Five competence areas required in the development of new products are also identified:

1. Service (eg help-desks and warranty provision)

2. Sourcing (eg materials and purchasing)

3. Engineering (eg design and testing)

4. Marketing (eg pre-sales support, market introduction)

5. Logistics (eg forecasting and inventory management).

The five competence areas are represented in a multi-functional team from the beginning of the project and work is undertaken in each competence area simultaneously. Decision points are inserted at certain phases in the development process to check whether the project should be continued and whether it should progress to the next step in the process.

A Framework for Innovation and Flexibility in High Technology Firms

Five basic tier groups are involved in the model:

1. The Target Customer Group

2. The Product Design Group

3. The Product Marketing Group

4. The Product Manufacturing Group

5. The Product Management Group.

These five tiers are involved in four cooperative triads each of which represents a different phase in the evolution of the product, during which three of the five are directly involved with each other.

The Inception Triad (Product Management, Target Customer and Product Marketing Groups) gains a perception of market acceptance, pricing, volume and packaging.

The Feasibility Triad (Product Management, Target Customer and Product Design Groups) involves design flexibility and the fulfilment of the new product's feature list with focus on applicable technologies.

The Realisability Triad (Product Management, Product Design and Product Manufacturing Groups) centres on aspects of plant capacity, flexibility and technical expertise, and asks if the product can actually be made.

The Distributing Triad (Product Management, Product Manufacturing and Product Marketing Groups) addresses questions of packaging, transport and distribution, and sales.

Dos and don'ts for developing new products

Do

* Determine customer needs at the outset.

* Involve customers, employees, including the sales force, and suppliers.

* Devote resources to market-oriented idea generation activities.

Don't

* Leave market research too late.

* Move on to the development stage before agreeing the product definition.

* Underestimate the strengths and weaknesses of the competition.

Useful reading

Product innovation: leading change through integrated product development, D. Rainey Cambridge: Cambridge University Press, 2005-07-28

Next generation product development, Mechael E. McGrath New York, NY: McGraw Hill, 2004

Product design and development, 3rd ed, Karl T. Ulrich and Steven D. Eppinger Boston, Mass.: McGraw-Hill, 2003

Thought starters

Do you work in a market that is characterised by:

* many substitute products?

* growing numbers of competitors?

* long lead times to product launch?

* stagnation through lack of innovation?