What are the steps you should have in place for a repeatable New Product Development (NPD) process? In this blog post, Harald Schroeder, ESCATEC's Director of Business Development, shares common reasons for NPD failure and the recipe for a creative process that can keep your business growing in the most sustainable way.
What is new product development?
NPD is the process of taking a product from an initial idea through to its launch in the market in a profitable way. The goal of NPD is to create products that meet evolving customer needs, address market gaps, and lever new technologies to deliver competitive advantage. NPD requires collaboration across different disciplines, such as marketing, engineering, and production, to ensure the product is both viable and will support an OEMs continued growth.
What are the 8 steps of successful NPD?
- Idea generation
- Idea screening
- Concept development and testing
- Marketing strategy development
- Business analysis
- Product development
- Test marketing
- Commercialisation
Why do you need a repeatable NPD process?
Extending your reach into existing verticals and opening up new markets for your business is the key to long-term growth established OEM companies. But many firms struggle to capitalise on initial successes in the market-place with ‘follow-up hits’.
Without new products continually adding to their revenue streams these companies risk losing momentum and money in highly competitive industrial sectors.
New products drive profitability
In their classic study of innovation McKinsey found that across all industries 25% of profits and revenues came from new products—and that companies focused on developing new products grew faster than their peers.
But new product development processes often fail.
Poor ideation, slow delivery and limited product/market fit are just some of the reasons for a high rate of NPD failure.
Why do NPD efforts fail?
In a disruptive world established OEMs are often not equipped to identify emerging threats and opportunities, or productise new innovation fast enough when they do.
Their focus on servicing existing products and customers, means they are not structured to innovate in the way a fast-moving sector requires.
As the the father of ‘Disruptive Innovation’ theory, Clayton Christensen puts it:
“The reason why it's so hard for existing companies to capitalise on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption."
These companies need an agile, repeatable process of ideation, validation, prototyping, development and marketing planning, driven by customer insight - to ensure they always keep one step ahead of the competition.
What does a great NPD process look like?
The 8 steps of an agile NPD process
Here are the 8 steps of a product development process that can keep you innovating in the fastest, and most profitable way:
1. Idea generation
"We innovate by starting with the customer and working backwards. That becomes the touchstone for how we invent." Jeff Bezos.
Companies should always be finding ways to feed new product ideas into their organisation. These tactics and techniques include:
1. SWOT analysis: Assessing the company's strengths, weaknesses, opportunities, and threats can uncover areas ripe for innovation and product development.
2. Voice of the Customer (VoC): Gathering direct feedback from customers to understand their needs, desires, and pain points can inspire product ideas that meet real market demands.
3. Market research: In-depth research into current market trends, customer behaviour, and competitor offerings can highlight gaps in the market where new products could thrive.
4. Market scanning: Regularly scanning the market for emerging trends, technologies, and shifts in consumer behaviour ensures that the company stays ahead of the curve in identifying potential product ideas.
5. Morphological analysis: This creative problem-solving technique involves breaking down a product or system into its essential components and exploring variations of each component to generate innovative ideas.
6. Focus groups with customers: Direct engagement with customers in focus groups allows companies to explore their needs and preferences in detail, providing insights that can lead to new product concepts.
7. Jobs to be done analysis: Understanding the jobs that customers need to accomplish and the challenges they face can inspire new products that solve specific problems.
8. Value analysis of existing products: Reviewing and analysing the value provided by current products can reveal opportunities for enhancements or new product developments that offer greater value to customers. You can read tips on using value analysis to drive new product development here.
But all these ideation tactics should have one thing in common: they should be focused on the customer and solving their unmet needs.
The key to successful ideation: study customer behaviour in depth
For example, Clayton Christensen’s’ classic ‘Jobs to be Done’ process encourages innovators to analyse in detail the problems that customers are trying to solve with their purchases. rather than focus on extending features they already offer to try and add more value.
In Christensen’s studies, customers often end up using existing products for very different purposes than they were invented for - suggesting whole new areas of unmet customer needs that innovators could usefully explore.
