New Product Development
Some products…
What is product development all about?
“Product development is the set of activities
beginning with the perception of a market
opportunity and ending in the production, sale,
and delivery of the product”
Ulrich & Eppinger, 2002
Market issues…
“Rather than compete with the super jumbo (a 550-seat cruiser by
Airbus), Boeing has decided to concentrate on a smaller, faster
‘sonic cruiser’. So the petty snipping of old has been replaced by
a genuine battle of philosophies: on one side is size, on the other
speed”
The Economist, July 2001
Technical issues…
… “advance fuel cell-vehicles, could have a profound effect on
vehicle manufacturing - perhaps setting the stage for the
reinvention of the automobile business. One of the biggest
hurdles is the development of safe and effective on-board
hydrogen storage.”
L. D. Burns
Vice President of R&D, General Motors
Resource issues…
“AstraZeneca has to rein in some of its most promising drug
candidates because of lack of resources to develop them
simultaneously”
Claes Wilhelmsson
Head of R&D, AstraZeneca
Characteristics of Successful Product
Development
• Product quality
– How good is the product?
• Product cost
– What is the capital equipment cost and unit production cost?
• Development time
– How quickly did the team complete the effort?
• Development cost
– How much did the firm have to spend to develop the product?
• Development capability
– Are the team and firm better able to develop other products?
Challenges of Product Development
• Trade-offs
– Lightweight vs costly
• Dynamics
– Technologies, customer tastes, competition change environment
• Details
– Screws vs snap fits on enclosure of computer
• Time pressure
– Decisions made quickly and without complete information
• Economics
– Large investment – will it pay off?
• Organizational realities
– Team composition, empowerment, functional allegiance, resources
Product Development Strategy
Task: Define a well-defined product development process and
propose a product development organization that will allow your
company to compete effectively over the next decade.
• Is there a standard development process that will work for every company?
• What milestones will be used to divide the overall product development process
into phases?
• What role do experts from different functional areas play in the development
process?
• Should the development organization be divided into groups corresponding to
projects or to development functions?
Product Development Process
Phase 0
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Planning
Concept
Development
System-level
Design
Detail Design
Testing and
Refinement
Production
Ramp-Up
Ulrich and Eppinger 2004
Generate mission
statement
(target market,
business goals,
key assumptions
and constraints)
Example
Mission: “design a better hand-held roofing nailer”
Assumptions:
The nailer will use nails (as opposed to adhesives, screws, etc.)
The nailer will be compatible with nail magazines on existing tools
The nailer will nail through roofing singles into wood
The nailer will be handheld.
Product Development Process
Phase 0
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Planning
Concept
Development
System-level
Design
Detail Design
Testing and
Refinement
Production
Ramp-Up
Identify needs of
target market;
Select several product
concepts for further
development and
testing
Ulrich and Eppinger 2004
Example
Needs of target market:
The nailer inserts nails in rapid succession.
The nailer is lightweight.
The nailer has no noticeable nailing delay after starting tool.
Product concepts:
Rotary motor with spring and single impact
Rotary motor with spring and multiple impacts
Linear motor with a moving mass and single impact
Product Development Process
Phase 0
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Planning
Concept
Development
System-level
Design
Detail Design
Testing and
Refinement
Production
Ramp-Up
Define product
architecture
Decompose product
into subsystems and
components
Define final assembly
scheme
Ulrich and Eppinger 2004
Product Development Process
Phase 0
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Planning
Concept
Development
System-level
Design
Detail Design
Testing and
Refinement
Production
Ramp-Up
Complete
specification of
geometry, materials
and tolerances of all
parts
List of standard parts
to be purchased
Detailed drawings
Process plans for
fabrication and
assembly
Ulrich and Eppinger 2004
Product Development Process
Phase 0
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Planning
Concept
Development
System-level
Design
Detail Design
Testing and
Refinement
Production
Ramp-Up
Building of alpha- and beta- prototypes
alpha: same material and geometry
- does it work?
- does it satisfy customer needs?
beta: parts supplied by production process
- tested internally and by customers
- tested for performance and reliability
Product Development Process
Phase 0
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Planning
Concept
Development
System-level
Design
Detail Design
Testing and
Refinement
Production
Ramp-Up
Small volume
production to train
workforce and work
out any remaining
problems.
Finally…
LAUNCH!!
