New product design and development

1

Lecture 10

New product development

Chapters 12 and 13

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008

Slide 12.2

New product development

1. Introduction
2. Product strategy
3. Classification of new products
4. Some explanations for high failure rates
5. Macro problems associated with NPD
6. Organisational activities involved in NPD
7. Summary & recap


3

Innovation Management
• If innovation declines so does market share
• Eg: Rover’s market share declined from 20%
to 10% over 20 years
• Innovation now will set up company for future
years because of it takes time.
• Cost cutting option vs generating new products
• NPD is a subset of the innovation process
• NPD is about converting business
opportunities to tangible products.


Slide 12.4

External consideration
• Macro factors
• Competition
• External R&D
• Suppliers and input prices
• Market needs
• Distribution systems
• Strategic alliances
• Shorter life-cycle of products


5

NPD Impacts
• NPD impacts on different parts of the
organisation in different ways
• Production management: manufacturing issues
• Marketing: understand and meet needs
• Finance: costs and profitability
• Design and engineering: technical issues


Slide 12.6

Competing demands within
• Return on capital employed
• Profit and market share
• Design, innovativeness and technological
supremacy
• Must fit into overall strategic direction


7

Example

• IBM
• Microsoft
• Apple
• 3M
– 1970s: 33% 0f sales
– 1890s: 40%
– 1990s: 50%


Slide 12.8

What to consider?
• Who is responsible for setting future direction?
• Watch for opportunities
• Watch what competitors are doing
• Market planning teams can play a significant
role, eg. In the shoe market a competitors may
be about to launch an improved product.
Project teams could be setup to look at new
designs, better fastenings, lower production
costs.


9

Macro view of new product development
Macro environment

Competition, finance, economic conditions, legal framework

New ideas, New products
suggestions, and services
concepts The organisation

How does this process work
?

Slide 12.10

Key themes from the product
development literature
Process
timing
pre-development activities Organisational
Management
development activities structure
authority
marketing activities mechanism
support
launch activities style
technical aspects
communication
People
multifunctional
Information co-ordination
general product champion
marketing Successful communication
external new products
communication
Strategy
orientation
objectives
synergy
Source: Hart (1995) in Bruce & Biemans, Wiley; Trott (2005), Prentice Hall product characteristics


11

Ansoff‟s directional policy matrix

Current New
products products

Current 1. Market 3. Product
markets penetration development
strategy strategy

New 2. Market 4. Diversification
markets development strategy
strategy

Source: Ansoff, 1968


Slide 12.12

A product is multi-dimensional

Brand name

Features

Quality
price
specifications
Level of Packaging
service

Technology


13

Change a dimension and you have
a new product

Brand name

Features

Quality
specifications Price
Level of
service

Packaging
Technology


Slide 12.14

What is ‘newness’
• Changing then performance capabilities of the
product (new improved washing detergent)
• Changed features and quality
• Changes to the ‘augumented product’
• Changed image eg green image
• Changed price

• Newness is relative


15

Classification of new products

• New to the world products
•First of a kind
•Create a new market
•Significant development in technology
•Use of existing technology in a different way
•Sony walkman
•3M post-it
•

Source: Booz, Allen & Hamilton, 1982Fa


Slide 12.16

Classification of new products
• "New to the firm" products
– Opportunity to enter established market
– Eg Nokia and Motorola were followed by
many others in the mobile phone market
• Product line additions

• Product improvements (revisions)
• Repositionings (eg aspirin)


17

Some explanations for high failure rates

• Market too small
• Poor match for company
• Not new or different
• Poor positioning or misunderstanding of customer
needs
• Inadequate support from channel
• Competitive response
• Changes in consumer taste
• Changes in wider environment
• Insufficient return of investment
• Internal organisational problems


Slide 12.18

Macro considerations in new product
development
• Shortage of important new product ideas
• Fragmented markets
• Social and governmental constraints
• Costliness of the new product development
process
• Capital shortage
• Shortened time span to completion
• Shorter life spans for successful products

Source: Kotler, 2000


19

Organisational activities involved in NPD

• Generation of new product concepts
• Idea screening
• Concept testing
• Prototype development
• Test marketing
• National marketing


Slide 12.20

Functional-based NPD
„over-the wall‟ model

New
product
project

Engineering
department Marketing
department


21

‘Over-the-wall’ model
• Each department would carry out their task
and then pass the project to the next
department
• Can hinder progress and will require
reworking
• Control of project is passed on
• Communication likely to be a problem
• Coordination a big problem


Slide 12.22

Activity-stage model
• Focuses on the project as a whole
• Moves from functional orientation to project
orientation
• Based on project teams
• Easy to identify who is responsible
• Stage-gate process – introduces management
approval to proceed. This can prematurely stop
progress.


