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CEO Best Practice: New Product Development

Executive Tools

  • Executive Summary
  • Self Assessment Checklist

Expert Practices Articles

  • New Product Development: An Overview
  • Where Do New Ideas Come From?
  • The Voice of the Customer
  • New Product Strategy
  • New Product Development Process
  • New Product Launch
  • The CEO and New Product Development
  • The New Product Development Team
  • New Product Development Mistakes

Case Histories

  • Invest in Market Research Before Launch
  • CEO Should Serve as Coach, Not NPD Lead
  • Conduct an Internal SWOT Analysis
  • Develop a Corporate Culture that Tolerates Mistakes
  • Test Products Based on Customers' Actions, not Words

Tools & Analysis

  • Managing for Innovation
  • New Product Introduction Myths
  • Creating New Products in Professional Service Firms

Book List: New Product Development

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CEO Best Practice: New Product Development

Executive Summary

  • New Product Development: An Overview
  • Where Do New Ideas Come From?
  • The Voice of the Customer
  • New Product Strategy
  • New Product Development Process
  • New Product Launch
  • The CEO and New Product Development
  • The New Product Development Team
  • New Product Development Mistakes

New Product Development: An Overview

Companies most often succeed in new product development when they leverage their own core competencies. There must be strong links between the new product and a company's:

  • Resources
  • Marketing expertise
  • Distribution channels
  • Sales
  • Technology and operations

"Without these core competencies in place, you shouldn't even be contemplating innovation," Webb advises.

Goozé stresses the role of marketing, in particular. Marketing considerations should start when the new product is still on the drawing board, he says. Ask all the basic questions, such as:

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Where Do New Ideas Come From?

To get at the good ideas, a company should strive for an open culture that encourages and rewards innovative thinking. Webb advocates the practice of "idea mining" -- soliciting input from a wide array of sources, including employees, vendors, other stakeholders and, most importantly, your customer base.

Both Vistage experts suggest facilitating greater interaction between representatives of your organization and those customers. This includes your sales force, since they're well-positioned to listen to customers on a regular basis. But, says Goozé, the people behind the scenes -- managers, engineers, etc. -- should be encouraged to get out in the field and talk more often with "real customers."

Webb urges the use of "idea portals" to develop an ongoing flow of ideas within the organization. One example: "poster boarding" in offices, boardrooms, kitchens, where staff can post suggestions and identify areas of additional value to customers. Another vehicle: an online submission process, where new ideas can be posted and reviewed on a regular basis.

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The Voice of the Customer

"The reason so many new products fail in the marketplace is that they don't resonate with customers," Webb says. "If you look closely, you'll find that these manufacturers neglected to incorporate both quantitative and qualitative customer information in the process."

Suggested methods for collecting customer data include:

  • Focus groups
  • Surveys
  • Customer site visits
  • Interviews with distributors and/or retailers

With comprehensive customer research, product designers can better manage the process through a balance of verified customer desires and realistic organizational competencies.

Whether you hire an outside marketing firm or use limited resources to conduct one-on-one customer interviews, these are the types of questions you need answered:

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New Product Strategy

New product strategy relies on exhaustive analysis of the company itself (internal) and the marketplace at large (external). "Do you know the extent of your current product line's strengths and weaknesses?" Goozé asks. "Are you fully apprised of technology needs for this line? Are there gaps or deficiencies that should be addressed before embarking on new product development?"

"Profitability should be assessed at each stage of development, from manufacturing to launch to customer service," Webb says. "This assessment includes calculating fixed and variable costs, expected sales price and anticipated sales volumes. New product development is costly but those costs can be estimated and managed."

Any new product venture must demonstrate a strong link to the company's overall business strategy, according to Goozé and Webb. Within this context, certain goals should be met:

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New Product Development Process

Webb likens the new product development process to the diagnostic medical pathway employed by physicians: "When developing a product, start with the least invasive and least expensive option. Don't design overly complex models and prototypes until the product demonstrates it's worthy of this kind of organizational resource."