Use technology to accelerate your process
In the age of AI, businesses have the platforms available to analyse huge amounts of qualitative data about their customers habits in order to accelerate these insights. These can include analysing customer feedback from a range of online sources, - as well as usage data from IoT products. With this kind of real-time market analysis many big corporations (such as Unilever) are helping to automate and accelerate their NPD process.
What next?
At the end of your ideation cycle there should be a formal means of submitting proposals for further screening by your business. This will entail providing a minimum level of supporting evidence and documentation to share with key decision-makers.
2. Idea screening
But before further resources are allocated to any of these projects, the ideas must be filtered and sense-checked. This should be done by a panel of experts drawn from your internal teams.
For each new product concept, they should ask the following questions to assess initial feasibility:
- How will potential customers in the target market benefit from the product?
- Where is the identifiable customer need for this product in the marketplace?
- Why can this product fulfil these needs where others fail?
- Have you got the product design expertise and process in place to do this properly?
- Have you got the technical expertise to manufacture the product?
- Does the proposed product fit with your manufacturing and distribution capabilities?
3. Concept development and testing
"The sooner you start to prototype, the sooner you will discover what’s wrong with your idea." David Kelley, Stamford University.
After a number of initial ideas are approved for further development, detailed feasibility studies should begin. The business should be working on documentation that identifies:
- The target market and decision-maker in the purchasing process
- What product features must the product incorporate to be a success
- How much will the customer be willing to pay for the product?
- How much will cost to manufacture the product?
- Can the product be produced and sold at a profit?
- How can the product be produced most cost-effectively?
Businesses can help prove feasibility through virtual computer-aided rendering, and rapid prototyping. Answering these questions and seeing a rapid prototype in the flesh, can help validate customer and market need, as well as helping you optimise your potential design and pricing strategy.
4. Marketing strategy development
"The key to your company's success is making better and better products that you can sell for higher and higher prices to more and more attractive customers." — Clayton Christensen
It sounds obvious, but increased sales is the ultimate objective of your NPD process.
And in order to decide which projects has the most promising future, you should create a potential marketing plan for each idea.
This strategy will help you understand the kind of reach and resonance each solution and its associated messaging will have in different regions and sectors - as well the impact of projected sales on your bottom line.
A competitive marketing strategy comprises four key elements.
- It recognises the importance of market need. Customer requirements should be the driving force behind any product development. Market trends are important, but if you can’t define and express the unique value your product brings to your customer, it may not be worth pursuing.
- It attempts to establish a sustainable, profitable market position. Its end target is always creating profit for the company.
- It recognises and acknowledges the forces that are determining competition in B2B markets: i.e. government regulation, global competition, the extent of buyers' knowledge and understanding of a particular market.
- It aims to create a sustainable competitive advantage: Since the forces that are determining competition are changing it is necessary to constantly work on adapting and improving the competitive marketing strategy in order to identify a market position that fits the available resources of the company.
5. Business analysis
These are the hard-nosed calculations that you will need to feed into your stop/go decision-making at this critical stage of the product roadmap.
- Estimate likely selling price based upon competition and customer feedback
- Estimate sales volume based upon size of market
- Estimate profitability and break-even point
- Is there a high chance of a good pay-off?
If the figures add up and there is a compelling business case for your new product - then the business can approve development to start.
6. Product design and development
Now, the detailed, exhaustive project requirements are assembled that will guide the design and development phase.
Formal engineering specifications are created. Verification and validation plans are developed for the future. These are the final quality checks that will systematically determine that all agreed deliverables are present and working in the final product.
The product is developed against designs, with regular checks made throughout the process to assess and mitigate the risk of its failure for the end-user and the project itself. Requirements for this process include:
- Resource estimation
- Requirements publication
- Engineering operations planning
- Scheduling
- Supplier collaboration
- Resource plan publication
- Program review and monitoring
- Contingencies (what-if planning)
Broadcom outsource new product design in an era of disruption
Knowing how and when to engage third-party EMS partners to accelerate your design and delivery process is key to NPD.
