In business and engineering, new product development (NPD) covers the complete process of bringing a new product to market. A central aspect of NPD is product design, along with various business considerations. New product development is described broadly as the transformation of a market opportunity into a product available for sale. The product can be tangible (something physical which one can touch) or intangible (like a service, experience, or belief),
though sometimes services and other processes are distinguished from
"products." NPD requires an understanding of customer needs and wants,
the competitive environment, and the nature of the market.
Cost, time and quality are the main variables that drive customer needs.
Aiming at these three variables, innovative companies develop
continuous practices and strategies to better satisfy customer
requirements and to increase their own market share by a regular
development of new products. There are many uncertainties and challenges
which companies must face throughout the process. The use of best practices and the elimination of barriers to communication are the main concerns for the management of the NPD .
Process structure
The
product development process typically consists of several activities
that firms employ in the complex process of delivering new products to
the market. A process management approach is used to provide a structure. Product development often overlaps much with the engineering design
process, particularly if the new product being developed involves
application of math and/or science. Every new product will pass through a
series of stages/phases, including ideation among other aspects of design, as well as manufacturing
and market introduction. In highly complex engineered products (e.g.
aircraft, automotive, machinery), the NPD process can be likewise
complex regarding management of personnel, milestones and deliverables.
Such projects typically use an integrated product team
approach. The process for managing large-scale complex engineering
products is much slower (often 10-plus years) than that deployed for
many types of consumer goods.
The product development process is articulated and broken down in
many different ways, many of which often include the following
phases/stages:
- Fuzzy front-end (FFE) is the set of activities employed before the more formal and well defined requirements specification is completed. Requirements speak to what the product should do or have, at varying degrees of specificity, in order to meet the perceived market or business need.
- Product design is the development of both the high-level and detailed-level design of the product: which turns the what of the requirements into a specific how this particular product will meet those requirements. This typically has the most overlap with the engineering design process, but can also include industrial design and even purely aesthetic aspects of design. On the marketing and planning side, this phase ends at pre-commercialization analysis stage.
- Product implementation often refers to later stages of detailed engineering design (e.g. refining mechanical or electrical hardware, or software, or goods or other product forms), as well as test process that may be used to validate that the prototype actually meets all design specifications that were established.
- Fuzzy back-end or commercialization phase represent the action steps where the production and market launch occur.
The front-end marketing phases have been very well researched, with
valuable models proposed. Peter Koen et al. provides a five-step
front-end activity called front-end innovation: opportunity
identification, opportunity analysis, idea genesis, idea selection, and
idea and technology development. He also includes an engine in the
middle of the five front-end stages and the possible outside barriers
that can influence the process outcome. The engine represents the
management driving the activities described. The front end of the
innovation is the greatest area of weakness in the NPD process. This is
mainly because the FFE is often chaotic, unpredictable and unstructured.
Engineering design is the process whereby a technical solution is developed iteratively to solve a given problem
The design stage is very important because at this stage most of the
product life cycle costs are engaged. Previous research shows that
70–80% of the final product quality and 70% of the product entire
life-cycle cost are determined in the product design phase, therefore
the design-manufacturing interface represent the greatest opportunity
for cost reduction.
Design projects last from a few weeks to three years with an average of one year.
Design and Commercialization phases usually start a very early
collaboration. When the concept design is finished it will be sent to
manufacturing plant for prototyping, developing a Concurrent Engineering
approach by implementing practices such as QFD, DFM/DFA
and more.
The output of the design (engineering) is a set of product and process
specifications – mostly in the form of drawings, and the output of
manufacturing is the product ready for sale.
Basically, the design team will develop drawings with technical
specifications representing the future product, and will send it to the
manufacturing plant to be executed. Solving product/process fit problems
is of high priority in information communication design because 90% of
the development effort must be scrapped if any changes are made after
the release to manufacturing.
NPD Process
- New Product Strategy – Innovators have clearly defined their goals and objectives for the new product.
- Idea Generation – Collective brainstorming ideas through internal and external sources.
- Screening – Condense the number of brainstormed ideas.
- Concept Testing – Structure an idea into a detailed concept.
- Business Analysis – Understand the cost and profits of the new product and determining if they meet company objectives.
- Product Development – Developing the product.
- Market Testing – Marketing mix is tested through a trial run of the product.
- Commercialization – Introducing the product to the public.
Models
Conceptual models have been designed in order to facilitate a smooth process.
