New Product Development – Creating a Successful Process
Having spent 24 years doing new product development (in one form or another) in the food and supplement industry, a common theme has emerged. Silos. Big, stainless steel silos like you might find on a dairy farm. We run ideas back and forth—from Research and Development over to the Marketing department, saying “We’ve developed this awesome product—go sell it!” And we run the other way: “R&D, we need to introduce an incredible product at the big show in 3 (or 6 or 10) months!” We watch as entrepreneurs commit to taking Aunt Betsy’s barbeque sauce to market, on the basis of midnight comments from friends at their Fourth of July party. It happens all too often. There is another way–one that is collaborative, where new product development (npd) is strategic, where cross functional teams are created from the onset, and management isn’t afraid to kill projects that no longer make sense.
According to the 2004 NPD Comparative Performance Assessment (www.pdma.org), companies who use a structured NPD Process have a 400% higher chance of market success for their new products. At the same time, they experience a 200% decrease in time to market than those who do not. These companies recognize that product development is not isolated to what happens in the laboratory—it actually occurs well ahead of that –from the time a need is identified in the market, or the moment someone has a great idea.
The five stages of new product development described below are separated by decision points, where management looks at the data, talks with the team, and makes decisions—including the critical decision of “go/no-go”.
1. Problem Identification – Clearly articulating who the consumer is, what she wants, and why she wants it. It is identification of which problem needs to be solved (or what “job” needs to be done.) What is the market need?
2. Concept Generation –Ideation sessions are completed (both internally and externally with customers), competitive analysis, preliminary technical and marketing assessments are done. Options are developed.
3. Concept Evaluation – Management critically evaluates the strategic fit, technical requirements, financial requirements, legal issues, and market evaluation of the options. Customers are engaged to ensure that the idea solves the initial problem identified.
4. Development – The team identifies ingredients, dosages, sources, processing requirements, and addresses stability/IP requirements. Marketing creates a brand, develops positioning, packaging, and marketing plans. The team meets regularly to ensure that the objectives and milestones are being met. Testing with consumers is done, and the product re-worked.
5. Launch – Production is running, internal systems are set, sales training is completed, execution of the marketing plans are underway, and sales is presenting to accounts, based on agreed-upon roll-out strategy. Feedback is received.
Having an integrated, structured process is not only for the large national or multi-national companies. It is actually even more critical for smaller companies, for whom the failure of new products can mean the difference between meeting payroll and not, between rolling into a new region, and shuttering the doors. By creating multi-functional teams internally, and thinking strategically, companies can help ensure that the final product does meet (and maybe even exceed!) consumer expectations.
In the next 5 articles in this series, we will look at each of the steps above in more detail, discussing some of the tools available to help small-mid size businesses succeed. For a classic read on new product development, see Winning at New Products, by Robert G. Cooper.
Published in NHI OnDemand May 2011