New Product Devp Process Draft Note Revised 30 Jan

8/3/2019 New Product Devp Process Draft Note Revised 30 Jan

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Technical Note

New Product Development ProcessGuidelines for Participants of MTM Lab

January 2011

Astad PastakiaHarini Mittal

CEPT UniversityAhmedabad


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Introduction

The new product development process starting from recognition of an opportunity to the finallaunch of a product may go through several stages. Different scholars and business entitieshave tried to model this process into discreet stages depending on their perspective and

experiences. Drawing upon the common elements of several of the well known models we present here a process model involving seven stages (Figure 1). Of these five stages whichwill be taken up for practical experience as part of the MTM lab are discussed in some detail.Where necessary, checklists have been provided to facilitate the implementation of studiesnecessary to complete a particular stage. Participants will be expected to submit a brief reportat the end of each of these five stages viz.

i) Ideation and selection of best ideasii) Concept developmentiii) Proof of conceptiv) Designing and prototypingv) Business plan

This note provides inputs for the first three of these stages i.e. all those stages where priorinformation collection and analysis is called for in order to build the case for the proposed

product/service.

1.0 Ideation Stage

In this stage the iterative use of divergentand convergent thinking may be relied upon tocome out with a list of possible opportunities for new product/service development. After the

brainstorming is over, one may use specific criteria such as uniqueness, practicality, businessattractiveness, eco-friendliness etc to select the best ideas for further exploration and

development. The ideation process can be greatly enhanced by looking at both market andtechnical possibilities and trying to marry the two.

Market Understanding

The objective of the entrepreneur is to move from consumer dissatisfaction and disgust toconsumer satisfaction and delight. One may think of all possible situations, which offer scopeto improve consumer satisfaction or remove the hardships / irritations of the consumers. It isalso possible to think of new ways of adding value for the consumer additional functionsand attributes, reduced costs, increased convenience and user-friendliness, eco-friendlinessetc.

Analysis of the market in a specific sub-sector that one may be interested, can help to identifymarket discontinuities market segments that may have been ignored in the past or only

partially served e.g. pianos for left handed people, mattresses for people with specific backproblems etc.


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Figure 1: New Product Development Process

Technical Possibilities:Available technologyNew platforms for new

applications

Market Understanding:Market discontinuities,Consumer dissatisfaction

Opportunity Recognition:

Ideation (1)

Preliminary selection

Concept Development(2):

Product specifications,Price points etc.

Preliminary TechnicalAssessment

Preliminary MarketAssessment, includingNeed assessment

Proof of Concept (3):Technical validation,lab testing, modeling,

virtual prototype etc.

Concept testing withpotential consumers

Building the businesscase mobilizin finances

Designing andPrototyping (4):

Stage A to Z

Eliciting consumerfeedback andparticipation

Interaction withproduction people and

technical experts

Test Marketing

Debugging

Business Plan (5)

Launch

Production feasibility,Includingenvironmental andsocial viability

Market feasibility,including financial

viability

No Go

Go

GoNo Go

Go

Go

No Go


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One can also think of unmet needs and wants through observation of the plight of people intheir day to day routines. A new technology (or even existing technology) could be harnessedto create new products and services to meet unmet needs and wants, once these are clearly

identified.

Technical Possibilities

Matching the market need with the available technology to examine the possibility of producing the new product without much difficulty is an integral part of ideation. Newtechnology and technology platforms offer tremendous scope for developing newapplications that meet existing and latent needs of various consumer segments e.g. ICTtechnologies (CDMA, Remote sensing, GIS, GPS etc) genetic modification of crops,nanotechnology, bio-technology are some of the emerging technologies.

2.0 Concept Development

Considerable spadework is needed prior to designing a new product/service. This includesdevelopment of the product concept, its clear articulation, and developing proof of theconcept. Only then can one hope to attract financial support for the project.

In the concept development stage the innovator would like to move from an initial idea to aclearly articulated product/ service concept. This would include the desirable attributes thatconsumers think would add value as well as the price range that would make sense in anexisting sub-sector, given the available competition. This step is perhaps the most critical inthe entire process of new product development, because if the concept is not articulatedclearly, it could create problems during the later stages of the process. Once again one wouldlike to marry technical possibilities with market demands, but this time with more specificinputs both from the technical experts as well as potential consumers. To enable this processone would need to carry out preliminary assessments as indicated below. The marketassessment should include a needs and wants study of the potential consumers/customers.

Preliminary market assessment1

Preliminary market assessment involves a quick-and-dirty market study. The purpose is todetermine whether the proposed product has any commercial prospects. The preliminarymarket assessment

y assesses market attractiveness and potential;

y gauges possible product acceptance;

y sizes up the competitive situation; and

y sculpts the product (shapes the idea into a tentative product design).

