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New product development is important to companies for several reasons. Changes to existing products can create value for customers, help gain traction in new markets, or help gain market share in existing markets. As you can tell, the main reason for new product development is to strengthen or create revenue streams for companies.
In business and engineering, new product development (NPD) is the complete process of bringing a new product or service to market. Throughout this challenge, we will follow the process of NPD from someone having an idea to the product being on the shelf. There are several stages in the new product development process—not always followed in order, but always beginning with an idea. We will first look at an overview of the entire process, then consider each stage in more detail.
Indeed, product development begins even before someone has a single new idea. It begins with a new product strategy (NPS), the company culture and process for innovation that aligns with company goals. The purpose of NPS is to provide guidance for the new product effort. Leadership identifies the strategic business requirements that the new product should comply with, derived from the corporate objectives and strategy of the organization as a whole. These business requirements assign roles to be played by the new products, which in turn are influenced by the needs of the industry.
A successful new product launch hinges on a well-defined operations strategy. This strategy ensures efficient production, timely delivery, and consistent quality. Key considerations include:
EXAMPLE
A company that has been making sportswear launches a new athletic shoe. They assign designers to come up with shoes that match current styles while differentiating themselves from competitors and being recognizable as their brand. They leverage historical sales data to predict demand and refine their estimates through trials in specific markets. They invest in automated stitching machines to increase production capacity while maintaining quality. Finally, they implement additional quality checks at key points in the manufacturing process to guarantee consistent performance in the new footwear.From an operations management perspective, a successful new product strategy necessitates a thorough analysis of production capabilities, including capacity planning, quality control processes, and supply chain efficiency. Aligning product design with existing infrastructure and markets and identifying potential bottlenecks early fosters a smooth launch and minimizes disruption to ongoing operations.
Generating new product ideas is a creative task that requires a specific way of thinking. Ideas for new products can be obtained from customers (employing user innovation), the company’s research and development (R&D) department, competitors, focus groups, employees, sales staff, corporate spies, trade shows, or through a policy of open innovation. Formal idea generating techniques include attribute listing, forced relationships, brainstorming, morphological analysis, and problem analysis.
Effective new product development hinges on a robust ideation process. Operations management principles can be leveraged to generate ideas that are not only innovative but also feasible for production.
One approach involves analyzing current production capabilities and identifying potential gaps. For instance, a bakery with excess oven capacity could explore new product lines suited for high-temperature baking, maximizing resource utilization while offering fresh options to customers.
By considering operational strengths and limitations during idea generation, businesses can ensure a smoother transition from concept to market launch.
The next step in the product development process is screening. It is a critical part of the development activity. The object is to eliminate unsound concepts prior to devoting resources to them. The screeners must ask at least three questions:
By implementing a well-defined screening process, companies can ensure efficient resource utilization. This translates to cost savings, reduced development timelines, and a sharpened focus on concepts with a demonstrably higher probability of success. It is during screening that potential roadblocks can be surfaced and addressed early, preventing wasted effort on products destined for failure.
Screening serves as a vital filter, separating promising ideas from those that are unlikely to achieve market traction. This ensures that development efforts are concentrated on concepts with the greatest potential for success.
After the various product ideas survive their initial screening, very few viable proposals will remain. Before the development of prototypes can be decided upon, however, a further evaluation will be conducted to gather additional information on these remaining ideas in order to justify the enormous costs required. The focus of the business analysis is primarily on profits, but other considerations, such as social responsibilities, may also be involved. Management must:
While financial benefit remains a primary consideration during this business analysis, it is not the sole factor. The evaluation process should also encompass the potential social impact of each concept, ensuring alignment with our organization's commitment to corporate social responsibility.
It is important to make informed decisions regarding prototype development, allocating resources effectively and mitigating potential risks by conducting this business analysis.
