New Product Development MBAX Spring 2007 Professor Page Moreau

Introduction to New Product Development

Introduction to NPD Why is NPD an exciting topic? What separates winners from losers? Why does NPD matter? The NPD Process NPD in Perspective Diffusion of Innovations Rogers Bass Are all New Products the Same?

Introduction to NPD Why is NPD an exciting topic?

The Dilemma: Risky but Critical

Risky Failure Rate of 40% “I think there is a world market for maybe five computers.” - Tom Watson, chairman of IBM 1943 “The radio craze will die out in time.” -Thomas Edison, 1922 “Video won’t be around more than 6 months; people will soon get tired of staring at a plywood box.” -Daryl Zanuck, President of 20th Century Fox 1946 “There is no reason anyone would want a computer in their home.” Ken Olsen, DEC founder 1977

Risky High Cost of Entire NPD Process Crystal Pepsi (1992) Gillette Mach III (1998) P&G’s Olestra (“Olean”) Job’s Next Computer/Apple Newton RJR Nabisco - Premier Smokeless Cigarettes (and their follower, Eclipse) Cadillac Allanté

Risky To avoid failure, everything has to be right: Concept Design Pricing Positioning Packaging Advertising and Promotion

Risky New Products Showcase and Learning Center Largely for consumer products that tend to have higher failure rates:

Critical

Source: Product Leadership - Creating and Launching Superior New Products Robert G. Cooper

Introduction to NPD Why is NPD an exciting topic? Introductions

Introduction to NPD Why is NPD an exciting topic? Introductions What separates winners from losers?

Winners vs. Losers Success Drivers Correlation with ProfitsTimeliness A unique, superior, differentiated product.53n/s A strong market orientation w/voice of customer Early fact-based product definition prior to development Effective implementation of front-end activities Use of true cross-functional teams Leverage – project builds on firm’s core competencies.32n/s Market attractiveness – size, growth, margins Quality of launch effort – planning and resources Tech. competencies and execution of technical activities.26.32

Winners vs. Losers The Cornerstones of Performance : 1)A High-Quality NPD Process 2)A Defined NPD Strategy for the Business 3)Resource Commitment

Introduction to NPD Why is NPD an exciting topic? What separates the winners from the losers? Why does NPD matter?

Well-managed NPD processes are a significant source of performance improvement Decrease Development Time by 30-70% Reduce # of Engineering Changes by 65-90% Reduce Time-to-Market by 20-90% Increase Overall Product Quality by % Increase White Collar Productivity by % Increase Dollar Sales by 5-50% Increase Return on Assets by % Source: Product Leadership (2000) Robert Cooper

PDMA Best Practices Survey The Best: average 49% of sales from products < 5 yrs old have a success rate over 80% Use stage/gate processes more extensively (& more stages) reward team non-financially in public and private ways innovate in their use of market research and engineering design tools Source: Drivers of NPD Success: The PDMA Report

Introduction to NPD Why is NPD such an exciting topic? Introductions Why does NPD matter? The NPD Process

Phase 1: Opportunity Identification and Selection Phase 2: Concept Generation/ Ideation

The NPD Process Phase 1: Opportunity Identification and Selection Phase 2: Concept Generation/ Ideation Phase 3: Concept Evaluation & Screening Phase 4: Development

The NPD Process Phase 1: Opportunity Identification and Selection Phase 2: Concept Generation/ Ideation Phase 3: Concept Evaluation & Screening Phase 4: Development Phase 5: Testing & Launch “Fuzzy” Front End

The NPD Process

Introduction to NPD Why is NPD an exciting topic? Introductions Why does NPD matter? The NPD Process NPD in Perspective Diffusion of Innovations Rogers Bass

NPD in Perspective Diffusion of Innovations Rogers (1962, 1983, 1995)

NPD in Perspective Diffusion of Innovations Rogers (1962, 1983, 1995): Product Factors Influencing Diffusion Speed:  Relative Advantage (+)  Compatibility (+)  Complexity (-)  Trialability (+)  Observability (+)  Risk (Ostlund) (-)

NPD in Perspective Diffusion of Innovations Rogers (1962, 1983, 1995) People Factors Influencing Diffusion Speed: Crossing the Chasm by Geoffrey Moore

NPD in Perspective Diffusion of Innovations Rogers (1962, 1983, 1995) Bass (1969)

NPD in Perspective Diffusion of Innovations Rogers (1962, 1983, 1995) Bass (1969): The Model: P(T) = p + (q/m) Y(T)

An Example of the Bass Model: Corn Adoption by Iowa Farmers

NPD in Perspective Are all new products the same? Continuity Continuum (Robertson ‘71) Commonly accepted categories: New-to-the-World New Category Entries (New Lines for Co.) Additions to Product Lines Product Improvements Cost Reductions Repositionings

NPD in Perspective

New-to-the-world (“Really New”) 1.Personal Computer14. Touch-Tone Phone 2.Microwave Oven15. Laser Surgery 3.Photocopier16. Computer Disk Drive 4.Pocket Calculator17. Organ Transplanting 5.Fax Machine18. Fiber-Optic Systems 6.Birth Control Pill19. Disposable Diaper 7.Home VCR20. MS-DOS 8.Communication Satellite21. MRIs 9.Bar Coding22. Gene-Splicing 10. Integrated Circuit23. Microsurgery 11. ATM24. Camcorder 12. Answering Machine25. Home Smoke Alarm 13. Velcro Fastener** Source: R&D Magazine 1992