lecture 1: new product introduction lecture outline importance of new product development new...
TRANSCRIPT
Lecture 1:
New Product Introduction
LECTURE OUTLINE• Importance of New Product Development• New Product Classification• Why New Products Fail• New Product Development Process• Economics of New Product Development• Idea Generation
New Products
26%
20% 10%
26%
11% 7%
New to the world products
Addition toexisting productline
Revisions/improvements to existing products
RepositioningsCost reductions
New productlines
New
to
the
com
pan
y
New to the market
LOW
HIGH
HIGH
What It Takes to Launch One What It Takes to Launch One “Commercially Successful” New Product“Commercially Successful” New Product
3,000
300
200
100
0“Raw”
unwritten ideas
Ideassubmittedto firm’spatent
department
“Small” projects
“Significant” developments
“Major”developments
Commercial “productlaunches”
“Commerciallysuccessful”
new product
3,000
300
125
9 4 1.7 1
Time
Nu
mb
er o
f id
eas,
pro
ject
s, a
nd
p
rod
uct
s
About 80% of New Products Fail
Reasons New Products Fail
• too small a target market or market size overestimated
• Hasty introduction without adequate information
• poor product quality
• bad timing
• bad execution of the marketing mix
New Products from SonyNew Products from Sony
1950s 1960s 1970s 1980s 1990s 2000s
2000s:•MD Walkman•Cyber Shot•DVD Handycam
1995: PlayStation video-game system captures 80% of U.S. 32-bit market.
1985: 8mm Handycam arrives.
1979: Walkman revolutionizes personal stereo tape players.
1982: Compact- disc player becomes first digital consumer electronics product
1975: Betamax VCR has initial success but loses out to better-marketed VHS VCRs.
1968: Its Trinitron TV becomes and remains the standard for color TV quality.
1955: First Japanese transistor radio starts its record of successes.
1946: Sony founded in bombed-out store. Its rice cooker never gets to market.
Why new product development canWhy new product development canbe a dice roll: some forecastsbe a dice roll: some forecasts
• “I think there is a world market for maybe five computers.”
Thomas Watsonchairman of IBM, 1943
• “The radio craze will die out in time.”Thomas Edison, 1922
• “There is no reason anyone would want a computer in their home.”
Ken Olsonchairman and founder
of Digital Equipment Corp., 1977
• “Video won’t be around more than six months; people will soon get tired of staring at a plywood box.”
Daryl F. Zanuckpresident of 20th Century Fox, 1946
New Product Development Process
IdeaIdeaGenerationGeneration
ConceptConceptDevelopmentDevelopmentand Testingand Testing
MarketingMarketingStrategyStrategy
DevelopmentDevelopment
IdeaIdeaScreeningScreening
BusinessBusinessAnalysisAnalysis
ProductProductDevelopmentDevelopment
MarketMarketTestingTesting
CommercializationCommercialization
Estimated Typical Costs of Developing Major New Products
Opportunity identification 200 100 – 500 100 50 – 200
Design 400 200 – 1,500 1,200 500 – 5,000
Testing 2,000 1,000 – 6,000 600 300 – 3,000
TOTAL DEVELOPMENT 2,600 1,300 – 8,000 1,900 850 – 8,200
Introduction 10,000 5,000 – 20,000 2,500 1,000 – 10,000
TOTAL INVESTMENT 12,600 6,300 – 28,000 4,400 1,850 – 18,200
Typical Range Typical Range
Costs for Consumer Costs for IndustrialProducts ($000’s) Products ($000’s)
Estimated Time Required for DevelopmentOf New consumer Products
Opportunity identification 5 4 – 8
Design 6 2 – 15
Testing
Pretest market 3 2 – 5
Test market 9 6 – 12
Introduction setup 4 2 – 6
TOTAL TIME 27 16 – 46
AverageTime Span Range for Majority(Months) of Products
Cross-Functional Integration
R&Dengineering
Marketing
Finance
ProductionInventory
Sales Forecast
Budgets
Fund requests
Budgets
Fund requests
Bud
gets
Fun
d r e
ques
t s
Customer n
eeds
Product desig
n
Design for manufacturing
Process needs
Idea Generation - SourcesIdea Generation - Sources
• Employees/Managers
• Customers/Lead Users
• Competitors
• Distribution / Suppliers
• Other sources – technology, legal environment
Idea Generation - MethodsIdea Generation - Methods
• Formal ideal generation – e.g., forms, survey
• Brainstorming
• Focus groups
• Lead user analysis
• Other creative ways