Whether you’ve just launched your very first product to market, or you’re an established leader, there comes a time when your growth will start to slow down a little and you’ll need to start thinking about the ‘next big thing’ that will kickstart your next phase of growth.
The more prepared for you are for when that time comes, the better.
What is New Product Development?
Here are two definitions we like:
“New product development (NPD) covers the complete process of bringing a new product to market”
Which is broad, to say the least. But Wikipedia offers an explanation:
“New product development is described broadly as the transformation of a market opportunity into a product available for sale.”
“Product development, also called new product management, is a series of steps that includes the conceptualization, design, development and marketing of newly created or newly rebranded goods or services”
In this article, we will cover the basics of New Product Development, why it is important, how to achieve it, and detail the different, although not competing, methods that people have researched to determine what separates the market leaders from the average companies.
Why New Product Development is important
“New Product Development (NPD) productivity in the top performing company is five times what it is the the average company. The top performer gets five times as much new product output for the same investment according to the Innovation Excellence Study 2005 conducted by Arthur D Little.”
So writes Robert G. Cooper, in his essay The Formula for Success.
The top companies make New Product Development seem effortless. They constantly spin out new products. Think, for example, of Apple; between the Apple Watch, the iPad, iPhone, Macs, Apple have managed to produce several new products a year for a while. On top of this, they continually add new services to ingrain themselves in consumers lives; things like Apple TV, and iCloud are making the company sticky.
Now, we need to acknowledge the cause and effect cycle of Cooper’s statement: are top companies in their position of power because they were able to adapt and undertake New Product Development quickly and effectively? Or, did becoming top companies enable them to undertake New Product Development, due to more capital, resources, and revenue for research and development?
The answer is: probably a bit of both. Apple are the market leader because they undertook New Product Development in an effective manner, and then Apple had more market share, more data, more capital to continue New Product Development effectively. And so the cycle continues.
New Product Development is important because:
- It helps you to increase market share.
- It engages customers, and builds brand loyalty.
- It allows a company to stay in touch with the market, and consumers.
How you should approach New Product Development
New Product Development is important, but of equal importance is the way in which you do it.
According to Prod-Dev, “An estimated 46% of the resources that companies devote to the conception, development and launch of new products go to projects that do not succeed – they fail in the marketplace or never make it to market.”
Cooper acknowledges the divide between a ‘top’ company and an average company’s New Product Development, and in his study he breaks down the processes of the ‘top companies’, and seeks the common denominators – what they all do that makes them able to undertake New Product Development effectively.
The Seven Key Principles of New Product Development
1) Customer Focused
Solving customer problems is key. If you can offer a real ‘value proposition’ to the customer, you are on your way to effective New Product Development.
This highlights the need for a certain “wow” factor. Offering boring modifications, small updates, and new products with no competitive advantage is a problem.
A great methodology for getting to the bottom of what consumers really want is via Jobs to Be Done, which you can learn more about in this post.
2) Front-end loading
This, in essence, is about good due-diligence. Thorough market, technical, and business assessments are critical at the front-end, or the early stage. That research early on will make the go-to decision making much easier, much more effective and in line with the reality of your circumstances.
It’s the ‘measure twice, cut once’ principle, which can be incredibly important (and cost effective) if you’re looking at a multi-million pound product development cycle.
This is where a consumer intelligence platform like Attest can pay for itself 1000x over by honing your idea first, while it’s still cheap to do so, helping you eliminate bad or unwanted new product ideas so you can focus in on the winners early on.
3) Spiral or Agile Development
Smart teams “create the first version of a product (perhaps a virtual one) and test it with the customer, seeking feedback. Then they use that feedback to produce the next, more complete version – maybe a working model or a protocept.”
This comes down to:
“build, test, obtain feedback, and revise”
The alternative is the outdated, linear approach (sometimes known as ‘Waterfall’) that starts at the top with an executive having a brainwave (see the dangers of Survivorship Bias here) and then focusing on getting it perfect before it’s released to consumers.
Too often, a product is thought up, and then the processes are put in place, and then you get around to making it; by the time it comes to market, it either does not suit the consumer, or a competitor’s product has come out, or the market has simply moved.
4) A Holistic Approach
Cross functional teams are key. They need to be involved from start to finish, and provide an outlet for the agile development mentioned above. For example, you shouldn’t invent the product in the lab, and only pass it onto marketing a few weeks before launch. Having a sound marketing and communications plan from the outset is essential. All teams should work hand-in-hand.
