New Product Development: an Overview

 Supporting Innovation
 Defining Goals
 Success Factors
 Additional Resources

Supporting Innovation

Among the many challenges businesses face, perhaps none is as crucial as the
mandate to change and grow. If companies stay still, they die. One area where
many companies attempt to change -- and all too often fail -- is new product
development.

Why do these ventures fail? Many businesses either expend too much energy
generating a variety of new products (without necessary forethought, screening or
testing) or too little energy (preferring to "stay the course" with their existing
product line).

"Slow and plodding doesn't get the job done," Goozé says. "Without innovation,
businesses fall prey to aggressive competitors, which in turn leads to waves of
customer defections when someone else's product outstrips theirs."

Of course, no one says product innovation is easy. According to studies, three out
of four new product ventures fail in the marketplace; a sizeable fraction of these
new products don't even make it to market.
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,"

The good news is, businesses can design internal roles and structures to support
new product development. Start by recognizing that the process essentially touches
on everything your business does.

"Innovation stimulates the company from top to bottom,".

"As new products progress from idea to reality, all functions become involved --
from manufacturing, supply chain and distribution to marketing and customer
service. The process requires the company's executives to think long and hard
about the changing needs of their customer base, as well as the threats -- real and
imaginary -- posed by the competition."
Marketing considerations should start when the new product is still on the drawing
board, he says. Ask all the basic questions, such as:

 Who is this new product for?

 How will it be used?
 How does it fit into our current line and how will it affect our future
products?

"Market research, whether conducted in-house or through an outside agency, is the

first essential step toward building a welcome response to your new product in the
marketplace."

Webb urges companies to search exhaustively for the right product advantage.
"Early on, identify precisely what your customers want and need," he says. "Use
customer-focused research to guide the process. Use that same research to pinpoint
what works and what doesn't in your competitor's offerings. When you get to the
prototype stage, go to customers and test, test, test."

Defining Goals

So you're considering adding a new product to your line. Have you looked at the
process (and proposed outcome) from a strategic perspective? Do you have clear
and measurable long-term goals?

"Without measurable goals, you have no benchmarks to track performance," Goozé

notes. "It's equally important to determine how the new product is linked to your
overall goals and strategy. The fit has to be right, or you risk substantial losses."

Innovation doesn't occur in a void. It must be tied to ongoing business priorities.

Other attributes of clearly-defined new product goals:

 Guides selection of development projects

 Defines target markets, competitive strengths and weaknesses, and angle of
attack in the marketplace
 Differentiates your new offering from the competition
 Offers staff a sense of direction and purpose

"Established goals help determine a schedule for completion of projects,"

"They're also essential in estimating development costs and resource requirements,

within the context of your larger business plan."

Success Factors

A wide range of factors goes into the successful development and launch of a new
product, but the leading factor, according to Goozé and Webb, is differentiation. A
product that genuinely sets itself apart from others succeeds by capturing larger
market share and meeting other long-range sales objectives.

This may seem obvious -- but if so, why are there so many "me too" products
floundering in the marketplace?

Goozé says: "There's nothing inherently wrong with being an imitator, if you can
bring something unique to the next stage of a new product's lifecycle. For an
imitation strategy to work, you have to have an advantage over the pioneer's initial
effort. You have to capitalize on something the pioneer missed."

What might that be? "The originators of a new product might have had difficulty
keeping costs under control, or they may have missed certain features and benefits
that would generate value for customers. In either case, successful imitators find a
way to offer the same value for less money, or more value for the same amount of
money." Goozé calls this "imitation-plus."

Other critical success factors:

 A steady stream of ideas

 Leaders who understand and encourage risk-taking
 Cross-functional project team
 Sufficient flow of resources from key functions
 Formal prioritizing of projects

Ultimately, Webb notes, a company's culture must reflect a dedicated commitment

to new product development. "There should be a common language and framework
for product initiatives. The project team should be able to access a comprehensive
database of ideas and customer research. People throughout the organization
should be encouraged and rewarded for coming up with new, profit-making ideas.
Everyone is in it together."
Where do New Ideas come from?

