The New Product Development Process Dissertation

Organizations today are constantly facing increasing global competition in the marketplace that demands more frequent innovation of goods and services that are of a high quality. The challenge such organizations face is to be more customer focused, responsive to their needs and provide goods and services that are cost effective.

This can be achieved by value delivery and creation where value delivery entails order fulfilment by ensuring the flow of materials, products and services through production and distribution while value creation entails new product or service development activities that identify the customer’s needs in the form of new products or services (Handfield, et al. 2000).

The new product development process is a series of interdependent and often overlapping stages during which a new product or service is brought from the idea generation stage, business or technical assessment, product or service conceptualization, product engineering and design, to the readiness stage for production or manufacturing.

As the product or service concept moves through these various stages, the idea is refined and evaluated for business and technical feasibility where the design is fine tuned and prototypes are developed for testing. The design is then finalized and preparations are made for the full scale production of the product or service (Handfield et al, 2000).

The new service development process which is derived from new product development is mostly concerned with the development and marketing of services instead of goods. A service is an act carried out to a customer that is intangible, inseparable and heterogeneous (Luteberget, 2005).

Customer Involvement in New Product/Service Development

Customer involvement in the product or service development process is the interaction or collaboration between the users of the product or service and the employees of a company during the period of product development to actualize it into a commercial product. The customer’s involvement in the development process entails an active engagement in the process with the developing company (Pinegar, 2000).

As Pinegar (2000) states, the customers role in the product or service development process is viewed in terms of their expressed wants and desires, the satisfaction that the good or service offered to them, their relationship with the developing organization and their response to previous product and/or service innovations. The customer is seen to be critical in the product or service development process because he/she is viewed as an integral component in the business strategies of an organization.

The role of customers in new product development has recently been the subject of discussion and study by researchers in the product development field. According to Pinegar (2000) the role of a customer can be classified into four categories which are coaching, partnering, reporting and advising. These classifications are used to explain the user involvement in the different stages of the product or service process.

Coaching involves the identification of product problems and opportunities in the market place and generating ideas that will be used in the product development process by conducting customer surveys to find out whether the current products meet the changing needs of consumers.

The partnering category involves the evaluation and analysis of alternative methods of product implementation while exploring the possible applications of the product other than those it was designed for. A business analysis is conducted where the customer partners with employees of the company to see whether the product or service will be viable in the market place.

The analysis of new innovation ideas will involve methods such as attribute analysis which has three approaches that can be used in generating new product or service ideas. The determinant gap analysis approach entails considering the attributes of the marketplace in determining which product or service innovation a company should undertake. These attributes can be the competitor’s products/services or previous products and services the company has produced (Anandan, 2009).

Perceptual gap analysis is used to analyze ideas when the attributes of the products or services in the marketplace are unknown. The similarity and dissimilarity analysis involves the evaluation of previous products/services by analyzing their similarity or dissimilarity to each other based on product/service attributes. Similarity analysis evaluates products on the same set of attributes while dissimilarity analysis focuses on the different attributes of the product/service (Anandan, 2009).

After the idea has passed through the business analysis stage successfully, the next step will involve the actual development of the product and prototype testing. During this stage the idea is translated into more concrete and tangible terms with regards to a product while for a service it is translated into a doable act.

This stage involves the consideration of customer satisfaction and technical feasibility by analyzing customer surveys and researching of the market to find out whether the product is satisfying their needs (Avlonitis and Papastathopoulou, 2006).

The advice category involves the use of product development specialists to identify product or service problems and opportunities by monitoring the trends in the market place and also the activities of their competitors. This stage is useful in the idea generation stage and also in the product testing stage of the product/service development. The product is tested in-house by the design team, a process known as alpha testing or by providing a sample to the intended market users a process referred to as Beta testing.

