New Product Management
The proliferation of new products on the market today means that most organizations need to be involved in new product development in order to stay competitive. This requires the application of systematic methods to all processes from conceptualization through marketing. Management of new product development efforts, however, can be more difficult than the management of established product lines. To be successful, a new product needs to be managed as if it were an entrepreneurial enterprise. Part of managing a new product development effort is the function of risk management and control. Although some factors in new product development are beyond the control of the manager, many are not. There are a number of tools available to help the new product development manager successfully bring a new product to market.
Keywords Design Review; Innovation; Management; New Product Development; Project Management; Risk Management; Strategy
Marketing: New Product Management
Although occasionally new products just evolve, more often than not they are the product of a coordinated effort by a product development team. These teams work together to bring a new product to the market that will help the organization maintain or gain a competitive edge. New product development is the application of systematic methods to all processes necessary to bring a new product to the marketplace from conceptualization through marketing. New products can be improvements on existing products or total innovations to what currently exists in the marketplace.
Particularly in the growth industry of high technology products; change, innovation, and new product development have become a way of life. As a result, new product development is essential to many industries today. More new products are appearing on the market today than ever before. Today's cutting edge technology frequently becomes tomorrow's distant memory as the proliferation of products on the market continues. This means that for an organization to stay ahead of its competition, it must be on the leading edge of its field. Otherwise, the organization can experience numerous problems that can affect its bottom line including slow or no growth, a decreasing customer base, fewer orders from existing customers, or increasing pressure from the marketplace to lower one's prices. As a result, regular and efficient development and introduction of new products has become a necessity in many industries.
The management of new product development, however, can be more difficult than the management of established product lines due to unpredictability stemming from several sources. First, the new product development process by definition is a creative process and, therefore, unpredictable. Although less so for products that are merely slight modifications and upgrades to current products, the development of new products or innovations requires the solution of new problems and the development of creative design solutions. These processes cannot be regulated in the same way that calibrating a machine can help to keep widgets on a production line within specification. As such, solutions to problems cannot necessarily be scheduled. Similarly, the reaction of the marketplace to a new product cannot be predicted with 100 percent accuracy. What looks good on the engineering drawing board may be largely ignored by the buying public. On the other hand, what seems like a small change to the designer may receive an overwhelming response in the marketplace. Similarly, although the new product may achieve a great initial response, the demand may quickly die down (e.g., if a competitor releases a more popular product or if there was only a limited market and the product is durable). In addition, delays in introducing a new product into the marketplace can also increase the risk of the venture due to the possibility of the competition releasing a similar product before and thereby gaining the competitive edge. There are ways to help both technical and marketing managers with these problems. However, new product development always involves a degree of risk.
To be successful, a new product needs to be managed as if it were an entrepreneurial enterprise - which, indeed, it is. New product development may begin with brainstorming activities or from the idea of a creative observer of a marketplace within the organization. These ideas may come from many sources, including monitoring of market changes and the actions of the competition, merger and acquisition possibilities, research and development, or analysis of market or consumer buying trends. In addition to these inputs, new product development decisions need to consider an economic analysis to determine the risks of the new venture to the organization.
One of the major goals when managing new product development is to reduce risk. Risk is the quantifiable probability that a financial investment's actual return will be lower than expected. Higher risks mean both a greater probability of loss and a possibility of greater return on investment. To be successful, managers of new product development need to manage the risks associated with the new venture. This process includes analyzing the tasks and activities of the project, planning ways to reduce the impact if the predicted normal course of events does not occur, and implementing reporting procedures so that project problems are discovered earlier in the process rather than later. The analysis activity of risk management involves the determination of what factors could cause the project to fail, what the consequences of such failure might be, and how likely failure is to occur. Various formulas are available to help managers make tradeoffs between the risks incurred for various options based on the comparative severity and importance of each risk. For example, if there is a high probability that a given activity in the process is likely to go wrong but it will have little impact on the overall completion of the project, it is probably less important than an activity that has a smaller chance of failing but that would prevent successful completion of the project. Such determinations can be used in the development and implementation of a plan to handle the possibility of failure at any one of these points.
Although some factors in new product development are beyond the control of the manager (e.g., the creative process; actions of the competition), many are not. First, it is important that management develops a team with the appropriate resources and expertise for new product development. Most important to the success of a new product venture is technical personnel with the expertise needed to design, develop, and bring the product to market. Included in the technical team should be personnel who can make technical assessments, design products, and manufacture products. However, although technical expertise and excellence are the sine quibus non of new product development, they alone are not sufficient for success in the marketplace. In addition, the technical team needs to be supported by a marketing support team that can determine how best to position the new product within the marketplace. This team should include personnel who can perform adequate marketing research, sales personnel, and advertising and promotional personnel. The marketing team should collect and analyze data concerning the needs and trends of the marketplace so that the technical team can better design the new product and the marketing team can better position it. This includes information about the wants and needs of potential customers, factors on which potential customers make their buying decisions for this type of product, and the potential customers' buying power. In addition, the marketing team needs to be able to research the competition and their activities, including their strengths, weaknesses, and strategies. This will enable the new product development management team to better craft their own strategy so that they can gain or maintain a competitive advantage.
Project managers are not the only level of management that needs to be involved in new product development. In a study of more than 700 new product development teams, it was found that only seven percent of them became enormous successes. Those that did all had the hands-on involvement of senior-level management (e.g., CEOs, division heads). This involvement was not just perfunctory, however. Senior level management on the most successful projects played a very active role in the development process from the first day of the project. Senior managers on successful new development projects...
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