 "The Thinking Power of an Army"

 Idea Screening
 Additional Resources

"The Thinking Power of an Army"

"What are your constraints to getting new things done?" he says the answer never
is: "Lack of ideas." In truth, ideas are plentiful -- good ideas are fewer and farther
between.

To get at the good ideas, says fellow , 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.
(See "The Voice of the Customer" in Additional Resources below.)

"The best ideas come from the people who use your existing product," he says.

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.

"In the right atmosphere, idea mining can unleash the thinking power of an army,"
he says.

Idea Screening

With the right environment in place and a steady flow of potentially profitable
ideas, what then? Without direction and discipline, businesses squander vast
amounts of time and money chasing after new product ideas, only to find in the
end that they lack certain critical ingredients, such as:

 Viable integration with existing product lines

 Realistic product service requirements
 Adequate supply chain management
 Sufficient distribution capacities

"With all the ideas pouring in, you have to design evaluation filters to screen the
good from the bad," He suggests a model called a "success triangle" (customer
need + problem + opportunity) as a quick, easy-to-use evaluation tool for assessing
the feasibility of a new idea.

"Can you make this new product in an affordable way?" he asks. "Will the
customer be willing to pay a certain price for it? You can evaluate most ideas in
this way, without going to great expense to determine an idea's validity."

Most multi-million dollar projects, he contends, could be evaluated on the back of

a cocktail napkin.
Other criteria to consider when analyzing the potential merit of a new product idea:

 What is the necessary investment?

 What is our present and potential competition?
 What is the new product's projected sales volume?
 What is its projected ROI?

Above all, says Goozé, make sure the proposed idea remains consistent with your
company's resources and objectives. If it lacks clearly defined ties to the
organization's infrastructure -- and can't be produced and serviced in sufficient
quantities -- it probably won't fly.

The Voice of the Customer

 Hearing the Voice

 What does the Customer Want?
 Additional Resources

Hearing the Voice

It's virtually impossible to over-emphasize the importance of the voice of the

customer.

"This principle starts as early as the idea generation phase,". "Whether you employ
surveys or conduct focus groups with documented lead-users, customers offer
valuable input throughout the early stages, as well as during successive phases of
development."

"The reason so many new products fail in the marketplace is that they don't
resonate with customers. 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.

What does the Customer Want?

Sometimes companies mistakenly conduct interviews with the intention of

gathering new customers for existing products.

"If the goal is new product development, you shouldn't be sending researchers into
the field to debate price or performance," Goozé says. "This should instead be a
time for rigorous listening. Ask open-ended questions that are designed to reveal
genuine needs and feelings among your customers. And then listen to the answers."

Ideally, a cross-functional product development team -- including representatives

from manufacturing, engineering, operations, marketing, etc. -- should conduct
these interviews. This way, critical functional areas arrive at a keener
understanding of what the end-user needs and the environment in which they
would use the intended product.
Of course, not all companies can afford to do this. So 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:

 Who are our customers?

 What is their problem or need?
 How will the proposed new product answer that need or solve that problem?
 Does the new product offer advantages over what the competition has?
 What factors will go into the customer's decision to purchase the new
product?

Webb also advises soliciting opinions beyond your existing customer base. "What
about people who use your competitor's products? What about lost accounts? What
about potential customers? If you can find a way to reach these people, you'll
significantly broaden the scope of information collected -- with the result being a
greater understanding of how to meet customer demand for value, reliability and
distinctive performance."
New Product Strategy

 A Climate of Innovation
 Know What You're Going For
 Speed!
 Additional Resources

A Climate of Innovation

New product development doesn't occur in a vacuum. In companies with a

successful track record of innovation, senior management understands that the
process involves a complex set of activities that cuts across most -- if not all --
business functions.

"Start with an in-depth analysis of current marketplace conditions and move on

from there to specific goals,". The analysis includes:

 Rigorous conceptual design

 Target market research
 Desired performance levels
 Investment requirements
 Projected financial impact

Other important considerations: how does the proposed new product screen against
your current marketing strategies? Will it dilute the focus of the company's overall
plan? Is there a danger that it will drain valuable resources from other more
profitable ventures?
"Use your existing market strategy as a guideline," Webb advises. "Know how
your target buyers will greet the proposed new product. Make sure it fits into your
company mission."