23

Simultaneous NPD

per cent of activity per cent of activity
100 100
commercialisation
technical
development
concept
generation

strategic
planning

0
duration of product innovation process end

Source: Crawford, 2000


Slide 12.24

NPD as a network of interactions

External inputs:
External inputs: competitors;
Marketing and sales Finance suppliers;
societal needs;
competitors; distributors;
supplier partnerships; customers.
distributors;
customers;
strategic alliances.

Accumulation of
knowledge
External inputs: External inputs:
over time
competitors; scientific and
suppliers; technological
distributors; Engineering and Research and developments;
customers; manufacturing development competitors;
university departments. suppliers;
customers;
university departments.


25

Innovation management framework
EXTERNAL INPUTS:
macro factors;
competition; profit;
growth; diversification; etc.

Organisation and
business strategy

Organisation‟s
knowledge base
accumulates
knowledge
over
EXTERNAL INPUTS: time
scientific and technological EXTERNAL INPUTS:
development; societal needs;
competitors; competitors;
suppliers; supplier partnerships;
customers; distributors;
university departments. customers;
strategic alliances.
Source: Trott, 1998


Slide 12.26

References

Trott P (2005) Innovation management &
New product development, Prentice hall, 3rd ed., London.

Baker M and Hart S (1989) Product strategy and management,
Harlow, Prentice Hall.

Deschamps J P and Nayak P R (1993) Lessons from product
juggernaughts, PRISM, Second Quarter.

Wheelwright S C and Clark K B (1992) Revolutionising Product
Development. New York: The Free Press.


27

Chapter 13

Packaging and product
development


Slide 12.28

Packaging

1. Introduction
2. Basic principles of packaging
3. Characteristics of packaging
4. Product rejuvenation
5. New product opportunities through packaging
6. Packaging systems
7. Retailer acceptance
8. Summary and recap


29

Maintaining brand leadership through packaging
developments, while the product remains unchanged
Brand Position Position
in 1935 in 2002

Bird‟s Custard 1 1

Heinz Soup 1 1

Kellogg‟s Cornflakes 1 1

McVitie's Digestives 1 1

Cadbury‟s Dairy Milk Chocolate 1 1

Schweppes Mixers 1 1

Kodak Film 1 1


Slide 12.30

The basic principles of packaging

Protection (inc. tamper proof)
and transportation

At optimal
overall cost

Identification Containment and
and labelling use of product


31

Characteristics of packaging
Fmcg packaging purpose and development considerations

Package purpose Development considerations

Dispense Access; portion control, e.g. built in measure;
pouring

Storage Stackability, location: refrigerator, bathroom,
kitchen

Stability Storage life, especially after opening

Handling Ease of use for intended purpose

Opening/resealing Appropriate to task, i.e. frequency of use

After use Secondary use (e.g. as storage container)

Disposal Ease of disposal


Slide 12.32

Product rejuvenation
Increasing number of competitive products leading to over
capacity and intensive competition:

• market leaders under pressure from smaller companies;
• strong increase in R&D to find better versions of the
product;
• cost economies used up;
• decline in product distinctiveness;
• dealer apathy and disenchantment with a product with
declining sales;
• changing market composition where the loyalty of those
first to adopt begins to waver.


33

We need a bottle for our pills.
What can you do?
Clic reversible cap child-resistant vials (very small
medicine bottle);
Clear-Vu Screw-Loc child-resistant vials;
Clear-Vu PET plastic graduated oval bottles;
ointment jars, dropper bottles, amber glass oval
bottles;
amber glass pill vials and square jars;
child-resistant and regular continuous thread closures;
HDPE wide-mouth pharmaceutical rounds;
Sani-Glas graduated flint glass oval bottles;
plus many more . . .


