New Product Development

Prof.V.Seshadri
SVKM’s NMIMS
 New Product Development -
Perspective
• New product development (NPD) is the
term used to describe the complete
process of bringing a new product or
service to market.
• NPD is said to be the lifeblood of a company
• Companies must now evolve new products
even to survive. There are no safe niches
that can be harvested for long periods of
time.
• Products need to keep pace with the hectic
pace of growth of the I.T. and
Communication technologies.
• Companies must grow NPD
Prof.V.Seshadri it’s
Ref 1own “core 2
 Types of NPDs
1.New-to the world type products
2.New product lines
3.Additions to existing product lines
4.Improvements and revisions of
existing products
5.Repositioning
6.Cost Reductions

Prof.V.Seshadri NPD Ref 1 3

 Examples
1.New to world: Cell phone; Credit
card; ATM
2.New product lines: Reliance’s foray
into petrochemicals from textiles;
ITC foray into Hotel business from
cigarettes
3.Additions: MTNL extending from
landline to mobile telephones
4.Improvements: New versions of
digital cameras by Sony
Prof.V.Seshadri NPD Ref 1 4
 Examples – contd.
•5. Repositioning: Certain brands of
Cereal foods like Oats as Health
foods.
•6. Cost reductions: Plastic car fender

(from metal); manual to computer

drafting

Prof.V.Seshadri NPD Ref 1 5

 NPD types: features
Type Time to Potential Potential Company
introduce revenue to revenue to positioning strategy
economy company
1 Longest Highest Highest Market development

2 Long High High Market development

3 Medium Medium Medium Line completion
4 Short Little Medium Market share
5 Shortest Little Medium Market share
6 Shorter Little Medium Raise margin

Prof.V.Seshadri NPD Ref 1 6

Typical ROI of non developer
firms

Prof.V.Seshadri NPD Ref 1 7

Typical ROI of developer
firms

Prof.V.Seshadri NPD Ref 1 8

 Effect of weak product
development on a firm’s
performance
• Increasing cost of sales
• Decreasing profits
• Degraded financial strength
• Reducing market share
• Downward spiral leading to
closure/bankruptcy

Prof.V.Seshadri NPD Ref 1 9

New Products that changed our
world
• Integrated circuits; semiconductors;
resistors & diodes – Digital
Computing
• Advanced insulation systems
• Composite materials and anaerobic
bonds
• Jet engines
• Mobile telephones; palm computers
• E-mails;
• Key hole surgery; laparoscopy
• Bar code scanners
• Refrigerators; Air conditioners
Prof.V.Seshadri NPD Ref 1 10
New Products that changed our
world
• Laser for cutting, operations;
metroscopy
• Image processing
• X- Ray; Gamma Ray
• Electronic Calculators;
• CNC ; CAD; CAM; CAE
• FEM; Rapid prototyping; Virtual
designing and Simulation
• Electric lighting; Fluorescent Lights;
• Television; Walkman; I-Pods;
Prof.V.Seshadri NPD Ref 1 11
New Products that changed our
world
• Satellite imaging; Satellite weather
forecasting
• E- books;
• Wireless messaging; Cordless phones;
• Audio & Video tapes; VCD; DVD ; Pen
drives; hard disc;
• Electric Power for various application
• Synthetic fabrics; Thermal wear;
fireproof wear
• Robotics; Automation
Prof.V.Seshadri NPD Ref 1 12
 Results of effective NPD
Strategic Advantages
Greater NPD capability
Pre-empting competition
Setting standards
Initial monopoly
Name recognition

Company performance
Effective Product Development
Growth & Profitability

Operational advantages
Lower costs
Skill/capability development
Potential economies
Brand image

Prof.V.Seshadri NPD Ref 1 13

 Product Life Cycle
a)Introduction
b)Growth
c)Maturity
d)Saturation
e)Decline

Prof.V.Seshadri NPD Ref 1 14

 Introduction stage
• Also referred as Incubation stage
• Expenses for promoting,
manufacturing and producing the
product are high
• Profit margins are low
• Survival probability is low

Prof.V.Seshadri NPD Ref 1 15

 Growth stage
• Incentives of greater cost reduction,
improved performance combines to
stimulate demand
• Demand often outstrips supply
• Profit margins increase due to costs
being spread over enhanced
volumes
• Profit margins peak in this stage
•
Prof.V.Seshadri NPD Ref 1 16
 Maturity stage
• More competitors enter the market
• Sales Volumes continue to rise
steadily
• Profits tend to take negative trend
because prices start dipping
• Product has entered a “commodity
market”

Prof.V.Seshadri NPD Ref 1 17

 Saturation stage
• Rate of demand is almost constant
initially and later starts dropping
• There is more of a replacement
market due to deterioration of
products
• Competiton is focused on price

Prof.V.Seshadri NPD Ref 1 18

 Decline stage
• Demand for the product actually
declines, because the product is
substituted by other another
product
• Volumes dip, profits turns to losses.
• The product is said to have reached
the end of it’s life.

