eut 441e npd

8/8/2019 EUT 441E NPD

1/30

EUT 441E New ProductDevelopment

1

EUT 441E

New Product Development

Prof.Dr. H. Alpay ErITU Dept. of Industrial Product Design

Office: EUT 7, Phone: 2931310 ext. 2201, E-mail: [email protected]

8/8/2019 EUT 441E NPD

2/30


2

Aims

EUT 441ENew Product Development

(NPD) course aims:1. to familiarize ID students with the basic

concepts of NPD and,

2. to help students understand how ID fitsinto NPD in a business context.

8/8/2019 EUT 441E NPD

3/30


3

Agenda

Main topics to be covered:Importance of NPD,

NPD Strategies,

Factors Affecting NPD at firm-level,Product Life Cycle,

Organisation of NPD,

NPD Process,

The Role of ID in NPD,Prototyping,

Management of NPD.

8/8/2019 EUT 441E NPD

4/30


4

Evaluation

Mid-term % 20

Term Paper % 20

Attendance & Participation % 10 Final Exam % 50

TOTAL %100

8/8/2019 EUT 441E NPD

5/30


5

Main Sources

Ulrich, K.T.and Eppinger S.D. (2000) Product Design and Development,

Mc Graw-Hill Inc., NY.

Urban G.L. and Hauser, J.R. (1993) Design and Marketing of New

Products, Prentice Hall, New Jersey.

Rosenal, M.D. (ed.) (1996) The PDMA Handbook of New ProductDevelopment, John Wiley and Sons Inc., NY.

Cagan, J. and VogelC. M. (2002). Creating Breakthrough Products,

Prentice-Hall Inc., New Jersey.

Bruce, M. and Bessant J. (2002) Design in Business, Pearson, Essex.

Design Management Journal

Journal of Product Innovation Management

Harvard Business Review

8/8/2019 EUT 441E NPD

6/30


6

Introduction

New Product Development (NPD) is a

cognitive and organizational process by

which new products or product systemsare conceptualized, designed and

developed to address opportunities and

problems in an industrial context.

8/8/2019 EUT 441E NPD

7/30

EUT 441E New ProductDevelopment 7

Characteristics of NPD

NPD is risky!

failure rates of new products are high.

Average %35 of new products fail in the

market.

8/8/2019 EUT 441E NPD

8/30


NPD is costly !

Large investments are made in NPD. Butnot all new-product ideas are carried to thecommercialization phase. Only one of 7NP ideas reaches to the market. This

means that the successful product mustcover not only its own NPD cost but alsothe cost of other 6.

8/8/2019 EUT 441E NPD

9/30


Characteristics of NPD

However, NPD is rewarding and necessary tomaintain a healthy organization in a market

economy.

Because NPD is the main source of

differentiation in a market where the price and

quality are not enough to differentiate productsanymore.

8/8/2019 EUT 441E NPD

10/30


Economics of NPD

Classical theory of economics

concentrates on quantity and price,assuming that product has more or less

standard quality.

8/8/2019 EUT 441E NPD

11/30


In markets where large numbers of people

are hungry for products, quantity and price

of a product are more important.

This type of markets are called as Sellers

Market

8/8/2019 EUT 441E NPD

12/30


Economics of NPD

When the number of companies offering similar

products increases in a market, then first the

price, and gradually the quality become

standardized factors. Companies start designing and developing new

products with new or improved features in order

to attract customers.

Such markets are called as Buyers Market.

NPD is a function of Buyers Market

8/8/2019 EUT 441E NPD

13/30


In order to differentiate its products

A company can;

buy other companies with attractive new

products (Acquisition).

buy patents of promising new products fromother companies or individuals.

manufacture new products under the licenseof other companies

8/8/2019 EUT 441E NPD

14/30


or

A company

can design and developits own new products!

8/8/2019 EUT 441E NPD

15/30


New Product Development

NEW: new to the worldnew to the company

new to the market

PRODUCT: anything for sale for thepurpose of satisfying a want or need onboth sides of the exchange process.

DEVELOPMENT: Iterative process thatcovers from the idea to the market launch.

8/8/2019 EUT 441E NPD

16/30


Related Concepts & Definitions

Invention:Act of discovering new methods andtechniques.

Innovation: Commercialization of invention.