Slide 12.34

New product opportunities through packaging
A wide variety of packaging systems are used for soft drinks
Packaging system Benefits and limitations

Glass bottle Indicated high quality, can be clear or
coloured; not suitable for children‟s drinks;
rigid structure for graphics; recyclable.
PET (polyethylene terephthalate) bottle Can be clear or coloured; resealable, suitable
for carbonated soft drinks; unbreakable,
recyclable, rigid structure for graphics.

PVC (polyvinyl chloride) bottle More opaque than PET; less rigid; can have a
handle incorporated; cheap; unbreakable.

Aluminium can Particularly suitable for carbonated soft drinks;
unresealable; effective structure for graphics;
recyclable.
Steel-mix can Particularly suitable for carbonated soft drinks;
unresealable; effective structure for graphics;
recyclable; cheaper than aluminium.

Tetra-pack carton Ideal for children‟s drinks; variety of pack
sizes; cheap; unresealable; appropriate for
long-life drinks; recyclable.


35

New product opportunities through packaging
Product and pack size variation
Consider:
• weight and ease of carrying home;
• storage space within the home;
• product usage versus shelf life;
• capital outlay;
• ease of dispensing product from large container.

E.g., Dulux emulsion paint.


Slide 12.36

Packaging systems
Packaging system Product example Key attributes

Steel and aluminium tins Carbonated soft drink Unresealable (single serve); effective structure
and cans for graphics; recyclable.

Folding cartons Frozen cheesecakes, cereal boxes, Versatile; final shape often a box, but features
easter eggs such as handles can be added; cardboard
engineering and new coatings provide additional
opportunities.
Rigid boxes Polystyrene boxes for chicken pieces Still used for premium products; stackability;
and minced beef separate lid.

Hanging-pack formats: Popular within the DIY market Inexpensive; ideal for small, low-cost items.

Blister packs Children‟s small toys, batteries Versatile blister from PVC usually mounted onto
a backing card.

Skin packs Often used in promotions to put two Versatile blister from PVC, similar to above
products together, e.g. jar of coffee and without the backing card mount; forms a
a packet of biscuits “covering skin” around the product.

Cartons Small cartons of DIY products such as All advantages of cartons plus ability to hang.
screws, nails, etc.

Flowraps Chocolate bars Inexpensive, good graphics available; variety of
films available.


37

Packaging systems (Continued)
Glass bottles and jars Premium products; wine; baby Traditional, facilitates tamper proofing.
food

PVC bottles and jars Personal care products; More opaque than PET; less rigid; can
carbonated drinks have a handle incorporated; cheap;
unbreakable.

PET bottles and jars Premium personal care Can be clear or coloured; resealable;
products; carbonated drinks unbreakable; recyclable; rigid structure
for graphics.

Flexible tubes Toothpaste, pharmaceutical Convenience of application;
creams resealability.

Thermoform/fill/seal Yoghurt pots; pharmaceutical Simple; facilitates in-house packaging;
products cost-effective.

Composite containers Pringles A spirally wound paper based tube with
plastic end caps.

Bags Potato chips; rice; sugar; Wide variety of finished products
fertilizer; retailer carrier-bags. available from high-quality paper
carrier-bar with rope handle to thin
polyethylene carrier-bag.


Slide 12.38

Retailers want

• to stock only product lines that sell;

• to reduce quantity purchased;

• to stock goods that produce high levels of profit.


39

Ten of the most irritable packages
Product package Problem/difficulty

1 4-pint milk plastic containers Leakage

2 Single portion vacuum formed cup for milk Difficult to open

3 Biscuit wraps Difficult to open

4 Frozen vegetables in bags Cannot reseal

5 Sugar, flour and rice bags Cannot be resealed

6 Audio cassettes that are tightly shrink Difficult to open
wrapped
7 Vacuum packed roasted coffee Difficult to open and to
dispense
8 McDonald‟s Happy Meals Excessive packaging

9 Pickled onions in glass jar Difficult to remove screw-top lid

10 Toothpaste tube Excessive waste; unable to
access all the contents.


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