The global consumer product market is exploding. In 2006 alone,150,000 new products were brought to market. Now for the bad news:of those, fewer than 5% were hits, and fewer than 15% will evenexist five years from now. Written for small business owners and entrepreneurs looking foran inside track on new product development, New ProductDevelopment for Dummies offers you a unique opportunity tolearn from two consummate insiders the secrets of successfullydeveloping, marketing and making a bundle from a new product orservice. You learn proven techniques for sizing up market potentialand divining customer needs. You get tested-in-the-trenchesstrategies for launching a new product or service. And you get afrank, in-depth appraisal of the most challenging issues facing newproduct developers today, including the need to collaborate withglobal partners, optimizing technology development for a21st century marketplace, getting start-up capital in anincreasingly competitive environment, and much more. Key topicscovered include: * Developing a winning NPD strategy * Generating bold new ideas for products and services * Understanding what your customers really want * Keeping projects on track, on budget, and on-time * Building effective cross-functional teams * Planning and executing a blockbuster launch * Collaborating with global partners * Maximizing your chances for success No matter what size or type of business you're in, thisbook provides you with an unbeatable competitive advantage in thebooming global marketplace for new products and services.
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by Robin Karol, PhD, NPDP, and Beebe Nelson, EdD, NPDP
Foreword by Dr. Geoffrey Nicholson, Vice President, 3M ret.
New Product Development For Dummies®
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Copyright © 2007 by Wiley Publishing, Inc., Indianapolis, Indiana
Published simultaneously in Canada
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Robin Karol is CEO of the Product Development and Management Associa- tion (PDMA), a professional society that creates and nurtures a global community in which people and businesses learn to grow and prosper through innovation and the introduction of new products. Robin is an adjunct full professor at the University of Delaware Lerner School of Business Administration, where she teaches courses on the Management of Creativity and Innovation. Robin worked at DuPont for 23 years in various aspects of innovation and new product development, achieving the role of Director of Innovation Processes. A certified new product development professional (NPDP), she received her PhD in Biochemistry from the State University of New York at Buffalo. She has numerous publications and has presented at many conferences and workshops. The Industrial Research Institute (IRI) presented Robin with its Maurice Holland Award for the best paper in its journal Research-Technology Management in 2003.
Beebe Nelson is Co-Director of the International Association for Product Development (IAPD), a consortium of leading product developers who come together to improve their ability to execute new product development. She has organized, chaired, presented at, and facilitated conferences and workshops in product development, and has contributed chapters and articles in a number of venues. From 1998 to 2003, she was Book Review Editor of the Journal of Product Innovation Management, a publication of the PDMA. Beebe is a certified new product development professional (NPDP) and holds a doctorate in philosophy from the Harvard Graduate School of Education. Beebe has taught Philosophy at the University of Massachusetts at Boston and most recently in the College of Management at UMass-Lowell. She chairs the Advisory Council of Partners in Ending Hunger, a not-for-profit organization located in Maine.
We dedicate this book to the members of the PDMA and the IAPD with whom we have worked and learned, and to George Castellion and his Frontier Dialogues. He was willing not to have the answers so that we could all learn together.
Our number one acknowledgement goes to the hundreds of new product development professionals who have made the practice into a field that we could write this book about. Thank you George Castellion for PDMA’s Frontier Dialogues, where we asked each other dumb questions until the answers began to emerge.
Thank you Kemp Dwenger and Dan Dimancescu (yes, those really are their names!) for researching Japanese product development practices and bringing them to the IAPD for us to learn from.
Thank you Merle Crawford, Robert Cooper, Abbie Griffin, and countless other academics for doing the research that enabled us to regularize the practices of new product development. Thank you Clayton Christiansen, Stefan Thomke, Henry Chesbrough, and many others for continually pushing the limits of NPD from your professorial offices.
Thank you Peter Senge for bringing home the systemic nature of new product development, both in your writings and in your association with the IAPD and the PDMA. And thank you Tom Bigda-Peyton, with whom Beebe applied the lessons of “the learning organization” at a number of client companies, including UTC, Corning, Fairchild, and Becton-Dickinson.
Thank you to the product developers and the leadership at DuPont, where Robin learned almost everything she knows about product development with the DuPont Consulting Solutions team. Thank you to the New Product Delivery Support Center at Polaroid, where Beebe worked with one of the most inspiring teams she has ever known.
Robin gives a special thank you to the original PACE(r) team members who struggled with her to understand how all this worked: Eric Schuler, Ken Pausell, Bob Gentlzer, Richard Tait, Greg Ajamian, Edmund Ziegler, and Ed Artz. I would also like to thank Michael McGrath of PRTM (Pittiglio, Rabin, Todd, and McGrath) for the creation of the PACE(r) process, for writing his books, and for being a mentor as I was learning new product development. I also thank Amram Shapiro and Mark Deck for working with the original team at DuPont and training us all.
Beebe’s special thanks go to Polaroid colleagues Julie Manga, Karen Anne Zien, Dick Collette, Christina Hepner Brodie, the late Pat McGurty, Carolyn Walker, Catherine Seo, Jim Fesler, and Mark Durrenberger. We were all beginners — none more than I — and working with you was a distinct pleasure. My clients at Polaroid, including Walter Byron and Wendy Watson, provided lots of OJT, and I hope they learned as much from me as I did from them.