Innovation is the transformation of an idea into a new orimproved saleable product or process in industry orcommerce. Technical, Organizational, Product orProcess Innovations. Design Innovations

R&D: The commitment of resources by a company to

scientific research and the refinement and modificationof research ideas aimed at ultimate development ofcommercially viable products or processes..

8/8/2019 EUT 441E NPD

17/30


Definitions

NPD: The process that transforms ideas, market needs

and opportunities into a new product to be launched on

to the market. NPD may involve changes in form,

components or even just packaging rather than chances

in operating principle or technology.

Product Design is the core of innovation and NPD

(OECD, 1982).

Design is the process of converting an idea into

information from which a new product can be made.

8/8/2019 EUT 441E NPD

18/30


Why do firms design & develop new products?

1. Financial goals : Pressures for Profit maximization, firms

generate about %40 of profits from new

products in the US.

NPD is linked to financial planning.

The need for sound profit making is a

strong motivation behind NPD.

8/8/2019 EUT 441E NPD

19/30



2. Sales and Market Share Growth:

Firms can capture a large slice of market share

by NPD, and then through incremental product

modification and experience cost advances can

be achieved. NPD becomes the chief means of market share

growth in a focused market strategy.

As Japanese did in the past, and as Koreans

have done recently. Vestelin CTV market ?

8/8/2019 EUT 441E NPD

20/30



3. Competitive actions:

It means what competitors doing.

An indication of unfavorable competitive

change is a strong motivation for NPD.

Office furniture and electronics industries

in Turkey.

8/8/2019 EUT 441E NPD

21/30


4. Product Life cycle:As a product matures, its

sales begins to decline, so do profits.

Then the movements of existing products in their

life cycle towards decline crates a motivation for

NPD. (Cars. Renault 9. Fiat 131)

5. Technology: Technological change puts

extreme pressures on firms to innovate or give

up.

A major technological change always forcesfirms towards NPD

8/8/2019 EUT 441E NPD

22/30



6. Globalization creates two new dimensions:

new competitors entering home markets

(threats) and opportunities abroad.

NPD is always an important part of firms global

business strategy.

7. Regulation: Government regulations and

deregulations causes firms to consider NPD.

Environmental standards imposed by

governments - e.g. Downsizing of cars,

packaging

8/8/2019 EUT 441E NPD

23/30



8. Material Costs and Availability: due to material costand availability, new product may have to be developed.

Oil crises of the 70s led to the design and developmentof small cars.

9. Invention. Start up companies, new inventionsusually led to NPD.

10. Demographic and life style changes: asconsumers ages, their needs change, so they need new

products, drug and medical services, diet, decafproducts, teenage as a consumer, liberation of woman.

Health conscious products. Environmental sensitivity.

8/8/2019 EUT 441E NPD

24/30



11. SupplierInitiatives and Reactionscan also be a source for NPD.

12. Customer requests. Especially inindustrial goods.

13. Alliances amongfirms: New NPDopportunities in NPD or pressures for

growth through NPD.

8/8/2019 EUT 441E NPD

25/30

EUT 441E New Product

Development

25

New Product Strategies

Firms develop their own managerial

strategies to deal with NPD. These are

called New Product Strategies.

NP strategy is part of the overall corporate

strategy.

8/8/2019 EUT 441E NPD

26/30


Development

26

What is corporate strategy?

Corporate strategy is a framework that

gives a company its overall direction.

The strategy formulation begins with a

systematic diagnosis of the threats and

opportunities, the organizations weakness

and strengths, and understanding of the

demand and competition in the market.

8/8/2019 EUT 441E NPD

27/30


Development

27

Basic New Product Strategies

The basic strategic NP decision is whether to be

reactive or proactive.

A reactive strategy is based on dealing with

initiative pressures as they occur, whereas aproactive strategy would explicitly allocate

company resources to preempt undesirable

events in the future or achieve goals.

Each strategy is appropriate under certain

conditions.

8/8/2019 EUT 441E NPD

28/30


Development

28

Reactive NP Strategies:

Defensive

Imitator (me too) Second but better,

Responsive

8/8/2019 EUT 441E NPD

29/30


Development

29

Proactive NP Strategies:

R&D based

Marketing-led

Entrepreneurial Acquisition

Alliances

8/8/2019 EUT 441E NPD

30/30


Development

30

PLC

Introduction

Maturity

Product Life Cycle

Time

Sales Volume

Decline

Growth

eut 441e npd

Documents