Paper presented in the International Conference on ‘Emerging Paradigms in Managing Business’ at Holy Grace Academy of Management Studies, Mala, Kerala on 15 December 2006.
In an age of technological advancements changing customer tastes and competitive pressures, corporate success will increasingly depend on bringing new products to the market. New product development is a major element of the firm’s product policy. For higher levels of growth breaking the geographical and cultural barriers, a firm has to look beyond the pampering of existing product line. Indian corporate houses are making unprecedented efforts in this line. Good examples in this score include Mahindra Scorpio and the one lakh car being developed by the TATAs.
Significance of New Products.
No company can remain idle relying on the past product successes. The real test of survival in a highly volatile environment is the success of new products the firm is able to launch. New product development process will help overcome the following challenges.
Ø Satisfy Changes in Consumer Demand.
People always look for better things - better products, and services, more convenience, more fashion and more value for money. To maintain a sustainable growth, a business has to answer these energetic requirements and the responses take the shape of innovative products and services. Growth and success of a firm is directly proportionate to the vigil about the changes taking place in the environment.
Ø Entering New profit Zones.
Every successful product of a firm will pass through the different stages of it’s life cycle and reaches the valley of decline. They struggle in enhancing the profit level of the firm. Thus, new products become necessary for the growth requirements and profit gathering.
Ø Meet Environmental challenges.
Environment of every firm assert different challenges time to time. It varies from social, economic and political conditions to techonological, supply and competition related threats. The pace of economic liberalization in India has kept every business organization busy concerning new product development. The challenges associated with the transformed environment make the existing product lines vulnerable. It is to reduce the vulnerability that they seek new products.
Innovation - The Customer - Company Vista.
Before proceeding with the innovation program the firm should have a clear idea about consumer’s perspective regarding new product. The classification of an innovation is done based on the extent to which the new product causes change in existing customer habits. On the above basis, innovation can be of three types.
I. Discontinuous Innovations.
By the very nature these are discontinuous to every consumer segment, since they comprise new to the world products only. These new products are different from products that already exist and they restructure markets and competition. For example mobile phone and internet drastically changed, the people communicate.
II. Continuous Innovations.
Continuous innovation is very different from the first one. Here the existing product undergoes marginal changes, without altering the customer habits.
When you bring out a continuous innovation these should be a “Just Noticeable Difference” (JND) with the existing products for the customer to feel the innovation.
III. Dynamically Continuous.
The firm of innovation fills the gap between the first two. The changes in customer habits caused by such innovation are not as large as discontinuous innovation, and not as in continuous innovation. For example Manual to Electronic type writer.
Company’s Perspective
The company’s definition of innovation is based on what the firm tries to achieve from the product.
I Product Replacements.
Here the company makes revisions and adjustments of existing products, repositioning and cost reductions.
II Addition to Existing Lines.
A firm’s move to add new brands, new varieties of flavours,fragrance,size of the product forms etc.A few examples are PentiumIV,an improvement of PentiumIII,a 25gm sachet tooth paste along with 250gms packets, liquid soap along with bars.
III New Product Lines
When the company moves to new product lines, that hitherto did not exist in their portfolio. It makes the company’s product portfolio bigger. Example is LG entering the soap and shampoo market.
IV New to the World Products.
Here entirely new products are introduced into the market, which could create very new markets itself. Nevertheless, this move carries high risk since it is difficult to predict customer’s reaction
However, it is clear that the classification of innovation from a firm’s perspective can also be added to earlier classification based on customer’s view.
Factors Influencing NPD Success
New product development is crucial to the future of a company. The trick is in getting the job done The answer lies in the people. Without the right people, and an organization-wide commitment to pursue a new product development strategy, companies will be left with a few good ideas, a lot of good advice, and no way to proceed into the new products promised.
Creating a supportive environment for new products is tantamount to success. There are five management factors that heavily influence the success of a new product development strategy:
Organization, structure, and teams
Accountability
Skills mix
Leadership sharing
Top-management commitment
New product management is a complex and subtle process. In many ways, successful and unsuccessful companies often share common elements in their approach to new products. They may even use a similar systematic process and similar criteria to measure performance. So if it isn't the development process, what distinguishes the winners from thelosersinthenewproductgame? The real difference lies in how those companies implement the process. Success rests upon creating an environment that is conducive to taking risks and supportive of the individualswhotakethem. Senior managers at winning new product companies recognize that only taking an interdisciplinary team approach can solve problems inherent in introducing new products. It is a delicate process requiring movement of people in a common direction.
The process
There are several stages in the new product development process:
Idea Generation
ideas for new products obtained from customers, the R&D department, competitors, focus groups, employees, or trade shows
formal idea generating techniques include attribute listing, forced relationships, brainstorming, morphological analysis, problem analysis, virtual prototyping, and rapid prototyping
Idea Screening
eliminate unsound concepts
must ask three questions:
will the target market benefit from the product
is it technically feasible to manufacture the product
will the product be profitable
Concept Development and Testing
develop the marketing and engineering details
who is the target market
what benefits will the product provide
how will consumers react to the product
how will the product be produced
what will it cost to produce it
test the concept by asking a sample of prospective customers what they think of the idea
Business Analysis
estimate likely selling price
estimate sales volume
estimate profitability and breakeven point
Beta Testing and Market Testing
produce a physical prototype or mock-up
test the product in typical usage situations
make adjustments where necessary
produce an initial run of the product and sell it in a test market area to determine customer acceptance
Technical Implementation
New program initiation
Resource estimation
Requirement publication
Engineering operations planning
Department scheduling
Supplier collaboration
Resource plan publication
Program review and monitoring
Contingencies - what-if planning
Commercialization
launch the product
produce and place advertisements and other promotions.
fill the distribution pipeline with product
critical path analysis is useful at this stage
These steps may be iterated as needed. Some steps may be eliminated. To reduce the time the process takes, many companies are completing several steps at the same time. Most industry leaders see new product development as a proactive process where resources are allocated to identify market changes and seize upon new product opportunities before Many industry leaders see new product development as an ongoing process as in which a new product development team is always looking for opportunities.The mantra for success of any business organisation in the most competetitive global business environment is new product development.Successful innovation and effective marketing of a new product will help the business to overcome the stiff challenges of the emerging global marketing environment.
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