I also have some very particular thank you’s. Thank you to Bob Gill for our first glimpse of an NPD territory — one that went far beyond the “river of development” — and to the late Bill Ausura for extending that view into the product lifecycle. Thank you to Christina Hepner Brodie, who taught me almost everything I know about customer visits when we worked together at Polaroid and later at the Center for Quality of Management.
Beebe and Robin reached out to many colleagues as they wrote the chapters of this book. The following people talked over content and structure, read drafts, and generally improved what we had to say: Thank you Don Ross of Innovare who helped us with Chapter 5 and with whom Beebe has done many exciting early stage NPD projects, and Rich Albright of Albright Technology Group, with whom Beebe co-wrote the chapter on technology mapping for the PDMA ToolBook2. Thanks to Mike Compeau of Compeau-Faulkes for his help with the chapter on new product launch. Thanks to Scott Elliott of TechZecs for help with Chapter 14 and to Don Hardenbrook of Intel for help with Chapter 11. Thanks to Mike Ransom and Dave Vondle of Eli Lilly for their input into Chapter 16.
Many, many thanks to our Technical Editor, Steve Somermeyer, a PDMA Board Member, a long time member of the IAPD’s Steering Committee, and the president of Somermeyer and Associates. Because of Steve’s hard work, we don’t have to say “the errors that remain are ours.” Now they belong to Steve as well.
Beebe particularly wants to acknowledge the IAPD and the IAPD members for an ongoing, high-level course in new product development. This group of companies has, for the past 15 years, been willing to set aside what they know to explore what they don’t yet understand, and it has been a fascinating and rewarding experience to work with and for them. I also know that without my clients — David Deems of Becton-Dickinson, Shriti Halberg of Cerner, all the folks at Praxair, Dick Tyler of Bose, Jacques LeMoine of Corning, Jennifer Lee of Globe Union, and, well, I wish I could mention every single one by name — I wouldn’t have understood what actually makes NPD work. Thank you all.
The success of the PDMA’s effort to codify the knowledge of thought leaders in the field of new product development was crucial to writing this book. Robin wants to thank the PDMA for supporting her with the time to work on this book and for being a resource of information. I want to specifically thank the Board Chair, Hamsa Thota, for his encouragement; Ken Kahn, VP of Publications, for getting me started on this; Gerry Katz, who heads up the PDMA’s Body of Knowledge; and all the directors, VPs, and members for being there to talk to throughout this project.
Mike Lewis, Acquisitions Editor at Wiley, held our hands through the contracting process, and Chrissy Guthrie, Senior Project Editor at Wiley, has been unfailingly supportive as we’ve worked toward the final product. We thank them both.
Steven Haines of Sequent Learning Networks held our hands as we worked through a number of thorny issues. His contribution to our understanding of product lifecycles enlivens many parts of the book. Phillip Clark jumped in to rescue us when we were overwhelmed by Wiley’s editing process. Thanks to you both.
We’re indebted to April Klimley, Editor of the PDMA’s Visions, who was always there to lend her mind and heart, as well as a hand, an eye, or an ear. If we couldn’t figure out how to do something, or to whom we could delegate it, April always sprang to our sides and pressed through. The book, our readers, and we owe her a great deal.
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Some of the people who helped bring this book to market include the following:
Acquisitions, Editorial, and Media Development
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Technical Editor: Stephen Somermeyer
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Publishing and Editorial for Consumer Dummies
Diane Graves Steele, Vice President and Publisher, Consumer Dummies
Joyce Pepple, Acquisitions Director, Consumer Dummies
Kristin A. Cocks, Product Development Director, Consumer Dummies
Michael Spring, Vice President and Publisher, Travel
Kelly Regan, Editorial Director, Travel
Publishing for Technology Dummies
Andy Cummings, Vice President and Publisher, Dummies Technology/General User
Gerry Fahey, Vice President of Production Services
Debbie Stailey, Director of Composition Services
New Product Development For Dummies. I would guess that some of my colleagues might be offended at these words. But the fact is that a certain amount of naiveté is an essential ingredient in the process of getting a new product to market. After all, if we know it all, where is the room for discovery? It has been my experience that successful innovators have the characteristic of trying something first to see if it works, and explaining it later. Indeed, even better still, they get someone else to explain it.
This book teaches us the various hurdles to be overcome and the activities required if this endeavour of developing new products is to be successful. Indeed, it is a survival issue for many companies and for countries, including the U.S. A recent study by the National Academy of Science shows that the United States has moved from having a positive balance of payments of $33 billion for high–tech products in 1990, to having a negative balance of payments of $24 billion in 2004.
There are incremental new products, and there are revolutionary new products, those products that change the basis of competition. Developing new products requires creativity — coming up with ideas for new products — and innovation — the process of turning those ideas into something of value.
I use the following definitions:
“Research and Development is the transformation of money into knowledge. Innovation is the transformation of knowledge into money.”
Clearly we need both. This book focuses on the transformation of an idea into something of value — in other words, the transformation of knowledge into money. We cannot be happy with satisfying the customer; we have to reach the next level of delighting the customer. That often comes from products that satisfy a need that the customer did not even know he or she had.
To be successful with new products, an organization must provide an environment that allows innovation to thrive, the resources to get it done, and a measurable expectation of success. If you want to activate innovation in an organization, you need to:
Know where you want to go — Vision
Know where the rest of the world is going —Foresight
Have ambition — Stretch goals
Have freedom to achieve your goals — Empowerment
Draw from and work with others — Communication, Networking
Be rewarded for your efforts — Recognition
Passion and courage, however difficult they are to measure, are also essential in new product development. I can tell you from my experience in championing Post-It Notes that we had to have passion and courage. We were told several times by management to kill the program. I know that if we had had some of the processes like the ones described in this book, we could have had that product in the market two years earlier than we did.
