Project Management-New Product Development

KAUNAS UNIVERSITY OF TECHNOLOGY SCHOOL OF ECONOMICS AND BUSINESS DEPARTMENT OF ECONOMICS

PROJECT MANAGEMENT

New Product Development

Author: Rahul Kumar Singh Supervisor: prof. dr. Ruta Ciutiene

Kaunas, 2016

Contents Introduction.................................................................................................................... 3 THE NEED FOR NEW PRODUCT DEVELOPMENT..............................................................4 Consumer "Needs and Wants" Change....................................................................4 Product Reaches The End Of Its Product Life Cycle.................................................4 Product Is At The Maturity Stage Of Its Product Life Cycle......................................4 Environmental Changes.......................................................................................... 4 Competitors............................................................................................................. 5 Rejuvenation of Existing Products........................................................................... 5 Product development processes........................................................................................... 5 Survey instrument............................................................................................................ 6 Methods of the Empirical study........................................................................................ 6 New product development organization and current strategy........................................................7 New product Strategy.................................................................................................... 7 New Product Structure................................................................................................... 8 New Product Systems.................................................................................................... 8 New Product Skills....................................................................................................... 9 New Product Style........................................................................................................ 9 INVENTION, INNOVATION AND TECHNICAL CHANGE...................................................9 Conclusion................................................................................................................ 11 References................................................................................................................ 12

Introduction The introduction of new product continues to be critical business activity to all companies, both consumer and business marketing-oriented. According to Kuczmarski more than ever, existing product can be expected over the course of the time to either be premade by new and improved product or, degenerate to position where profit are nonexistent with no doubt a long term health od many organization is attached on their ability to provide existing and new customers with and ongoing stream of new product .according to Crawford Over 10,000 new products are marketed in the US every year and Hundreds of thousands of people make their living producing and marketing New products. Almost 3% of the country’s GNP is spent on the technical phase of new product development (this percentage represents R&D only, not manufacturing and marketing costs). In short, new product development is big business. The continues change in the environment surrounding the organization forces change in organization itself.as the organization is developed to its potential, it will become outdated owing to continues technological, market and management change. The new product development involves all aspects and functions to management, who need to draw them all together to ensure success. The process is made up of a series of activities, usually led by different department or team, each with different structure, skills, culture, people and resources. The multifarious aspects of developing a new product, and the key role played by the marketing concept. Now that innovation is no longer seen as an end in itself, but is being replaced by the goal of efficient resource usage, it is the ability of management to re-define its development strategies in an environment of rising costs and supply shortages that will be its real test over the next decade.

THE NEED FOR NEW PRODUCT DEVELOPMENT New product development is essentially a means of improving corporate viability (Hayhurst, 1968) and ultimately, therefore, national prosperity (Viscount Caldecote, 1979). From the viewpoint of the company the process may be used to diversify the range of business activities undertaken. However, this end may be achieved by employing a number of valid alternatives to new product development

Consumer "Needs and Wants" Change Consumer "needs and wants" continuously change. Firms should respond to these changes through their products and services. Otherwise consumers will switch to competitor products that satisfy their "needs and wants". For example consumers are becoming more health conscious, this is forcing companies to introduce low sugar, salt and fat products. Coca-Cola Zero which contains no sugar is a classic example of new product development even though Coca-Cola's existing product range already contained diet coke. Both diet coke and Coca-Cola Zero contain no sugar but they taste different.

Product Reaches The End Of Its Product Life Cycle The product maybe at the end of its Product Life Cycle, so the company may introduce new and improved updated versions. Microsoft has done this by moving from the Xbox to the Xbox 360 and now Xbox 360 limited editions allow Microsoft to refresh the product through small changes.

Product Is At The Maturity Stage Of Its Product Life Cycle The product might be at the maturity stage of its Product Life Cycle and need modifications to stimulate an increase in sales. Nintendo have replaced its DSi console with the 3DS console which contains additional features such as an extra camera so that you can film in 3D, a 3D screen which doesn't require glasses, a joystick and motion sensors.