The task is to find out quickly and for minimal cost as much as possible about market size,growth, segments, customer needs and interest, and competition.

Given the limited cost and the short time duration of the study, this type of market assessment

is clearly not a professional and scientific piece of market research. Rather its detective work

1 This section is abridged and adopted from Cooper (2001).


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and desk research: gathering available information through players in the value chain (forexample, talking with retailers, distributors, and technical service people); examiningsecondary sources (for example, reports and articles published by trade magazines,associations, government agencies, and research and consulting firms); contacting potential

users (for example, through a phone blitz or focus groups); and canvassing outside sources(for example, industry experts, magazine editors, or consultants). Its tough work, much like

playing detective and following up on leads, but its surprising how much information abouta products market prospects can be gleaned from several days of solid sleuthing.

Here are some sources of market information that can be accessed relatively inexpensivelyfor Stage 1:

y Internet searches. Search through trade magazines, journals, reports, and other published items looking for information on your market, the product type, and yourcompetitors.

y Your own library. Try your own library, a major public library or other availablelibraries in town.

y Key customers. Insights from a limited number of leading, key, or trusted customerscan prove very useful at this early stage. Have direct, face-to-face discussions with afew customers. These need not be based on a detailed questionnaire but can beunstructured and exploratory. For industrial goods, try to pick trusted yetrepresentative or leading users. Talk to several people within each firm. If budgets aretight and time is pressing, try telephone interviews.

y Focus groups. In spite of their limitations, focus groups, made up of a handful ofcustomers, either consumers or industrial users, remain a cost-effective and relativelyfast way to gain insights into customer needs, wants, and preferences.

y Advertisements. Get your hands on your competitors advertisements and tradeliterature. Find out what they are saying about their productsfeatures and

performance characteristics, as well as how competitors are trying to position theirproducts.

y Consulting and research firms. Some consulting and research firms publish multi-client or standardized reports that provide an overview of an industry. Although theymay not be specific to your new product, these reports or studies are a cost-effectiveway to gain information on market size, trends, and competition.

y Government agencies. Governments collect a myriad of data. Finding it is the

problem. But dont give up before you begin. Some Departments and publicinstitutions (such as WASMO) are more proactive in putting out information in the

public domain.

y Industry experts. Try to meet an industry expert for a day or two and pick his or her brains. Although the effort involved may be high, the knowledge gained may save

you weeks of work.


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y Trade associations. Some industries have excellent trade associations that providevaluable market data. Contact these associations.

Needs and Wants study

The consumer needs study can be carried out with the help of informal discussions with

potential consumers or a focused group discussion. The checklist given below is adoptedfrom Cooper (2001)

1. How is the potential customer now solving his or her problem? What is the current

solution? For example, what particular product is he or she using, and why?

2. What unsolved problems is the customer or user experiencing with the current solution?

Are there opportunities here for a new solution or new way of doing things?

3. I f the customer had a choice, which product or brand would he or she buy now? Why?

Which one or ones would he or she not buy? Why not?

These types of questions are important in that they are methods of inferring what thecustomer is looking for and what he or she wishes to avoid. Here were trying to uncoverwhat the customers unmet and unarticulated needs are and what they see as having value,and what a new solution might look like.

4. What are the customers choice criteriathe criteria that the customer uses to make a

purchase decision? What is the relative importance or weight of each criterion in the

decision?

5. How do current (competitive) products rate on each of the choice criteria? Which

competitor scores highest on each criterion? Whos the lowest? What is it about these

products that cause the customer to rate them so high or low, on each criterion?

These fairly traditional questions on choice criteria and competitive ratings are important forseveral reasons. First, an understanding of how the customer makes his or her purchasechoice and what criteria are used is a critical input into product design; at a minimum, yournew product must address and score high on the important criteria. Second, understandinghow competitors products score identifies areas of potential opportunityfor example, acompetitive product weaknessthat can be exploited with an improved design. Knowledgeof the reasons that underlie these competitive ratings also provides valuable insights to the

product designer regarding what to build into your new product and what to avoid. Finally,different patterns of responses among customers may suggest the existence of two or moremarket segments. There may be a market niche that has been missed by competitorsone

that can be successfully targeted by you.

6. What does the customer specifically like about competitive products or current solutions?

What does he or she dislike? What problems does the customer have when using competitive

products?

