The 'what' and 'why' of new product development

(The author is a Professor of
Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international
award-winning development and management economist, formerly
a Gold Medalist in Economics at Gauhati University)

''A disciplined and defined set of tasks and steps that describe the normal means by which a company repetitively converts embryonic ideas into saleable products or services." New Product Development (NPD) is perceived as a comprehensive set of multi-disciplinary processes that transform a market opportunity into a marketable new product to satisfy customer requirements. Some authors also call it New Product Introduction (NPI) or new product planning and development, whether it's tangible products such as new smartphones or automobiles to intangible products like new apps or Netflix series. NPD is key to a company's survival, growth and also for differentiating itself from other players who are in the same game. The need for continually refining NPD sources from constantly evolving consumer appetite and buyers behaviour, global competitive forces, the new applications of technology, amongst other factors.

Research shows that only 4 in 7 product ideas enter the product development stage, and 3 products get launched from 14 product ideas with only 1 in 7 product ideas will yield a successful product, Typically, launched products have a failure rate of 25% to 45%. With automation, smart systems, and agile practice at organisations today, companies tend to follow a 'rugby' approach compared to playing a 'relay race' when it comes to NPD. The traditional and sequential approaches to developing new concepts for products and services are no longer effective. The rugby approach, started originally by the US and Japanese companies looked at the NPD in a holistic way where the ball gets continually passed within the team as it moves as a unit up the field.

A) The old and the new – 'Rugby approach'

The old approach moved like a relay race where a project moved sequentially from phase to phase, with one group of functional specialists passing the baton to the next group. The typical stages of NPD are concept development, feasibility testing, product design, development process, pilot production, and final production. Under the rugby approach, the product development process emerges from the constant interconnected interaction of a hand-picked, multidisciplinary team whose members work together from start to finish – instead of the sequential and functional way of moving the project from one phase to the next.

Several studies by Harvard and MIT illustrated that there are certain assumptions when it comes to embracing and practising the rugby approach: a) built-in instability, b) self-organizing project teams, c) overlapping development phases, d) multi-learning opportunities and tapping into them, e) subtle control, and f) organizational transfer of learning. Together, when they are managed well, it transforms the organisation into a machine that introduces creative, market-driven ideas from an old and conservating setting. To assume that differentiation when it comes to product or service is the key to maintaining competitive advantage, organisations need to be speedy and flexible.

B) Competitive Advantage via New Product Development

Whether it's Netflix, FIFA, Smartphone Apps, Airbnb or Uber, the purpose of ensuring a continual product development process is to generate superior customer value and ensure that the product has a long-life cycle in the market once introduced. While it may be the case that continuous NPD helps some companies maintain their standard pace in the market, it is also a big commitment to maintaining within the constraints of financial and administrative resources available at a given point in time.

Some NPD could be or lead to product innovation that changes the way given industry functions, therefore affecting all other firms in the game. An innovative NPD can set industry standards— these could lead to barriers to entry for new start-ups or even existing players [ what the iPod did to Walkman players, or what Netflix did to Blockbusters ] and open up a new market altogether [ social media ]. Apart from NPD giving new opportunities for firms to explore and navigate new waters, it is also useful for top managers to reorganise and retrain sales force, factory settings, or field service networks.

C) Fast-moving product life cycle for fast fashion firms: An Example

Fashion and fast fashion is a good example of an industry that deliberately, given their nature of business, designs a shorter life cycle for their products [ and hence faster NPD process in action]. The fashion industry is faced with a high seasonal demand, which depends on the seasonal nature of fashion products and runs at least twice every year, one time for each season and with short Time-To-Market (i.e., 15 months in the apparel industry, 12 months in the leather industry). Several product pivots occur, that is supported and enhanced by continuous interactions among designers, stylists and marketing functions.

This does connect with the 'rugby' approach as mentioned earlier in this article. It is common to see that revisions and modifications are still happening when the final product is already on the shelves; this occurs to make some re-arrangements and re-alignments in accordance with customer demand (e.g., change of colours for a model in the clothing sector). In particular, those firms who run an omnichannel (physical store and online store running parallel) are faced with continual revisions all the time.

Two separate studies conducted at the University of Florence (Italy) and University of Manchester (UK), illustrates the process of NPD in the context of the fashion industry, involving the following steps, (i) Design, (ii) Modelling/prototyping (products demonstration at the fashion fairs), (iii) Detailed Engineering, (iv) Material sourcing, and finally (v) Production and distribution.

Let us look at these stages and understand the process and interlinkages between them starting from the 5th stage and going backwards. The production phase usually lasts 3-4 months and starts typically only after when material sourcing is completed. The duration of the sourcing stage may range between 2 weeks – 2.5 months. This heavily depends largely on the duration of the commercial launch, which generally takes place at the same time when fashion week festivals are running. At this stage, naturally, the industry increases its multistakeholder engagement and thereby learns new information which puts instant pressure on the NPD process. At an early sourcing phase, a provisional order of raw material is submitted to the suppliers, while confirmation of the raw material quantity is given at the end of this phase, with a maximum gap of 20-30% from the provisional phase. During this short period, as soon as the number of sold units is known for the current season, the company then gets to decide which selected product lines will go ahead and which ones to discard/ archive. This helps in confirming the final quantity to be ordered.

The engineering phase also runs parallel to the 4th stage: e.g., the generation of the final Bill of Material (BOM) takes place after orders are placed. Once the company's decision is made (i.e., which product lines to go with), the creation of the BOM and the raw material purchase orders is confirmed. In some companies, the engineering phase is completed for all the products before the beginning of the fashion fairs which allows quick/ agile management of the sourcing and design activities, since only a small percentage of all the items are presented at the fashion shows.

In lieu of conclusion

Change is hard, adaptation is difficult, managing chaos can be both art and science. Firms do not do well with change, especially if it isn't during a crisis period. Having a rugby approach, however, keep the balls rolling ceaselessly so as to ensure there is a constant page at which cross-functional teams, management groups, and supplier network can create a sense of urgency throughout the organisation. While having the foresight and a strategic plan is necessary, introducing changes in phases especially if the firm has a centralised structure is of utmost importance. Although earlier in the article, we learned that US and Japanese firms took the lead with the rugby approach in different sectors – the management style, the approach to team and stakeholder management are drastically different in these two countries. Similarly, when we adopt this approach in other contexts and countries, it can be said that although the fundamental steps are involved in the rugby method there can be firm-specific and market-specific configurations required to be made. Above all, maintaining the core team and building organisational knowledge from experience (in years and lessons) in the industry is crucial for maintaining an efficient NPD model.