Companies of any size must hire innovative people to join their team. These people should be creative, have broad interests, be capable problem solvers, be self motivated, have a strong work ethic, and be resourceful.
And so in your passionate and courageous effort to get new products successfully into the market by using the tools in this book, always keep in mind the six phases a program is likely to go through:
4. Search for the guilty
5. Punishment of the innocent
6. Praise and honors for the non-participant
A final message: Enjoy the book, innovate for the customer, network with your colleagues, and have fun. But most of all, I wish you success with your new products.
— Dr. Geoffrey C. Nicholson, Retired 3M Vice President
Visit http://www.dummies.com/cheatsheet/newproductdevelopment to view this book's cheat sheet.
About This Book
Conventions Used in This Book
What You’re Not to Read
How This Book Is Organized
Icons Used in This Book
Where to Go from Here
Part I : The Basics of New Product Development
Chapter 1: It Takes a Company . . .
The Requirements of NPD Success
Moving from Product Possibility to Market Reality
Identifying the Roles of the Functions
Playing Your Part in Product Development
Chapter 2: What Are You Developing, and Why?
Growing Your Business: Market Expansion, Acquisition, or Innovation?
Assessing the Importance of New Products in Your Growth Plans
Identifying the Role of NPD for Your Company
Defining the Types of New Products
Making the Most of Products, Services, Solutions, and Experiences
Chapter 3: Defining Your Product Strategy
Understanding the Market
Opportunities in Existing Product Lines
Constructing Your Profit Model
Fitting Your New Product Lines with Your Brand
Part II : Charting the Ocean of Opportunity for New Products
Chapter 4: What Do Your Customers Really Want?
Dissecting the Customer Visit Process
Building the Foundation for the Customer Visit Program
Dipping Your Toes into the Visiting Process
The Final Push
Distilling the Results: Images and Requirements
Quantifying the Results of the Customer Visit Program
Chapter 5: Turning Your Company into an Idea Factory
Drafting Your Creative Teams
Setting Up and Opening the Creative Session
Getting Creative by Thinking Outside the Box
Using Your Knowledge of the Customer to Inspire Solutions
Dipping into Your Bag of Tricks to Make Creative Sessions Even More Creative
Chapter 6: Picking Winners and Losing Losers
Screening Your Ideas and Developing New Concepts
Improving Your Concepts with Quality Function Deployment
Turning Losing Concepts into Assets
Chapter 7: Making the Most of Technology
Recognizing the Importance of Inventorying Your Technology
Surveying Ways to Inventory Your Technology
Connecting Technology Capabilities to Products and Markets
Developing or Finding the Necessary Technology
Chapter 8: Focusing Your NPD Efforts
Setting NPD Targets
Including Partners in New Product Development
Managing Your Business to Achieve Your NPD Goals
Uniting Your NPD Efforts with an Internal Communication Plan
Part III : Navigating the River of Product Development
Chapter 9: One Foot in Front of the Other: The Product Development Process
Connecting Research to Development: The Fuzzy Front End
Phase 1: Navigating from the Ocean to the River
Phase 2: The Business Case Phase
Phase 3: The Development Phase
Phase 4: Launch and Commercialization
Making the Product Development Process Work for You
Involving the Functions in the NPD Process
Relating to Management during the NPD Process
Understanding and Managing NPD Risk
Chapter 10: Organizing the NPD Troops
What Makes Teams Fly?
Understanding Why Cross-Functional Teams Are Special
Leading Cross-Functional Teams
Taking the “Cross” Out of Cross-Functional Teams
Preparing for Engagement: Assembling and Equipping Your NPD Team
Defining the Troops’ Roles and Responsibilities
Organizing Your NPD Teams
Chapter 11: Managing Your Corporation’s NPD Resources
Is Your Company a Well-Oiled Machine or a Herd of Cats?
Filling and Balancing Your NPD Portfolio
Resourcing New Product Projects in the Development Pipeline
Shortening Cycle Time
Practicing the Discipline of No Waste
Chapter 12: Using Reviews to Keep Projects on Track
Understanding the Purpose of Reviews
Abiding by the Rules for a Successful Review
For Reviewers: Knowing When and How to Say No
Making Review Meetings Work
The Prose of Finance and Strategy: Writing a Project’s Business Case
Chapter 13: Launching Products for Market Success
Preparing for a Successful Launch — You Gotta Start Early
Forming the Launch Plan
Double-Checking the Details
Factoring In Post-Launch Evaluations
Part IV : New Challenges in Product Development
Chapter 14: Developing Products in the Digital Age
Using Digital Technology to Test and Experiment
Using Digital Technologies for Team Collaboration
Booting Up IT to Organize Your Corporation’s Innovations
Chapter 15: Product Development Goes Global
Mapping the Landscape in the Global Development Game
Surveying the Benefits of Globalization and Defining Your Strategy
Recognizing (And Avoiding) the Risks of Globalization
Beefing Up Your Social Skills in the Global Economy
Chapter 16: Choose Your Partner! Partners in Product Development
Understanding the “Open Innovation Paradigm”
Deciding Whom to Partner With
Structuring the Business Partner Relationship
A Line in the Sandbox: Deciding What Assets to Keep and What to Share
Unveiling the How-To’s and Secrets of Collaboration
Part V : The Part of Tens
Chapter 17: Ten Ideas on Ways to Test Your New Products
Conducting New Product Concept Testing
Checking Your Progress with Prototypes
Testing Products in Customers’ Hands
Chapter 18: Ten (Or More) Ways to Track Your Innovation Efforts
Ten (Minus Two) Ways to Keep Track of Your Teams’ Progress
Ten Ways to Measure the Health of Your Product Development Processes
Ten (Divided by Two) Metrics to Make Sure Your NPD Efforts Are Paying Off
Seeing Ten (Or Fewer) Measures at a Glance with Dashboard Metrics
Business Case Outline
: Further Reading
Do you watch the Super Bowl on a high-definition flat-screen television? Does your microwave heat up leftovers in the blink of an eye? If so, thank a new product developer. Are you confident that the package you sent today will reach its destination by tomorrow morning? Have you found a retirement package that meets all your needs? If so, thank a new product developer.