The traditional stages of development, broadly defined, include (1) exploration; (2) product description; (3) development; (4) testing; and (5) launch. More specific elements include:

  • Marketing opportunity identification
  • Strategic alignment
  • Concept development or new product idea generation
  • Competitive positioning
  • Resource identification
  • Design-to-cost analysis
  • Manufacturing development
  • Commercialization

A product development process that takes place in phases -- typically called "stage-gate process" -- was originally designed by Dr. Robert G. Cooper in 1986. The stage-gate system defines specific phases and tasks that the cross-functional team must meet and complete in order to move through the product development process.

"A stage-gate system is used, often by larger companies, as a road-map for advancing the process," Goozé says. "Each stage consists of a set of stipulated periods, with an 'entry point' that serves both as quality control and as a checkpoint. If certain criteria haven't been met at the entry to each stage, the process can't go forward."

Multistage systems vary from one company to the next, but they frequently incorporate a template for meticulous reviews at each stage. At each "gate," the project team is charged with reevaluating the product and determining whether it should progress to the next level.

"Stage-gate systems generally benefit companies larger in scale than Vistage-sized companies," Webb observes. "Smaller companies find the process overly bureaucratic and paper-intensive."

Goozé describe a four-step process he calls CARETM (Creating, Advancing, Refining and Execution). In the first phase, the project team generates an unfettered stream of ideas and concepts. "The creating step is characterized by a lack of constraints regarding existing rules or boundaries. Success in this step requires a view of the 'big picture' and a mind open to alternative solutions."

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New Product Launch

Among the key components included in a strong product launch plan:

  • Clearly defined sales objectives
  • Assured sales channel readiness
  • Promotional functions in place (public relations/marketing/advertising)
  • Resources to track, monitor and account for execution

"Launch projects often fail because companies don't manufacture adequate quantities of the new product and make them available to prospective customers," Webb says. He suggests creating a launch team with responsibility for, among other things, ensuring that all levels of the company are prepared to handle demand for the product and to train staff in its use for customer support.

To make sure everyone is working toward the same goal, certain milestones should be established:

  • Have we identified all necessary launch channels?
  • What number of new products do we plan to sell by a specific date?
  • When will the product be ready to launch at a national trade convention?
  • Are sufficient stocking orders placed with key distributors?
  • How can we grow the product into a 5-10 percent market entrenchment by a

"In order to establish the new product's identity in the marketplace, the core message must be repeated over and over again," Goozé notes. This requires consistent positioning within all of the company's marketing communications, including:

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The CEO and New Product Development

"Without a focal point within the organization, it's difficult for a new product to get the level of attention it needs to be successful," Goozé says. "There has to be a product champion who's intimately involved with the process and ready to play a major coordinating role between designers, production and marketing."

Above all, the product champion acts as the voice of your eventual customer.

Webb strongly agrees. "If not the CEO, there should be a person in a senior executive position able to devote the needed time and resources to advocate for the new product development process. This helps ensure that different organizational functions work together towards the same goal and that launch mechanisms and market resources are sufficient to meet long-range objectives."

"A new product venture won't succeed without leadership," Webb asserts. "The leader offers a vision, inspiration and a guiding hand, but it doesn't end there. The leader forges links with eventual suppliers and distributors, and always -- always -- incorporates customer needs and demands into the final product."

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The New Product Development Team

"The key is ensuring that all functions within the organization are well-represented," he says. This includes:

  • Engineering
  • Operations
  • Manufacturing
  • Sales
  • Marketing
  • Finance
  • Customer Service

According to Goozé and Webb, successful new product development teams share these essential components:

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New Product Development Mistakes

"One of the most common errors I see starts with the company's basic attitude," Webb notes. "I call it the 'not-invented-here' mentality. Some businesses seem to feel they're just not geared to come up with new products. That's wrong! Most, if not all companies, need to have a vibrant new product development concept happening today."

Other problems crop up due to poor product definition, says Goozé. These include:

  • Product requirements created with insufficient customer contribution
  • Lack of defined product strategy or plan
  • Failure to define simply and with reliability
  • Inadequate early funding
  • Lack of required equipment and facilities
  • Marketing requirements included too late, after development is in progress
  • "Project creep" (constantly changing product specifications requiring constant alterations in design)

Many of the problems connected to new product failure are linked to poor up-front preparation, Goozé notes.

"A surprising number of new products move from idea to development without doing the right homework beforehand," he says. The "right homework" includes:

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