A product that has passed the screening and business analysis stages is ready for technical and marketing development. Technical development involves two steps. The first is the applied laboratory research required to develop exact product specifications. The goal of this research is to construct a prototype model of the product that can be subjected to further study.
Once the prototype has been created, manufacturing methods research can be undertaken to plan the best way of making the product in commercial quantities under normal manufacturing conditions. This is an extremely important step because there is a significant distinction between what an engineer can assemble in a laboratory and what a factory worker can produce.
While the laboratory technicians are working on the prototype, the marketing department is responsible for testing the new product with its intended consumers and developing the other elements of the marketing mix. They must ask the following questions:
Assuming the product has cleared the technical and marketing development stage, the manufacturing department is asked to prepare plans for producing it. The plan begins with an appraisal of the existing production plant and the necessary tooling required to achieve the most economical production. Compromise between attractiveness and economy is often necessary. Finally, manufacturing planning must consider how to secure the availability of required funds, facilities, and personnel at the intended time, as well as the methods of coordinating this effort.
It is at this point that the product planner must prepare a complete marketing plan—one that starts with a statement of objectives and ends with the fusion of product, distribution, promotion, and pricing into an integrated program of marketing action. It is important to note, however, that even in the beginning stages of product development, the company has already begun thinking about customers and marketing strategies, but this phase formalizes the marketing process.
A successful new product launch requires a cohesive strategy integrating marketing and operations management. Market research informs product development, ensuring features address customer needs. Operations translates these features into production processes with capacity planning to meet anticipated demand. Then, in terms of marketing planning, the marketing department uses this information to craft targeted campaigns, generating interest before launch.
EXAMPLE
A company creating a fitness tracker would involve marketing in understanding target user preferences (durability, data tracking) and operations in translating these into production processes (waterproof materials, data storage capacity). This alignment ensures a smooth launch and product that resonates with the market.Market testing involves gauging potential customer response to a product's features, pricing, and marketing strategy. This feedback informs operations by refining production processes and inventory management for a successful launch.
Market testing is the final step before commercialization; the objective is to test all the variables in the marketing plan, including elements of the product. Companies don’t just put out a product, they put out a product with packaging, pricing, and advertising, among many other elements that will determine if the product is successful or not. These elements are tested along with the product itself. Like commercialization, this continues beyond the NPD phase; even long-established products will continue to have market testing to maintain viability with changing tastes and demographics.
Market testing acts as a critical link between new product strategy and operations management. It involves gauging potential customer response to a product prototype before full-scale launch. This feedback informs strategic decisions on product features, pricing, and marketing. Operations can then refine production processes and ensure capacity to meet anticipated demand.
EXAMPLE
A company developing a smart speaker may conduct market testing to assess consumer interest in voice-activated features and preferred price points. This data guides product development and helps operations prepare for efficient manufacturing based on potential sales volume.At last, the product is ready to go. It has survived the development process, and it is now on the way to commercial success. How can it be guided to that success? It is the purpose of the lifecycle marketing plan to answer this question. Such a complete marketing program will, of course, involve additional decisions about distribution, promotion, and pricing. Like market testing, these are always in flux, so this part of the process extends well beyond the new product development phase.
Commercialization in the context of NPD is introducing the product to the market. It bridges the gap between new product strategy and operations management. It takes a promising concept, defines its target market and value proposition (new product strategy), and then translates that vision into a manufacturable, distributable good (operations management). Imagine a new athletic shoe designed for eco-conscious runners. Commercialization would involve finalizing the design, securing sustainable materials, and establishing efficient production processes (operations), while simultaneously crafting a marketing campaign that highlights the shoe's environmental benefits (new product strategy). This synchronized approach ensures a smooth transition from product development to market success.
We will now take a deeper look at each step and specific ways a company might approach it during new product development.
Source: This tutorial has been adapted from Saylor Academy and NSCC “Operations Management”. Access for free at https://pressbooks.nscc.ca/operationsmanagement2/. License: Creative Commons Attribution 4.0 International.
