PRODUCT DEVELOPMENT

AND MANAGEMENT
PART ONE
OVERVIEW AND OPPORTUNITY IDENTIFICATION/SELECTION
Break The Ice
 Let’s experience it
https://www.8thwall.com/
 What is one
product you can't
live without?
• Why you like it (e.g., solves a problem, makes
life easier, has great design)
• One way it could be improved
 The Basic New Product Process

Phase 1: Opportunity Identification/Selection

Phase 2: Concept Generation

Phase 3: Concept/Project Evaluation

Phase 4: Development

Phase 5: Launch

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 Case Study of Samsung Galaxy Note 7 (2016)

Samsung launched the Galaxy Note 7 with an aggressive marketing

strategy, highlighting its cutting-edge design, S-Pen features, and fast-
charging capabilities. The product received strong pre-orders and initial
sales.

Despite high demand, customers quickly reported battery overheating

issues, leading to explosions in some cases. This resulted in massive
recalls, airline bans, and customer frustration.

How did R&D become essential?

 Value Chain and NPD

By Roland Ortt
Product Life Cycle and NPD
 Chapter 01

The Strategic Elements of Product Development

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Importance of New Products

• It is big business – billions of dollars annually on technical development

alone.
• The challenge of creating radical innovation (totally new product
categories) is viewed as “the most important business issue of our time.”
• Accelerating innovation and business growth through innovation are the
top business challenges according to the Industrial Research Institute.

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But the New Products Process is Difficult!

Percent of Products that Fail

90
90
80
70
60
50 40
40
30
20 10
10
0
Sometimes Quoted Research Reports Sometimes Claimed
in Press

Although you may hear much higher percentages, careful

studies supported by research evidence suggest that about
40% of new products fail — somewhat higher for consumer
products, somewhat lower for business-to-business products.

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Best Practices in New Products

• For every 100 ideas,

• Fewer than 70 make it though initial screening
• Fewer than 50 pass concept evaluation and testing
• A little more than 30 make it through development
• About 30 make it through testing
• About 25 are commercialized
• 15 of these 25 (about 60%) are successful.

• Success rate is lower in consumer goods (51%) and as high as

65% in healthcare.

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 Comparing the Best New Product Firms vs. the Rest

● For the top most firms, about 49% of company sales

and profits come from products that were introduced
in the last five years.
● Other firms – the average is around 21%.
● Lesson: firms that maintain their commitment to new
products are rewarded with sales and profits!

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Why for the failure?

Product Flaws
Incorrect Pricing
No Market Research
Failure to Identify User Needs
Poor Execution
Poor Planning
Poor Product Differentiation
Inadequate Risk Management
Ignoring User Feedback
Insufficient Marketing and Promotion
Opportunity Identification and Selection

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 Four key pathways for product innovation:
Pathways Approach Example

Exploiting Underutilized Using existing IBM developed Watson AI to assist

Resources assets more doctors in diagnosing diseases and
effectively. recommending treatments in
healthcare.
Exploiting New Resources Leveraging new Beyond Meat, a plant-based meat
discoveries, company, saw an opportunity in the
acquisitions, or vegan snack and beverage market
markets. but lacked expertise in global
distribution.➔ partner with Pepsico

Responding to External Addressing Governments worldwide imposed

Mandates customer needs, bans on single-use plastics, putting
market threats, or pressure on companies like Unilever,
regulations. which relied heavily on plastic
packaging.➔ Biodegradable
Packaging
Responding to Internal Aligning with top Adidas set a corporate sustainability
Mandates management goal to reduce plastic waste in
strategies or response to internal sustainability
identified gaps. initiatives. ➔ Adidas x Parley
Globalization and New Product Development

• Top firms deploy over 50% of their R&D spending in foreign

countries.
• Global product teams allow firms to leverage their new product
skills across their subsidiaries.
• Design, R&D, and manufacturing may occur in different subsidiaries
around the world.
• Difficulties: coordinating the efforts across multiple countries to
launch a successful new product.
• Having a global innovation culture – being aware of differences in
business and cultural environments and being open to global
markets – is important to success.

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Source: Medium
Why increased global R&D is needed?
Firms With a Global Innovation Culture

● Procter & Gamble products are developed globally in

the firm’s 22 research centers located in 13
countries. Market research and testing of the
Swiffer occurred in the U.S. and France.
● Apple did product design and customer
requirement definition in the U.S. and Japan in
developing the iPod.
● Ikea identifies unmet customer needs and
commissions in-house and outsourced designers to
compete for the design. Worldwide manufacturing
partners compete for the manufacturing rights. The
firm also has excellent global logistics for product
delivery to stores and customers.

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P&G – Procter & Gamble: Swiffer
“It’s about more than floors”
● In 1994 P&G still pushed a heavy
bucket and rag mop around the
house, watching the soapy water
turn dark with dirt well before
the job was done.
The New Products Process is All About Teams

• The new products team is a cross-functional team with personnel

from marketing, R&D, engineering, manufacturing, production,
design, and other areas.
• All members of the team make a contribution to the new products
process and the success of the team depends on how well they
interact.
• Try to avoid narrow functional viewpoints and stereotypes.

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Functional teams vs Cross-functional team
What are teams usually involved in the product development?