Often competitive products do have many positive design aspects, which can be borrowedand built into your new product. Theres nothing wrong with copying the good facets of acompetitors product, providing one goes well beyond a mere copy. For example, in


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developing its successful luxury automobile, the Lexus, Toyota took a hard look at luxurycars around the world, particularly European ones. Toyota borrowed the best ideas fromthese; many of the design concepts in the Lexus are simply copied from other luxury cars.Knowledge of the positive facets of competitive products is obviously a valuable input to the

designer. Similarly, identification of customer dislikes and problems in competitive productsopens up opportunities for significant design improvement. Remember: The objective is to

design a superior product; that means it must be superior to the leading competitive products.An understanding of where the competitor failsits Achilles heelis half the battle!

7. What specific features, attributes, and performance is the customer looking for in a new

product? Which of these are must haves and which are only desirable but not essential?

8. What trade-offs is the customer prepared to make (for example, among various possible

performance deliverables, or product features, or features versus price)?

An understanding of the customers stated requirementsboth musts and shouldsisobviously a critical design input. But note that this customer-stated wish list is usually fairlysterile, and it is not specific enough to build a winning new product design. A knowledge of

customer trade-offs reveals the relative preferences among various product features andattributes and indicates relative value or importance of different design features to thecustomer.

9. How does the customer use (and abuse) the product? What is the customers use systemin which the product must operate? And how does it fit into (or interact with) other

components of the system?

10. What are the customers economics? How does your potential product affect his or her

economics in use?

These last two questions are both critical and difficult. The first looks beyond the productitself; it probes the role the product plays in the total system. And it applies to all kinds of

products, from prepared food entres (where the kitchen and household are the system) totelecommunications components and software. The economics or value in use isfundamental to understanding how you can deliver a product that yields better economicvaluefor example, by saving the customer money over the total life of the product or insome other facet of his system.

Preliminary Technical assessment2

The preliminary technical assessment, a second facet of concept development, subjects theproposed product to the businesss technical staffR&D, engineering, and operationsfor

appraisal. The purpose is to establish preliminary rough technical and product performanceobjectives; undertake a very preliminary technical feasibility study; and pinpoint possibletechnical risks. Specific tasks might include discussions among technical and operations

people; a preliminary literature search (for example, a titles search); a preliminary patentsearch; and acquisition and review of competitive literature. The key questions concern thetechnical viability of the product:

2 Based on Cooper (2001)


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y Approximately what will the product requirements or specifications be? (Note thatthe product definition may still be fairly vague and fluid at this early stage.)

y How would these requirements be achieved technically? Is there a foreseeabletechnical solution? Is invention or new science required?

y What are the odds that the product is technically feasible? At what cost and time?

y Do you have the technological capability to develop it yourselves? Or do you need apartner or outside supplier for some development work?

y Can the product be manufactured or produced? How, with what equipment, and atwhat cost? Or should you consider outsourcing or a partner?

y What intellectual property and product regulatory issues are involved?

y What are the key technical risks? And how might we handle each?

3.0 Proof ofConcept

The product concept developed so far needs to be tested first for technical validity and thenwith the consumers. This would give us the necessary confidence to work out a plan for

product development.

Technical validity:

The technical validation can be carried out in a variety of ways laboratory testing, practicalexperiments, modeling and simulation, developing a working model, developing a virtualmodel etc.

Concept testing with consumers:

The product concept as developed after validation may be shared with the potentialconsumers to confirm whether it matched well with what the consumers had in mind. Theconcept may be suitably modified before proceeding to the next stage.

Concept tests differ from user needs-and-wants studies in two major ways: First, in a concepttest you have something to show the customer to solicit feedback; second, you are seekingvery different types of information than in a user needs-and-wants study.

The concept test is not a prospecting study but rather a test or validation that the proposed

product concept is indeed a winner; intent to purchase is established. Note that at this earlystage you still dont have a developed product. The purpose of this concept test is to see ifyoure heading in the right direction. By this time you should have, at minimum, a writtendescription of the product and its benefits, features, performance characteristics, and likely

price. In addition, you may have something concrete to show the customerline drawings,

artists renderings, a model, a PowerPoint slide show, a crude working model, or evena virtual prototype of the product on your laptop. The better you are able to convey what the

final product will be and do, the more accurate gauge of purchase intent you will get. Get asclose to the final product as you can in your concept presentation:


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Hewlett-Packard investigated the development of a new computer pointing device toreplace the mouse, namely, fixed mounted cylinders that are twirled with the operatorsthumb. The product had not yet been developed, but customer reaction was sought througha full-proposition concept test. Customers were shown a video, which demonstrated a

mock-up and simulation of the product, and a simulation on a computer screen was used tovividly portray how the new device would work. Note that although H-P did not actually

have a prototype or product to test with the customer, this concept test came very close toitwell before development had begun!

Once the technical investigation has yielded a technically feasible concept, then a fullproposition concept can be shown to the customera model, a set of drawings, a storyboard,a spec sheet, a dummy brochure, or a virtual prototypeand his or her response can begauged: Given what youve told us, this is what weve come up with in terms of a proposed

product. What do you think of it? Would you buy it?

