MODULE 20 PRODUCT DEVELOPMENT

OVERVIEW

Product development typically refers to all stages involved in bringing a product from concept
or idea through market release and beyond. In other words, product development
incorporates a product’s entire journey. This part takes you through the journey of a product
from ideation to commercialization of the product. In doing this, you can further gain
cognizance with regard to product design, process/ product innovation and modern
approach towards minimum viable process.

LEARNING OBJECTIVES

• Reproduce the process of product development

• Develop the product design
• Illustrate the process of product development
• Associate the impact of product innovation on process innovation.

20.1 INTRODUCTION

Product development concerns itself with modifications or extensions provided to ideas to

improve the functioning, the cost, and the value-for-money of the product. Development effort
improves the performance of the product, adds options and additional features, and even
adds variants of the basic product.

20.2 PRODUCT DESIGN

At the design stage, detailed specifications are provided so that manufacturing can produce
what has been designed. This means not only providing dimensional specifications but even
specifications regarding capacity, horse power, speed, colour etc. are laid down and the task
of manufacturing is to convert the design into physical entities.

Product Variety:
Two distinctly different priorities can affect the design of a product or a service,

1. One is standardization. And Another is customization.

1. Standardization:

It has the following advantages:

Ease in production.

Reduction in Variety
 Better use of productive facilities,

Lower unit costs.

When the service is strong and the price is low, organizations will minimize unit costs

Simplifies operational procedures

Reduces the need for many controls.

Possibility to get quantity discounts.

Steady flow of materials through work centres

Reduces the number of production set-ups related to change in flow.

It reduces the total inventory of raw materials, work-in-process and finished goods.

It provides economies of scale in production itself.

2. Customization:

By adding variety, an organisation attempts to satisfy the varied needs and tastes of its
customers and competes on non-price considerations. This is possible through
modularization. A product is designed using modules or sub-assemblies that are
interchangeable and each different combination of modules gives a new variety of the
product.

a) Design Simplification becomes a solution to modularization. It gives payoffs through lower

production costs and in some cases by lower material costs also.

b) Structuring of Options is a major part of making a product line competitive, when not
competing on costs alone. But it is complicated since each option may not have the same
margin. A lot of sales effort is required explaining options. It complicates the customer's
choice. Options given to customers may create additional difficulties where the product is
made-to-order. All options are not used to the same extent. Low-usage option parts become
hard to plan and control, when mixed with a high-usage option part.

c) CAD/CAM: A part can be computer designed (computer-aided design) and its fabrication
instructions can be generated by computer-aided manufacturing (CAD/CAM). All the
preparation time is in programming where detailed instructions regard the physical task to
be performed and the sequence in which these have to be performed are written into a
programme. This then allows for very small batch sizes without losing on economy. This has
paved way for computer-integrated manufacturing (CIM), the direction towards which
manufacturing in some industries is proceeding.

Design Characteristics and Trade-offs:

The key elements to be considered in product design are:

a) The new design must meet the need and perform the function for which it is designed.

b) The total cost incurred in producing the new design should not be excessive; else that
will affect its demand. Hence, it should be kept in control.

c) The quality of the new design should be high and cost effective.

d) The new design should function normally without failures for the expected duration. It
must provide for redundancies and high reliability of elements.

The other elements which are also important in a product design, perhaps to a lesser degree
are:

a) The new design shall be more attractive, without sacrificing on the other attributes.

b) The new design should be environmentally sustainable.

c) The new design should not pose a hazard.

d) The new design should be easily and quickly producible.

e) It should be easily repairable with a minimum of down time, to avoid production lags.

f) The design should be available when desired by the recipient.

g) Timings and accessibility are important for design of services because services cannot
be inventoried.

The Impact of Product Innovation on Process Innovation:

The design of a product or service has very close linkages with the design of the process
required to produce it. In some cases, the product design itself becomes feasible only
because of technological innovations. Throughout the product life- cycle, the process of
product development goes on.

