Product Management

16.1.2 Product development

Importance Time Basic Research Base Advantages/Disadvantages

Karl Martin A. Aldueso

Importance of Product Development

Replace existing products Extend an existing products life Broaden a product range Reduce the cost and improve Enter new markets Meet changed customer needs

Importance of New Products

% revenue from new products

Product life

Year

Importance of Early Market Entry

Loss of contribution over product life

15%

6% 4%
5% increase in development costs 10% increase in manufacturing costs

6 months late to market

Time

Utmost importance Dangers: Accelerated development Slower development

- Figure 16.5

Effect of shortened development time on product risk

Risk

Shortened development time Existing development time

Product development

Product launch

Product phase-out

Applied research
Product development Product launch Product phase-out

Product development

Product launch

Product phase-out

Product development

Product launch

Product phase-out

Product development from a common research base

Applied research

Basic research

Product development

Product launch

Product phase-out

Product development

Product launch

Product phase-out

Product development

Product launch

Product phase-out

Applied research

Product development

Product launch

Product phase-out

Product development

Product launch

Product phase-out

Advantages/disadvantages of acquiring a product/technology

Advantages: Uncertainties of development time and cost are avoided The cost of an unsuccessful product launch is avoided Buying a product means that internal technical skills can now be used on other projects Cash flow becomes positive earlier Disadvantages: The company may have to pay over the odds for the product Reputation gained by the existing product may hamper its entry into other more profitable market Problems of supporting the product and of developing it further Good internal engineers will leave The companys reputation as an innovator will be weakened

Lead or Follow?

Lead - being first into the market

Follow - learn from the competitors mistakes

Thank You!

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Cost of engineering change

Design Design test Process development Pre-production Volume manufacture