Energizing New Product Development PennTAP Webinar September 26, 2014 NOTE: You should hear music playing.  If you do not, please go to: Meeting>Manage My Settings>Audio Setup Wizard , then follow the steps of the wizard.  Please be sure that your speakers are not muted.  If you have any questions, please enter them in the chat area. Mark Toda PennTAP 814-865-0427 mtoda@psu.edu Pennsylvania Industrial Resource Center Pennsylvania Ben Franklin Technology Partners Pennsylvania Small Business Development Centers Pennsylvania Keystone Innovation Network

Energizing New Product Development Overview Opportunity/problem NPD Success Factors An approach to New Products New Product Strategy Idea Generation Idea Screening & Selection Concept to Launch (Stage-Gate™) Metrics and Assessing the New Product Process University/external resources’ role in product development

New Product Development Opportunity 50% of U.S. Companies’ sales come from new products. Degree of Innovativeness – measure of investment value. Manufacturers that are not now developing new products will wither and die. Problem Picking winners from losers, insuring the product delights the customer. Managing risk and allocating resources to successfully deliver new products. 1/3 of new products fail at launch.

The Stage-Gate Process Idea Screen Idea Stage 1 First Review Stage 2 Ideation Preliminary Investigation Detailed Investigation Stage 5 Second Review Stage 3 Stage 4 Gate Gate Testing & Validation Full Production & Market Launch Development Winning at New Products Dr. Robert Cooper

Value of a Structured, Systematic NPD Process Guides the project team through a seemingly chaotic, multidisciplinary process Facilitates management of many projects Facilitates optimized resource allocation Facilitates selection of “winners”, and elimination of “losers” Evaluate the quality of development activities & action plans Improved communications between functional areas

New Product Success Factors A unique superior product (unique benefits, product value) A strong market orientation (customer, competition, market) More pre-development homework (concept, market, technical, business) Sharp and early product definition Right organizational structure Speed of execution Look to the world products High quality, disciplined, systematic process Winning at New Products Dr. Robert Cooper

New Product Strategy Aligned with Corporate strategic plan. Clearly understood & communicated role for new product development Defined strategic arenas (products, markets, technologies) Goals or objectives for new product development efforts Long term thrust A new product strategy can help with - idea generation, project selection & priority, portfolio management, resource planning

Corporate Goals and Objectives Strategic Plan New Product Plan Goals & Objectives Things like: # of new products introduced per year……………………… 15 Revenue from new products per year………………………. $1.5M % of new products that are new to the company………….. 15% % of new products that are new to the world………………. 3% Customer satisfaction with new products…………………… 95% Note: fictitious numbers

Growing with New Products & New Markets Dr. Irene Petrick Penn State University

New Product Ideas Market Pull Ideas – generated from the marketplace, recognition of market need, customer requests, and competitive advantage Technology Push ideas – generated by science or technology research, or serendipitous discovery Ideas trigger the process – technological possibilities are matched with market needs.

Internal Sources for New Product Ideas Establish a focal Point – collects ideas, facilitates idea generation Engage all sources of new ideas research, product design & engineering, sales & marketing customer service, production, other executives & board of directors Suggestion Box Group Creativity Sessions Scouting Time

Internal Process for New Ideas Screen Focal Point Ideas Go Idea Bank Kill – or - Hold, Low Priority We manage everything else, why not idea generation?

Idea Submission Form Describe the new product idea What customer need or problem will the new product address Who are the potential markets and customers Is the product a modification, substitute or leading edge product

Idea Generation Brainstorming : lots of ideas, positive atmosphere, record every idea One on One: capture information from one-on-one interactions Focus groups: usually used to test ideas, or clearly define problems/opportunities Interaction groups: customers, sales, & technical people are involved Immersion: develop complete understand of a market(s) Plusing/amplifying: focus on enhancing a current product or new product idea

Idea Screen First Review Second Review Gate Gate 1. Preliminary Investigation First Review 2. Detailed Investigation Second Review Ideation Strategic alignment Market potential Technical feasibility Technical feasibility Market attractiveness 1st cut financial analysis Technical assessment Market assessment Financial assessment 4. Testing & Validation 5. Market Launch 3. Development Gate Gate

Status by Stage Idea Stage1 Stage 2 Stage 3 Stage 4 Stage 5 Project1

New Product Evaluation Techniques Benefit Measurement Techniques – (qualitative) rely on subjective assessments of strategic variables   Fit with corporate objectives Competitive advantage Market attractiveness   Financial or Economic Models – this is the conventional investment decision   ROI Payback period Break-even analysis Discounted cash flow analysis   Portfolio Methods – prioritization and resource allocation methods   Maximize the total portfolio value Yield the right balance of projects Yield a strategically aligned portfolio  

New Product Project Metrics Unique & appropriate metrics at each stage of the development process Assess quality of the stage activities Forecast return on investment (ROI) from new product projects Prioritize projects and allocate resources Optimize portfolio of new product projects Ensure alignment to corporate goals & objectives Learn from successful, and unsuccessful projects You can’t manage what you don’t measure

New Product Performance Metrics Project Qualitative Benefit Score Predevelopment & @ Launch Development Costs - actual (hours, expenses) Projected Sales (1 yr after launch) Actual Sales Projected 1st year ROI Actual 1st year ROI   Project A   6 8 $225,000 $350,000 $450,000

New Product Performance Metrics Select metrics that are useful, only collect what you are going to use. Select metrics that are can be readily obtained. Select metrics that are easy to understand and tell the pass/fail story Collect appropriate metrics at various points in the development cycle. Insure timely gathering & communication of metrics.

An Approach to Assessing the New Product Process Interview representatives from key functional areas. Likes, dislikes, suggestions, rate NPD performance Distribute audit questionnaire Reviews NP projects, NP process, and NP performance.

University Resources in Product Development 1. Preliminary Investigation 2. Detailed Investigation Ideation University R&D University R&D University R&D 4. Testing & Validation 5. Market Launch 3. Development Penn State Integrated Design Solutions Faculty led, short duration, asyncronous, funded projects Penn State Learning Factory Student team, semester long, set cost

Resources Available to Assist You PennTAP Grant funded technical assistance Connection with University and other external resources Industrial Resource Centers Innovation Engineering services Technology Scouting Technology Driven Market Intelligence Ben Franklin Technology Partners University collaboration Funding assistance Business development Small Business Development Centers Business planning Market Analysis and Competitive Research Technology Commercialization Keystone Innovation Network

Questions? Mark Toda PennTAP 814-865-0427 mtoda@psu.edu