Introduction To Product Planning and Development

Lec.
01
INTRODUCTION TO PRODUCT
PLANNING AND DEVELOPMENT
• A product is something sold by an enterprise
to its customers.
• Product development is the set of activities

beginning with the perception of a market
opportunity and ending in the production,
sale, and delivery of a product.
we explicitly focus on products that are

engineered, discrete, and physical
Characteristics of Successful Product
Development
From the perspective of the investors in a for-

profit enterprise, successful product
development results in products that can be
produced and sold profitably,
Dimensions which ultimately relate to profit
commonly used to assess the performance of a
product development effort.
• Product quality
• Product cost
• Development time
• Development cost
• Development capability
Product quality:
– How good is the product resulting from
the development effort?
– Does it satisfy customer needs?
– Is it robust and reliable?
– Product quality is ultimately reflected
in market share and the price that
customers are willing to pay
Product cost:
• What is the manufacturing cost of the
product? This cost includes spending on
capital equipment and tooling as well as the
incremental cost of producing each unit of the
product. Product cost determines how much
profit accrues to the firm for a particular sales
volume and a particular sales price.
Development time:
• How quickly did the team complete the
product development effort?
• Development time determines how
responsive the firm can be to competitive
forces and to technological developments, as
well as how quickly the firm receives the
economic returns from the team’s efforts.
Development cost:
• How much did the firm have to spend to
develop the product?
• Development cost is usually a significant
fraction of the investment required to achieve
the profits.
Development capability:
• Are the team and the firm better able to
develop future products as a result of their
experience with a product development
project?
• Development capability is an asset the firm
can use to develop products more effectively
and economically in the future.
Who Designs and Develops Products?
• Product development is an interdisciplinary

activity requiring contributions from nearly all
the functions of a firm; however, three
functions are almost always central to a
product development project:
– Marketing:
– Design:
– Manufacturing:
Marketing:
• The marketing function mediates the interactions
between the firm and its customers.
• Marketing often facilitates the identification of
product opportunities, the definition of market
segments, and the identification of customer needs.
• Marketing also typically arranges for
communication between the firm and its
customers, sets target prices, and oversees the
launch and promotion of the product.
Design:
• The design function plays the lead role in
defining the physical form of the product to
best meet customer needs.
• the design function includes engineering
design (mechanical, electrical, software, etc.)
and industrial design (aesthetics, ergonomics,
user interfaces).
Manufacturing:
• The manufacturing function is primarily
responsible for designing, operating, and/or
coordinating the production system in order
to produce the product.
• the manufacturing function also often
includes purchasing, distribution, and
installation. This collection of activities is
sometimes called the supply chain.
Duration and Cost of Product Development
• few products can be developed in less than 1 year,

many require 3 to 5 years, and some take as long
as 10 years.
• The cost of product development is roughly
proportional to the number of people on the
project team and to the duration of the project
• a firm will have to make some investment in the
tooling and equipment required for production.
The Challenges of Product Development
• Trade-offs:
• Dynamics:
• Details:
• Time pressure:
• Economics:
Trade-offs:
Ex. An airplane can be made lighter, but this
action will probably increase manufacturing
cost.
• One of the most difficult aspects of product
development is recognizing, understanding,
and managing such trade-offs in a way that
maximizes the success of the product.
Dynamics:
• Technologies improve, customer preferences
evolve, competitors introduce new products,
and the macroeconomic environment shifts.
Decision making in an environment of
constant change is a formidable task.
Details:
• The choice between using screws or snap-fits
on the enclosure of a computer can have
economic implications of millions of dollars.
• Developing a product of even modest

complexity may require thousands of such
decisions.
Time pressure:
• Any one of these difficulties would be easily
manageable by itself given plenty of time, but
product development decisions must usually
be made quickly and without complete
information.
Economics:
• Developing, producing, and marketing a new
product requires a large investment. To earn a
reasonable return on this investment, the
resulting product must be both appealing to
customers and relatively inexpensive to
produce.

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Lec.

• Product development is the set of activities

we explicitly focus on products that are

From the perspective of the investors in a for-

• Product development is an interdisciplinary

• few products can be developed in less than 1 year,

• Developing a product of even modest

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