Product development is the creation of a new or different product that offers innovative new benefits to the end user. This includes both the creation of an entirely new product and modifications to an existing product. These changes or new introductions may be targeting a newly defined customer requirement or a niche category in the market.
A product can be defined as a collection of benefits that can be either tangible such as a physical item or intangible such as a service or experience. The new product development process involves two simultaneous activity paths. One of these focuses on extensive market research and analysis while the other deals with generating ideas, design of the product and detail engineering.
New product development is the first stage in the product life cycle management process, the strategic process that is used to manage products and market share. An effective product development process helps a company to:
- Grow through the creation of new business opportunities
- Boost profitability for stakeholders
- Increase customer satisfaction through better products meeting specific needs
In this article, we look at 1) two approaches for managing product development, 2) points to remember, and 3) other product development techniques.
1. TWO APPROACHES FOR MANAGING PRODUCT DEVELOPMENT
There have been several approaches to managing an effective new product development process. One such method is the Fuzzy Front End (FFE) followed by a more formal Stage Gate process. The FFE is a more chaotic early stage process, where the concept is defined. The Stage Gate is a more formal step by step process where the concept is formalized and managed systematically.
a. Fuzzy Front End (FFE)
Defined by Koen, the fuzzy front end includes the chaotic, unpredictable, and unstructured activities that precede a more formal new product development process. This is stage after an opportunity has been realized and before a formal product development process is deemed ready. Here, a concept may be generated and then the decision made regarding the feasibility of this concept and whether it is worthy of further investment of resources.
Practically, the FFE may not be a formal or detailed part of the product development process. However, it may end up taking up to half the total development time and this is the point where serious commitments regarding time, investment and the nature of the envisioned end product are decided. Because of this, it sets the direction for the whole project and the product. This is why the importance of this phase cannot be overlooked and it should be included in the overall projected product development cycle time.
In no particular order, Koen mentions five different elements of the front end. These are:
Identification of Design Criteria
In a semi structured manner, both large and incremental business and technological chances are identified. Based on criteria / guidelines decided here, new projects / products will be assigned resources and a structured development strategy can begin to be established
Identified ideas are converted to implications for business context relevant to the company. Market research and studies as well as some basic trials may be conducted at this point to understand how the concept will translate into a solution for the customer
Through an incremental and iterative process, the identified idea is taken birth to a mature tangible concept. The process followed here can be formulated internally or externally through a specific customer request or a unique material availability from a supplier
Does the concept of idea reached here make business sense and does it have business value? Positive answers to these questions lead to the decision to purse the creation of the prototype of the product and negative answers may end the process right here to be started again from the beginning
Based on factors such as available market share, customer requirements, investment needed, competitor analysis etc., a business case can now be developed. This is often treated as the first step of the formal product development process.
There is no formal or universal definition of the Fuzzy Front End. Neither is there a clear framework of how it works. Generally, it is said to encompass tasks such as strategic planning, generating concepts and pre-technical evaluations. These activities are not set in any formal framework, but flow in an unpredictable, unstructured and often chaotic manner. Despite this, it can be a valuable and often vital lead into a successful product development activity.
b. Eight Stage Gate Process for New Product Development
Often known as the stage gate process, this 8 stage framework was developed by Robert G. Cooper after extensive research product success and failure. Since product developments often include big or small teams and may require substantial investment, following a structured and formal process may help maximize the probability of a successful product and mitigate the risk of failure. This process can also help keep everyone on the development team structured and on the same page.
The 8 stages in this process are:
At this stage, a product development team will take the concept narrowed down in the fuzzy front end and work on brainstorming this concept into concrete ideas for products. It is necessary to employ strong analyses to identify current market trends and available solutions, understand customer behavior and needs, and identify areas of opportunity. This information will help keep ideas focused and relevant. Some tools that can help this analysis include a basis internal and external SWOT analysis, study of market and customer trends, competitor analysis, focus groups, sales staff and other employees, and information from trade shows. It is also helpful for the team to keep important aspects of the future product in mind such as how lean it is, how scalable it is and how much return can it generate. There may be many ideas at this point, which will be analyzed in detail in the next stage.
At this stage, the task is to remove ideas that do not make strong business sense. A set criteria should be decided against which each idea will be evaluated and discussed. There should be as little deviation as possible from this criteria so that no extra time is spent debating unsuitable ideas. Some questions that can be asked at this stage include
- Will the target audience benefit from this product?
- What is the size of this target audience and is there a growth forecast?
- Is there existing competitor presence or is it anticipated?
- Are the industry and market trends positive?
- Does it make technical sense to manufacture the proposed product?
- Will the product be profitable?
