IT 324 – Production Management

Learner Reference Module

What is a "New Product"?

 A new product is anything a company offers to the market that is perceived as new by potential customers. This includes:
a. Completely new-to-the-world products.
b. New product lines.
c. Additions to existing product lines.
d. Improvements and revisions of existing products.
e. Repositioning1 of existing products.
f. Cost reductions.

Significance:

 Drives economic growth.

 Meets evolving customer needs.
 Creates competitive advantage.
 Essential for business survival and growth.

Why Do Companies Develop New Products?

 Market Drivers:
a. Changing customer preferences.
b. Competitive pressures.
c. Technological advancements.
d. Market saturation.
 Internal Drivers:
a. Growth objectives.
b. Utilization of existing resources and capabilities.
c. Diversification.
d. Increase profitability.

Key Challenges in NPD:

a. High failure rates.

b. Uncertainty and risk.
c. Time and cost constraints.
d. Coordination and communication issues.
e. Market unpredictability.

General Stages of NPD:

 Ideation - Generating new product ideas.

 Screening - Evaluating and selecting promising ideas.
 Development - Creating prototypes and refining the product.
 Testing - Evaluating the product's performance and customer acceptance.
 Commercialization - Launching the product into the market.

Importance of a Structured NPD Process:

 Reduces risk and uncertainty.

 Improves efficiency and effectiveness.
 Enhances customer focus.
 Facilitates cross-functional collaboration.
 Enables continuous improvement.

Key Terms:

 Innovation – the process of introducing something new or significantly improving an existing idea, product, service, or
method, ultimately creating value and driving positive change.
  Market research – systematic process of gathering, analyzing, and interpreting data about a market, product, or service,
and its potential or current customers, to understand their characteristics, spending habits, and needs.
 Prototype – an early, often simplified version of a product, system, or design, used to test and validate its functionality,
usability, and feasibility before full-scale production or implementation.
 Commercialization – the process of bringing a new product or service to market, involving activities like production,
distribution, marketing, and sales, to make it available to consumers for profit.
 Risk assessment – a systematic process of identifying, analyzing, and evaluating potential hazards and risks to determine
the likelihood and severity of their potential consequences, ultimately aiming to develop and implement effective control
measures to minimize or eliminate those risks.
 Product lifecycle – the journey a product takes from its initial idea to its eventual removal from the market,
encompassing stages like development, introduction, growth, maturity, and decline.
 Competitive advantage – any characteristic that allows a company to outperform its rivals, such as offering lower prices,
superior quality, innovation, or exceptional customer service.

PHASE 1 OF NEW PRODUCT PROCESS: OPPORTUNITY IDENTIFICATION & SELECTION

 The first one of the 5 phases of the new products process creates the basis for the development of a successful product. At
this stage, an active and passive generation of new product opportunities takes place. For instance, new product
suggestions, changes in the marketing plan, resource changes, or new needs and wants in the marketplace may be sources
of promising opportunities.
 The identified opportunities should be researched, evaluated, validated and ranked. However, bare in mind that we are
still talking about opportunities, not specific product concepts or ideas.
 Refers to the systematic process of identifying potential opportunities for creating and launching new products or
services, and selecting the most promising ones to pursue further

IDEA GENERATION

 Customer-Centric Approach:
o Start by understanding the needs, preferences, and pain points of your target market.
o Use techniques such as customer interviews, surveys, and observation to gather insights.
 Market Trends and Analysis:
o Research industry trends, technological advancements, and emerging consumer behaviors.
o Look for gaps in the market or areas where existing products/services fall short.
 Cross-functional Collaboration:
o Involve team members from different departments to generate diverse perspectives.
o Encourage interdisciplinary brainstorming sessions to generate innovative ideas.
 Prototype Development:
o Create prototypes or minimum viable products (MVPs) to test and validate concepts.
o Gather feedback from potential users to iterate and refine the product idea

OPPORTUNITY RECOGNITION

 Problem-Solution Fit:
o Identify specific problems or unmet needs within the target market.
o Evaluate how well the proposed product addresses these pain points and provides value to customers.
 Competitive Analysis:
o Assess the strengths and weaknesses of existing products in the market.
o Look for opportunities to differentiate your product through unique features, pricing strategies, or distribution
channels
 Feasibility Assessment:
o Consider the technical, operational, and financial feasibility of developing and launching the new product.
o Evaluate potential risks and challenges that may arise during the development process.