The alpha and beta testing methods are mostly used by developers of computer software who provide beta versions of their software for testing to computer experts. Gillette Company is well known for its ability to successfully launch new products into the market and meet its consumer’s needs. This is largely due to their continued use of the alpha and beta testing methods (Avlonitis and Papastathopoulou, 2006).

Focus groups are also used in this stage to test product samples by looking at what other applications the product can be used for. The last phase is the product launching phase into the market. During this stage, company finalizes and implements the production or service operations plan and also the marketing plan.

The customer’s involvement in this stage will be to purchase, use and provide feedback about the product. The reporting category is useful to the company as it enables the users of the product or service to provide feedback on the tests conducted on the new innovation by carrying out customer surveys, market research and customer visits (Pinegar, 2000).

Managing Customer Involvement in the Product Design Process

The early stages of the product design process are sometimes characterised by uncertainty when it comes to identifying product concepts that will lead to the development of a successful product that will be acceptable by the market.

Poor management of customer involvement knowledge in these early stages might lead to problems involving customer acceptance and product design in the final stages of the development process which might prove to be expensive to reverse. Because customers are the final stakeholders of the product, involving customers during the first stages of the development process will reduce uncertainty that is usually associated the process (Bogue and Sorenson, 2006).

In order to manage customer involvement effectively and efficiently, Bogue and Sorenson note that market orientation should be considered by companies that are pursuing new product innovations. Companies that have market orientation are viewed to be more proficient in gathering and analyzing information collected from consumers in the market. Customers are viewed by these market oriented organizations to be significant designers because they make important contributions to the product design.

Market oriented companies are expected to have a clear understanding of the needs of the customer which will allow them to manage the customer’s involvement and the knowledge they provide in developing the product which will in turn enable them to develop products or commodities that are of a superior quality to meet the customers needs resulting in a positive influence on the innovation activities of the company.

Customer involvement management can be done by carrying out facilitation in the concept development stage by using techniques such as focus groups, sensory analysis and conjoint analysis methods. These market oriented techniques can help the company to determine the feasibility of the product design and its acceptance to the market (Bogue and Sorenson, 2006).

User-led innovations

The user led innovation concept was developed by Von Hippel in 1986; He defined the concept of lead users as people who had strong needs that would become prominent in the marketplace in the future. According to Hippel, lead users were viewed to be ahead when it came to trends in the marketplace.

They often faced needs that could not be met by the available products or services, a situation which saw them filling this gap by modifying the available products to their own liking. This created the user led innovations which were common in the technology industry of software and information technology. User led innovations mostly relied on localized information that was already in the users possession (Burmann and Arnhold, 2008).

Von Hippel described the process of user led innovations as involving the first stage where the users innovate the product. After innovation, they would join communities that were driven by the common need of collective innovation after which the user manufacturers would implement the idea using low cost capital production techniques.

The innovations made by the users served the purpose of not only creating new product concepts that would be used in forecasting the needs of the current market but they would also be used by companies to commercialise the innovations into products that would be acceptable and usable to a large mass of consumers.

To enhance the commercialization process, the manufacturer of the product would look for lead users, evaluate their innovations and then incorporate the users into the development process of new products (Burmann and Arnhold, 2008).

Hippel’s user led innovation concept has recently undergone some modifications by researchers such as Berthon, Pitt and McCarthy who introduced the concept of creative consumers to further explain lead users. They defined creative consumers as individuals or groups of people who adapted, modified and transformed a product concept to meet their individual needs.

Research on New Product/ Service Development

Understanding the customer’s preference is a basic part of any product development system. The traditional product development process incorporated the use of tools such as market data, focus groups and surveys to collect important information about market trends and the customer’s perceptions of the company’s goods and/or services. Recent research on new product development has provided some valuable insights into the relationship between the user’s involvement in product development and their satisfaction.

Gruner and Homburg in their 2000 research based their findings on the German machine industry by studying the relationship between the intensity of the customer’s involvement during the different stages of product development, the characteristics portrayed by the involved customers and the success of the product their discoveries indicated that the involvement of the customer through certain phases of the process had a good impact on the products success.