- Will it be acceptable to the customer at target price?
Concept Development and Testing
At this stage, the legal and practical aspects of developing and launching the new product are studied. It is pertinent to investigate all intellectual property and patent issues to prevent later infringement issues. An understanding of the marketing message and marketing details will also help streamline and focus the process moving forward. Identifying the target market, purchase decision makers, product features, potential benefits and consumer reactions to the product are some important marketing related points. In addition, design details and their technical requirements as well as cost effective production are also vital considerations.
Once marketing and design details are evaluated and understood, it is now time to conduct a business analysis to assess product profitability potential. It is important to estimate as close to reality as possible the likely sale price, based on competitor analysis results and consumer focus group or survey data. It is also necessary to workup sales volumes based on market size and relevant tools. And based on this, profitability and a break-even point can be identified.
Beta Testing and Market Testing
At this point, it is now time to manufacture an actual prototype or a close mockup. The product, and ideally the packaging, should now be tested in true to life usage conditions. This can be done through focus groups, interviews, introductions at tradeshows. The feedback that is generated can help identify redundant features or those that create no real value and any hitches in the user experience. Necessary adjustments can now be made. As further testing, an initial trial market can be identified and a small scale launch conducted to further assess acceptance by the target user group.
At this stage, the technical teams will finalize the quality management system. They will also work out the resource requirements, plan engineering operations and create department schedules. Technical communications and requirements can be published to create a record. Suppliers should be brought on board and logistics worked out. A system for regular reviews of the project as well as contingency and risk mitigation plans should also be drawn up.
The product is ready for launch at this stage. Necessary advertising and marketing communications strategies are set into motion and the distribution channel is loaded up to ensure consistent product availability. The product should be monitored for usage feedback with consistent technical support available if applicable. In order to help convert undecided consumers into actual buyers, the marketing communications and brand presence need to be strong, relevant, visible and updated.
New Product Pricing and Post Launch Review
At this point, a review of the entire process is a good idea to identify best practices and areas of improvement. The impact of this new product on the entire product portfolio should also be evaluated. An external and internal value analysis will help understand the impact of the product. The product may have been launched at an introductory price and it may now be time to decide upon an actual pricing strategy. This can be done after assessing consumer response, competitor response and product costs. A forecast of unit volumes, revenue and profit will also add value. An ongoing mechanism needs to be put in place to evaluate changing customer needs and market trends to ensure that the product stays relevant and competitive as consumers grow older and change preferences.
2. POINTS TO REMEMBER
It is important to note that the product development process is a fluid and evolving one. Some steps may need to be iterated while others may be eliminated altogether. In the interest of quicker time to market, some companies may run several steps simultaneously.
There must be an understanding that ideas may get trashed and some of these may be exciting and innovative but wrong for what is presently required. The company must also be prepared for losses and have a risk mitigation or market exit strategy planned in advance to avoid being caught off guard.
A Balanced Team
The product development process ideally needs both technical or engineering and marketing or business expertise. The best way to achieve this is to create a specialized cross functional team and give it end to end responsibility for the product. This means that the team will be working on idea generation all the way to commercialization and post launch reviews. If the industry requires extensive and expensive R&D, then a collaboration among different companies may help spread out costs and risks associated with a new product as well as provide access to a wider variety of skills and experience. In any case, it is vital that the team work in close collaboration to ensure the successful development and launch of the new product. With clear goals, the team can ensure that the product development process is productive and relevant.
A Proactive Process
New product development is increasingly seen as a proactive process by senior management. There is an effort to identify changes in market trends and seize opportunities for new products before a need for them is explicitly present or before a competitor reaches it. This allows time to perfect and plan a product’s development and launch in detail and allows risk mitigation and planning. If a more reactive methodology is adopted then, there will always be a rush to catch up which may lead to a substandard product or a poorly planned launch. New product development should be seen as a form of continuous development where the entire company is alert towards potential opportunities.
3. OTHER PRODUCT DEVELOPMENT TECHNIQUES
SCRUM is a simple framework that allows teams to collaborate effectively on complex projects. Through this methodology, product development occurs in small pieces. Each piece builds up on a previously created piece. Working on one small piece at a time encourages the creative process and allows teams to incorporate feedback and make changes as well as to create only what is needed.
Through a small set of rules, basic structure is provided to the teams to allow them to focus innovation on finding solutions to what might other be an extremely daunting challenge.
The Scrum process involves three basic roles. These are:
- Product Owners who finalize what needs to be created
- Development teams who create what is needed and then demonstrate it after which the next step is determined
- Scrum Masters who ensure a smooth process and work on process improvement, team development and product quality