MARKET RESEARCH

 Market Segmentation:
o Identify distinct customer segments based on demographics, psychographics, and behavioral patterns.
o Tailor the product concept to address the specific needs and preferences of each segment.
 Product Positioning:
o Determine the positioning strategy for the new product relative to competitors.
o Highlight unique selling propositions (USPs) and key benefits that differentiate it from alternatives in the market
 Demand Forecasting:
o Estimate the potential demand for the new product based on market size, growth trends, and consumer willingness to
pay.
o Use quantitative methods such as surveys, conjoint analysis, or trend analysis to make projections.

SWOT ANALYSIS

Strengths:

o Identify internal strengths such as unique technology, intellectual property, or brand reputation.
o Leverage these strengths to capitalize on market opportunities and overcome potential weaknesses.

Weaknesses:

o Assess internal limitations such as resource constraints, technical challenges, or organizational barriers.
o Develop strategies to mitigate weaknesses and build capabilities that support product development.

Opportunities:

o Evaluate external opportunities such as growing market segments, changing consumer preferences, or technological
advancements.
o Align product development efforts with these opportunities to maximize potential impact and market relevance.

Threats:

o Identify external threats such as competitive rivalry, market saturation, or regulatory risks.
o Develop contingency plans and risk mitigation strategies to address potential threats and safeguard the success of the new
product.

PHASE 2 OF NEW PRODUCT PROCESS – CONCEPT GENERATION

Concept Generation - This phase involves brainstorming and creating a variety of potential product ideas based on the insights
gained from the first phase, which is typically the Discovery or Idea Generation phase.

The Concept Generation phase is a crucial stage in the new product development (NPD) process, acting as a bridge
between initial idea generation and the more concrete stages of design and development. It's all about taking the raw ideas sparked
in the initial "Discovery" phase and transforming them into tangible, potentially viable product concepts.

In this stage, a high-potential or urgent opportunity is selected. Also, customer involvement begins: make sure to
understand how the customer wants the existing problem to be solved. Based on that, you can collect available new product
concepts that fit the opportunity and generate new concepts as well.

Steps in the Concept Generation Process

1. IDEA SCREENING
This involves filtering the initial pool of ideas based on factors like feasibility, market demand, alignment with business goals,
and available resources. This step helps narrow down the focus to the most promising ideas.
2. BRAIN STORMING
This is where the creative engine revs up. Brainstorming sessions, mind mapping, and other ideation techniques are employed
to generate a wide range of potential product concepts. The goal is quantity and diversity of ideas at this stage.
3. CROSS FUNCTIONAL C0LLABORATION
Involving team members from different departments (marketing, engineering, sales, etc.) brings diverse perspectives and
expertise to the table. This collaborative approach helps identify potential challenges and ensures a more comprehensive
evaluation of ideas.
4. PROTOTYPING
Creating basic prototypes or mock-ups helps visualize and communicate the concepts more effectively. Prototypes allow for
gathering valuable feedback and refining the ideas early in the process. Prototypes can be physical or analytical,
 comprehensive or focused, each serving different purposes like communication, integration, learning, and achieving
milestones.
5. MARKET RESEARCH
Conducting preliminary market research helps to understand the potential demand for the generated concepts. Analyzing
customer needs, preferences, and market trends ensures that the concepts align with market expectations.
6. RISK ANALYSIS
Identifying potential risks associated with each concept, such as technical challenges, market competition, and regulatory
hurdles, is crucial for evaluating the feasibility of overcoming these challenges.
7. CONCEPT EVALUATION
Developing criteria for evaluating and comparing different concepts is essential for making informed decisions. Factors like
cost, time to market, scalability, and potential return on investment should be considered.
8. SELECTION OF CONCEPT
Based on the evaluations and feedback, the most promising concepts are selected. These concepts should align with the
organization’s strategic goals and have the potential for success in the market.
9. FEASIBILITY ANALYSIS
Feasibility Analysis: Conduct a more detailed feasibility analysis on the selected concept(s) to assess technical, financial, and
operational aspects. Verify that the concept is viable and can be realistically implemented.
10. CONCEPT PRESENT
Concept Presentation: A formal presentation of the selected concept(s) is prepared for stakeholders, including management,
investors, and other relevant parties. The presentation should highlight the value proposition, market potential, and key
features of the concept.

WHY PROTOTYPING MATTERS

 Learning: Identify issues and improvements.

 Communication: Convey ideas to stakeholders.
 Integration: Ensure components work together.
 Milestones: Track progress effectively.

