New Product Development: an
Overview
Supporting
Innovation
Among the many challenges businesses face,
perhaps none is as crucial as the mandate to change and grow. If
companies stay still, they die. One area where many companies attempt
to change -- and all too often fail -- is new product development.
Why do these ventures fail? According to TEC
new product development experts Mitch Goozé and Nick
Webb, many businesses either expend too much energy generating
a variety of new products (without necessary forethought, screening
or testing) or too little energy (preferring to "stay the course"
with their existing product line).
"Slow and plodding doesn't get the job
done," Goozé says. "Without innovation, businesses
fall prey to aggressive competitors, which in turn leads to waves
of customer defections when someone else's product outstrips theirs."
Of course, no one says product innovation is
easy. According to studies, three out of four new product ventures
fail in the marketplace; a sizeable fraction of these new products
don't even make it to market.
Companies most often succeed in new product
development when they leverage their own core competencies. There
must be strong links between the new product and a company's:
- Resources
- Marketing expertise
- Distribution channels
- Sales
- Technology and operations
"Without these core competencies in place,
you shouldn't even be contemplating innovation," Webb advises.
The good news is, businesses can design internal
roles and structures to support new product development. Start by
recognizing that the process essentially touches on everything your
business does.
"Innovation stimulates the company from
top to bottom," Goozé notes. "As new products progress
from idea to reality, all functions become involved -- from manufacturing,
supply chain and distribution to marketing and customer service.
The process requires the company's executives to think long and
hard about the changing needs of their customer base, as well as
the threats -- real and imaginary -- posed by the competition."
Goozé stresses the role of marketing,
in particular. Marketing considerations should start when the new
product is still on the drawing board, he says. Ask all the basic
questions, such as:
- Who is this new product for?
- How will it be used?
- How does it fit into our current line
and how will it affect our future products?
"Market research, whether conducted in-house
or through an outside agency, is the first essential step toward
building a welcome response to your new product in the marketplace."
Webb urges companies to search exhaustively
for the right product advantage. "Early on, identify precisely
what your customers want and need," he says. "Use customer-focused
research to guide the process. Use that same research to pinpoint
what works and what doesn't in your competitor's offerings. When
you get to the prototype stage, go to customers and test, test,
test."
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Defining
Goals
So you're considering adding a new product
to your line. Have you looked at the process (and proposed outcome)
from a strategic perspective? Do you have clear and measurable long-term
goals?
"Without measurable goals, you have no
benchmarks to track performance," Goozé notes. "It's
equally important to determine how the new product is linked to
your overall goals and strategy. The fit has to be right, or you
risk substantial losses."
Innovation doesn't occur in a void. It must
be tied to ongoing business priorities.
Other attributes of clearly-defined new product
goals:
- Guides selection of development projects
- Defines target markets, competitive
strengths and weaknesses, and angle of attack in the marketplace
- Differentiates your new offering from
the competition
- Offers staff a sense of direction and
purpose
"Established goals help determine a schedule
for completion of projects," Webb says. "They're also
essential in estimating development costs and resource requirements,
within the context of your larger business plan."
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Success
Factors
A wide range of factors goes into the successful
development and launch of a new product, but the leading factor,
according to Goozé and Webb, is differentiation. A
product that genuinely sets itself apart from others succeeds by
capturing larger market share and meeting other long-range sales
objectives.
This may seem obvious -- but if so, why are
there so many "me too" products floundering in the marketplace?
Goozé says: "There's nothing inherently
wrong with being an imitator, if you can bring something unique
to the next stage of a new product's lifecycle. For an imitation
strategy to work, you have to have an advantage over the pioneer's
initial effort. You have to capitalize on something the pioneer
missed."
What might that be? "The originators of
a new product might have had difficulty keeping costs under control,
or they may have missed certain features and benefits that would
generate value for customers. In either case, successful imitators
find a way to offer the same value for less money, or more value
for the same amount of money." Goozé calls this "imitation-plus."
Other critical success factors:
- A steady stream of ideas
- Leaders who understand and encourage
risk-taking
- Cross-functional project team
- Sufficient flow of resources from key
functions
- Formal prioritizing of projects
Ultimately, Webb notes, a company's culture
must reflect a dedicated commitment to new product development.
"There should be a common language and framework for product
initiatives. The project team should be able to access a comprehensive
database of ideas and customer research. People throughout the organization
should be encouraged and rewarded for coming up with new, profit-making
ideas. Everyone is in it together."
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Additional
Resources
Below are links to more best practices as defined
by our expert panel:
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