Are you hoping that someone will solve the planet’s energy problems and find cures for the diseases that plague the world? A new product developer is already on the case.
The people who develop new products look for problems they can solve, gaps they can fill, and ways they can make consumers’ lives better, easier, and more exciting. They take on these tasks because they’re curious, creative, and ambitious. They also want to make money — for themselves and for their companies. Unlike visionaries who like to invent for the sake of invention, new product developers commit to getting new products into markets where people can benefit from them, and for good returns on their investments. If you’re looking to grow your business, sustain it for the long haul, and become a hero to your customers, jump right into New Product Development For Dummies. You can thank us later!
We wrote this book for people who develop new products. Don’t let the title of this book mislead you into thinking that developing new products is a walk in the park. Developing new products is not only the most rewarding thing you can do in business but also about the most challenging. It calls for both creativity and discipline, and it requires a willingness to make mistakes and then learn from them.
We first met at product conferences, where companies from around the world came together to trade stories of their successes and share the reasons for their failures. We were anxious to collaborate with others. Fifteen years or so ago, though, none of us really knew how to make new product development pay off on a consistent basis. We’d look at each other and say, “Do you suppose it would help if we had cross-functional new product teams?” Or, “I wonder if we ought to get management to review this project before we bet the farm on it.” Many of us were willing to make the kinds of stupid mistakes people make when they have no obvious answers.
Today, we do know what’s important to achieve success in developing new products. We don’t mean that only we, Robin and Beebe, know. We mean that many professionals know, and plenty of people in small and large companies around the world use the practices that we describe here.
In this book, we give you tons of tips, examples, and pointers that illustrate what successful new product developers do, and we help you to implement the practices that separate “the best from the rest.” We had a blast writing this book, and we hope that you have a blast reading it and applying it to your work. After all, what’s more exciting than creating something that didn’t exist before? You do very important and very hard work. Our biggest motivation as we wrote this book was to make sure that everything we put on paper is accurate, helpful, and clear and represents the respect we have for you and for the work you’re doing.
To guide you through this book, we include the following conventions:
Italics point out defined terms and emphasize certain words.
Boldface text indicates key words in bulleted lists and actions to take in numbered lists.
Monofont highlights Web addresses.
Here are two important definitions:
People who develop new products don’t develop only things; they develop things and services and improvements to things and services that already exist. When we use the term “new product,” we’re referring to all the new products and services that solve customers’ problems and make their lives better.
When we use the term develop, we’re referring to all the activities that occur between the time when a company sees an opportunity for a new product and when it introduces the product to the market.
We really didn’t include anything that we don’t think is important, but if you’re in a hurry (and if you’re a product developer, we bet you are), here are some suggestions:
Look at the Table of Contents to figure out exactly which chapter deals with the problem that’s bugging you right now. You can skip all the rest, until another problem or question rears its head.
You can skip all the sidebars or save them for a rainy day. These shaded boxes mostly give examples and pointers from real-world experience. If you don’t read them, you won’t lose the thread.
You can skip the text marked with a Technical Stuff icon. We put some things in those paragraphs that seemed a bit, well, technical — it isn’t the kind of stuff product developers talk about on a daily basis.
One of the cardinal rules in new product development is “Know thy customer.” For us, that customer is you. We had to make some assumptions about you in writing this book, and some of them may be foolish or just plain wrong. Anyway, here they are:
We assume that you’re interested in developing new products or in supporting people who develop new products.
We assume that you have some business background. We use terms like “return on investment” and “business case” throughout the text — terms that we assume you learned in school and/or use in your everyday work.
We assume that you work in any industry imaginable and that you play just about any conceivable role in your industry. Your company may be large or small, old or just starting out. Also, we assume that you may be changing roles or industries.
Product developers often create character sketches of people for whom they develop their products. Here are some sketches that helped us picture our readers:
I’m the VP of R&D at a small company that builds homes for first-time homeowners. I’m sure we could do a better job of designing, constructing, and marketing our homes if we treated them like new products. After all, we go through a pretty complex design/development process each time we introduce a new model. I need some kind of primer, an entry-level guide to help me understand what product developers do.
I’m the CEO and founder of a small company that manufactures “environmentally friendly” air-conditioners. Dave, the head of R&D, is always suggesting ways to make our air-conditioners better, but Mike, the head of manufacturing, usually manages to squelch Dave’s efforts. It’s probably just as well, because I’m not sure that Dave’s bells and whistles would be useful to our customers. I think we need to look into how some of the leading companies develop their new products.