In electronics manufacturing some companies simply do not have the in-house skills to design and volume manufacture the cutting-edge component modules they need to power their proposed devices. But outsourcing these aspects of specialist design and manufacture can help companies to become more ambitious and disruptive in the scope of their NPD Process.
For example, Broadcom needed ESCATEC's expertise in CoB (Chip on Board) processes, and optical engineering to rapidly prototype and refine their new 3D ToF sensor. This outsourcing process ensured their product was market-ready within required deadlines, always keeping them one step ahead of their competition.
Strategic collaboration with specialists is a major part of the modern NPD process.
7. Test marketing
When you have developed the product and the first complete prototype is available, you need to test it thoroughly:
- Conduct focus groups or customer interviews to assess the product
- Introduce the product at a trade show
- Produce an initial run of the product and sell it in a test market area to determine customer acceptance.
Now is your opportunity to tweak the product based on market feedback, in readiness to bring it to market.
8. Commercialisation
It might be time for your product launch, but the development work doesn’t stop there.
Your product manager needs to monitor the success of the product as it is rolled out. They need to plan for future upgrades and potential new additions to your suite:
- Produce and place advertisements and other promotions
- Plan sales channels and activities
- Establish the required marketing mix for your product to cut through
- Activate the marketing plan
- Fill the distribution pipeline with product
- Conduct post-market monitoring to capture refinements/new product ideas
What skills do you need to build a repeatable NPD process?
To implement a successful process you need the right combination of skills available in your product management and marketing team to balance innovation with pragmatism.
You need a blend of maverick creativity, complete customer focus, a hard-nosed commercial outlook, and of course, a seamless commercialisation process.
And if that sounds like a hard trick to pull off, you’d be right.
Risk of project failure is everywhere for the product teams and marketing departments hoping to bring innovation to a crowded marketplace.
Why VUCA is the enemy of the NPD process
VUCA - the famous futurist acronym - sums up these challenges perfectly. In the age of disruptive technology, business success is constantly threatened by Volatility, Uncertainty, Complexity and Ambiguity.
Even those with a suite of highly successful products on the market can be caught off guard as trends change rapidly, components and materials suddenly become unavailable, outmoded, or unprofitable to use.
How to mitigate the risks of VUCA
The academic and consultant Bob Johansen has proposed a leadership response to the challenge of VUCA environment which he calls VUCA Prime. The need for visionary, agile, and data led innovation to combat uncertain times is clear.
Who can support an agile NPD process?
Developing a repeatable system for NPD like the one described above is the way to build-in protection from product failure; it provides a space for creativity as well as laser-focused requirements gathering and idea validation.
It formalises STOP/GO moments within the process, helping you assess evidence and decide whether to kill or continue projects at critical moments depending on their changing potential for success.
But to ensure this kind of agility, may require a complete revamp of your partner network and supplier chain.
For example, the potential for miniaturisation, IoT and app integration to change the use cases for your proposed product could make it much more valuable in the marketplace. But if you don't have the ability to design and prototype this technology you won't be able to explore the full potential of such a pivot.
And if you don’t have a flexible NPI process for taking each new product seamlessly through to manufacture, you risk delays, increased costs, and potential quality issues that can undermine your customer trust and satisfaction.
Finding the right partner to accelerate and streamline NPD is essential to keep pace with changing customer demand:
"With ESCATEC as our partner, we can confidently scale up production to meet evolving international demand. We have exciting plans to enhance our fertility tracker's functionality, potentially transforming it into a contraceptive device in the future. ESCATEC's expertise and support will be instrumental in realizing our vision." Co-CEO of breathe ilo, Lisa Krapinger-Rüther.
No matter your challenges in the electronics sector, partnering with an EMS provider that can offer both product design and volume manufacturing services, gives you the flexibility and confidence you need to develop new kinds of ground-breaking products for new markets.
The reality of a turbulent, ever-changing market demands a new kind of discipline to survive. Are you ready to embrace it?
Editor’s note: this post was originally published in January 2022, and updated in August 2024 for accuracy.