Environmental Changes There may be environmental changes which the company wants to capitalise on. Music companies are now selling more music via internet downloads than through traditional retail shops. Record companies were pushed into selling music through the internet following the success of the internet site Napster, which offered illegal music downloads. In April 2006 the song "Crazy" by Gnarls Barkley made history by becoming the first song to achieve the number one spot in the UK charts through music download sales only. In March 2011 Mercury Records stopped releasing singles on CD as by then 99% of single sales were through downloads.

Competitors Competitors may force change. This is very apparent in the technology market, where new products are constantly being introduced to a target market that welcomes change and innovation. Technology consumers are not afraid to try new products, in fact they often want the latest gadget to show to friends and colleagues. If a product is successful then competitors will attempt to develop similar products. In fact Google say that they developed the Android

operating system to prevent the technology market for products such as mobile phones and tablets being dominated by one supplier.

Rejuvenation of Existing Products The theory of the product life cycle described by Doyle (1976) is frequently and incorrectly put forward as revealing a direct need for new products, e.g., Skinner (1972). The principal tenets of this theory require that, firstly, sales of a product group, form or brand, pass through a series of definable stages at different times, and secondly, that the profit: sale ratio follows a similar cyclical curve, as a function of the changing character of the market Since management sees a decline in sales and profitability possibly due to revocable changes in the suitability of the marketing mix) concluding that further decline is inevitable due to dogmatic belief in the concept, they withdraw marketing support from the product, only to have their beliefs subsequently confirmed. In this way, not only are "cash cows" (Scanlon, 1980) slaughtered, but new products may be herded into the market with all the inherent risk involved in premature launch.

Product development processes Some studies have provided a wide variety of important information on issues and recommendations related to many aspects and phases of the product development process. These range from establishing an environment conducive to fostering innovation and product development efforts all the way to and including suggestions for improving product launch activities and post-launch success measures. Yet, despite the useful insights provided by this research, most work has centered on theoretical prescriptions and, to a large degree ignored, the current state of affairs in US corporations (Craig and Hart, 1992). An extensive review of the literature regarding product development processes and practices reveals that little work has been performed to-date in two important areas: evaluating how well, if at all, organizations are paying heed to research recommendations; and whether product development structure and practices differ between the consumer and business-oriented (industrial) manufacturing sectors of the US economy. The purpose of the current study is to seek answers to several questions. First, “What is the current state of practice regarding the structure and process related to development of new products?” Second, “Is there one best way for managers to structure and undertake the product development process?” Third, “Why, given the large amount of resources and effort dedicated to improving product development practices, do so many companies still experience extreme difficulties in developing and launching successful new products?” Fourth, “Do significant differences exist between the programs and processes undertaken by consumer versus business products firms?” Finally, “What are the means by which managers can improve their product development processes?” Results of a study encompassing both consumer and business products managers responsible for the development of new products are presented and differences in practices are discussed. Based on the findings, managerial implications and Recommendations for organizations involved in product development are provided. The framework for an integrated product development programme has been described by Credland (1968), who advocates the use of a sequential approach utilizing check lists based on the following headings: (1) Decision to study broad market;

(2) Investigation of commercial opportunities; (3) Assessment of product feasibility; (4) Assessment of product profit feasibility; (5) Assessment of consumer acceptability and brand development; (6) Final assessment prior to test market; (7) test marketing; (8) Overall assessment. On a more specific level, the development process has been described by Toll (1969) as comprising of the following stages: (1) Planning (including identification of company assets, formulation of objectives) and broad definition of markets of interest; (2) Market exploration (including identification of potential growth areas) and existing products; (3) search for product ideas; (4) Investigation of new ideas in terms of company resources and abilities; (5) Evaluation of new ideas (including concept and product testing); (6) Selection of remaining favorable ideas based on financial considerations; (7) Implementation of test marketing and/or national launch.