SUMMARY

 Concept generation transforms ideas into viable product concepts.

 Involves collaboration, research, and evaluation.
 Prototyping is critical for refining and validating ideas.
 Ensures alignment with market needs and business goals.

PHASE 3 OF NEW PRODUCT PROCESS - CONCEPT/PROJECT EVALUATION

This module delves into Phase 3 of the new product development process, focusing on concept/project evaluation. This
phase is pivotal in transitioning from abstract ideas to tangible market offerings. We will explore how rigorous evaluation,
financial analysis, and detailed planning contribute to minimizing risk and maximizing product success.

I. Concept Evaluation and Testing: Validating the Vision

Concept evaluation is the foundation of successful product development, preventing costly errors by ensuring market
alignment.

1. Methodologies
 Qualitative Research:
o Focus Groups - Facilitated discussions that uncover nuanced consumer opinions and latent needs.
o Individual Interviews - One-on-one sessions that provide deep, personalized insights into consumer preferences.
 Quantitative Research:
o Surveys - Structured questionnaires for gathering statistically significant data from a broad audience.
o Conjoint Analysis - A technique to understand consumer trade-offs between product features and price.
o Simulated Test Markets - Realistic market simulations that predict potential sales and consumer behavior.
2. Evaluation Criteria
o Consumer Appeal - Factors driving consumer interest and perceived desirability.
o Perceived Value - The balance between price and benefits from the consumer's perspective.
o Feasibility - The technical and operational viability of product production.
 o Competitive Differentiation - The product's unique selling proposition and market positioning.
o Market Fit - Alignment with market needs, trends, and potential market size.
3. Iterative Design
Using feedback for continuous improvement through prototyping and agile adaptation.
4. Case Studies
Analyzing real-world examples to understand decision-making processes in concept evaluation.

II. Sales Forecasting and Financial Analysis: Quantifying the Potential

Accurate sales forecasts and financial analyses are crucial for informed production planning and investment decisions.

1. Sales Forecasting Methodologies:

 Historical Data Analysis - Identifying past sales patterns to predict future trends.
 Market Research and Trend Analysis - Utilizing market data and trend analysis.
 Expert Opinions (Delphi Method) - Leveraging collective wisdom and consensus-building techniques.
 Regression Analysis - Using statistical models to establish relationships between variables.
 Time Series Analysis - Analyzing time-dependent data to identify patterns and trends.

2. Financial Analysis Components

 Cost Estimation
o Fixed Costs - Costs that remain constant regardless of production volume.
o Variable Costs - Costs that vary with production volume.
o Production, marketing, and research and development costs.
 Revenue Projections - Estimating income based on market demand and pricing.
 Profitability Analysis
o Break-Even Analysis - Determining the sales volume required to cover all costs.
o Return on Investment (ROI) - Measuring investment profitability.
o Net Present Value (NPV) and Internal Rate of Return (IRR) - Evaluating project profitability considering the
time value of money.
 Risk Assessment - Identifying and evaluating potential risks.
 Financial Statements - Understanding balance sheets, income statements, and cash flow statements.
 Communication - Effectively presenting financial findings to stakeholders.

3. Product Protocol: Defining the Blueprint

A comprehensive product protocol is essential for guiding production, marketing, and launch strategies.

 Protocol Components:
o Detailed Product Specifications - Defining technical and functional requirements.
o Target Market and Market Positioning - Identifying the audience and defining the product's place in the market.
o Quality Standards and Control Procedures - Ensuring product consistency.
o Regulatory and Compliance Requirements - Meeting legal and industry standards.
o Manufacturing and Production Processes - Outlining production flow.
o Packaging and Labeling Specifications - Defining requirements.
o Launch Strategy and Marketing Plan - Outlining promotional and sales strategies.
o Supply Chain Details - Managing the flow of materials and products.
 Development Process - Collaborative development, stakeholder input, and thorough documentation.
 Practical Application - Developing product protocols for hypothetical products and peer review.

PHASE 4 OF NEW PRODUCT PROCESS - DEVELOPMENT

This module focuses on Phase 4 of the new product development process: Development. This phase involves
transforming the evaluated product concept into a tangible prototype and testing its usability. Effective design, rigorous testing,
and efficient team management are crucial for a successful product launch.