Their empirical studies showed that the customer’s involvement in the early stages of the development process gave a higher success rate than when they were involved in the mid and last stages of the product development process which yielded a lower success rate. This shows that when the users were involved in the idea generation stage, there was a higher chance the product innovation was going to be successful in the market than when the consumer was involved in the testing stage (Gruner and Homburg, 2000).

Alam (2002) conducted research on how a customer’s involvement contributes in the new service development process by concentrating in the B2B industry.

He divided his work into four research areas which were; the objective or purpose of involving the customer, the stages of involvement, intensity of the involvement and the mode of involvement. The results of his study showed that there was only one purpose of involving users in service development which was to achieve the successful development of a service that achieved the desired purpose of the customer.

According to Alam’s research, customers are involved in all the stages of the product or service development process but where there involvement was most important was in the idea generation stage, the product or service design stage and the product testing or pilot rum stage.

The intensity of the user was divided into four levels one of them being the passive acquisition of input where the users took the initiative to provide input in the developing of the product or service. The second level involved the providing of feedback on specific issues where the developers of the product approached service users to obtain information on specific issues at the various stages of the development process.

The third level involved extensive consultation with the users or customers where the service or product developers invited the users to share their knowledge about what they want in the new product and also provide their own inputs into the process. The final stage involved the incorporation of customers into the development team to see how the product will be developed and whether it has met the specifications and desires of the design team and the user (Alam, 2002).

Examples of New Product/ Service Development in Companies: Volvo and Skype

Skype, the global free telephony Company that is rapidly expanding in its operations around the world involves customers in its new service development process. In Skype’s service development, customers are allowed to co-produce the directory by downloading Skype software and then registering as users of the software.

The customers can then expand the directory by recommending Skype to their colleagues, family and friends. As their friends register, they can also download the same software and expand their directories in the same way.

Skype does not need any mainframes since it incorporates the unused capacity in its registered users. This means that it is the users who facilitate the creation of value in Skype’s services by sharing and developing in Skype’s services. The customers also have the opportunity to run the help desk (Edvardsson, et al. 2006)

In its product and service development process, Volvo uses the program Concept Lab Volvo to inform its customers and users of its products and services about its design principles and also about emerging car design concepts. The users are allowed to provide feedback on these car designs and they can also have one on one chat sessions with the developers and design team. The developers use this information in their ongoing design work.

Volvo also uses target groups in its idea sourcing stage where people in trend sensitive markets and areas with a high design capability are invited to design parts or components of the whole car. An example of this target group is the Your Concept Car which was designed by eight women (Edvardsson et al, 2006).

Success and Failure of New Product Development

Sampson (as cited by Luterberget, 2005) in his 1970 studies described a new product or service to be successful by looking at whether it has satisfied the needs, wants or desires of customers. He also described a successful new product as possessing outstanding performance when compared to other products that were designed for the same purpose.

Products which undergo minor or major changes might fail to meet the classification of successful new product innovations. A major source of successful competitive advantage for organizations in the future will be the consistent and successful development of new and modified products and services. However the product life cycles are reducing as the product variety increases because of niche market penetration.

In the case of a group of consumer products introduced in the 1920s, the average time from the introduction to the peak production of the product was approximated to be 28 years. For a group of similar products introduced in the 1960s-70s the approximate time for peak production was estimated to reduce to 10 years. This trend is seen to continue and will pose a threat to the product development process (Barclay, et al. 2000).

In a 1987 case study of 149 UK engineering based companies, surveys conducted found that the average product life cycle was 12 years and the average development of a new product was 22 months. The same surveys were conducted again in 1996 and they showed that the product life cycle had now become eight years while the development of a new product would now take 15 months.

