Why Do Businesses Engage in New Product Development?
Introducing new products is costly and risky; a failed new product launch can lead to massive losses and can even put a company out of business. If a company already has a cash cow, then why risk it? The answer, of course, is that businesses must constantly be innovating and adjusting their offerings to consumer preferences and tastes. New technology, competition and consumer preferences can rapidly change and what was once a cash cow will quickly become obsolete. For this reason, companies must constantly be engaged in new product development. To do this, feedback from customers and suppliers is invaluable. Customers can provide new insights on how they are using the product and suppliers can provide insights on new technologies and manufacturing methods to better serve the customer.
An efficient new product development process will help a company succeed in quickly transforming a new market opportunity into a product available for sale. In contrast, an inefficient process can lead to poor products that don’t satisfy consumer needs and low ROI. In this guide to new product development, we will cover:
- New Product Strategy
- Idea Generation
- Idea Screening
- Product Concept Testing
- Business Analysis
- Product Design
- Market Testing
New Product Strategy
Before even beginning to brainstorm an idea, companies must ensure that the new product aligns with their corporate strategy. Ford Motor Company, for instance, is unlikely to start a new restaurant chain or introduce a new smart-phone. Companies and entrepreneurs need to identify a market need and fully understand user frustrations with the current products on the market. To continue the Ford example, Ford continually refines and creates new market data gathering techniques to better understand their customers. The techniques include mining the internet for comments on auto sites and blogs, 1-on-1 interviews, focus groups, questionnaires, consumer reports, and many others. All these efforts are to gain more insight on how customers are using the products and what their needs and expectations are.
Whether it be a large business or a small start-up, starting the conversation with customer needs and introducing products that align with the overall business strategy to meet these needs is critical. New product strategy must be determined to frame the conversation for successful idea generation.
Once a new product strategy has been developed and a problem has been identified, solutions must be generated to solve the problem. This is typically done with a team of stakeholders that include sales, marketing, engineering, supply chain, and any other function that has knowledge of the current market shortcomings and may have ideas on how to fill the gap. New technologies should especially be considered. Suppliers are an excellent source of information for new innovations occurring in the industry. Suppliers can offer a fresh perspective and inside knowledge on new manufacturing techniques, new materials, and more efficient designs. Additionally, including suppliers in the new product development process helps with sourcing components when the new product is ultimately launched. Having already been included early in the new product development process, the supplier will already be intimately aware of the technical details and can seamlessly integrate the product into their planning.
After new technologies have been considered, key company stakeholders and suppliers have provided input and proposals, the ideas must be screened and evaluated under a variety of criteria. Competitors, existing products, customer needs, technical feasibility, level of R&D required, and profitability all must be considered. If an idea perfectly solves a consumer problem but would require an infeasible amount of technical development and R&D, then the idea should most likely be screened out. Likewise, if an idea is technically feasible, but doesn’t really address the actual underlying customer need, then this idea too, should be screened out.
Product Concept Testing
Once the ideas have been screened to handful of the best proposals, they must be structured into a detailed concept that can easily be communicated and tested with the target market. Once the team has identified the best idea candidates and developed the concept into a marketable product, the products need to be tested with the customers. To do this typically requires a concept model so that the customer can physically see and feel the product in their hands. 3D printing is a great method for rapidly creating concept models. Multiple iterations can easily be produced, and customer feedback can quickly and easily be incorporated and retested with new focus groups.
After the product concepts have been tested with the customers and feedback has been obtained, the integrated product team (IPT) can further narrow down the list of proposals that will undergo a business analysis. A new product may perfectly fulfill customer needs and be within the technical capabilities of the company, but at the end of the day, the product must still make money. The business analysis is used to determine estimated sales, costs, volumes and profitability. Sales estimates should be generated, which can be based on past similar products or similar products from other companies currently on the market. Cost models can be generated using estimated material and labor hours to produce the components. Preferably, actual supplier estimates will be used to calculate these material and labor prices. Another reason why including suppliers early in the new product development process is beneficial in that it will allow you to generate more accurate cost models.
From these initial core profitability models, a breakeven analysis can be performed, and the payback period determined. If the sales estimates are at a volume lower than the breakeven quantity, then the proposal can be eliminated. Additionally, much attention should also be paid to the payback period. How long will the lifespan of the product be and how long will it be relevant to users. Will the product become obsolete before it will pay back the initial investment? These are all important questions to ask during the business analysis. In these cases, it is important to evaluate the pace of innovation within the industry and develop an accurate forecast of the product’s lifespan.
The design stage is the most expensive stage of the process as it requires the most engineering hours of any other stage in the process. At this stage, the product idea should be narrowed down to one or sometimes 2 or 3 new products. It will depend on the product, but often multiple areas of engineering expertise are required for a great product design. If the integrated product team does not have the necessary design expertise or material knowledge for a technology or manufacturing method, then they can hire a company that specializes in that area.
Suppliers are also another great resource to use, especially during product design. This is the stage they will be able to provide the most assistance as they will be able to advise in critical areas such as manufacturability, materials and various manufacturing methods to consider. The engineering team will easily be able to incorporate the supplier feedback from the start and the product design will have a much more seamless transition to manufacturing.
Prototyping is a critical piece of the product design process that can either provide a great deal of insight or be the cause of seemingly unending delays. New product development cycles need to be fast so that the products can quickly get to market and sell as much as possible before new technology, consumer preferences or competitors emerges. Slowing down the development cycle reduces product ROI. Rapid prototyping with 3D printing can provide fast, accurate, high quality products in days or hours rather than weeks and months. Faster lead times for prototypes mean that more testing can be done with the customers, the designs can be quickly iterated and a new prototype with the most recent changes can be provided overnight. In addition to concept models, 3D printed functional prototypes can also be made with premium high-quality engineering grade composite materials such as carbon fiber and fiberglass. These high performing materials can handle a wide range of demanding applications and tests.
Like previous steps, once the product design is completed, more market testing is needed. There are a few different options that companies can use to receive market feedback at this stage. The most common being beta trials. With beta trials, companies release small batches of the new products and invite groups of customers to try out the product before it officially launches. Small batch manufacturing with 3D printing is a great option for companies looking for a fast, high quality, low cost and low risk way to do a product beta trial. Small batches ensure a suitable lot size for testing purposes, but does not require the company to invest in large amounts of new product inventory that may have to be changed after the beta trials. With 3D printed small batches, feedback from beta trials can be quickly incorporated and new batches with the updated product can quickly be built and tested. This process can continue until the company feels confident enough with the product to launch and commercialize the product.
Finally, after all the ideas have been formulated, screened and developed, the new product(s) are ready to launch. In addition to the PR and marketing plans, the manufacturer must be primed and ready to supply products to sell. Utilizing the same suppliers throughout the entire new product development cycle allows for a much more seamless manufacturing process whereby the supplier is already up to speed on the technical details. This can eliminate many delays that occur all too often with new product launches whereby the firm is ready to start selling products, but there are delays in the supply chain. Effective product launches require open communication channels between all the relevant stakeholders.
If demand is more uncertain, then small batch manufacturing with 3D printing can be carried over to the launch as multiple small batches will enable a much leaner approach and allow supply to more closely match demand. This creates very little risk of overproduction or incurring inventory holding costs as the products are made on-demand when the customers place an order.
Interested in finding out more on how 3D printing can accelerate you new product development cycle? At ZABFAB Manufacturing, we offer 3D printing design services, rapid prototyping, and small batch manufacturing. Contact us now to start developing your new product!