New product development should take place within an ongoing "climate of

innovation." For this to happen, everyone from the CEO on down should agree on
specific principles, including:

 We will honor idea generation whether the idea works or doesn't.

 We will learn from failure.
 We will encourage creativity skills among all staff.
 We're committed to getting the best ideas from employees and customers.

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?". "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?"

You should know your competitors, too. When it comes to product design,
production engineering, marketing and finance, what are their strengths and
weaknesses?

And, of course, the bottom-line strategic concern: profitability.

"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."
Know What You're Going For

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

 Cost -- Estimate the manufacturing cost of the proposed new product

(including capital equipment, tooling and the incremental cost of producing
each unit).
 Development time -- Set a timeframe for the product development effort,
based on how responsive the team can be to external forces and
technological developments.
 Quality -- The new product must satisfy customer demand. Its quality will
eventually determine market share, as well as the price customers are willing
to pay for it.

"Be sure to allocate sufficient marketing resources when laying out your goals,"
"This includes resources for advertising, public relations and promotion. What
sense is there in launching a new product without being able to spread the word
about it?"

Another helpful internal goal: employee training. Staff members need to be

educated on how to use and promote the new product. It's also a good idea to plan
for customer training -- in order to enhance potential for user satisfaction and as
another potential source of income. Customers are often willing to pay a little extra
to get more from a new (or improved) product.

Speed!
"Speed in product development is a distinct competitive advantage," Webb says,
"but use caution. Speed in development should never come at the expense of
quality."

The advantages are clear-cut: responding to customer needs and beating

competitors to market often result in success, particularly in higher profitability.
Bear in mind that all products have a limited lifecycle, so getting to market first
generally means sale revenues will be realized earlier and will last longer than
imitation or "me, too" products.

"Speedy development and launch also increase the odds that the original
conception is still in sync with customers' predicted need,". "A short time frame
makes it more likely that market conditions will be favorable for the eventual
launch."

Both TEC experts warn, however, that speed in and of itself is no guarantor of
success. Many methods involved in getting to market ahead of others can actually
end up costing more money. Reducing product testing time could result in product
performance problems later on, including added warranty and servicing costs --
and that can translate into customer dissatisfaction, a major negative.

"Speed-to-market works best if you're ready to sell effectively,". "That means

when all functions -- engineering, sales, channel partners, customer support -- are
prepared to go."
To further improve the chances of success, Webb advises:

 Do your homework. Start the process with clear-cut specifications.

 Have the right team in place. Any sincere new product venture must have
a dedicated project leader and multifunctional team in place at the outset.

New Product Development: Process

 Stage Systems
 The CARETM Process
 Description and Testing
 Go/Kill
 Additional Resources

Stage Systems

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

"There are no predetermined criteria or specific number of stages for every new
product. In most cases, companies set up what are called 'gates' -- points at which a
significant incremental investment of resources has to occur in order to go
forward."

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,". "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 TEC-sized

companies,". "Smaller companies find the process overly bureaucratic and paper-
intensive."

More efficient methods exist for smaller companies to pursue in the development
of new products. Says Webb: "A good way of moving forward is by modeling the
idea, gathering ever more market data, measuring production costs and, as much as
possible, getting input from key customers." (See "The Voice of the
Customer" in Additional Resources below)

The CARETM Process

Goozé describes a four-step process called CARETM (Inscape Corp.), for 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."

The best individuals to enlist for this process include those who:

 Are good at exploring alternatives and discussing concepts

 Are capable of realizing the master plan
 Can easily move from one subject to another
 Don't necessarily follow tradition
  Go with "gut feelings" when making decisions

In the "Advancing" phase, ideas and concepts are moved forward. Using past
experience and successful methods, a plan for implementation is developed. People
who perform well as advancers:

 Recognize ideas and directions early

 Think of how a new idea could actually be implemented
 Give the team a purpose
 Focus on the purpose of achieving objectives efficiently
 Can easily deal with more than one thing at a time

In the third phase, "Refining," the team methodically analyzes flaws or problems
with the innovation ideas from the creating step. "You have an idea, you think it's a
good idea, but you have to ask: What's wrong with it? As you move forward,
there's intensive review: What did I leave out? What did I forget? This is the 'yes,
but' step."