I’m the process owner for new product development in our company. We’re successful at developing new products and services, but I know we could do more. Where I could get the most bang for my buck would be to bring all my processes — front-end, development, lifecycle — up to speed. I’m going to take a look at New Product Development For Dummies. Who knows, it may give us the baseline we need across all our divisions and all our processes.
My partner and I have a great idea for a new product. We’re a long way from getting it to the market, though. We need to understand what all the steps are on the way. How do you get started? What are the necessary resources? And if we want to hook up with an established company, how would we go about it?
My boss, who’s the head of marketing at our company, wants me to go to a Product Development and Management Association (PDMA) conference. He thinks that we could improve our product-change and product-introduction processes. I think I’ll learn some useful things there, but I want to find a basic book that introduces me to the field before I go to the conference and make a fool of myself!
I’m about to graduate from college, and I think that new product development looks like an exciting career field. However, I didn’t learn much about the field at school. I need something that will help me understand the field so that I have an idea of where to begin.
I work in Purchasing. My company, a mid-size furniture business, has been extending the amount of outsourcing we do in designing and developing new products. I’m feeling increasing pressure to become more of a thought leader and less of a responder in new product development. I wonder, would New Product Development For Dummies help me understand the processes better and teach me to be more of a contributor?
I’m the Chief Technology Officer for a process chemical company. People in my industry don’t really think about developing new products or services. My company has been doing what we do for years now and continues to get decent margins. But I think we have a huge opportunity to extend what we’re doing into new areas. I need to learn more. I could hire a consultant, but then I’d get only his or her approach. I want to find a book that gives me the skinny so I know how to take the next step.
I’m the process owner for a mid-size company’s NPD division. We produce consumer goods. We’re extremely successful in new product development; in fact, I’m traveling today to give a presentation on our voice of the customer process at a professional conference. But I’ve found a book called New Product Development For Dummies. One thing’s for sure in NPD, the finish line is always moving. You know, I may learn something from this book. If not, I can always leave it in a seat pocket on the plane so that no one will know I was reading it.
To be successful at new product development, you have to know how and why new products are important to your company; you have to develop a way to continuously explore new opportunities; and you have to manage a disciplined process that will bring the most promising opportunities to market. The first three parts of this book address these important topics. In the final parts of the book, you discover some of the new challenges that product developers are facing, and you find some tips that help you navigate issues that are important to product development.
Exactly what are “new products,” and how do they contribute to your company? Until you can answer those questions, your company’s efforts at new product development are likely to be helter-skelter. Your success will be hit-or-miss, with “miss” usually coming out on top. In Chapter 1, you discover what it takes to develop great new products, and you find out what role you and others must play in NPD activities. In Chapter 2, you take a look at the many different outputs we call “new products.” You get a handle on which ones are important for your company, and you see how to integrate new product development with your company’s overall strategies. Chapter 3 takes you into the world of product portfolios, product lifecycles, product platforms, and profit models — topics that help you come up with a clear NPD strategy.
The most successful new product developers stay on the lookout for opportunities. The point isn’t to build a better mousetrap, unless you’ve really researched what will prompt the mice to run to your door. In this part of the book, you go through the best practices of visiting customers (Chapter 4), you find out how to turn your company into an “idea factory” (Chapter 5), and you discover how to survey technology both inside and outside your company (Chapter 7). You also discover how to identify the most promising ideas within the ocean of opportunity (Chapter 6), and you read about the disciplines that help your teams focus their efforts on those potentially winning ideas (Chapter 8).
Developing and launching a new product requires discipline, hard work, and risk management. To help you through this part of the product development landscape, the five chapters in Part III give you the scoop on the “river of development,” which starts when management charters a team to develop the business case for a new product idea or concept and runs all the way to the market. Chapter 9 lays out the standard new product development process from idea to launch. Chapter 10 gives information on how to assemble and run a cross-functional NPD team.
Chapter 11 is the gearbox of the whole book: It shows how you can join the strategies, the opportunities, and the products that your company already has in the market with the ongoing work of the product development teams. Chapter 12 discusses reviews and business cases and their roles in assessing the progress of new product projects. Finally, Chapter 13 gives you advice for making a successful transition from development to the market.
Being best-in-class in product development is a moving target you’ll continually aim to hit. You’ll face many challenges, and your company will have to branch out to new areas of the product development tree. In this part, you get to see some of the changes that are making the old dogs of NPD learn new tricks.
In Chapter 14, we discuss the digitization of information. In Chapter 15, you find out how companies are going global to create new products. And in Chapter 16, you discover the increasing importance of partnering in product development. All three trends impact product development, and as they interact with each other, their impact becomes even greater.
Testing and measuring are important throughout the product development process. We gathered some handy information that product developers use to accomplish these important activities and put the info in the Part of Tens. Chapter 17 tells you about the role of testing in NPD, and Chapter 18 presents some ways you can measure NPD success.
Whether you want to flip through this book to look for tidbits or study each section as if we’re about to give you a final exam, you should pay attention to the icons; they’ll lead you to pocketable and useable take-aways.
Here’s a rundown of the icons you’ll see in this book:
We use this icon to flag bits of text that we think are very important to remember. This icon may present some new, breakthrough advice, or it may recall something that we present in another chapter that also applies to what you’re reading now.
