PRODUCT DESIGN AND DEVELOPMENT

PRODUCT DESIGN AND DEVELOPMENT

15.823 SPRING 2001GLEN L. URBAN

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OUTLINE

• NEW PRODUCT DEVELOPMENT PROCESS• REALLY NEW PRODUCTS --INFORMATION

ACCELERATION• “LISTENING IN” -- Advisor/Virtual Engineer • IMPLICATIONS FOR INTERNET

– TESTING CONVENTIONAL PRODUCTS ON THE INTERNET

– DESIGNING INTERNET PRODUCTS

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FAILURE

• WHAT IS FAILURE RATE OF PRODUCTS INTRODUCED TO THE MARKET?

• WHY FAIL?• IMPLICATIONS FOR INTERNET

STARTUPS?

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SUCCESS OF COMMERCIALIZED NEW PRODUCTS

Unsuccesful33%

1976 - 1981

Unsuccesful33%

1963 - 1968

Successful Met CompanyCriteria65%

Successful Met CompanyCriteria65%

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ANA - 1984

•138 Member Firms

•43 of 100 Top Advertisers

•74% Packaged Goods

•12% Durables

•12% Industrial

•9% Services

• Line Extensions 27%

• New Brand/Existing Category 31%

• New Brand/New Category 60%

FAILURE RATE(Not Meet Business Objectives)

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1990’s(Cooper and Kleinschmidt 1994

• 203 Industrial New Products -- 50% Fail

• 103 Chemicals -- 35% Fail

(21 Firms in N. A./Europe)

Market Success

• Superior Product (Unique, Value, Quality,

Physical Benefits, Visible)

• Market Driven (Market Study, Customer Tests)

• Up Front Homework/Product Definition

• Cross functional Team/Strong Leader

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Causes of Failure• Market Too Small• Not New/Not Different• Poor Positioning• Forecasting Error• Competitive Response• Change in Customer Tastes• Poor Repeat/Diffusion• Low ROI• Organizational Problems

• Poor Match for Company• No Real User Benefit• Little Channel Support• Poor Timing• Shift in Technology• Change in Environment• Poor Service• Lack of Coordination• Poor Quality

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PERCENT TRANSITION IN STAGES

1968 1981Idea Generation and Screening toBusiness Analysis

21.3 67.7

Business Analysis to Development 55.9 71.2*Development to Testing 37.8 80.0Testing to Commercialize 62.2 70.2Commercialized to Success 60.7 65.3

*i.e. 71.2% of the ideas to enter Business Analysis pass criteria to enter Development phase.Source: Elrod/Booz, Allen, and Hamilton

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INTERNET STARTUP• WHAT IS CHANCE OF SUCCESS?

– IDEA– BUSINESS PLAN– LAUNCH– IPO

• HOW TO MAXIMIZE SUCCESS?– RESEARCH– TIMING

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NEW

MARKET

EXISTING

NEWEXISTING

PRODUCTS

NEW PRODUCT ARENASNewProd01

STATE OF THE ART

• PROCESS ENHANCEMENTS• INFORMATION ACCELERATION• LISTENING IN• IMPLICATIONS FOR INTERNET

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Proven Methods

DESIGN

PRE-MARKET TESTING

TEST-MARKET

LAUNCH AND LIFE CYCLE MANAGEMENT

OPPORTUNITY IDENTIFICATION

•Customer Active Paradigm•Focus Groups / Voice of Customer•Order of Entry

•Multi-Dimensional Scaling/Conjoint•QFD•Lead Users

•Concept/Product Testing•Laboratory Test-marketing•Information Acceleration

•Stochastic Models•Electronic Measurement

•Life Cycle Modeling•Scanner Data/Brand Management/D.S.S.

New Product Process and Proven Marketing MethodsNewProd01

ENHANCEMENT

OPPORTUNITY IDENTIFICATION

DESIGN

TESTING

INTRODUCTION

INNOVATION AND BUSINESS STRATEGY

•Proactive Budgeting -- 25%•Technology/Customer/Production/Engineering•Organization -- Large Scale to Start Up

•“Really New” -- Create Markets•Needs vs. Desire•Global Team -- 24 Hour work Day

•CBP Specs Design Sophistication•Virtual Prototyping•Platforms and Architecture -- Process Intensive

•Premarket Forecasting -- Risk Management•Virtual Testing•Model Response - Specs -- Cost

•Marketing world-wide•Channel Power/Remote Buying•Little Protection -- Pioneering Benefits

•Elaborate For Segments•Rejuvenation Cycle•Learn from Failure

PROFIT MANAGEMENT

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PRIU

S

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