Variations to Product Development Process
• Market pull products
– Market opportunity to technology, e.g. sporting goods, furniture
– Uses generic process
• Technology push products
– Technology to market opportunity, e.g. teflon, gore-tex
– Concept development takes technology as given
• Platform products
– Built around existing platform, e.g. consumer electronics, printers
– Concept development assumes proven technology platform
• Process intensive products
– Product constrained by production process, e.g. semiconductors, chemicals
– Product and process developed from start
• Quick build products
– Rapid modeling and prototyping, e.g. software, cell phones
– Many design-build-test cycles
• Complex systems
– System includes many subsystems and components, e.g. airplanes, jet engines
– System and subsystems developed by many teams working in parallel
Cost and Duration of NPD Projects
Cost and Duration of NPD Projects
Stanley Tools
Jobmaster
Screwdriver
Annual Production volume
Sales lifetime
Sales price
Number of unique parts
Development time
Internal development team
(peak size)
External development team
(peak size)
Development cost
Rollerblade InLine Skate
HP DeskJet
Printer
VW New Beetle
Automobile
Boeing 777
Airplane
Cost and Duration of NPD Projects
Stanley Tools
Jobmaster
Screwdriver
Rollerblade InLine Skate
HP DeskJet
Printer
VW New Beetle
Automobile
Boeing 777
Airplane
Annual Production volume
100,000/year
100,000/year
4M/year
100,000/year
50/year
Sales lifetime
40 years
3 years
2 years
6 years
30 years
Sales price
$3
$200
$300
$17000
$130M
Number of unique parts
3
35
200
10,000
130,000
Development time
1 year
2 years
1.5 years
3.5 years
4.5 years
Internal development team
(peak size)
3 people
5 people
100 people
800 people
6800 people
External development team
(peak size)
3 people
10 people
75 people
800 people
10,000 people
Development cost
$150,000
$750,000
$50M
$400M
$3B
Cost and Duration of NPD Projects
• Plot development cost against the other rows and see if there is
any correlation. Why or why not?
What drives product development costs?
development cost
3500000000
3000000000
2500000000
2000000000
1500000000
1000000000
500000000
0
-20000
0
-500000000
20000
40000
60000
80000
100000
120000
140000
# parts
What drives product development costs?
development cost
3500000000
3000000000
2500000000
2000000000
1500000000
1000000000
500000000
0
-500000000
0
2000
4000
6000
8000
10000
Internal team size x duration
What drives product development costs?
development cost
3500000000
3000000000
2500000000
2000000000
1500000000
1000000000
500000000
0
-20000
0
-500000000
20000
40000
60000
80000
Total team size x duration
What drives product development costs?
Design Changes over Time
Quality Function Deployment
• A method to translate customer requirements into engineering
specifications
• Aims to get design, engineering and production people
involved early on in the process
Quality Function Deployment
Quality Function Deployment (QFD)
Quality Function Deployment (QFD)
Quality Function Deployment (QFD)
Quality Function Deployment (QFD)
Quality Function Deployment (QFD)
Who is Involved in Product Development?
• Marketing
–
–
–
–
–
Mediates interactions between firm and customers
Identifies product opportunities
Defines market segments
Identifies customer needs
Oversees launch and promotion of product
• Design
– Lead role in defining physical form of product to best meet customer
needs
– Includes engineering design and industrial design
• Manufacturing and supply chain
– Designs and operates the supply chain in order to produce the product
from procurement to distribution
Organizational challenges
• How should the product development team
operate?
Project-Based Organization
Marketing
Project Manager
Engineering
Operations
Project 1
Project
Managers have
more power
“Heavy Weight”
Project Manager
Project Manager
Project 2
Functional-Based Organization
Marketing manager
Engineering
Operations manager
Project 1
Project 1
Project 1
Project 2
Project 2
Project 2
Project 3
Project 3
Project 4
Functional managers have more power
Matrix Organization
Project Manager
Project 1
Project Manager
Marketing manager
Project 2
R&D manager
Engineering
Pros and cons
Functional
Matrix
Project
Strength
Fosters
specialization and
expertise
Provides integration Optimal resource
and speed benefits
allocation, quick
trade-off resolution
Weakness
Coordination
among groups can
be slow
Requires more
managers and
administrators
Difficulty
maintaining
functional
capabilities
Example
Slight variations to
custom design
Many recently
successful projects
in automobile,
electronics, aero
Start-up companies,
dynamic markets, to
achieve
breakthroughts
Major issue
How to integrate
different functions
to achieve a
common goal.
How to balance
functions and
projects. How to
evaluate project &
functional
performance.
How to maintain
functional expertise
over time
Final Word…
Phase 0
Phase 1
Phase 2
Phase 3
Phase 4
Phase 5
Planning
Concept
Development
System-level
Design
Detail Design
Testing and
Refinement
Production
Ramp-Up
Product development is a process and it can be managed!!