Product Development Process

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

ar Re se

t t uc e n od m Pr elop ev

Profits

D

ch

New Technology Platforms

Manufacture Sales

New Products

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

Evaluate

Semi commercial plan trials

Evaluate

Pilot production run

Evaluate

Test Concept Product Stage Development Marketing Stage Stage (2) (3)

Laboratory Development

Evaluate

Idea

Idea Stage (1)

Commercialisation stage Product life cycle

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 ♦ Potential ♦ Penetration ♦ Scale ♦ Input ♦ Rewards ♦ Risk

Measure Size of market Sales growth rate Vulnerability of competitors Share of market Sales volume Investment in € and technology Profits 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 ♦ Politics

Marketing 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 ♦ Demographics &

Measures Age, income, sex, race, martial status, size,

Socioeconomic family geographic, education, occupation, life cycle ♦ Attitudes Personality, life style, ♦ product

Post Project Appraisal (Project Management) Technical Events First Breakthrough Feasibility Project Report Patent Starts st 1 Approach Filing Time Fails

2nd Breakthrough Scale up Technical Funding Patent Completion Request Filing

Line

Business Request

Business Events

New Competitor Customer Product Requirement Launch

Product Decision Specification Not to launch Change Product