NEW PRODUCT DEVELOPMENT - Urenio

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New Product Development 6 • The company objectives should be decoded as an annual anticipated outcome, whether this is defined as profits made or as company growth due to the consequent development of the new product, • The standards for the determination of the success of each new product should be set, for example the quality of the product, its price, its position on the market compared to other competitive products, etc. In case that any of the ideas for the development of a new product meets with the strategic planning of an enterprise as outlined above, then the future course of development of that product is feasible. Otherwise, the company strategic planning and objectives should be altered, something that could prove quite costly. (see Example 2) Β. Assessing ideas based on sales and company profit Each new product to be developed or each new idea to be made into a new product should be capable of producing a minimum percentage of sales, and consequently profit, for the enterprise. Prior to the development of a new idea on a new product, many large enterprises set minimum sales goals amounting to a 60% profit on the cost of the product development. In other words, for the development of each new product of a cost of 40 million dollars, they should have secured or anticipated mixed profit (before taxes) amounting to 60 million dollars. If a small company is trying to face a larger company that has set the above goals through the development of a new idea on a new product, the former should set such sort of goals – maybe even stricter ones – in order to succeed. Γ. Assessing ideas based on big customers and users An important issue that many companies, big or small, tend to overlook, is the assessment of new ideas, which could develop into new products, deriving from big customers and users. The most common phenomenon is the full development of a product ensuing from a good idea, without the slightest involvement of the end-users, due to the large enthusiasm entailed in such a development. As a result, when the product is introduced in the market it fails, jeopardising not only the investments made for its development, but also the future of the company. Reasons for the failure of new products Underestimation of competitors Overestimation of the number of potential consumers Overestimation of the price of the product Lack of or failure to identify mature markets for the distribution of the product URENIO - Urban and Regional Innovation Research Unit http://www.urenio.org
New Product Development 7 All of the above reasons, for which a new product may fail, are due to the lack of communication between the enterprise and its customers and the users of its products upon the assessment of new ideas to be developed into products. In some enterprises of hi-tech or pharmaceutical products, where a lot of time and many financial resources are spent on the development of new products based on new ideas, the involvement of customers and end-users in idea assessment is a fundamental factor for the development of an idea into a new product and the avoidance of the afore-mentioned negative factors. 3 PRODUCT DEVELOPMENT a. RESEARCH AND DEVELOPMENT (R&D) For the development of a new product, in most cases it is necessary to use research and development departments within the company. The aim of these departments is to perform research on new technological and non-technological applications and to further develop them into products. Rapid development of new technologies, especially in the fields of material, medicine, genetics, pharmacology, electronics, etc., and the reduction of product life have rendered the existence of these departments essential. The basic factors constituting the proper organisation and operation of such departments are the following: a1. Finances The operation of a research and development department can be very expensive. a2. Perplexity A new product should be simple and so should be its research and development procedure. The possible complexity of the product or of its research and development procedure could cause delays and increase of its development cost. The more complicated a development procedure is, the more experts are involved in it, the more difficult is the possibility of making swift, dynamic decisions; all these issues are translated into more time and more money. a3. Manpower The development of a new product through a research and development department moves faster and more effectively when the team involved in the specific project consists of 6 to 10 individuals working full-time. For the development of several products, such as cars, computers and airplanes, larger teams are required. However, since this is not always possible due to cost, the development of the product in such cases is effectuated with the participation of part-time employees or through outside contractors. In order to plan and find the most efficient combination of people to form such a research and development team for new products, an enterprise should take the following into consideration: URENIO - Urban and Regional Innovation Research Unit http://www.urenio.org
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