At this stage, he adds, you sometimes discover things that change everything and
that may bring everything to a halt. But that's part of the process, especially if you
risk exceeding resources available to support the project.

Finally, in the "Execution" or implementation phase, marketing activities take top

priority. "The focus is on an orderly implementation that achieves a high-quality
outcome. Successful execution requires focused objectives and guidelines. These
will be natural results of the prior three steps, if they're done well."

The best executors:

  Pay attention to details
 Are methodical
 Are cautious with new approaches
 Finish everything they start

"Successful execution requires focused objectives and guidelines," Goozé says.

"These will be natural results of the prior three steps -- if they're done well."

Description and Testing

Two phases -- one at the very beginning and one nearer the end -- are essential
components of the development process.

The "product description" serves as a working blueprint and should be included

early on in the development stage. This includes:

 Detailed product specifications

 Summary of features and benefits
 Primary areas of application
 Performance and cost requirements
 Analysis of competing products
 Rationale for development
 Outline of working plan

"A strong definition of the proposed product inspires innovation while at the same
time encouraging the project team to stay focused on what the product must
ultimately provide to customers,".
Similarly, the testing phase completes the process of meeting customer needs and
expectations.

"In this phase, the product is tested for design flaws and checked to ensure that
everything's working as it should,". "This crucial point in the process demands that
many different functions -- including engineering, parts, tools and equipment,
assembly sequences, operators, technicians and production supervisors -- all work
together efficiently."

Testing also serves as a useful information-gathering component. "Actually, it's a

good idea to be collecting data at every stage of the development process, focusing
in the early phases on customer interaction and creativity,". "Later, when the
product is near launch, a pilot production test is conducted for quality, cost and
user-friendliness."

With a pilot (or prototype) product, the project team can test and verify its capacity
to perform as originally conceived. An "engineering prototype" (essentially a
simplified version of the final product) is most useful as a means of "getting the
bugs out," while an advanced prototype enables the team to conduct formal
internal and field testing.

It may be useful to conduct detailed computer modeling and evaluation (saving

time and money over an actual physical prototype).

Last but not least, the product is introduced to the market under conditions such as
limited scope and control of the marketing mix (price, promotion and distribution),
with results carefully analyzed afterward. (See "New Product Launch"
in Additional Resources below.)
Go/Kill

Whether a company adheres strictly to the "stage-gate" system or moves the

development process along according to other guidelines, it's important to build in
a way to abort what may be determined to be a failed enterprise. This veto
mechanism is often referred to as "Go/Kill."

"One reason so many new product ventures fail is that no one does truly rigorous
scrutiny along the way," Webb notes. "Instead, misconceived or needlessly
expensive projects are allowed to go through the pipeline until it's too late to stop
them. Unfortunately, when these flawed products fall short in the marketplace, the
costs are even greater."

What criteria apply to the Go/Kill decision? These include:

Positive

 The project demonstrates unique strategic value to company.

 The complexity of the project is manageable and not excessive.
 High profitability is anticipated.
 The new product will be cheap and fast to produce.

Negative

 The project doesn't align with business strategy.

 The project fails to meet customer needs better than existing products.
 The project doesn't leverage company's technological resources and
expertise.
"Most entrepreneurs think the new product development process goes from A to B
-- A being an original idea and B being execution. Often they say to themselves,
'All my ideas are great!' The hard truth is, not all ideas are great. A product
development system that involves careful planning and prioritization, followed by
a strong commitment to marketing, significantly increases the odds of success."

New Product Launch

 Planning
 Positioning
 Execution
 Additional Resources

Planning

A new product has been conceived, researched, tested in prototype and made it
through all the hurdles of the process. The time has come to launch it in the
marketplace. What happens now?

"In the most successful ventures, planning for the new product launch starts along
with preliminary design and development," Goozé says. "Positioning, sales
channels and distribution, advertising and public relations all need to be addressed
and should be given as much time and energy as the development and design stage.
Synchronizing marketing activities with product development is critical for
success."

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.