Once in a while, we want to go a bit deeper into some specialized stuff. We tip you off to that type of information by using this icon. You can skip over these icons and be just fine, but the info they contain will add to your understanding of new product development.
This icon flags actions or strategies you can use to set yourself up for success.
This icon flags the pitfalls and landmines that can derail your company’s new product development train. We’ve tried to identify the most important traps so you can concentrate on the positives and avoid the negatives.
You don’t have to start reading this book at the beginning and continue straight through to the end. In new product development, you really can’t define a beginning or end anyway. Wherever you start, you’re always in the middle of things — your existing products, your customers, your technology, your business goals . . . the list goes on.
We advise you to take a look at the Cheat Sheet at the front of the book and locate yourself and your NPD job on the map. You may be an executive whose key responsibilities lie in strategy. If so, you may want to start with Part I. Perhaps you’re a functional head who’s in charge of a business unit or an NPD process owner; if so, you may want to start with Part II to get a handle on what feeds the NPD pipeline. If you’re a member of a cross-functional new product team or of a function that supports new product development, you may want to read Part III first.
No matter where you start, though, we have one strong belief: Chapter 11 should be required reading for everyone — especially for executives. Get to it when you can, but make sure you get to it.
When developing new products, you must keep your eyes on many balls at once. You need the cooperation and collaboration of many people within and outside your organization. We wrote this book so that you could see all the pieces in one place. If you understand all the things that need to go right in order to succeed in new product development, you’ll be able to work with others — and to teach, coach, and influence others — so that all the balls stay in play.
In this part . . .
I f product developers behave like the blind men with the elephant, they won’t get too far. You’ll find the engineer at the trunk exclaiming over the functional elegance, the marketer at the tail stressing how easy it will be to sell, the manufacturer tapping on the legs and complaining that his current infrastructure won’t accept them, and so on.
Developing new products takes a whole company (and sometimes even more than one). When companies take the new product development challenge seriously, they become learning organizations. They take off their functional blindfolds and discover how to communicate across internal boundaries. Employees work together to understand and share the work that they have to complete. They set clear goals and objectives for their new product development initiatives. They create common languages in which to articulate their strategies.
To optimize your company’s ability to succeed at new product development (NPD), you have to come to terms with the organizational challenges that NPD presents. Part I provides an overview of how NPD impacts a company, and how the company can respond to that impact.
Achieving success at NPD
Carrying your trusty map of the NPD landscape
Taking an idea from development to launch
Finding the functions’ places in the lineup
Reviewing the roll call of NPD players
Developing new products that will succeed in the marketplace goes way beyond simply coming up with a great new idea, a great new invention, or a great new design. Developing successful new products is a complex job that comes with many tasks and many responsibilities. And how many different people, with how many different skills, do you need to accomplish the tasks? How about inventors, scientists, designers, and engineers? And manufacturers, marketers, and salespeople? How about heads of businesses and functions and people with finance and legal expertise? Maybe we should also include suppliers and partners, and what about customers, and . . . well, you get the idea. Instead of a village, “it takes a company to develop new products . . .”
Oh my! It’s no wonder that so many companies find it hard to be successful at developing new products. In this chapter, we give you the general requirements for new product development (NPD) success, and we look at a map of the processes that you can take on your NPD journey. We identify the players in your company who have important roles in the NPD drama. Finally, we review what role you, our faithful reader, play in your company and what that means for your NPD participation.
We hope that by the time you finish this chapter, you’re ready to order copies of this book for everyone you work with so that they’ll know how to play their parts. NPD is one game you can’t play by yourself!
Over the years, product developers have come up with a pretty good list of what new products need to do to succeed at NPD. They need to
Meet the needs of potential customers (see Chapter 4). This is probably the most important item on the list. If you haven’t identified your potential customers, and if you don’t understand their needs, the rest of this list won’t do you much good.
Use technology that your company has access to or can develop (see Chapters 7 and 16). Peter Carcia at Polaroid used to warn his teams not to design products that required “transparent aluminum.” Don’t limit yourself to your existing resources. Have an aggressive program of technology development and technology outsourcing and/or acquisition. But don’t fool yourself into thinking that you can develop products that require miracles in the course of development (even minor ones!).
Attract customers by being different from competitors’ products. What’s worse than spending six months or two years working on a product only to find that it’s a me-too? Be sure you know who your competitors are and what they’re up to, and be sure that you understand your customers well enough to produce a product that will delight them more than your competitors’ products do.
Be designed so that you can manufacture, package, ship, and/or service them. Long ago — not any more, we hope — engineers used to consistently design products that manufacturers couldn’t build. Successful product developers “design for X” by including manufacturers, distributors, and so on in the early conversations and the ongoing work of product design and development. See Chapter 9 for more on how to “design for X.”
Enhance or be consistent with your company’s brand image. The best product with the wrong brand is the wrong product. Your products reflect on your brand, and your brand reflects on your products, and if they don’t enhance each other they may play takeaway. If you’ve got a great product that doesn’t square with your brand, maybe your company needs a second — or fourth or fifth — brand. See Chapter 3 for a bit more on lining new products up with your brand.
Be promoted by a good marketing campaign (see Chapter 13, as well as Marketing For Dummies, 2nd Edition, by Alexander Hiam [Wiley]). Don’t make the marketing campaign an afterthought.
Provide a good return on your company’s investment. This is where the rubber hits the road in terms of judging the success of a product. Product development teams and business leaders can make this outcome far more likely by taking the new product’s business case very seriously (see Chapter 12) and doing what’s needed to make sure the product hits its goals.