WhatInformation to Seek?A concept test seeks customer reaction to the product in an attempt to assess marketacceptance and expected sales revenues. Information objectives typically include the

following:

1. A measure of the customers interest in the proposed product and a determination ofwhy interest level is high or low

2. A measure of the customers liking for the product concept, and what facets he or shelikes most, and what he or she likes least

3. A comparative measure of the customers preference for the concept relative tocompetitive brands or products the customer now uses, and the reasons for these

preferences4. An indication of what the customer might expect to pay for the product5. An indication of the customers purchase intent at a specified price6. Information useful in finalizing the positioning strategy.

Annexure 1 shows a typical questionnaire format. Note that there is a combination of closed-ended questions (to which the customer selects an answer, for example on a 15 or 010scale) and open-ended questions (which result in a verbal answer or discussion). The closed-ended questions provide concrete, numeric data that can be aggregated and analyzed acrossmany customers. But numbers alone tend to be sterile; hence open-ended responses are alsosought to lend richness and greater understanding.

Using the Results of aConceptTest:

Use the results of a concept test with caution. They merely provide an indication of likelyproduct acceptance. There are no guarantees, and the results should not be used blindly. For

most new products, particularly concepts in categories familiar to the customer, concept testsare likely to overstate the market acceptance. For example, a result of 30 percent ofrespondents definitely would buy is not likely to translate into a market share of 30 percentfor several reasons. First, respondents tend to have a positive response bias. There are manyreasons for this: the so-called Hawthorn effect, whereby people under observation tend torespond more positively or enthusiastically than those not being studied; the desire to givesocially acceptable or pleasing answers to the interviewer; and the fact that its easy to sayyes when theres no money or commitment involved. Second, although a respondent mightsay that hell buy your product, in the case of a frequently repurchased product, he may


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continue to buy the competitors as well, that is, split his purchases. If he buys both productsequally, the original result of 30 percent definitely would buy actually translates into a 15

percent market share. Third, not all potential buyers in the defined target market will beexposed or exposed sufficiently to the new product. Advertising, promotion, and sales force

may reach less than half of the total target market. The intent to purchase figure must be cutdown by a factor that reflects market exposure (or audience reach) on launch.

4.0 Designing and Prototyping

Having established proof of concept and built a case for developing the new product/ service,one is now in a position to start designing the prototype and developing it. This again is aniterative process which may move into several stages and take anything from a few days to afew years, depending on the complexity of the product being developed. Throughout this

process the product development team is expected to interact with the production team/technical experts on one hand and take feedback from potential consumers on the other. Veryoften, it may be possible to actively involve consumer(s) in the product development process,if they have the necessary motivation and ideas to enhance the process.

5.0 Business Plan Development

Development of the final prototype is a signal that the product/ service may most likely beready for the market. Test marketing may be planned, while simultaneously developing a

business plan. The business plan should take into account the following:a) technical and production feasibility

b) environmental and social feasibilityc) market feasibilityd) financial viability

In the case of an on-going business, it is of utmost importance that the new product/servicefits in with the existing business and product lines of the company. However, this would needto be taken into consideration during the initial assessment itself.

References

Cooper, Robert (2001) Winning at New Products: Accelerating the Process from Idea toLaunch. Boston: Harvard Business Publishing, Digital Chapters.

Khandwalla Pradip N., (2004) Lifelong Creativity: An Unending Quest. New Delhi:McGraw-Hill Publishing Company Ltd.

Innovator's Toolkit: Ten Practical Strategies to Help you Develop andImplementInnovation.Harvard Business School Press, Boston, 2009


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Annexure 1

The Typical Concept Test Questionnaire

1a. First, are you interested in the proposed product? You can answer on this five-

point scale (show them the scale):

not interested at all not too interested somewhat

quite interested very interested

1b. Why so interested (or not interested)? __________________________________

2a. To what extent do you like the product?



2b. Identify the things you like the most about it: ____________________________

2c. What things do you like least about it? __________________________________

3a. You are already purchasing (or familiar with) Brand X. How would you comparethe new product with Brand X?



3b. Why did you like it more (or less than Brand X? __________________________

4. Assume this new product was already available. How much would you expect to payfor it (you can ask this price question relative to a product they are familiar with ornow buy)?____________________________________________________________

5a. Lets assume the new product is on the market at a price of $Y. What is the likelihoodthat you would buy it?



5b. Why. . .what made you answer the way you did (in 5a)? ____________________

5c. (If negative): What would you like to see changed in the product?Any suggestions?______________________________________________________

Documents

New Product Devp Process Draft Note Revised 30 Jan