Added to this is the necessity of team accountability. This is essential for good communication, but also for people to know where their roles reside.
“You can’t manage what you don’t measure.” – Peter Drucker
Measuring how your new products perform is key to understanding and evaluating your processes.
This must start at a team-level, and be built up to the company at large; but, only by measuring teams can we enforce that much needed accountability we mentioned above.
What does a new product launch have to do in years 1, 2 and 3 in order to be crowned a ‘success’? What numbers would be so bad that it would necessitate you pull the plug on it? Better to agree these up front than after your product has already gone to market.
6) Focused and effective portfolio management
Here is the biggie, and a word of warning to all those seeking to maximise their New Product Development.
Most companies simply have far too many “development projects” on the go at the same time. Resources are spread, and their portfolio is out of balance – not only are there too many projects, but they are the wrong mix.
Cooper’s suggestion to alleviate this problem is to develop a funnel mechanism. Start with lots of ideas, and put them through the paces; set up gates and tests to see which ones are going to add most to the company.
7) A lean, scalable, and adaptable process
The overarching theme of these points is agility. Anything that involves too much bureaucracy, time wasting, and the dreaded ‘make work’ activities, needs to be changed.
Cooper’s rule: if your New Product Development process is over three years old, it probably needs to be changed.
The Stage-Gate Process
This is the foundation of Cooper’s New Product Development Process that has gathered plenty of traction over the years.
Stage 0 Discovery: discover new opportunities and ideas Stage 1 Scoping: An assessment of the possible benefits of the project. Stage 2 Build Business Case: This is part of the critical ‘due diligence’ we highlighted earlier. This is about evaluating the business feasibility, leading to: product and project definition; project justification; and project plan. Stage 3 Development: Design and development, and operations understood, the market launch is developed. Testing is outlined. Stage 4 Testing and Validation: This is the key difference between the ‘top’ companies and the average ones. This stage validates the product, the market, the development, and it keeps the company in touch with market developments. Stage 5 Launch: Commercialisation of the product.
However we should also highlight ‘The New New Product Development Game,’ a research article written by Hirotaka Takeuchi and Ikujiro Nonaka. They develop a ‘more holistic’ version of the process. While a huge amount of it takes its lead from Cooper’s work, some of the points are interestingly illustrated, and more easily digestible.
Creating a culture of change is key – it is part of developing the ongoing processes and cross functional teams we outlined earlier.
Self-organising project teams
“A group possesses a self-organizing capability when it exhibits three conditions: autonomy, self-transcendence, and cross-fertilization.”
In other words, when a team is given free-reign, with ‘zero-information’ (ie prior knowledge is discounted), they can work freely, effectively, and offer appropriate solutions.
Within the right framework, “the project team begins to operate like a startup company – it takes initiatives and risks, and develops an independent agenda.”
Overlapping development phases
Teams work on different time scales – R&D take a lot of time, and production teams the least. They must work together to synchronize their timelines to meets deadlines. The benefit is that “each member soon begins to share knowledge about the marketplace and the technical community”.
This is a development of what we talked about earlier – cross-functional teams are essential to effective New Product Development.
This is simply about staying in touch with a host of different outside sources of information to keep the project up to date.
Subtle control is the culmination of “self-control,” “control through peer pressure,” and “control by love.”
In essence, it is about having a management system in place that keeps an eye on proceedings, to “prevent instability, ambiguity, and tension from turning into chaos,” while also having management that “avoids the kind of rigid control that impairs creativity and spontaneity.”
Organisational Transfer of Learning
This is more than simply keeping everyone in touch, it is about the “transfer of learning to subsequent new product development projects”. That is something that is often missed. We talk so much about keeping everyone in touch during a project, and give no consideration as to what to do between projects; this is about inter-project sharing of knowledge, as opposed to intra-project.
All these steps are important, and well worth considering. However, every single step seems to come back to two key points.
Firstly, being lean (remove waste and inefficiency from the process), scalable (push for as much autonomy as possible), and adaptable (test and learn as you go along) is key.
Secondly, building the New Product Development around consumers is vital.
Yes, getting your New Product Development process right is important, but if you’re not engaging with, or listening to, your target consumers, then there is no point in even worrying about the processes, because the product won’t be satisfying their needs. That’s a recipe for failure before you’ve even begun.
For the consumer insights and data you need to start your New Product Development on the strongest possible terms, get in touch with our team today!