What is New Product Development?
New Product Development or NPD is a structured approach to product planning that spans ideation through commercialization and lifecycle management. It is a structured approach to developing new products that optimizes revenue and accelerates the ability to deliver high quality solutions to market.
NPD focuses on customer needs, on the competitive landscape, and the future evolution of markets and demand. It is a strategic approach to developing, commercializing, and managing products that is designed to ensure the right products are delivered to the right customer groups at all times, optimizing the value for those customers and for the organization developing the products. New Product Development is used extensively in many industry verticals, from manufacturing to pharma, consumer goods to automotive.
Why Does New Product Development Matter?
In today’s world, customer expectations are constantly evolving. Technological advancements and increasingly global competition require companies to continuously innovate if they are to keep up with, and optimally anticipate, customer demands. That requires an organization to develop and actively manage a new product development strategy that combines strategic plans, focused investments, rigorous performance evaluation and adaptive lifecycle planning.
Common New Product Development Challenges
Every industry and every organization experiences different challenges with product development, but the following are common issues that must be managed, and ideally avoided if organizations are to optimize NPD performance.
- Lack of understanding of the customer. Effective NPD starts with meeting customer demand. And not just demand today, the demand that will exist when the product is ready for commercialization. Organizations that fail to stay in touch with their customers, and understand those unstated demands that are often difference makers, will struggle to succeed.
- Flawed product roadmaps. NPD requires an effective and actively managed strategic roadmap for the portfolio of products, and for each individual product. That roadmap must align with both the organization’s priorities and customer needs, and it must be communicated effectively to all stakeholders. If that doesn’t happen, organizations will struggle.
- Execution issues. Time to market for the right solutions is critical. It’s no good selecting the right products to develop if they cannot be developed and commercialized in a competitive timeframe. Those organizations that struggle to deliver, or that can only achieve speed by compromising quality, will never have an effective NPD approach.
- The wrong technology platforms. NPD can’t be managed as a standalone approach. It must be integrated with all other strategic work, and that means it needs to leverage an enterprise strategic portfolio management solution that integrates with the rest of the enterprise architecture to manage impacts, dependencies and all other variables. Spreadsheets are not that tool.
9 Elements of Effective New Product Development
New Product Development must be planned and executed as part of an overall strategic approach to business. As such it must align with the larger concept of strategic portfolio management, or SPM. Within that strategic framework, NPD requires:
1. Consideration of the voice of the customer
The easiest way to ensure that the right products are being developed, is to give the customer what they want. The concept of voice of the customer is to ensure that development includes stated and unstated customer needs. These are captured through interviews and surveys, buying and usage patterns, focus groups and so on. Most organizations do this, but not all of them can then integrate the responses into the product development process.
Product planning and prioritization must be based on a complete, integrated consideration of all your customer focused variables. The ability to leverage the understanding of those customer needs and wants is critical in helping to ensure you are investing in the right things at the right time, implemented in the right way. And then you need to continue to validate those decisions by adjusting and adapting your plans in real time as customers shift and evolve their requirements. As we look at all of the other components of New Product Development below, consider that the voice of the customer must be heard in every one of them.
2. Effective ideation and demand management
With that voice of the customer in mind, you are able to establish your strategic priorities, goals and objectives for your new product investments and then develop ideas and proposals to meet those goals. Almost certainly there will be more proposals than can be funded and delivered, so you need to manage demand and ensure that the right investments are funded and pursued.
To do that, strategy must drive everything. Your product development priorities must integrate with other organizational strategies to ensure alignment with the big picture, while integrated business casing and cost benefit analysis needs to ensure that targets and metrics are clearly defined. This aligns the proposed work with the expected benefits, and provides a solid framework for delivery. At the same time, you must constantly ensure that the right initiatives are being pursued, with the right expectations of performance.
3. Integrated capital planning & financial performance management
Developing new products costs money, and that’s a limited commodity. You need to ensure that you are allocating funds to the initiatives that will actually deliver, and then you need to manage that funding to ensure the return on investment is actually occurring. To do that effectively, you need capital planning tools to help you directly align everything with your strategic priorities, as those should drive everything you do. Investments must be identified and approved from the top down based on their alignment with those priorities, and their ability to contribute as identified in the business case.
Those investments should then be funded directly, with investment owners able to further allocate funds where needed. For New Product Development that means that the product becomes the unit of funding, with product owners managing their budgets in order to optimize delivery. Integrated management of budget, actual and forecast numbers provides financial controls over those investments and continuous and adaptive planning allows for the reallocation or fine tuning of budgets as needed in response to evolving operating environments.
