TECHNOLOGY ENTREPRENEURSHIP
(ENT600)
UNIT 6 :
NEW PRODUCT DEVELOPMENT
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 1
Definition of New Product Development
New product development is defined as
the process by which entrepreneur
designs and creates new product or
service that will be sold to customers
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 2
The Importance of New Product
Development
For Survival
Introduction of new product provides a platform for
the company to compete
Companies that are able to develop and introduce
new and improved products will have a distinct
advantage to compete
Competition has become more intense as
technological products become more complex and
the technological product life-cycle getting shorter
Companies face threat of losing market share when
competitors come up with their new products
Thus company have to come up with new products to
ensure survival
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 3
The Importance of New Product
Development
Strategy for growth
Development of new products can ensure
business to grow by:
Introducing new products to existing
markets
Introducing new products to new
markets
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 4
Defining a New Product
The outcome of product development process is
a new product
The new product can be:
a completely new product
not a completely new product but an existing
product that has undergone significant
improvements
A new product is any product perceived to be
new in the mind of the consumers
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 5
Classifications of new products
Two classification of new products:
Completely New Product
Improvements on Existing Products
Completely New Product
New-to-the world products
The first of its kind (new inventions)
Create new market
New to the firm (new product lines)
New to the company but not new to the
marketplace
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 6
Improvements on Existing Products
Addition to existing lines
Subsets to the new product lines
Perhaps targeted to different market segments
Improvements and revisions to existing products
New products to replace existing products with cosmetic and
functional enhancements
Cost reductions
Offer no new benefits to the consumer other than possibly
reduced price
Provides enormous added-value to the firm (financial rewards
too)
Repositioning
New applications to existing products
More to do with consumer perception rather than technical
development
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 7
Product and New Product Development
A product is an item or service that serves the needs
of customers
A product has many dimensions, which includes:
Features
Quality Specifications
Packaging
Price
Brand Name
Technology
Theoretically, it is possible to label a product as new
when any changes or modifications are made to any
of the product dimensions
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 8
Product Dimensions
Packaging
Price
Quality Brand Name
Specifications PRODUCT
Technology
Features
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 9
Different examples of changes in product dimensions
that can create a new product:
Changing the performance capabilities of the
product (e.g. a new, improved washing detergent)
Changing the application advice for the product
(e.g. the use of liquid instead of powder
detergent)
Changing the after-sales service for the product
(e.g. frequency of service for a motor car)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 10
Different examples of changes in product
dimensions that can create a new product
(cont.):
Changing the promoted image of the
product (e.g. the use of bio-degradable
packaging material)
Changing the availability of the product
(e.g. the use of vending machines for top-
up cards)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 11
New Product Development
Process
New product development process for
technology ventures usually begins with
research and development to product
design to concept testing to building
prototypes and to test marketing (before
full-scale commercialization)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 12
Product Development Process
1. RESEARCH AND DEVELOPMENT
2. PRODUCT DESIGN
3. CONCEPT TESTING
4. BUILD PROTOTYPE
5. TEST MARKETING
COMMERCIALIZATION
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 13
Product Development Process:
1. Research and Development
New product is often characterized by very high rate
of failures
This may be due to very limited historical or
preliminary data
Therefore, research and development is a critical
step in the new product development
Research and development (R & D) refers to
organized efforts that are directed towards
discovering new knowledge, product or process
Usually, innovation is involve in the R & D for new
product
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 14
Product Development Process:
1. Research and Development (cont.)
Product development research is conducted
to:
helps company to response to market
changes more effectively
understand the attitudes of customers
towards the new technology that is going
to be introduced
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 15
Product Development Process:
2. Product Design
Product design refers to the conceptual
translation of a new product idea or concept
It includes design of the product and its
architecture (physical design), artistic design
(aesthetics) as well as the required
parameters to satisfy the market needs
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 16
Product Development Process:
2. Product Design (cont.)
When designing the product, the basic
product performance criteria must be taken
into consideration. This includes:
Performance
Reliability
Safety in use
Durability
Special features
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 17
Product Design:
Product Performance Criteria
Performance
The main characteristics of the product or services
Reliability
The consistency of performance and dependability
Safety in use
Risk of injury or harm
Durability
The useful life of the product
Special features
extra characteristics
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 18
Product Development Process:
3. Concept Testing
Concept testing is the initial test for most new
product designed
It involves the process of using quantitative
and qualitative methods to evaluate
consumer response to a product idea prior to
the introduction of product to the market
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 19
Product Development Process:
3. Concept Testing (cont.)
It involves showing a preliminary description
of the product or service idea to prospective
customers to gauge customer interest and
purchase intent
If strong acceptance is found, the next step
will be the preparation of the prototype
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 20
Purpose of Concept Testing
The main purpose of concept testing are:
To choose the most promising alternative from a
set of alternatives
To get an initial notion of the commercial
prospects of a concept
To find out who is most interested in the concept
To indicate what direction further development
work should take
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 21
Concept Testing: The Process
Define the purpose of the test
Choose a survey population
Choose a survey format
Communicate the concept
Measure customer response
Interpret the results
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 22
Example: Concept Testing for the emPower
Electric Scooter (shown below)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 23
Example: Concept Testing for the emPower
Electric Scooter
The purpose of concept test:
To identify what market to be in?
Sample population
College students who live 2-5 km from
campus
Commercial transportation
Survey format:
Face-to face interview
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
24
(2009) DEVELOPMENT
Example: Concept Testing for the emPower
Electric Scooter
Communicating the concept can be done by:
Verbal description
Sketch
Rendering (a drawing in perspective of a
proposed structure)
Storyboard (illustrations or images displayed
in sequence for the purpose of pre-
visualizing)
Physical appearance model
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
25
(2009) DEVELOPMENT
Example: Concept Testing for the
emPower Electric Scooter
Example of Verbal Description
The product is a lightweight electric scooter that can
be easily folded and taken with you inside a building
or on a public transportation
The scooter weighs about 15 kilos. It travels at speed
of up to 20 km/hr and can go about 20 km on a single
charge
The scooter can be recharged in about 2 hours from a
standard electric outlet.
The scooter is easy to ride and has a simple controls
just an accelerator and a brake
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 26
Example: Concept Testing for the emPower
Electric Scooter (Sketch)
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
27
(2009) DEVELOPMENT
Example: Concept Testing for the emPower
Electric Scooter (Rendering)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 28
Example: Concept Testing for the emPower
Electric Scooter (Storyboard)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 29
Example: Concept Testing for the emPower Electric
Scooter (Physical Appearance Model)
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 30
Example: Concept Testing for the emPower
Electric Scooter : Customer Response
Measure of customer response through
survey:
Part 1: Qualification
Part 2: Product Description
Part 3: Purchase Intent
Part 4: Comments
Part 5: Interpret Results
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
31
(2009) DEVELOPMENT
Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
Part 1: Qualification
How far do you live from campus?
If not within the specified radius, thank the
respondent and end interview
How do you currently get to campus from
home?
How do you currently get around campus?
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 32
Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
Part 2: Product Description
Present the concept description as in the
previous verbal description
Get comments from respondents
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 33
Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
Part 3: Purchase Intent
If the product were priced according to your expectations, how
likely would you be to purchase the scooter within the next year?
I would I would I might or I would I would
definitely not probably not might not probably definitely
purchase the purchase purchase purchase purchase
scooter the scooter the scooter the scooter the scooter
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 34
Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
Part 4: Comments
What would you expect the price of the
scooter to be?
What concerns do you have about the product
concept?
Can you make any suggestions for improving
the product concept?
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 35
Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response
Part 5: Interpreting the results
From the data set gathered during the
interview, forecast the potential of the product
for commercialization
Make estimate in terms of:
Size of the market
Selling price
Sales forecast
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
Product Development Process:
4. Build Prototype
A prototype is the first physical depiction
model of the new product or service
It is usually in a rough or tentative mode
This model has the essential features of the
proposed product or services but the model is
open to modification
Prototypes can be used to elicit comments
from designers and users to learn more about
the product
One of the objectives of having prototype is it
permits usability testing
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 37
Usability of Products
Usability is a measure of a users experience
when interacting with a product
Five factors determining usability:
Ease of learning
Efficiency of use
Memorability
Error frequency and severity
Satisfaction
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 38
Usability of Products
Ease of learning
How long does it take to learn the products operation?
Efficiency of use
Once experienced, how fast can the user complete the
necessary steps?
Memorability
Can the user remember how to use the product?
Error frequency and severity
How often do the users make errors, and how serious are
these errors?
Satisfaction
Does the user like operating the product?
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 39
Product Development Process:
5. Test Marketing
Test marketing is usually carried out prior to a
full-scale launching of a new product
In test marketing, the new developed product
will be introduced to a representative sample
of population to assess the markets reaction
The purpose of carrying out test marketing is
to predict sales and profits from a major
product launch
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 40
