The start-up products almost always come from the inspiration, experience or professional technology of the business owners. However, as the company grows in size, technology continues to evolve, and customer needs become increasingly complex, it is no longer possible to develop new products by the old and outdated methods. Rather, there must be a set of “processes” that can respond to sudden changes in the business environment and quickly time-to-market. As a business consultant I recommend business owners to take reference to this article to establish a new product development process for their company that meets their own business needs.
New Product Development Process
According to the definition of the American New Product Development Management Association (PDMA): the new product process refers to a series of disciplined and clearly defined tasks and steps. The standard procedures that companies must use from initial ideas to marketable products or services, which covers idea generation, screening, and testing; business case analysis, product development, test marketing, launch to market, and post-launch evaluation.
According to the PDMA survey, 20% of the top companies in the United States have 38% of their revenue and 42.4% of their profits from the sales of new products. Innovation is the only way for companies to surpass their competitors and win. Even so, the average failure rate of new products is as high as 41%. Although innovation and development of new products are important, innovation is definitely not the same as random thinking without purpose and lack of direction. There is a systemic approach to stimulate creativity, integrate management functions in the process to achieve the innovative goals.
Successful new product development must meet the following principles and conditions:
Driven by innovation: aiming to create products or services that meet market needs or provide unique solutions.
Customer-centric: successful products must be customer-centric and focus on meeting customer needs.
Cross-functional collaboration: requires collaboration across departments, including marketing, RD, design, and manufacturing.
Iterative process: involves multiple cycles of design, testing, and improvement.
New product development typically involves the following key stages:
- 1) Idea generation: brainstorm and collect new concepts for new products or services from different channels.
- 2) Idea screening: evaluate new concepts to determine whether they are feasible and consistent with corporate development goals.
- 3) Concept testing: refining the new concept and testing it with target customers.
- 4) Business case analysis: detailed analysis of the product’s potential market, cost and revenue forecasts.
- 5) Product development: building product samples for further testing and improvement.
- 6) Test marketing: launch a product in a limited amount of time in a specific market to gauge market response.
- 7) Commercialisation: the product is fully launched and promoted to a wider market.
- 8) Post-launch review: continuously monitor and evaluate product performance and make necessary adjustments and improvements.
Here we use 3M as an example to explain new product development.
3M currently has a total of more than 50,000 products worldwide, and 30% to 40% of its annual revenue comes from new products. In addition to “visible” home life products that are popular among all ages, such as traceless hooks, post-it notes, thermal insulation papers, car engine cleaning products, acne patches, masks, earplugs, etc., as well as 80% of commercial products that most are not noticed, including Under Armor’s reflective materials, Lexus sound insulation panels, 7-11 signs, etc. 3M’s product range is extremely diversified.
3M develops new ideas based on the actual needs of consumers and focuses on enhancing the “convenience” of life. The new ideas are explained to designers and manufacturers, and discussed about the feasibility. The product is repeatedly tested to see if it can meet market needs and has market potential before it is launched to the market. 3M has advantages in raw material research and development, with a total of 46 technology platforms, such as grinding and mucosa. Technicians can combine different technologies to produce hundreds of millions of product combinations, so as long as they find an idea with market potential, they can almost always able to develop it. It is the best demonstration of connecting the technology with the market, and turning it into a product.
As early as 2004, air purifiers were not successful in the Asian market. The reason was that the living space was not large enough and the humid environment instead was the key concern for families. So 3M tried to combine the two functions of dehumidification and air freshening into one. The filter material of air purifiers is 3M’s strength, therefore the new product focuses on the air freshening function, supplemented by dehumidification effect. After confirming that this innovative concept is feasible, the product development and manufacturing phase begins. They started developing the new product, designing product specifications, appearance, etc. Then they looked into whether the product can be scaled up and produced on a large scale at a reasonable price. The new air freshening dehumidifier launched in 2016 was out of stock within a month, successfully filling a market gap.
Knowing your strength and gaining market insights
There are undoubtedly risks in the new product development process, but successful products bring rewards and can also develop new markets, which is an important basis for the continuous growth of the enterprises. The success factor of 3M’s product development is to make good use of its raw material research and development strength and gain market insights. Business owners need to get rid of making decisions based on intuition, and instead use data to assist decision-making. I believe that this is a change of habits for many business owners, and it is also a test of whether the company can grow to another level.