PRODUCT DESIGN AND

DEVELOPMENT
15.823 SPRING 2001
GLEN L. URBAN

New
Prod

01

OUTLINE
NEW PRODUCT DEVELOPMENT PROCESS
REALLY NEW PRODUCTS --INFORMATION
ACCELERATION
LISTENING IN -- Advisor/Virtual Engineer
IMPLICATIONS FOR INTERNET
TESTING CONVENTIONAL PRODUCTS ON THE
INTERNET
DESIGNING INTERNET PRODUCTS

New
Prod

01

FAILURE
WHAT IS FAILURE RATE OF
PRODUCTS INTRODUCED TO THE
MARKET?
WHY FAIL?
IMPLICATIONS FOR INTERNET
STARTUPS?

New
Prod

01

SUCCESS OF COMMERCIALIZED
NEW PRODUCTS

Successful
Met Company
Criteria
65%

New
Prod

Unsuccesful
33%

1976 - 1981
01

Successful
Met Company
Criteria
65%

Unsuccesful
33%

1963 - 1968

ANA - 1984
138 Member Firms
43 of 100 Top Advertisers
74% Packaged Goods
12% Durables
12% Industrial
9% Services

FAILURE RATE
(Not Meet Business Objectives)

New
Prod

01

Line Extensions

27%

New Brand/Existing Category

31%

New Brand/New Category

60%

1990s
(Cooper and Kleinschmidt 1994

203 Industrial New Products -- 50% Fail

103 Chemicals -- 35% Fail

(21 Firms in N. A./Europe)

Market Success

Superior Product (Unique, Value, Quality,

Physical Benefits, Visible)

Market Driven (Market Study, Customer Tests)

Up Front Homework/Product Definition
Cross functional Team/Strong Leader
New
Prod

01

Causes of Failure

New
Prod

01

Market Too Small

Not New/Not Different
Poor Positioning
Forecasting Error
Competitive Response
Change in Customer Tastes
Poor Repeat/Diffusion
Low ROI
Organizational Problems

Poor Match for Company

No Real User Benefit
Little Channel Support
Poor Timing
Shift in Technology
Change in Environment
Poor Service
Lack of Coordination
Poor Quality

PERCENT TRANSITION IN STAGES

1968 1981
Idea Generation and Screening to
Business Analysis
Business Analysis to Development
Development to Testing
Testing to Commercialize
Commercialized to Success

21.3

67.7

55.9
37.8
62.2
60.7

71.2*
80.0
70.2
65.3

*i.e. 71.2% of the ideas to enter Business Analysis pass criteria to enter Development phase.
Source: Elrod/Booz, Allen, and Hamilton

New
Prod

01

INTERNET STARTUP
WHAT IS CHANCE OF SUCCESS?
IDEA
BUSINESS PLAN
LAUNCH
IPO
HOW TO MAXIMIZE SUCCESS?
RESEARCH
TIMING

New
Prod

01

NEW

MARKET

EXISTING

EXISTING

NEW
PRODUCTS

NEW PRODUCT ARENAS

New
Prod

01

STATE OF THE ART

New
Prod

01

PROCESS ENHANCEMENTS
INFORMATION ACCELERATION
LISTENING IN
IMPLICATIONS FOR INTERNET

Proven Methods
Customer Active Paradigm

OPPORTUNITY
IDENTIFICATION

DESIGN

Focus Groups / Voice of Customer

Order of Entry
Multi-Dimensional Scaling/Conjoint
QFD
Lead Users

PRE-MARKET TESTING

Concept/Product Testing
Laboratory Test-marketing
Information Acceleration

TEST-MARKET

Stochastic Models
Electronic Measurement

LAUNCH AND LIFE CYCLE

MANAGEMENT
New
Prod

01

Life Cycle Modeling

Scanner Data/Brand Management/D.S.S.

New Product Process and Proven Marketing Methods

ENHANCEMENT
INNOVATION AND BUSINESS
STRATEGY

Proactive Budgeting -- 25%

Technology/Customer/Production/Engineering
Organization -- Large Scale to Start Up

OPPORTUNITY IDENTIFICATION

Really New -- Create Markets

Needs vs. Desire
Global Team -- 24 Hour work Day
CBP

DESIGN

Specs

Design Sophistication

Virtual Prototyping
Platforms and Architecture -- Process Intensive
Premarket Forecasting -- Risk Management

TESTING

Virtual Testing
Model Response - Specs -- Cost
Marketing world-wide

INTRODUCTION

Channel Power/Remote Buying

Little Protection -- Pioneering Benefits

PROFIT MANAGEMENT
New
Prod

Elaborate For Segments

Rejuvenation Cycle
Learn from Failure

01

PRIUS
New
Prod

01

New
Prod

01