R&D Design Engineering

Manufacturing Marketing
Existek. (n.d.). What is a cross-functional team? Benefits, challenges, and best practices. Existek. https://existek.com/blog/cross-functional-team/
Not All New Products Are Planned = Serendipitous

• Microwave ovens
• Aspartame (NutraSweet)
• ScotchGard fabric protector
• Teflon (synthetic fluoropolymer)
• Penicillin
• X-rays

In each case, an accidental discovery — but someone knew

they had something when they saw it!
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 What Is a New Product?
● New-to-the-world (really-new) products (10% of new products): Inventions that
create a whole new market. Ex.: Polaroid camera, Sony Walkman, Palm Pilot,
Rollerblade skates, P&G Febreze and Dryel.
● New-to-the-firm products (20%): Products that take a firm into a category new to
it. Ex.: P&G brand shampoo or coffee, Hallmark gift items, AT&T Universal credit
card, Canon laser printer.
● Additions to existing product lines (26%): Line extensions and flankers that flesh
out the product line in current markets. Ex.: Tide Liquid, Bud Light, Apple’s iMac,
HP LaserJet 7P.
● Improvements and revisions to existing products (26%): Current products made
better. Ex.: P&G’s continuing improvements to Tide detergent, Ivory soap.
● Repositionings (7%): Products that are retargeted for a new use or application. Also
includes retargeting to new users or new target markets. Ex.: Arm & Hammer
baking soda sold as a refrigerator deodorant; aspirin repositioned as a safeguard
against heart attacks; Marlboro retargeted as a man’s cigarette.
● Cost reductions (11%): New products that provide the customer similar
performance but at a lower cost. May be more of a “new product” in terms of
design or production.

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Easier Said Than Done?

• Top innovators such as Intel and Gillette stay focused and

committed to innovation as a long-term strategic goal.
• Without such focus, firms can fall back to “tweaking” existing
products and relying on minor product improvements, instead of
true product innovation that results in new-to-the-world products
or really new product lines.
• The best new product firms do not give in to this temptation, but
continue to commit to innovative products.
• The biggest factor contributing to success is having a unique,
superior product that adds value for the customer.

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The Strategic Elements of Product Development

• The New Products Process (This chapter and Chapter 2)

• A phased process that takes the new product idea through
concept development, evaluation, development, launch, and
post-launch.
• The Product Innovation Charter (Chapter 3)
• A strategy for new products that ensures that the team develops
products in line with firm objectives and marketplace
opportunities.
• The Product Portfolio (Chapter 3)
• A way to assess which new products would be the best ones to
add to the existing line, given financial and strategic objectives.

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The Basic New Product Process
 Principles and Issues in the New Products Process
• Between the phases of the process are evaluation tasks or
decision points, where hard Go/No Go decisions are
taken.
• There is pressure to accelerate time to market (speed the
product through this process), and phase overlapping
and cross-functional teams are used to accomplish this.
• Fuzzy gates are commonly used: this is a “conditional Go”
so as not to slow down the process in analysis.
• Still, fuzzy gates must have teeth! A potential problem is
that the result should be No Go but the project goes
through anyway.
• Another problem: hollow gates (the Go decision is made
but no financial support is provided).
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 Summary
Term Meaning Example Risk
A new phone passes
A clear yes or no Can be too rigid
Go/No Go all tests → "Go". If
decision to continue or and kill innovative
Decision battery life is too poor
stop a project. ideas.
→ "No Go".
A conditional "Go" A car project moves
Can lead to bad
that allows progress forward while battery
Fuzzy Gates projects moving
despite some improvements are
forward.
uncertainty. still in progress.
A Go decision
A skincare line is
without financial The project stalls
Hollow Gates approved but gets no
support, making and wastes time.
funding for testing.
execution difficult.
Third-Generation New Products Process

● Most firms use what is called a Third-Generation process –

more fluid and flexible
○ This is a flexible interpretation of the basic process, which

allows overlapping phases and fuzzy gates.

● This flexibility is particularly important in the development of
new-to-the-world, breakthrough products.

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 PIC, Product Innovation Charter

The purpose of new product strategy is to:

● Set new product objectives (sale, profit, contribution, market

share….)
● Understand the contribution of new product development within

the company’s wider goals

● Define the technologies, markets and product scope

A Product Innovation Charter (PIC) can be used to help guide this

process.
Product Innovation Charter (PIC), is a set of policies, goals, objectives
and restrictions across organizations.
 The New Products Process Interacts With the Other
Strategic Elements
• Without the strategic direction provided by the Product Innovation
Charter (PIC), the firm’s attempts at product development will be
unfocused. The PIC helps the team identify opportunities and focus
efforts.
• Product Portfolio considerations help the firm decide whether a
new product opportunity adds financially and strategically to the
current line and avoids spreading scarce financial and human
resources too thin.

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So, Does All Of This Actually Work?

• Check the efforts of the best product developers in the business:

the Outstanding Corporate Innovator award winners as selected by
the Product Development & Management Association
• Recent winners: Hewlett-Packard, Dow Chemical, Maytag, Harley-
Davidson, Corning, Royal DSM, Bausch & Lomb.
• All have had a sustained commitment to innovation, with
remarkable results in terms of new products.

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 CLASS ACTIVITY

Students will choose any ONE product and discuss how the following
products were discovered:

• Microwave ovens
• Aspartame (NutraSweet)
• ScotchGard fabric protector
• Teflon
• Penicillin
• X-rays

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What surprised you today about product development?