Economics evaluation of new product development project must involve the costs of development and manufacturing during stage 4, technical development.

1. Idea Insights from GNPS
Technical Development in
NPD
Episode 15-20
www.globalnpsolutions.com/idea-incubator/
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2. Idea Insights from GNPS
NPD Structured Process
• Staged and gated processes guide new product development
• Minimizes innovation risk and investment
• Stages:
1. Opportunity Identification
2. Concept Generation
3. Concept Evaluation
4. Technical Development
5. Commercial Launch
www.globalnpsolutions.com/idea-incubator/
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3. Idea Insights from GNPS
Activities in Stage 4
• Much of technical development specific to product, industry
• Includes engineering, quality, reliability
• Also includes risk assessments, market research studies
• Identify capital investment & manufacturing costs
www.globalnpsolutions.com/idea-incubator/
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4. Idea Insights from GNPS
Determining Costs
• Profit = Revenue – Cost
• Revenue estimates from Stage 3
• Costs finalized during Stage 4
• Development Cost
• Ignore “sunk costs” or include?
• Manufacturing Costs
• Technical design is completed
www.globalnpsolutions.com/idea-incubator/
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5. Idea Insights from GNPS
Economies of Scale
• Variable costs change with amount of production and sales
• Fixed costs don’t change (like development cost)
• Example:
• Dev Cost = $100,000
• Produce 100,000 units, allocate $1/unit
• Product only 10,000 units, allocate $10/unit
• Economy of scale lowers allocated costs
www.globalnpsolutions.com/idea-incubator/
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6. Idea Insights from GNPS
For More Information
• See the full post at the Idea Incubator Blog
• www.globalnpsolutions.com/idea-incubator/
• Free registration
• Contact me!
• 1-281-280-8717
• info@globalnpsolutions.com
• 2323 Clear Lake City Blvd., #180-177
Houston, TX 77062
www.globalnpsolutions.com/idea-incubator/
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