Having a successful new product from time to time isn’t enough. New product development is a core competency of the company that takes resources and generates revenue. To build its competence at NPD, your company must
Develop employees who can make sure your new products meet all the requirements in the previous list, and a little more.
Assign its scarce resources to projects that are most likely to succeed.
Ensure that new product projects and business functions within the company support each other as much as possible.
Although it’s true that every new product starts with an idea, not every idea ends up in the market. The most successful companies start by exploring many different opportunities and coming up with many different options. You want to make sure that among these options are ideas for products that will appeal to customers, sell in large markets, and take advantage of the latest technologies.
When we go through the product development map in the sections that follow, we say “start here” and “go there” as if we were playing a board game. In this game, though, you can start anywhere and go anywhere. If you just picked up this book and you’re in the middle of a new product development project, you can skip to the part that addresses what you’re doing. When you have time, read the other parts, too. Often, you can trace what goes wrong or right in one part of the development process to good or bad work in the other parts.
In the sections that follow, we take a quick look at the three major territories of the NPD landscape.
In the NPD process (refer to the Cheat Sheet for a handy illustration of the process), we call the place where you find product opportunities the “ocean.” The ocean of new product opportunity is nearly limitless because constant change opens up new vistas. Think of the changes you’ve seen just in the past ten years. New technologies, new markets, and new products have enabled people to dive deeper and voyage wider into the resourcefulness and creativity of the human race.
Exploring the ocean of opportunity gives you (and your new product team) the information you need to develop your company’s strategy for new product development. By identifying market and technology opportunities, you can focus your development efforts on the most promising ideas and avoid the traps and dead ends. And by reviewing your current product lines, you know whether to direct NPD projects to improve offerings in your existing product lines or develop wholly new products or product lines. (The chapters in Part II describe the ocean of opportunity in more detail.)
After you’ve identified a bunch of opportunities, you want to choose the very best ideas that can succeed in your market and that you have the resources to develop. To do this, you use screens that allow only a few ideas to move into and through the development process (also known as the “river of development”). These screens — companies call them reviews or Decision Diamonds — are places where the company’s decision makers review ideas for products against the company’s strategic criteria and decide which ideas should use some of the company’s scarce resources. Only a small number of opportunities should pass through the initial Idea Screen compared to the vast amount that float around in the ocean of opportunity. After an idea has passed the initial Idea Screen, it becomes the property of the cross-functional development team, which works through the phases and reviews of the product development process (see Chapter 9). At each review, business decision makers do one of the following:
Continue funding the project for another phase
Stop or hold (recycle) the project if the reviewers need more information
Redirect, or even cancel, the project if it isn’t meeting expectations or if the company’s strategic landscape has changed
You can read more about reviews in Chapter 12.
Don’t forget that a company’s executives need to know that they can get good returns on their new product investments. Therefore, in addition to doing the actual work of developing new products, the product development team has to develop a business case for management. You can read more about business cases and how to create them in Chapter 12, and you can find a business case template in the Appendix.
Your development team has spent months, maybe years, anticipating this moment — the moment when your new product launches from the protected environment of the team atmosphere into the wide world of the marketplace. In some companies, moving a product from development into the market is called “crossing the valley of death.” Why? Because many new products fail at this point. To avoid launch failure, you need to plan for the launch throughout the development process instead of waiting for when your product is nearly ready for the market (see Chapter 13 for more on this topic).
The major players in the development of new products are the people on the new product development team. These people have different roles, which may include the team leader, the members of the core team, and members of the extended team. One thing they have in common, though, is that they come from different functions and departments within the company. In this section, we give you an overview of what each function contributes to your new product development efforts, and we explain the particular roles the functions play throughout the process.
Even if your company is too small to have distinct functions, you can recognize the roles that individuals and groups play in your company. This section, as well as the information in Chapter 10, can help you do a better job of making sure the people and groups in your company are collaborating to make your NPD efforts as effective and efficient as possible.
Many new product efforts include partners from outside your company. You need to understand the basics of working with different functions when “outsiders” are part of the development picture. See Chapter 16 for more on partnering in product development.
Success in new product development depends in large measure on how well you understand the market, including the following:
The existing markets for your products
How your markets are growing or shrinking
What new markets you may be able to enter
What your competitors are doing in the marketplace
The marketing function in a large company, along with market research, may be responsible for collecting and managing market knowledge. In a small company, one person may be most interested in the market. But here’s the thing: Understanding the market isn’t the same as being good at selling in it. Your company, big or small, and your new product development team need to develop a deep appreciation for your customers and your markets. And your marketers must be able to communicate their knowledge to others with whom they share the responsibility for developing new products.
Research and development is where many of your scientists and engineers live. Members of the R&D department contribute their understanding of technology to the company’s product development efforts. Much of what your R&D experts know is pretty arcane (like that word, which means mysterious, deep, esoteric!).
Successful product developers make sure that their scientists and engineers work with others to share their knowledge and to understand how it relates to what the other functions know and do. This type of collaboration and sharing needs to happen in all the parts of the product development landscape.
Technologists can be very perceptive during customer visits (see Chapter 4). They also have the best understanding of existing and emerging technology (see Chapter 7). Members of R&D on an NPD team are likely to offer suggestions about technology innovations or technology tweaks or that may just provide a competitive leap forward as your new products meet their competition.
