3 Steps to Successful New Product Development
Most successful manufacturing companies continually release a stream of new products. These new products are an essential key to growth and future revenue sources. A void of something which attracts new customers and provides a reason to retain past customers can spell doom for an enterprise. Hence, a robust, speedy and reliable new product development (NPD) process is the lifeline of these companies. Consider these three factors in your New Product Development planning and execution.
Profitable New Products
There are several dimensions to a successful NPD deployment. Of course, while the classic “4 Ps” (Product, Price, Promotion, and Place) of Marketing remain requirements, there are a couple of others to consider. First, “Profit” should be monitored as Price does not always equate to profitability! As product development progresses, both development and production costs evolve. If at some point the latter exceeds the market’s acceptable price or results in an unacceptable margin, the product will not be successful.
The other is the significance of “time to market.” The most wonderful product if offered too late may have already lost mindshare and loyalty; worse, there could be a significant opportunity cost if release and market acceptance are delayed. Returns on Investment (ROI) are calculated with the time value of money in mind; as time progresses the calculated ROI becomes less if all other factors are maintained constant. These concepts will be explored further in future columns.
Strong Return on Investment
Regarding ROI, it must be monitored and objectively evaluated throughout the process. Many companies feel that either: a) there is an inherent commitment and loyalty to the product’s launch due to many factors (which can include personal or organizational pride); or, b) the project is deemed “too big to fail.” The latter refers to product development efforts that become money pits and individuals and organizations feel that they have to complete what they started due to the sunk costs. One of the prime tenets of Project Management methodology reminds us that sunk costs should NEVER be considered when making a decision to continue or terminate a project. Those costs are in the past and cannot be easily recovered. However, if the incremental estimate to complete the project results in a poor ROI, then cancellation of the project must be considered.
Take control of your NPD Process
So where do you start? A great place to begin is to understand your current NPD processes. It is important to have a full understanding of your business and new product development requirements. Our next blog will cover these elements but in the meantime, here is a link to an article to help you Stay Competitive through Strong Project Management in your NPD process. Look for how we can help YOUR new product development effort be more successful and what techniques to deploy to assure that success.