- IDEO approach. The concept adopted by IDEO, a design and consulting firm, is one of the most researched processes in regard to new product development and is a five-step procedure. These steps are listed in chronological order:
- Understand and observe the market, the client, the technology, and the limitations of the problem;
- Synthesize the information collected at the first step;
- Visualise new customers using the product;
- Prototype, evaluate and improve the concept;
- Implementation of design changes which are associated with more technologically advanced procedures and therefore this step will require more time
- BAH Model. One of the first developed models that today companies still use in the NPD process is the Booz, Allen and Hamilton (BAH) Model, published in 1982. This is the best known model because it underlies the NPD systems that have been put forward later. This model represents the foundation of all the other models that have been developed afterwards. Significant work has been conducted in order to propose better models, but in fact these models can be easily linked to BAH model. The seven steps of BAH model are: new product strategy, idea generation, screening and evaluation, business analysis, development, testing, and commercialization.
- Stage-gate model. A pioneer of NPD research in the consumers goods sector is Robert G. Cooper. Over the last two decades he conducted significant work in the area of NPD. The Stage-Gate model developed in the 1980s was proposed as a new tool for managing new products development processes. This was mainly applied to the consumers goods industry. The 2010 APQC benchmarking study reveals that 88% of U.S. businesses employ a stage-gate system to manage new products, from idea to launch. In return, the companies that adopt this system are reported to receive benefits such as improved teamwork, improved success rates, earlier detection of failure, a better launch, and even shorter cycle times – reduced by about 30%. These findings highlight the importance of the stage-gate model in the area of new product development.
- Lean Start-up approach. Over the last few years, the Lean Startup movement has grown in popularity, challenging many of the assumptions inherent in the stage-gate model.
- Exploratory product development model. Exploratory product
development, which often goes by the acronym ExPD, is an emerging
approach to new product development. Consultants Mary Drotar and Kathy
Morrissey first introduced ExPD at the 2015 Product Development and Management Association annual meeting and later outlined their approach in the Product Development and Management Association’s magazine Visions. In 2015, their firm Strategy2Market received the trademark on the term “Exploratory PD.” Rather than going through a set of discrete phases, like the phase-gate
process, exploratory product development allows organizations to adapt
to a landscape of shifting market circumstances and uncertainty by using
a more flexible and adaptable product development process for both
hardware and software. Where the traditional phase-gate approach works
best in a stable market environment, ExPD is more suitable for product
development in markets that are unstable and less predictable. Unstable
and unpredictable markets cause uncertainty and risk in product
development. Many factors contribute to the outcome of a project, and
ExPD works on the assumption that the ones that the product team doesn’t
know enough about or are unaware of are the factors that create
uncertainty and risk. The primary goal of ExPD is to reduce uncertainty
and risk by reducing the unknown. When organizations adapt quickly to
the changing environment (market, technology, regulations,
globalization, etc.), they reduce uncertainty and risk, which leads to
product success. ExPD is described as a two-pronged, integrated systems
approach. Drotar and Morrissey state that product development is complex
and needs to be managed as a system, integrating essential elements:
strategy, portfolio management, organization/teams/culture, metrics,
market/customer understanding, and process.
Marketing considerations
There
have been a number of approaches proposed for analyzing and responding
to the marketing challenges of new product development. Two of these
are the eight stages process of Peter Koen of the Stevens Institute of Technology, and a process known as the fuzzy front end.
Fuzzy Front End
The Fuzzy Front End
(FFE) is the messy "getting started" period of new product engineering
development processes. It is also referred to as the "Front End of
Innovation", or "Idea Management".
It is in the front end where the organization formulates a
concept of the product to be developed and decides whether or not to
invest resources in the further development of an idea.
It is the phase between first consideration of an opportunity and when
it is judged ready to enter the structured development process (Kim and
Wilemon, 2007; Koen et al., 2001).
It includes all activities from the search for new opportunities through
the formation of a germ of an idea to the development of a precise
concept. The Fuzzy Front End phase ends when an organization approves
and begins formal development of the concept.
Although the Fuzzy Front End may not be an expensive part of
product development, it can consume 50% of development time (see Chapter
3 of the Smith and Reinertsen reference below),
and it is where major commitments are typically made involving time,
money, and the product's nature, thus setting the course for the entire
project and final end product. Consequently, this phase should be
considered as an essential part of development rather than something
that happens "before development," and its cycle time should be included
in the total development cycle time.
Koen et al. (2001), distinguish five different front-end elements (not necessarily in a particular order):
- Opportunity Identification
- Opportunity Analysis
- Idea Genesis
- Idea Selection
- Idea and Technology Development
- The first element is the opportunity identification. In this element, large or incremental business and technological chances are identified in a more or less structured way. Using the guidelines established here, resources will eventually be allocated to new projects.... which then lead to a structured NPPD (New Product & Process Development) strategy.