The role of manufacturing in NPD is to make the product concept a reality. Within this role, manufacturing has the following tasks:
Ensuring that the company’s manufacturing capabilities and infrastructure are adequate to produce the new product
Deciding what parts of production the company may need to outsource (see Chapters 15 and 16)
Managing the supply chain for the new product
Your manufacturing function must be able to produce as much of the product as you think you can sell, at the expected quality and performance. Therefore, members of this function should be involved in the development process from the very beginning. Include them when you visit customers to understand customer needs (see Chapter 4). Not only are their insights different from the insights of individuals in other functions, but they also have a much better idea of what it takes to put products into production.
Some of the new “products” that companies create are actually services. Airlines, for example, distinguish themselves on the services they offer. So do hotels, restaurants, and companies that deliver your packages overnight to anywhere in the world. The people in your company who design and market services should take the lead in developing services.
However, when the product a company creates is a product, companies may make the mistake of paying little attention to service. The individuals in your company who are responsible for providing service should be integral parts of the new product effort whenever a product entails aftermarket service.
Integrating service into the NPD process can alert product developers to new opportunities and help them avoid costly mistakes. For example, an NPD team that includes a member from the service function is less likely to design a product that’s overly hard to service. Integrating service into development also can help NPD teams think about installation and repairs — whether these are the responsibility of the customer or of your company, and how expensive they should be (the easier and cheaper, the better for everyone).
Packaging impacts your new product’s attractiveness on a store shelf, a computer screen, or in any other place customers are likely to find and buy it. Your new product’s attractiveness — and often the size and shape of the final package — sometimes impacts a store’s willingness to stock it. Here’s a bottom-line way to perk up management: How much it costs to ship your new product depends, in part, on its packaging. And the cost of shipping impacts the final price, which impacts everything!
Our point? Involve your packaging function early in the development process. The members of the function can help the team understand the preferences of retailers and wholesalers; they can help influence product design to simplify packaging; and they can participate in consumer preference tests (see Chapter 17). At the end of the process, the packaging of your product often is the first impression your product makes. Use the resources of your packaging department to make it a good one.
The four Ps of marketing include product, pricing, promotion, and place. Your new product won’t sell unless you distribute it to places where customers can buy it. A company’s distribution and channel strategy shapes the choices that are open to the NPD team. Does your company sell through one of the “big box” stores? Do you offer products through catalogues or on the Internet? Is your distribution through dealers or distributors? Which of the existing routes will the NPD team choose to get its product out? Or will it try to carve out a new route? The distribution function should be involved in the product development process to make sure your NPD team understands the distribution options so it can get the new product out in front of an eager audience.
Your information technology (IT) department provides your NPD team (and your whole company, really) with valuable tools for development and business. For instance, through IT, you have the ability to
Communicate internally: Many of us now send e-mails to the person in the office next door instead of getting up and knocking on the door. Most NPD teams are linked together via e-mail and instant messaging, and teams can send and share documents and keep an assortment of others “in the loop.”
Store data: Your NPD team can use an Intranet site to post documents and progress reports to facilitate work, communication, and company involvement. Your IT department can help with document formatting, document control, and your ability to access and use data from other parts of the company.
Communicate with the outside world: Many development teams are spread throughout the world (see Chapter 15), and many development efforts require companies to outsource work to other locations (see Chapter 16). IT provides the tools that help these teams communicate, including Intranet sites where project information can be stored and shared. Teams can access documents from a shared site, and team members located in different places can work on projects simultaneously.
Go to Chapter 14 for more on the role of IT in NPD.
You can’t assemble the data your NPD team needs to represent the value proposition for your new product (which is what management and your customers are interested in) without the expertise of your finance department. Involve members of this function early in the process as you map the ocean of opportunity, and keep them involved as you build your business case (see Chapter 12).
People develop new products. These people need rewards, career paths, and all the other motivators that keep employees happy and productive. Your human resource (HR) department needs to understand the special needs of employees who develop new products. The performance goals and reviews that work for functional employees may not be appropriate for product developers.
Your HR department may be the right function in your company to create a cross-cutting set of practices that enable the functions to support your product developers. HR can look across the functions and design employee reward structures that balance functional and project work. And these structures can help the company in other ways by leveling the playing field among the functions.
NPD teams should also not hesitate to turn to HR for its special expertise in organizational development. For example, HR can help a team leader understand how to lead and motivate her team (see Chapter 10), and help a team identify the diversity that they need to come up with the best ideas (see Chapter 5).
New product development can present challenges to legal and standards boundaries. Many companies have to work within clear boundaries — for example, the pharmaceutical and medical device industries. For others, these issues come up when they’re developing some products, but not all. Be sure your team has explored the possibility that its work may need to clear regulatory hurdles or that existing standards may limit what the team can do. Involve the legal department if the intellectual property (IP) it’s developing needs protecting.
Your regulatory, legal, and standards functions have the responsibility of supporting your new product teams — as well as executives, business leaders, and functional heads — and helping them to understand regulations that may advance or hinder their work. But they can do their jobs only if the new product developers keep them informed of potential issues.
Executives, business and functional heads, members of functions and departments, and so on — all these people play a role in developing new products. In this section, we speak directly to you by identifying the roles people play in product development. Find your title and read away, or brush up on all the titles for a more complete understanding.
Executives include CEOs, CTOs — can we say “CXOs”? — as well as heads of business units, vice presidents, directors, functional heads, and so on. These managers are responsible for charting the overall direction of the business as a whole, and their top-down support provides the context for product development.
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