New product design and development
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This document summarizes key aspects of new product development from chapters 12 and 13 of the textbook "Innovation Management and New Product Development". It discusses the importance of innovation for market share, the role of new product development in converting opportunities to products, and external considerations in NPD. The document also outlines impacts of NPD on different organizational functions and competing demands within organizations. Ansoff's directional policy matrix and the multi-dimensional nature of products are presented.
New product design and development
- 1. Slide 12.1 Lecture 10 New product development Chapters 12 and 13 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.2 New product development 1. Introduction 2. Product strategy 3. Classification of new products 4. Some explanations for high failure rates 5. Macro problems associated with NPD 6. Organisational activities involved in NPD 7. Summary & recap Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 2. Slide 12.3 Innovation Management • If innovation declines so does market share • Eg: Rover’s market share declined from 20% to 10% over 20 years • Innovation now will set up company for future years because of it takes time. • Cost cutting option vs generating new products • NPD is a subset of the innovation process • NPD is about converting business opportunities to tangible products. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.4 External consideration • Macro factors • Competition • External R&D • Suppliers and input prices • Market needs • Distribution systems • Strategic alliances • Shorter life-cycle of products Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 3. Slide 12.5 NPD Impacts • NPD impacts on different parts of the organisation in different ways • Production management: manufacturing issues • Marketing: understand and meet needs • Finance: costs and profitability • Design and engineering: technical issues Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.6 Competing demands within • Return on capital employed • Profit and market share • Design, innovativeness and technological supremacy • Must fit into overall strategic direction Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 4. Slide 12.7 Example • IBM • Microsoft • Apple • 3M – 1970s: 33% 0f sales – 1890s: 40% – 1990s: 50% Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.8 What to consider? • Who is responsible for setting future direction? • Watch for opportunities • Watch what competitors are doing • Market planning teams can play a significant role, eg. In the shoe market a competitors may be about to launch an improved product. Project teams could be setup to look at new designs, better fastenings, lower production costs. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 5. Slide 12.9 Macro view of new product development Macro environment Competition, finance, economic conditions, legal framework New ideas, New products suggestions, and services concepts The organisation How does this process work ? Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.10 Key themes from the product development literature Process timing pre-development activities Organisational Management development activities structure authority marketing activities mechanism support launch activities style technical aspects communication People multifunctional Information co-ordination general product champion marketing Successful communication external new products communication Strategy orientation objectives synergy Source: Hart (1995) in Bruce & Biemans, Wiley; Trott (2005), Prentice Hall product characteristics Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 6. Slide 12.11 Ansoff‟s directional policy matrix Current New products products Current 1. Market 3. Product markets penetration development strategy strategy New 2. Market 4. Diversification markets development strategy strategy Source: Ansoff, 1968 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.12 A product is multi-dimensional Brand name Features Quality price specifications Level of Packaging service Technology Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 7. Slide 12.13 Change a dimension and you have a new product Brand name Features Quality specifications Price Level of service Packaging Technology Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.14 What is ‘newness’ • Changing then performance capabilities of the product (new improved washing detergent) • Changed features and quality • Changes to the ‘augumented product’ • Changed image eg green image • Changed price • Newness is relative Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 8. Slide 12.15 Classification of new products • New to the world products •First of a kind •Create a new market •Significant development in technology •Use of existing technology in a different way •Sony walkman •3M post-it • Source: Booz, Allen & Hamilton, 1982Fa Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.16 Classification of new products • "New to the firm" products – Opportunity to enter established market – Eg Nokia and Motorola were followed by many others in the mobile phone market • Product line additions • Product improvements (revisions) • Repositionings (eg aspirin) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 9. Slide 