I. Design: Shaping the Product

Design is the process of creating a product that meets both user needs and business objectives, emphasizing both functionality
and aesthetics.
 Design Thinking Methodologies:
o Empathize - Understanding user needs, behaviors, and motivations through user research.
o Define - Clearly articulating the problem to be solved based on user insights.
 o Ideate - Generating a wide range of potential solutions and product concepts.
o Prototype - Creating tangible representations of design ideas to test and refine.
o Test - Evaluating prototypes with users to gather feedback and iterate on the design.
 Key Design Considerations:
o User-Centered Design- Focusing on the user's needs, preferences, and behaviors throughout the design process.
o Ergonomics and Usability - Ensuring the product is comfortable, efficient, and easy to use.
o Aesthetics and Style - Creating a visually appealing product that aligns with the brand and target market.
o Functionality and Performance - Designing a product that meets its intended purpose and performs reliably.
o Materials and Manufacturing - Selecting appropriate materials and considering manufacturing processes.
o Sustainability - Designing products with environmental impact in mind.
 Design Tools and Technologies:
o CAD (Computer-Aided Design) software for creating 2D and 3D models.
o Prototyping tools (3D printing, laser cutting) for creating physical prototypes.
o UI/UX (User Interface/User Experience) design tools for software and digital products.
o Simulation software for testing product performance and behavior.
II. Product Use Testing: Validating the Design
Product use testing evaluates how users interact with the product in real-world or simulated conditions to identify design
flaws and areas for improvement.
 Types of Product Use Testing
o Alpha Testing - Internal testing conducted by the development team to identify early issues.
o Beta Testing - External testing with a sample of target users to gather feedback on usability and performance.
o Usability Testing - Observing users as they interact with the product to identify design flaws and areas of
difficulty.
o Field Testing - Testing the product in the actual environment where it will be used.
 Testing Metrics and Methods
o Task Success Rate - The percentage of users who can complete a specific task.
o Time on Task - The amount of time it takes users to complete a task.
o Error Rate - The number of errors users make while interacting with the product.
o User Satisfaction - Measuring user attitudes and opinions through surveys and questionnaires.
o Heuristic Evaluation - Expert review of the product against established usability principles.
 Analyzing and Reporting Test Results
o Documenting test findings and identifying key issues.
o Prioritizing issues based on severity and impact.
o Communicating test results to the development team and stakeholders.
o Iterating on the design based on test feedback.
III. Development Team Management: Collaboration for Success
Effective team management is essential for coordinating the diverse skills and expertise required to develop a new product.
 Cross-Functional Teams
o Composition - Including members from design, engineering, marketing, production, and other relevant
departments.
o Collaboration - Fostering communication, cooperation, and shared understanding among team members.
o Roles and Responsibilities - Clearly defining roles and responsibilities to avoid duplication of effort and ensure
accountability.
 Project Management
o Planning - Defining project scope, objectives, timelines, and resources.
o Execution - Managing the development process, tracking progress, and resolving issues.
o Monitoring and Control - Tracking progress, managing risks, and ensuring the project stays on schedule and
within budget.
o Communication - Establishing effective communication channels and processes for keeping the team,
stakeholders, and management informed.
 Team Dynamics and Leadership:
o Motivation and Empowerment: Creating a positive and supportive work environment that motivates team
members.
o Conflict Resolution: Addressing and resolving conflicts constructively.
o Decision-Making: Establishing clear decision-making processes.
o Leadership: Providing guidance, direction, and support to the team.