4. Application of stage-gate governance controls
In today’s fast paced world, work teams need to be able to focus on developing solutions without excessive governance controls slowing them down. But that approach must be balanced with a governance model that ensures investments remain capable of delivering the expected returns. Achieving that optimally requires a stage-gate approach to new product governance, providing adequate control points throughout the entire process from initial funding through commercialization.
Those controls should be implemented as part of a lean portfolio management approach, with lean governance providing leaders with the controls they need, without getting in the way of the ability to deliver. By integrating governance directly with funding at the investment layer you ensure that there is no loss of oversight, and also no loss of productivity.
5. Optimized resource management and capacity planning
Rapidly delivering the right solutions to market depends on having the right people, with the right skills, in the right place at the right time. And it means ensuring those people are available to dedicate their efforts to the work. Organizations struggle to maintain that ability in an environment of constantly shifting resource demands, often experiencing bottlenecks due to over allocated resources, and inefficiencies from under allocations.
To permanently solve those problems in your product development channels you need a single, integrated resource management solution to capture resource demand, capacity, allocations and utilization – both by function or role, and by individual. You need to be able to see the impact on resources of different portfolio models, understand upcoming capacity and capability needs, and manage people more effectively across all initiatives at all times. You can’t do that if you rely on disconnected systems or spreadsheets.
6. Streamlined time to market and integrated roadmapping
Your new products only deliver benefits when they are commercialized. You need to ensure that happens as quickly as possible, without compromising the quality of the solutions. That requires a strategic view of your entire product portfolio, both now and through future plans. The best way to achieve that is through the use of roadmapping tools that allow you to develop and manage those plans, adjusting where needed and communicating clearly and concisely to all stakeholders.
But more than just developing roadmaps for planning and communication, you must be able to manage your performance against that roadmap. Achieving that requires all work to be integrated into a single platform where ongoing work can be managed through contextualized status reporting, capturing variances and analyzing the implications of those variances across each individual product and the entire portfolio. That in turn drives allows you to optimize decision making, and ultimately achieve higher performance – delivering the right products to market and delivering value as fast as possible.
7. Support for integrated working styles
Products today are made up of many different aspects, often combining manufactured elements with software. As a result, work to develop those products is carried out in each of the tri-modal realities. Work is conducted in a number of different structures, and by teams operating in different tools. Effective and efficient New Product Development requires each of those teams to be able to operate in the way that works for them, not being forced to adjust and adapt due to system limitations.
Investment owners must be able to decompose their products into projects and epics in parallel, to manage the work of their teams through whatever execution layer tool they choose, and to capture data and manage performance from one location against the context of the overall product.
8. Powerful what-if portfolio analysis capabilities
Today’s new product is tomorrow’s obsolete product. That’s just how things are in today’s fast-moving world. To prepare for that you need to continuously review and refine your long-term product strategies, creating new solutions, maximizing the return on today’s core products, and retiring those that are no longer able to contribute effectively.
Achieving that in a world that is constantly shifting and evolving requires what-if analysis tools integrated with the platform, allowing you to perform dynamic analysis of different portfolio models, understand dependencies and make the best decisions for your business. Those decisions must then be capable of being implemented quickly and with minimal disruption, proactively managing impacts on financials, resources and dependencies.
9. Comprehensive measurement & benefits realization
The key to successful New Product Development isn’t just to get products to market quickly, but to get the right products to market quickly and profitably. To achieve that you need to define your success criteria, determine the appropriate metrics, and measure performance. The most effective ay of achieving that, in fact the only reliable way, is to use a top-down approach that ties everything back to the strategic priorities. Whether it’s confirming financial performance, or measuring non-financial metrics like NPS, benefits realization tools give you the ability to tie every variable directly to strategy.
Success criteria and performance metrics defined in the business case must also be adjusted based on the evolution of the product through the development phase, and then monitored through integrations with finance systems, inclusion of survey scores, etc. This allows you to not only validate current performance; it also contributes to the next wave of development and ensures your product development approach is continuously improving.
Delivering World Class New Product Development
New Product Development is a strategic approach to delivering value to customers, and it must be undertaken as a strategic initiative. It requires commitment and investment on multiple fronts – understanding your customers, developing internal excellence, and aligning with the rest of your strategic priorities. It also requires the ability to manage those different elements through a single, integrated platform such as NH360 Strategic Portfolio Manager.