Positioning

"Positioning is not about features and specifications," says Goozé. "It's the core
message that differentiates your product from everything else in the marketplace.
A unique product identity strengthens the market's perception of your product and
in turn reinforces your company's overall positioning."

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
specified date?

"Break down every conceivable launch component,". "Identify customer databases

where appropriate. Send new product samples to industry and trade publication
reviewers. Do everything necessary to create a strong, functioning life-support
system for that product."

Planning for these activities should be as simple as possible, he adds. "We're not
talking about writing a 50-page launch overview document. These tasks should
facilitate the most favorable deployment of the new product -- that's all."

Approaching the customer with the new product can be the most delicate situation
of all, which is why "having your ducks in a row" is so important. If existing
customers encounter design flaws in the new product, they may forgive and forget
(particularly if their relationship with the company is strong enough), but it's
unlikely new customers will feel the same way. Also, the new product may not be
the right "fit" with all of your current customers. Preparedness reduces the risk that
the company's credibility may be damaged by missteps at launch time.

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

 New and current product literature

 Press releases
 Product specifications
 Sales presentations
 Internal communications

Goozé draws a distinction between advertising and public relations. Public

relations presents the new product as "news" which, he says, "is viewed as
impartial and more reliable than advertising -- even if the news is only a company
press release printed verbatim."

Advertising, on the other hand, is aimed at presenting the product (specifically, its
features and benefits) in the best possible light.

"These promotional tools are most effective when used in tandem. The goal is
having each activity reinforce each other to influence the market and your
customers."

Beyond issuing press releases, look for unique angles to interest industry opinion
leaders, or try placing stories about how the new product benefits customers in
trade publications. "Exposure to your product via both advertisements and public
relations generates greater mindshare and higher perception in the marketplace,"
Goozé says. "Success breeds success."

Execution

How will the new product reach customers? Are your established sales channels
(sales force, distributors, dealers, etc.) up to the new challenge?

"When introducing a new product, you need to step back and assess its fit with
existing channels," Goozé says. For example, if the new product is a features-
reduced version of an existing product that is being targeted to a mass market,
there are some questions you should ask:

 Do our existing distributors serve mass marketing retail outlets?

 Does our current pricing schedule take factors like mass market competition
into consideration?
  If we lower our price, how much can we afford to spend on the sale of each
unit at this lower price?
 Can we reach this market with our current sales force?

"Determining your pricing strategy and reviewing your sales channels should be
happening while the product is being positioned, as these factors will have a
definite impact on the positioning message." Goozé says.

In situations where one company partners with another to introduce a new product,
Webb advises strict due diligence before the execution phase -- thus ensuring that
each partner is fully committed to the process and has the necessary financial
resources and familiarity with the marketplace.

"Whatever the circumstances, have clear-cut performance objectives in place and

be ready to measure them carefully," he adds. "Use the launch team to track
progress and make it responsible for communicating results to senior
management."
The CEO and New Product Development

 "You Need a Champion"

 The Leadership Factor
 Additional Resources

"You Need a Champion"

When the time comes for your business to develop a new product, you might think
the involvement of a dedicated project team is enough to handle the task.

"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.

"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."

"New products always mean change,". "A senior-level champion -- usually not the
originator of the new product idea, since he or she won't be considered a credible
representative -- has the power to move obstacles to change aside and keep the
process moving forward."
The Leadership Factor

The new product development team is charged with overseeing the nuts-and-bolts
process, but the product champion has the capacity to see the broader overall
picture -- how the new product fits in with the company's existing line, strategic
plans, and so on.

"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."

At the same time, Goozé adds, leadership means not getting mired in daily
operations, or micromanaging every aspect of the development process.

"At the senior leadership level, there has to be a deep commitment to innovation as
a source of growth. This is behind-the-scenes stuff -- the conviction felt throughout
the organization that resources are there for new product development, they won't
be redirected for other purposes, and a disciplined game plan exists from start to
finish. Only the company's leaders can fulfill this role."
New Product Development: Team

 Cross-Functional
 Team Components
 Additional Resources

Cross-Functional

On paper, the formula is simple: Choose the right team to develop a new product
and give it all the right resources. But knowing what comprises the right team is
the real challenge.