PHASE 5 OF NEW PRODUCT PROCESS - LAUNCH

This module focuses on Phase 5 of the new product development process: Launch. This phase involves the critical
transition of a developed product from the development stage to the market. Effective strategic planning, marketing management,
market testing, and launch management are essential for a successful product introduction.
I. Strategic Launch Planning & Implementation
A well-defined strategic launch plan is crucial for coordinating all activities and resources to ensure a successful product
introduction.
 Key Components of a Launch Plan:
o Launch Objectives - Defining specific, measurable, achievable, relevant, and time-bound (SMART) goals for
the launch.
o Target Market Strategy - Identifying and segmenting the target market and defining the optimal approach to
reach them.
o Positioning Strategy - Defining how the product will be positioned in the market relative to competitors.
o Marketing Mix Strategy (4Ps/7Ps) - Developing strategies for product, price, place (distribution), promotion
(and for services: people, process, physical evidence).
o Sales and Distribution Strategy - Planning how the product will be sold and distributed to reach the target
market.
o Budgeting - Allocating financial resources to support launch activities.
o Timeline - Establishing a detailed schedule of activities and milestones.
o Contingency Planning - Identifying potential risks and developing strategies to mitigate them.
 Implementation Considerations:
o Cross-Functional Coordination - Ensuring effective communication and collaboration between different
departments (e.g., marketing, sales, operations).
o Resource Allocation - Assigning and managing the necessary resources (e.g., personnel, budget, materials).
o Training and Support - Providing training and support to sales teams, distributors, and other stakeholders.
o Monitoring and Evaluation - Tracking key performance indicators (KPIs) to assess the effectiveness of the
launch and make adjustments as needed.
II. Marketing Management
Effective marketing management is essential for creating awareness, generating demand, and driving adoption of the new
product.
 Key Marketing Activities
o Marketing Communication - Developing and executing communication strategies to inform and persuade the
target market (e.g., advertising, public relations, social media marketing).
o Sales Promotion - Implementing short-term incentives to encourage trial and purchase (e.g., discounts, coupons,
samples).
o Channel Management - Selecting and managing distribution channels to reach the target market effectively.
o Pricing Strategy - Determining the optimal pricing strategy to maximize revenue and profitability.
o Branding - Establishing a strong brand identity and messaging to differentiate the product and create customer
loyalty.
o Customer Relationship Management (CRM) - Building and maintaining relationships with customers to drive
repeat business and advocacy.
 Digital Marketing
o Search Engine Optimization (SEO) - the practice of improving a website's visibility and ranking in search
engine results pages (SERPs) for specific keywords, aiming to increase organic (unpaid) traffic.
o Search Engine Marketing (SEM) - a digital marketing strategy that uses both paid advertising (like pay-per-click
ads) and unpaid (organic) methods to improve a website's visibility in search engine results pages (SERPs).
o Social Media Marketing - leverages social media platforms to promote brands, products, and services, aiming to
build connections with audiences, increase sales, and drive website traffic through engaging content and
interactions.
o Email Marketing - a digital marketing strategy that uses email to engage with potential and existing customers,
promote products or services, and drive customer action, such as sales or sign-ups.
o Content Marketing - a type of marketing that involves the creation and sharing of online material (such as
videos, blogs, and social media posts) that does not explicitly promote a brand but is intended to stimulate
interest in its products or services.
o Analytics - the practice of using data to evaluate the effectiveness of marketing activities, understand customer
behavior, and optimize strategies for better results and return of investment (ROI).
 Marketing Metrics:
o Brand Awareness
o Customer Acquisition Cost (CAC)
o Customer Lifetime Value (CLTV)
o Conversion Rates
o Return on Marketing Investment (ROMI)
III. Market Testing
Market testing provides real-world feedback on the product and marketing strategy before full-scale launch.
 Objectives of Market Testing:
o Validate key assumptions about the target market, product positioning, and marketing mix.
o Forecast sales and market share.
 o Identify potential problems or issues with the product, marketing strategy, or launch plan.
o Refine the marketing mix and launch plan based on market feedback.
 Types of Market Testing:
o Standard Test Markets - Conducting a full marketing campaign in a small number of representative cities.
o Controlled Test Markets - Testing the product in a limited number of stores or with a panel of consumers.
o Simulated Test Markets - Creating a simulated shopping environment to test consumer response to the product
and marketing mix.
 Test Market Selection:
o Representativeness
o Isolation
o Measurability
 Data Analysis:
o Sales Data
o Consumer Surveys
o Observational Data
 Go/No-Go Decision: Using market test results to decide whether to proceed with full-scale launch, modify the launch
plan, or abandon the product.
IV. Launch Management
Effective launch management involves coordinating and controlling all launch activities to ensure a smooth and successful
product introduction.
 Key Launch Management Activities:
o Launch Coordination - Managing the timing and sequencing of launch activities.
o Inventory Management - Ensuring adequate product availability to meet initial demand.
o Distribution Management - Coordinating the flow of products through the distribution channels.
o Sales Force Management - Motivating and equipping the sales force to sell the new product.
o Public Relations and Communications - Managing media relations and communicating with stakeholders.
o Post-Launch Evaluation - Assessing the success of the launch and identifying areas for improvement.
 Knowledge Creation and Innovation Metrics:
o Tracking key metrics to measure the success of the launch and its impact on the organization's innovation goals.
Examples:
 Adoption Rate
 Market Share
 Customer Satisfaction
 Time to Breakeven
 Return on Innovation Investment
 Continuous Improvement: Using launch data and feedback to improve future product launches.