Survey instrument Methods of the Empirical study According to Ian Barclay Mark Benson(1990)An empirical study was conducted to access the current new product development practices undertaken by US Organisation.on the basis on an in depth literature review a series of interview conducted with consumer and business product managers and industry analysts; consultation with other researchers and the author, experience in product development consulting, a two phase survey instrument was developed and pretested. The objective of this survey was to instrument and collect information related to the following specific areas: Phase 1:    

Which function within an organization hold primary responsibility for approval of product development process and carrying out the required activity? Do formal processes for stimulating and evaluating new product ideas exist within organizations? What forms new product introductions take and what entities serve as the main impetus for new product ideas? What percentage of company sales are derived from products introduced within the last five years and what percentage of sales are invested back into R&D efforts?

Phase 2: 

 

Which organizational factor best serve to motivate personnel and increase the likelihood of cooperative, supportive working relationship during the new product development process? What factor contribute the successful new product development process and what organizational strengths foster success? What factor contribute to fail new product development efforts?

Phases one and two: Do differences exist in the above between consumer and business products companies? From the answers to the above, conclusions can be reached as to whether there exists one optimum way to structure the product development process; how significantly actual practices differ among organizations; and the importance and effect of primary market(s) served on the structure and factors influencing success/failure of new product development efforts. Specific recommendations can then be formulated as to how the new product development process may be improved on. Of specific importance is the ability to recognize and make use of current practices as a springboard from which future research efforts can be undertaken.

New product development organization and current strategy New product Strategy A well defines new product strategy itself driven by the corporate strategy and objectives, should be at the core of any company’s approach to new product development. The new product strategy should provide

guidelines for decision making throughout the NPDP. Essentially, the purpose of developing a new strategy is to define the strategic role new products will play in fulfilling corporate objectives. According to McDonough, five alternative new product strategies have been identified which vary along three dimensions:        

First to the market Second to the market “me too” “me better” Quick response Capacity for rapid response Innovation level(high/low) Existing technology capability.

According to copper new product performance and its strategy are closely linked. He classified five different strategy scenarios. Those are as following:

1. Technology Driven: involving high technology, innovative and based on state of arts development, these strategies are technologically driven with non-market orientation 2. Balanced: where new product are technologically sophisticated and innovative, combines with strong degree of product fit focus and market orientation 3. Technologically deficient: where new product are of low technology “me too” low risk efforts relying on mature technologies; 4. Low budget conservative: a low R&D spending and a “stay close to home “approach 5. High budget diverse: A high R&D budget with an unfocused and diverse approach to the new product development

New Product Structure Structure is one of the most obvious of the 7Ss, and is perceived and interpreted by employees as a basis for their choice of behavior. Having the "right" organizational structure may not be sufficient to stimulate behaviors that promote innovation. However, structures that are not based on innovative organizing principles will discourage innovation. Four generic types of structure have been defined, each having its own advantages and disadvantages. Souder found that the type of structure varied depending on whether the company was proactive or reactive. The type of structure was also found to depend on the level of innovation required. A company's new product strategy will, to some extent, determine the structure required Considerable attention has been given to identifying the ideal formal structures needed for the management of the new product development process. No one organizational structure is best; on the contrary different organizational mechanisms are appropriate to different types of new product developments, companies and products.

New Product Systems Formalization of the new product development process to ensure efficiency can have the disadvantage of stifling creativity and constraining innovation. The innovation process is not suited to formalized procedures and control. Alternatively, leaving innovation to develop in an unfocused way may increase the cost and complexity of the process. It would seem more appropriate that companies apply systems as tools, with different emphasis at different stages during the new product development process. Generally, during the early stages, these controls should be loose. As the development progresses and more capital is allocated, tighter controls are needed to avoid costly changes, to meet launch dates, and to prevent designers continuing to "perfection”. Many systems exist to help control the new product development process, and many companies have developed their own based on experience. These systems in effect describe the process of new product development. Might, in 1984, examined the effectiveness of project control systems based on a study of 103 development projects. He found that, simply because a control system worked well on one project, this did not mean it would work well on another. Recognition by project managers of the interactions between control methods and situational conditions has a crucial impact on the success of the product.