12.17 Some explanations for high failure rates • Market too small • Poor match for company • Not new or different • Poor positioning or misunderstanding of customer needs • Inadequate support from channel • Competitive response • Changes in consumer taste • Changes in wider environment • Insufficient return of investment • Internal organisational problems Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.18 Macro considerations in new product development • Shortage of important new product ideas • Fragmented markets • Social and governmental constraints • Costliness of the new product development process • Capital shortage • Shortened time span to completion • Shorter life spans for successful products Source: Kotler, 2000 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 10. Slide 12.19 Organisational activities involved in NPD • Generation of new product concepts • Idea screening • Concept testing • Prototype development • Test marketing • National marketing Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.20 Functional-based NPD „over-the wall‟ model New product project Engineering department Marketing department Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 11. Slide 12.21 ‘Over-the-wall’ model • Each department would carry out their task and then pass the project to the next department • Can hinder progress and will require reworking • Control of project is passed on • Communication likely to be a problem • Coordination a big problem Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.22 Activity-stage model • Focuses on the project as a whole • Moves from functional orientation to project orientation • Based on project teams • Easy to identify who is responsible • Stage-gate process – introduces management approval to proceed. This can prematurely stop progress. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 12. Slide 12.23 Simultaneous NPD per cent of activity per cent of activity 100 100 commercialisation technical development concept generation strategic planning 0 duration of product innovation process end Source: Crawford, 2000 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.24 NPD as a network of interactions External inputs: External inputs: competitors; Marketing and sales Finance suppliers; societal needs; competitors; distributors; supplier partnerships; customers. distributors; customers; strategic alliances. Accumulation of knowledge External inputs: External inputs: over time competitors; scientific and suppliers; technological distributors; Engineering and Research and developments; customers; manufacturing development competitors; university departments. suppliers; customers; university departments. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 13. Slide 12.25 Innovation management framework EXTERNAL INPUTS: macro factors; competition; profit; growth; diversification; etc. Organisation and business strategy Organisation‟s knowledge base accumulates knowledge over EXTERNAL INPUTS: time scientific and technological EXTERNAL INPUTS: development; societal needs; competitors; competitors; suppliers; supplier partnerships; customers; distributors; university departments. customers; strategic alliances. Source: Trott, 1998 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.26 References Trott P (2005) Innovation management & New product development, Prentice hall, 3rd ed., London. Baker M and Hart S (1989) Product strategy and management, Harlow, Prentice Hall. Deschamps J P and Nayak P R (1993) Lessons from product juggernaughts, PRISM, Second Quarter. Wheelwright S C and Clark K B (1992) Revolutionising Product Development. New York: The Free Press. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 14. Slide 12.27 Chapter 13 Packaging and product development Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.28 Packaging 1. Introduction 2. Basic principles of packaging 3. Characteristics of packaging 4. Product rejuvenation 5. New product opportunities through packaging 6. Packaging systems 7. Retailer acceptance 8. Summary and recap Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 15. Slide 12.29 Maintaining brand leadership through packaging developments, while the product remains unchanged Brand Position Position in 1935 in 2002 Bird‟s Custard 1 1 Heinz Soup 1 1 Kellogg‟s Cornflakes 1 1 McVitie's Digestives 1 1 Cadbury‟s Dairy Milk Chocolate 1 1 Schweppes Mixers 1 1 Kodak Film 1 1 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.30 The basic principles of packaging Protection (inc. tamper proof) and transportation At optimal overall cost Identification Containment and and labelling use of product Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 16. Slide 12.31 Characteristics of packaging Fmcg packaging purpose and development considerations Package purpose Development considerations Dispense Access; portion control, e.g. built in measure; pouring Storage Stackability, location: refrigerator, bathroom, kitchen Stability Storage life, especially after opening Handling Ease of use for intended purpose Opening/resealing Appropriate to task, i.e. frequency of use After use Secondary use (e.g. as storage container) Disposal Ease of disposal Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.32 Product rejuvenation Increasing number of competitive products leading to over capacity and intensive competition: • market leaders under pressure from smaller companies; • strong increase in R&D to find better versions of the product; • cost economies used up; • decline in product distinctiveness; • dealer apathy and disenchantment with a product with declining sales; • changing market composition where the loyalty of those first to adopt begins to waver. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 17. Slide 12.33 We need a bottle for our pills. What can you do? Clic reversible cap child-resistant vials (very small medicine bottle); Clear-Vu Screw-Loc child-resistant vials; Clear-Vu PET plastic graduated oval bottles; ointment jars, dropper bottles, amber glass oval bottles; amber glass pill vials and square jars; child-resistant and regular continuous thread closures; HDPE wide-mouth pharmaceutical rounds; Sani-Glas graduated flint glass oval bottles; plus many more . . . Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.34 New product opportunities through packaging A wide variety of packaging systems are used for soft drinks Packaging system Benefits and limitations Glass bottle Indicated high quality, can be clear or coloured; not suitable for children‟s drinks; rigid structure for graphics; recyclable. PET (polyethylene terephthalate) bottle Can be clear or coloured; resealable, suitable for carbonated soft drinks; unbreakable, recyclable, rigid structure for graphics. PVC (polyvinyl chloride) bottle More opaque than PET; less rigid; can have a handle incorporated; cheap; unbreakable. Aluminium can Particularly suitable for carbonated soft drinks; unresealable; effective structure for graphics; recyclable. Steel-mix can Particularly suitable for carbonated soft drinks; unresealable; effective structure for graphics; recyclable; cheaper than aluminium. Tetra-pack carton Ideal for children‟s drinks; variety of pack sizes; cheap; unresealable; appropriate for long-life drinks; recyclable. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 18. Slide 12.35 New product opportunities through packaging Product and pack size variation Consider: • weight and ease of carrying home; • storage space within the home; • product usage versus shelf life; • capital outlay; • ease of dispensing product from large container. E.g., Dulux emulsion paint. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.36 Packaging systems Packaging system Product example Key attributes Steel and aluminium tins Carbonated soft drink Unresealable (single serve); effective structure and cans for graphics; recyclable. Folding cartons Frozen cheesecakes, cereal boxes, Versatile; final shape often a box, but features easter eggs such as handles can be added; cardboard engineering and new coatings provide additional opportunities. Rigid boxes Polystyrene boxes for chicken pieces Still used for premium products; stackability; and minced beef separate lid. Hanging-pack formats: Popular within the DIY market Inexpensive; ideal for small, low-cost items. Blister packs Children‟s small toys, batteries Versatile blister from PVC usually mounted onto a backing card. Skin packs Often used in promotions to put two Versatile blister from PVC, similar to above products together, e.g. jar of coffee and without the backing card mount; forms a a packet of biscuits “covering skin” around the product. Cartons Small cartons of DIY products such as All advantages of cartons plus ability to hang. screws, nails, etc. Flowraps Chocolate bars Inexpensive, good graphics available; variety of films available. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 19. Slide 12.37 Packaging systems (Continued) Glass bottles and jars Premium products; wine; baby Traditional, facilitates tamper proofing. food PVC bottles and jars Personal care products; More opaque than PET; less rigid; can carbonated drinks have a handle incorporated; cheap; unbreakable. PET bottles and jars Premium personal care Can be clear or coloured; resealable; products; carbonated drinks unbreakable; recyclable; rigid structure for graphics. Flexible tubes Toothpaste, pharmaceutical Convenience of application; creams resealability. Thermoform/fill/seal Yoghurt pots; pharmaceutical Simple; facilitates in-house packaging; products cost-effective. Composite containers Pringles A spirally wound paper based tube with plastic end caps. Bags Potato chips; rice; sugar; Wide variety of finished products fertilizer; retailer carrier-bags. available from high-quality paper carrier-bar with rope handle to thin polyethylene carrier-bag. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 12.38 Retailers want • to stock only product lines that sell; • to reduce quantity purchased; • to stock goods that produce high levels of profit. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
- 20. Slide 12.39 Ten of the most irritable packages Product package Problem/difficulty 1 4-pint milk plastic containers Leakage 2 Single portion vacuum formed cup for milk Difficult to open 3 Biscuit wraps Difficult to open 4 Frozen vegetables in bags Cannot reseal 5 Sugar, flour and rice bags Cannot be resealed 6 Audio cassettes that are tightly shrink Difficult to open wrapped 7 Vacuum packed roasted coffee Difficult to open and to dispense 8 McDonald‟s Happy Meals Excessive packaging 9 Pickled onions in glass jar Difficult to remove screw-top lid 10 Toothpaste tube Excessive waste; unable to access all the contents. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008