| New
Product Strategy
A
Climate of Innovation
New product development
doesn't occur in a vacuum, according to
TEC experts Mitch Goozé and
Nick Webb. In companies with a
successful track record of innovation,
senior management understands that the
process involves a complex set of activities
that cuts across most -- if not all --
business functions.
"Start with
an in-depth analysis of current marketplace
conditions and move on from there to specific
goals," Goozé says. The analysis
includes:
- Rigorous conceptual
design
- Target market
research
- Desired performance
levels
- Investment
requirements
- Projected
financial impact
Other important considerations:
how does the proposed new product screen
against your current marketing strategies?
Will it dilute the focus of the company's
overall plan? Is there a danger that it
will drain valuable resources from other
more profitable ventures?
"Use your existing
market strategy as a guideline,"
Webb advises. "Know how your target
buyers will greet the proposed new product.
Make sure it fits into your company mission."
Ideally, the TEC
experts say, new product development should
take place within an ongoing "climate
of innovation." For this to happen,
everyone from the CEO on down should agree
on specific principles, including:
- We will honor
idea generation whether the idea works
or doesn't.
- We will learn
from failure.
- We will encourage
creativity skills among all staff.
- We're committed
to getting the best ideas from employees
and customers.
New product strategy
relies on exhaustive analysis of the company
itself (internal) and the marketplace
at large (external). "Do you know
the extent of your current product line's
strengths and weaknesses?" Goozé
asks. "Are you fully apprised of
technology needs for this line? Are there
gaps or deficiencies that should be addressed
before embarking on new product development?"
You should know your
competitors, too. When it comes to product
design, production engineering, marketing
and finance, what are their strengths
and weaknesses?
And, of course, the
bottom-line strategic concern: profitability.
"Profitability
should be assessed at each stage of development,
from manufacturing to launch to customer
service," Webb says. "This assessment
includes calculating fixed and variable
costs, expected sales price and anticipated
sales volumes. New product development
is costly but those costs can be estimated
and managed."
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Know
What You're Going For
Any new product venture
must demonstrate a strong link to the
company's overall business strategy, according
to Goozé and Webb. Within this
context, certain goals should be met:
- Cost
-- Estimate the manufacturing cost of
the proposed new product (including
capital equipment, tooling and the incremental
cost of producing each unit).
- Development
time -- Set a timeframe for the
product development effort, based on
how responsive the team can be to external
forces and technological developments.
- Quality
-- The new product must satisfy
customer demand. Its quality will eventually
determine market share, as well as the
price customers are willing to pay for
it.
"Be sure to
allocate sufficient marketing resources
when laying out your goals," Goozé
advises. "This includes resources
for advertising, public relations and
promotion. What sense is there in launching
a new product without being able to spread
the word about it?"
Another helpful internal
goal: employee training. Staff members
need to be educated on how to use and
promote the new product. It's also a good
idea to plan for customer training
-- in order to enhance potential for user
satisfaction and as another potential
source of income. Customers are often
willing to pay a little extra to get more
from a new (or improved) product.
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Speed!
"Speed in product
development is a distinct competitive
advantage," Webb says, "but
use caution. Speed in development should
never come at the expense of quality."
The advantages are
clear-cut: responding to customer needs
and beating competitors to market often
result in success, particularly in higher
profitability. Bear in mind that all products
have a limited lifecycle, so getting to
market first generally means sale revenues
will be realized earlier and will last
longer than imitation or "me, too"
products.
"Speedy development
and launch also increase the odds that
the original conception is still in sync
with customers' predicted need,"
Goozé notes. "A short time
frame makes it more likely that market
conditions will be favorable for the eventual
launch."
Both TEC experts
warn, however, that speed in and of itself
is no guarantor of success. Many methods
involved in getting to market ahead of
others can actually end up costing more
money. Reducing product testing time could
result in product performance problems
later on, including added warranty and
servicing costs -- and that can translate
into customer dissatisfaction, a major
negative.
"Speed-to-market
works best if you're ready to sell effectively,"
Goozé says. "That means when
all functions -- engineering, sales, channel
partners, customer support -- are prepared
to go."
To further improve
the chances of success, Webb advises:
- Do your
homework. Start the process with
clear-cut specifications.
- Have the
right team in place. Any sincere
new product venture must have a dedicated
project leader and multifunctional team
in place at the outset.
For more details
on doing it right the first time, see
"New Product Development Process"
in Additional Resources
below.
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Additional
Resources
Below are links to
more best practices as defined by our
expert panel:
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