New Product Skills The skills required for new product development will vary tremendously throughout the process. Using Crawford's model of the product innovation process although this is shown as a sequential process, it is in fact an iterative, parallel one with feedback loops. This shows the variation in the skills required to develop a new product. To draw these skills together a large amount of teamwork is needed, along with co-ordination and communication skills. The need for such obvious skills must not be overlooked. Many skills will depend on experience born of years of working in the new product development environment.

New Product Style An organization’s sociocultural behavior is as important as its structural configuration. The style that exists within an organization will be strongly influenced by its top management. Many studies have shown that a crucial factor in successful new product development is top management support. Studies also stress the importance of support for innovation, and an open flexible company attitude. This does not need to involve senior managers making all the key decisions. Indeed some studies have shown that over involvement by senior management can cause delays and upset the innovation process. This is the "loose/tight" balance discussed in the previous article. We would offer the following as a general guide to developing the desired "style": • Greater general business awareness; • High level of training and development, especially in technological and commercial aspects; • Recognition of the importance of the new product process; • High level of commitment to staff and projects; • Clear definition of responsibility; • Decision making at the lowest possible level; • An ability to profit from mistakes; • People seen, and promoted, as the key to success; • Generation of trust and co-operation.

INVENTION, INNOVATION AND TECHNICAL CHANGE This pattern has been observed by Kuhn in his concept of a scientific paradigm. Mueller draws these concepts together besides highlighting certain key implications when he says: "Invention is concerned with creativity and discovery and generally implies fabrication, mental or otherwise. It is not necessarily useful—that is, if something new is brought into being—it is an invention in one non legal sense of the word. In order to be legally patentable, however an invention 'must represent true innovation and add to the sum of useful knowledge' according to the US Supreme Court". These concepts provide a clear basis for distinction between invention and innovation. However Haefele in his valuable paper on the subject spotlights the crucial role of recognition: "the pride of creation demands recognition" The technical change derives from this process of innovation and invention. It is the impact that these processes have on the firm, the market and society. Mansfield sees the rate of imitation as

playing a key role in this process. Patent Laws play a part in slowing down the rate of imitation of technological and scientific inventions. The diffusion of innovations through customer groups is further slowed by the Common inability of the innovator to meet the needs of the market when real breakthroughs occurs. Many countries attempt to stimulate this process of technological change by encouraging the dissemination of information. The US Government took a very active interest in disseminating the results of the NASA development work with considerable success in some fields. There is an increasing tendency for firms to attempt to maximize the short term returns of their R &D activity through offering licensing arrangements and partnership schemes particularly in other countries. The Business Communication Company of the US and the various new product directories play an important role in this process. The Newsletter of the International New Product Centre offers details of licensing opportunities as varied as Protein Fiber and Headlight switches in countries ranging from Scotland to Japan. The importance of the interplay between invention, innovation and adoption in the growth of many industries has been widely noted. Freeman's Study of the Electrical Industry highlighted the role of R & D. Adams and Dirlam brought out the interplay between invention and innovation in the development of the Major Steel Manufacturers. The complex interrelations involved in the process of innovation and technical change is brought out by Peck. "The role of the equipment makers demonstrates that a substantial part of the technical change in one industry is likely to originate from the progress in another industry".

Conclusion The work did provide a manageable method for identifying the problems, and developing effective recommendations to improve the chances, of new product success. Essentially the methodology is a combination of the attributes associated with NPDP success .New product development is required for the future security of any company, although product revitalization or alternative forms of diversification may fulfil short-term corporate needs. The multifarious nature of new product development requires the application of interdisciplinary skills, and the success of the exercise is dependent upon not only the efficiency of the application, but also the creativity of the individuals in the company and the climate established by senior management. In order to be successful, a new product must meet customer needs.

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