- The second element is the opportunity analysis. It is done to translate the identified opportunities into implications for the business and technology specific context of the company. Here extensive efforts may be made to align ideas to target customer groups and do market studies and/or technical trials and research.
- The third element is the idea genesis, which is described as evolutionary and iterative process progressing from birth to maturation of the opportunity into a tangible idea. The process of the idea genesis can be made internally or come from outside inputs, e.g. a supplier offering a new material/technology or from a customer with an unusual request.
- The fourth element is the idea selection. Its purpose is to choose whether to pursue an idea by analyzing its potential business value.
- The fifth element is the idea and technology development. During this part of the front-end, the business case is developed based on estimates of the total available market, customer needs, investment requirements, competition analysis and project uncertainty. Some organizations consider this to be the first stage of the NPPD process (i.e., Stage 0).
A universally acceptable definition for Fuzzy Front End or a dominant framework has not been developed so far.
In a glossary of PDMA,
it is mentioned that the Fuzzy Front End generally consists of three
tasks: strategic planning, idea generation, and pre-technical
evaluation. These activities are often chaotic, unpredictable, and
unstructured. In comparison, the subsequent new product development
process is typically structured, predictable, and formal.
The term Fuzzy Front End was first popularized by Smith and Reinertsen (1991).
R.G. Cooper (1988)
it describes the early stages of NPPD as a four-step process in which
ideas are generated (I), subjected to a preliminary technical and market
assessment (II) and merged to coherent product concepts (III) which are
finally judged for their fit with existing product strategies and
portfolios (IV).
Other conceptualisations
Other authors have divided predevelopment product development activities differently.
The Phase Zero of the Stage-Gate Model of New Product Development
The Stage-Gate model of NPD predevelopment activities are summarised in Phase zero and one, in respect to earlier definition of predevelopment activities:
- Preliminary
- Technical assessment
- Source-of-supply assessment: suppliers and partners or alliances
- Market research: market size and segmentation analysis, VoC (voice of the customer) research
- Product idea testing
- Customer value assessment
- Product definition
- Business and financial analysis
These activities yield essential information to make a Go/No-Go to
Development decision. These decisions represent the Gates in the
Stage-Gate model.
Early Phase of the Innovation Process
A
conceptual model of Front-End Process was proposed which includes early
phases of the innovation process. This model is structured in three
phases and three gates:
- Phase 1: Environmental screening or opportunity identification stage in which external changes will be analysed and translated into potential business opportunities.
- Phase 2: Preliminary definition of an idea or concept.
- Phase 3: Detailed product, project or service definition, and Business planning.
The gates are:
- Opportunity screening
- Idea evaluation
- Go/No-Go for development
The final gate leads to a dedicated new product development project.
Many professionals and academics consider that the general features of
Fuzzy Front End (fuzziness, ambiguity, and uncertainty) make it
difficult to see the FFE as a structured process, but rather as a set of
interdependent activities ( e.g. Kim and Wilemon, 2002).
However, Husig et al., 2005 [10] argue that front-end not need to be
fuzzy, but can be handled in a structured manner. In fact Carbone showed that when using the front end success factors in an integrated process, product success is increased. Peter Koen
argues that in the FFE for incremental, platform and radical projects,
three separate strategies and processes are typically involved.
The traditional Stage Gate (TM) process was designed for incremental
product development, namely for a single product. The FFE for developing
a new platform must start out with a strategic vision of where the
company wants to develop products and this will lead to a family of
products. Projects for breakthrough products start out with a similar
strategic vision, but are associated with technologies which require new
discoveries.
Activity view on Fuzzy-Front End
Predevelopment is the initial stage in NPD and consists of numerous activities, such as:
- product strategy formulation and communication
- opportunity identification and assessment
- idea generation
- product definition
- project planning
- executive reviews
Economical analysis, benchmarking of competitive products and
modeling and prototyping are also important activities during the
front-end activities.
The outcomes of FFE are the:
- mission statement
- customer needs
- details of the selected idea
- product definition and specifications
- economic analysis of the product
- the development schedule
- project staffing and the budget
- a business plan aligned with corporate strategy
Incremental, platform and breakthrough products include:
- Incremental products are considered to be cost reductions, improvements to existing product lines, additions to existing platforms and repositioning of existing products introduced in markets.
- Breakthrough products are new to the company or new to the world and offer a 5–10 times or greater improvement in performance combined with a 30–50% or greater reduction in costs.
- Platform products establish a basic architecture for a next generation product or process and are substantially larger in scope and resources than incremental projects.