Such estimations show that the number of new products introduced into the market in the next five years would be twice that of the last five years (Barclay et al, 2000). When research evidence on the success and failure of product or service development is examined, the failure rates have remained at 30% for the last 60 years. This evidence shows that companies are not improving in their product development activities and that they are also becoming more expert and critical in the approaches to new product or service development.

An example of a product design that failed in the past is the Premier Safe Cigarette which was seen to be one of the biggest design failures of all time. The basic idea behind this cigarette was to have an inner cardboard tube with holes along its length which would hold the tobacco.

At the end of the tube was some charcoal which when lit released nicotine. The nicotine passed through the holes in the tube which reduced the chances of smoke and tar. After seven years of development, test marketing was conducted which showed that the cigarette was difficult to light and it had a terrible taste.

The failure of the cigarette cost the developing company, RJR Nabisco $500 million, a result which was partly attributed to the break up of the company. A service design that failed in the recent past was the Internet University (UkeU) which was launched in September 2003.

The program was abandoned after 900 of the expected 5,600 students enrolled for courses that cost £44,000. The failure was due to that fact no previous market research had been conducted to determine if there was any demand for e-learning. The losses incurred amounted to £50 million (Hollins and Shinkins, 2006, p.131-132).

Conclusion and Recommendation

The ability to produce a steady flow of successful new products or services consistently is one of the key factors that lead to an organizations success. The role of a customer in product and service development is a fairly new concept that is yet to fully catch on with most companies when it comes to developing new innovations.

However the general feeling about incorporating the user’s views while developing the products/services is optimistic and good. Researchers have also shown involving customers in the development process increases the success of the goods or services in the market in terms of launching and sales.

Customer involvement will also lead to improved quality in company products or services with customer value being taken into consideration. The performance of the product in the market can also be monitored by looking at how involved the customer was in the development process. Organizations should therefore view customer involvement in the development process as vital since the success or failure of a product or service will depend on whether it meets the needs and desires of its target market.

Companies should ensure there is user involvement in their new innovations as this ensures that the needs in the target market have been met, satisfied and incorporated into the new product or service. Companies should also have a clear view of what they want to achieve by customer involvement in their product and service innovations.

References

Alam, I. (2002) An exploratory investigation of user involvement in new service development. Journal of Academy of Marketing Science, Vol.30 p.250-261.

Anandan, C. (2009) Product management. 2^nd Edition. New Delhi : Tata McGraw-Hill.

Avlonitis, G.J. and Papastathopoulou, P. (2006) Product and services management. London: Sage Publications

Barclay, I., Dann, Z. and Holroyd, P. (2000) New product development: a practical workbook for improving performance. Great Britain: Reed Educational and Professional Publishing Ltd

Bogue, J., and Sorenson, D. (2006) Managing customer knowledge during the concept development stage of the new food product development process: Department of Food Business and Development. Ireland: University College Cork

Burmann, C., and Arnhold, U. (2008) User generated branding: state of the art research. Berlin, Germany: Transaction Publishers

Edvardsson, Gustafsson, Kristensson and Magnusson (Eds) (2006) Involving customers in new service development. London: Imperial College Press

Gruner, K.E and Homburg, C. (2000) Does Customer Interaction Enhance new product success. Journal of Business Research, Vol 49, p.1-14.

Handfield, R.B., Monczka, R.M., Ragatz, G.L. and Frayer, D.J. (2000) New product development; strategies for supplier integration. Milwaukee, US: American Society for Quality press

Hollins, B., and Shinkins, S. (2006) Managing service operations: design and implementation. London: SAGE Publications Ltd. Pp. 131- 132

Luteberget, A. (2005) Customer involvement in new service development: how does customer involvement enhance new service success? Master’s Thesis in Information and Communication Technology. Agder University College: Faculty of Engineering and Science, Vol (2) 12-16

Pinegar, J.S. (2000) Customer involvement in industrial product development: creating superior products. Power point presentation [online]. Web.