We take it for granted when new products appear on the market. Perhaps they were made by elves! Well, they must have been made by someone, who followed a process. And that process was the New Product Development, or NPD, process.
The New Product Development process is now mature and well understood. There are many ways to articulate it, and none is that different from what mediaeval craftsmen would have used. But it’s still a big idea. And it’s an idea every manager should at least be familiar with.
Why Do We Need New Products?
There’s a big and philosophical question. Environmentalists may take issue with the constant stream of new things that use up the Earth’s finite resources. But some new products replace older, less efficient products. Others make the human experience a better one. A new vaccine or a better farming implement, for example.
Of course, the Luddite mentality can prevail. But by and large, most of us welcome innovations and improvements. As scientists make new discoveries, technologists turn them into new products, and engineers build them. That has moved us from throwing a stick and hitting with a rock, to spear throwers and hand axes, and on to maglev trains and CNC machines.
New Product Development built the modern world… and rebuilt it… and continues to do so.
What is New Product Development?
New Product Development is the process that takes a new product or service from conception to the marketplace.
Within modern businesses, it is usually highly structured and well-documented, for two reasons:
Speed to market, investment cost, and risk are three of the prime factors that will determine the commercial success of a new product. An efficient process can:
- speed the development lifecycle
- reduce the costs
- manage risks, eliminating them along the way
Not only does the New Product Development process suck up a lot of the organisation’s budget and create a substantial element of risk. It also holds the future of the business in its hands. The implications of a successful or failed new product introduction can be financial, reputational, and even existential.
What is the Purpose of the New Product Development Process?
We create new products for three reasons. And, whilst I have precisely zero evidence for this, my judgement is that, in volume terms, these reasons are ordered:
- Meeting a customer demand
Market research shows that existing or potential customers actively want to buy a product that you do not currently offer. The principal way to learn about this is through Voice of the Customer (VOC) research.
- Address a market opportunity
You determine that you could create a demand for a new product, by extending your current product range in a particular way. Usually, these are associated products that we can think of as:
- Horizontally integrated – like-products of an adjacent product class. For example, a manufacturer of toasters and kettles may also start making blenders. Or a manufacturer of vacuum cleaners and fans may create a range of hair driers.
- Vertically integrated – products that are connected to the use of an existing product set , but are either more generic or more specific. An example might be for a computer manufacturer to start producing peripheral devices (more specific) or maybe its own software platform (more generic).
- Create a new market category
When we looked at W Chan Kim and Renée Mauborgne’s concept of a Blue Ocean Strategy, this was what they are talking about. A wholly new product that does not readily fit into an existing category and therefore has no real competitors. This is a big gamble for the New Product Development process. But, the hope is that it will create a new demand, which will grow rapidly, before competitors can match your offering.
How to do New Product Development
You will find many models of the New Product Development process. I will offer you a conceptual model, which you will be able to reconcile against whatever model you find in the organisations with which you work.
1. New product strategy
This is an organisational-tier strategy, for how new products need to fit with an existing portfolio and serve the company’s mission and vision. Sets goals and objectives for any new product.
2. Concept creation
There are various steps to this, which some processes bring to the fore as principle steps in the NPD process:
- Creating the new ideas – often this starts with stimulus from a Voice of the Customer exercise
- Screening the ideas to find likely winners, and eliminating those that don’t fit for any of a dozen or more reasons
- Structuring the best idea into a clear concept
This is how people interact with, and experience, products and services. It affects which products or services we choose and what we are prepared to pay for them. Often, design is a key differentiator from competing products.
4. Business Analysis
Before a company invests heavily in developing a product design, it needs to assess the likely commercial impact of the new product, to build an investment appraisal.
Engineering and problem solving to craft a finished, marketable product – often via a series of pilots or prototype.
6. Marketing strategy
This includes market testing, often with advanced prototypes (and using beta test versions in the software world). The marketing strategy covers everything to do with how the company will raise awareness of a new product and generate market demand. It will often focus on the 4Ps of Product, Place, Price, and Promotion.
How will the company make a long-term, sustainable profit from its new product or service, and maintain a satisfactory cash flow? This essential piece of work takes in pricing, detailed marketing and sales plans, product launch plan, service and support packages, and much more.
What’s this Fuzzy Front End I’ve Heard of?
One common model of New Product Development has four stages. These map onto the process above, and I’ve indicated the mapping of steps in brackets:
- Fuzzy Front End (1,2)
- Design (3,4)
- Implementation (5)
- Fuzzy (or Messy) Back End (6,7)
Some people refer to the process of crafting new ideas as fuzzy because there is often little structure or clarity of direction. Product ideas change a lot during the Fuzzy Front End (FFE), as product managers seek to refine them. However, like the Definition Stage in Project Management, the FFE is crucial to the success of the end product. And therefore, it is vital to not rush thorough this stage. Some advocates argue for this step accounting for up to 50 per cent of the time from first inkling to product launch.
…and Fuzzy Back End
For hard-nosed product engineers, the whole commercial and marketing piece is pretty messy and imprecise.
What is Your experience of New Product Development?
We’d love to hear your experiences, ideas, and questions. Please leave them in the comments below.
To learn more…
In researching this article, I found one absolutely stand-out article on the web. If you want to learn more, I do recommend the extended page: ‘Innovation for Everyone: Everything You Need to Know About New Product Development’ on the Smartsheet website.
Also, the concept of Scrum – now a mainstay of IT Project Management – started as an innovative approach to New Product Development.