"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

"In many cases, a company assigns engineers with the responsibility to develop
new products and they work in isolation,". "This leaves them at a disadvantage,
since the majority of engineers have little interaction with customers."
In addition to the cross-functional team, successful companies (a) include
customers, suppliers and distributors on the team or (b) solicit their input during
the earliest stages of the process. (See "The Voice of the Customer" in Additional
Resources below.)

The cross-functional team is dedicated to the project, accountable for it from idea
to launch and aided by a powerful "product champion" (sometimes the CEO, more
often a senior executive).

Team Components

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

 A set of clearly identified and assigned team members

 Cross-functional representation
 A dedicated and accountable team leader
 Regular meetings and communication, with frequent updates and problem-
solving sessions

As with any project team, the proper flow of relevant information is critical. Both
the team leader and product champion should ensure that a steady flow of
information is made available to the team about changing customer needs and
preferences, as this information will likely affect design and development work.

The new product development team should carefully document each stage of the
process, in order to track both break-throughs and setbacks, and to meet these
ongoing objectives:
  Build on market knowledge.
 Avoid previous mistakes.
 Reduce development cycle time.

"Particularly for small companies unfamiliar with the process, there can be a steep
learning curve along the way," Webb says. "Complete documentation helps those
who follow with future new product ventures to move ahead in a more streamlined,
efficient way."
New Product Development: Mistakes

 Product Pitfalls
 Doing the Homework
 Additional Resources

Product Pitfalls

It's hard enough introducing a new product into the marketplace because of the
flood of manufactured goods already available to consumers. What makes the
venture even more difficult, there are the mistakes companies make again and
again throughout the development process.

"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)

"We also find that, in some new product ventures, activities are completed for the
sake of activity itself," he adds. In these situations, it's important to be seen doing
something -- but without a comprehensive process for evaluating why a product is
being developed and who it's being developed for, a business ends up with efforts
going off in all directions and resources wasted on dead-end pursuits.

Other common new product development pitfalls:

 Going with what one customer demands. Although the TEC experts stress
the crucial need for customer input in the new product development process,
dangers arise if a company lets one customer -- however important -- call the
shots. "This customer may want a new feature added to your product line
that meets his or her needs alone, thus putting other customers at a
disadvantage," Webb says. "When this happens, particularly if the feature
requires extensive re-tooling, you place a great deal of time, money and
other resources at risk." Better to balance this one customer's needs with
comprehensive market data that covers the full range of your customers'
requirements.
 Making promises your sales force can't keep. A salesperson should
always be included in the cross-functional product development team -- if
for no other reason than to ensure that scheduled rollouts are timed with
sales activities. You can't afford to have the sales team promising new,
improved features on products if they aren't ready to go.
 Approving product ideas that are wrong from the outset."Too many
organizations spend time evaluating concepts they shouldn't even be looking
 at," Webb says. He advocates creating "input filters" -- a way of looking at
ideas that are genuinely synergistic with the company's existing line and its
position in the marketplace; products that match a rational developmental
timetable; and that genuinely meet a market-researched customer need.

Doing the Homework

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:

 Comprehensive market and competitive analyses. Do you know if

competitors are planning a similar new product push? Are you factoring in
sufficient resources to market, sell and promote the new product once it's
launched?
 Customer research. Who are the customers you see purchasing the new
product? How will it better meet their needs?
 Concept testing. Do you have a cross-functional project team in place? Is
the team prepared to collect and analyze data at each stage of product
development?
 Technical and operations feasibility assessments. Are your manufacturing
capabilities up to the task of generating sufficient numbers of the new
product? Are you prepared to move from laboratory testing to full-scale
production?
"Part of the necessary preparatory work includes product definition. You have to
know what your target audience is, a clear idea of what benefits are going to be
delivered and a realistic view of performance requirements and specifications."

Inevitably, some new product ventures will fail during the development process.
Some studies suggest that only one out of 20 ideas survive to the launch phase. "It's
natural that problems will arise -- technical, marketing, strategic problems -- that
doom the idea or simply make it impossible to make at a profit," Webb says. "But
in many cases some preliminary research can determine whether or not it's feasible
to move forward with a specific idea."