Thursday, May 22, 2014

The NPD Process - It's a Stage-Gate Thing

“The best performing companies’ new product development (NPD) revenues range from 20%-50% of total revenues and more for profit.” – NP Learning, LLC

Do I have your attention?

First a quick explanation of “stage-gate process”. The stages are the periods during which the actual work takes place and should include specific milestones. The gates occur between the stages and are the decision-making points. Common gate criteria include:

  • Strategy fit
  • Defined market need
  • Market attractiveness
  • Project feasibility
  • Product advantage
  • HES considerations
  • Risk-Reward analysis
  • Determination of any show stoppers or "killer" variables
  • Ability to leverage resources
  • Appropriateness of action plan

Generic Gating Process. Illustration provided by Global NP Solutions.

The best firms are significantly more likely to use a structured new development process and innovation strategy to guide their new product development than the rest. What does that mean? It means that you are more likely to be productive and successful if you include the following six steps in your new product development and more likely to fail if you don’t. PDMA’s 2003 best practices study showed that 69% of the “best” firms report using a formal, cross-functional process for NPD. They were also seeing a significant decrease in time to market, especially for New-to-the World products, which went from 3.5 years to 2.

Stage 1: Opportunity Identification

This is when you identify potential markets, technologies and products that fit the organization’s strategy. The organization links the market and business strategic plans with the potential new product.
Key ActivitiesKey Deliverables
  • Strategy fit
  • Market attractiveness
  • Technical feasibility
  • "Killer" variables
  • Product Innovation Charter
  • Market opportunity assessment map
  • Product roadmap

Stage 2: Concept Generation

Activities focus on generating product ideas or concept that will meet the market needs found in Stage 1. No idea or concept is too outlandish at this stage.
Key ActivitiesKey Deliverables
  • Problem-based ideation (brainstorming)
  • Pursuing inside sources
  • Pursuing outside sources
  • Preliminary technical assessment
  • Preliminary market assessment
  • Product concept statement
  • Preliminary business case

Stage 3: Concept Evaluation

At this point, you should be evaluating the concepts generated in stage 2 and select the most attractive of them for further development.
Key ActivitiesKey Deliverables
  • Market requirements
  • Concept testing
  • Define product attributes
  • Sales forecasting and financial analysis
  • Capital requirements
  • Quality function deployment
  • Product protocol
  • Business case
  • Project and resource plan

Stage 4: Development

Development of the new product is finalized and the product is manufactured. This should involve multiple personnel across several divisions. This stage may require investment for new facilities to produce the new product. Stage 4 is normally lengthier and more costly than the other stages.
Key ActivitiesKey Deliverables
  • Develop prototypes
  • Product use testing
  • Strategic launch planning
  • Production planning
  • Regulatory/legal issues
  • Design for excellence (DFX)
  • Proven product prototype
  • Updated business case with a high degree of accuracy (within 5%-10%

Stage 5: Launch

This is, for many, the most exciting stage of the process since the new product is being commercialized. This stage involves everything necessary to launch the new product. Key activities are oriented around the launch and ensuring appropriate inventory exists for the new product as it goes into full sale.
Key ActivitiesKey Deliverables
  • Implement the strategic launch plan
  • Launch management
  • Implement operations and ramp up to full-scale production
  • Transfer the product to mainstream
  • Commercialization
  • New product introduction

Stage 6: Life Cycle Management

This stage involves monitoring the product for success in the marketplace and making any necessary adjustments to it in the event it is not performing as expected. This stage is the one most likely to be skipped in the NPD process.
Key ActivitiesKey Deliverables
  • Monitor the new product
  • Make refinements
  • Augment the product to create a new product line if needed
  • Exit strategy
  • Real-time metrics

Summary

Following a structured NPD process can improve time-to-market, decrease costs by allowing for the killing off of unfeasible products earlier on in the process, improve IRR and ROI and improve communication across all functional areas resulting in superior products that better meet customer needs. In the end, the question isn’t “Why use an NPD Process?” but rather “Why not use an NPD process?”