Prof.V.Seshadri NPD Ref 1 19

Product Life Cycle - features
• The shape of the curves may be
different depending on :Type of
industry, Type of competitors; quality,
price, introduction time, customer
requirements etc.
• PLC is also influenced by technological
advancements
• Closer the company is to consumer
goods and the market the shorter the
PLC. Closer the company to basic
industry or producers goods, the
longer the cycle.
Prof.V.Seshadri NPD Ref 1 20
 Product Life Cycle - features
• PLC of a product has dramatically
reduced for practically all product
types in recent years.
•e.g.

•Mechanical type writers: 30 yrs

•Electromechanical: 10 yrs

•Electronic Typewriters: 5 yrs

Prof.V.Seshadri NPD Ref 1 21

 Life Cycle changes with
time
• Household appliances:
•Introductory stage: 12.5 yrs TO 2 yrs

•Growth stage: 33.8 yrs TO 6.8 yrs

•PLC :

• Analytical instruments: 10 yrs to 4 yrs

• Video games: 9 months
•Therefore it is important to introduce a

new product just after the existing

product has completed the growth
phase.
Prof.V.Seshadri NPD Ref 1 22
Vol/Profit vs Time – Product Life
Cycle
 Technological Life Cycle
• PLC of consumer goods &
consumables are governed by
Fashion, Technology and the
benefits sought by the market
place
• In case of Industrial goods: the PLC
depends largely on the impact of
Technology and fashion plays lesser
role.
• TLC is the evolution of technology
Prof.V.Seshadri NPD Ref 1 24
 Technological Life Cycle
1.Cutting edge
2.State of the art
3.Advanced
4.Mainstream
5.Mature
6.Decline

Prof.V.Seshadri NPD Ref 1 25

TLC stage effects on industry
population and profits
 Cutting edge technology
• The cutting edge phase of the TLC is
charecterized by technology
advancements that is well ahead of
the most sophisticated applications
in the market place. They involve
more of research than
development. The researches can
be:
•a) Pure research

•b) Applied research

•c) Product research

Prof.V.Seshadri NPD Ref 1 27
 Cutting edge technology
firms
• They develop the technology with a
specific application in mind.
• The success for the technology is
determined by finding additional
applications
•e.g. LEDs for electronic equipments.

Prof.V.Seshadri NPD Ref 1 28

Re
la
Stages of Technology
ti
ve

ef
fo Marketing
effort
rt
Engineering
al effort
lo
ca
ti
on

Prof.V.Seshadri NPD Ref 1 29

 New Product Types

Ne Hig
wn h New Product Lines New to the world
es
s
to
co
mp Additions
Improvements / to existing product lines
an
Revisions to existing products
y
Cost Reductions
Re - positionings
Low High
Newness to
market
Prof.V.Seshadri NPD Ref Warwick 30
 Breakthrough and Follow-on
products
Breakthrough Products
Complete development process
Long total dev cycle ( in years)
Large impact on profits
Technology and innovation driven
Thrives in un-coordinated processes
Many competing designs
High development risks
Prof.V.Seshadri NPD
Follow-on products
Mostly development phase required
Short cycle ( in months)
Competitive positioning and market
share protection
Cost and market drive
Requires a systematic process
Dominant or proven design
Risks are much smaller
31
Types of development
projects
d ) Research and Advanced De
High
Ex
c ) Radical Breakthroughs
te
nt
of
pr b ) Next Generation or Platform
oc
es
s
cha ) Enhancements / hybrids
/derivatives
an
ge
Low Extent of product Hig
change h
e ) Alliances / Partnered projects
Prof.V.Seshadri NPD Ref Warwick
 Generic Product Development
Process

R&D Tech . Dev Capability AcquisitionProject Mgmt .

Tech Acquisition

Product design Prototyping

Product test and approaval
Product Lau

Requirements capture Product definition and approval

Concept development
Process design Process dev
Process
. test & Approv

Supply Chain Development

Prof.V.Seshadri NPD Ref 1 33

 Definition- ( Ref.Wikepedia)
• In business and engineering, new product
development (NPD) is the term used to
describe the complete process of bringing
a new product or service to market. There
are two parallel paths involved in the NPD
process: one involves the idea generation,
product design and detail engineering; the
other involves market research and
marketing analysis. Companies typically
see new product development as the first
stage in generating and commercializing
new products within the overall strategic
process of product life cycle management
used to maintain or grow their market
share Prof.V.Seshadri NPD Ref 1 34
 NPD- the process
•1.Idea Generation
•2.Idea Screening

•3.Concept Development and

Testing
•4. Business Analysis

•5. Beta Testing and Market

Testing
•6. Technical Implementation

•7. Commercialization

•8. New Product Pricing

Prof.V.Seshadri NPD Ref 1 35