20.3 NEW PRODUCT DEVELOPMENT

New Product development usually follows a process divided into stages, phases or steps, by
which a company conceives a new product idea and then researches, plans, designs,
prototypes, and tests it, before launching it into the market. They are discussed as follows:
1. Ideation

2. Product definition

3. Prototyping

4. Detailed Design

5. Validation/Test Marketing

6. Commercialization

Step 1: Ideation

The first step of the New Product Development process (NPD), is called “Ideation”. This is
where new product concepts originate. Small team to explore the idea, and provide initial
definition of the product concept, analysis of business, performs market research, and
explores it’s technical and market risk.

A wrong product concept increases opportunity cost. The Corporate Development

organization and executives constantly scan for new product ideas. Competitive analysis and
market scanning provides insight on the developments and changing trends in the market.

Engineering should be brainstorming, too. The Ideation step is often the most challenging
and a product development checklist can be used to pinpoint risks in this stage and
throughout the rest of development.

Step 2: Product Definition (Discovery)

It is also called “scoping,” or discovery. This step involves refining the definition of the product
concept. The detailed assessment of the technical, market and business aspects of the new
product concept and core functionality are presented in detail.

The differentiation element for the new product is clearly defined. This step helps in defining
the initial marketing strategy. The ARR (Annual Recurring Revenue) or Acquisition Costs are
estimated at this stage.

Step 3: Prototyping

In this step, the product team creates a detailed business plan. This plan usually involves
intensive market research which explores the competitive landscape for the new product and
the proposed product fits. A financial model for the new offering and pricing is determined in
this stage.
For tangible new products, manufacturability of the proposed new product is also considered.
This helps in deciding how the new product will perform in the marketplace. This step reduces
the market risk for the new product in all businesses.

Step 4: Detailed Design

In this phase, a prototype of the product is refined by iteratively working with customers:
getting their feedback and incorporating it into the prototype. Marketing, sales and
manufacturing begin to create the launch and manufacturing platforms to support the
emerging product. This is often led by program management and includes prototyping, also.

Step 5: Validation/Test Marketing

Validation and testing means ensuring the prototype works as planned. It means validating
the product from the customers and markets viewpoint and testing the viability of the
financial model for the product.

The feedback from the customers during the Development phase is tested in “real world”
conditions to the possible extent. The marketing strategy is also finalized at this point.
Revisions if any should be done at this stage itself, to get the final product ready for
consumption in the market.

Step 6: Commercialization

During this step of the product development process the team realizes everything required to
bring the final product to market, including marketing and sales plans. The team begins to
operationalize the manufacture and customer support for the product.

Gate Reviews
Gate review refers to presentation specific, pre-defined deliverables, and the outcomes
required to move on to the next phase of the product development process.

Minimum Viable Process: A Modern Approach

The traditional six-step process described above is the established new product development
process. But, there is escalation process known as Minimum Viable Process which
avoids lengthy and repeated reviews.

The Minimum Viable Process recognizes that each portion of the process has many activities
done concurrently and iteratively. The team engages with Senior Management in three check-
ins that show that the concept is sound, that there is a fit between the market and the product,
and that everything is prepared for the product launch. These check-ins demonstrate that
continued investment is warranted.

Thus, a Minimum Viable Process has a maximum of three major steps, with three check-ins
after each step.
Step 1: Concept Fit

Step 2: Product/Market Fit

Step 3: Development

Step 1: Concept Fit: The requirements of this stage are:

Product ideas are matches the vision

The team has autonomy to innovate and iterate

The technology is tested

Projects should have right staff with the right resources

Projects should be facilitated for faster iterative development

There should be obviously good commercial potential

The team should prove the management that continuous revenue is foreseeable, and large
potential market. This phase should include market research and clarify how the proposed
product will leverage the company’s brand, and the team should be able to describe the
product’s unique value proposition. The product’s fit with the current distribution channels
and its projected customer base should be proved.

It should also be checked that, the proposed project meets the company’s current strategic
priorities.

Step 2: Product/Market Fit: Activities during this phase of the development process include:

Vetting the technology

Defining use

Estimating the cost of development

Confirmation and quantification of the commercial potential

By the end of this phase, there should be tested prototypes with users to confirm fit with the
intended market. They should have identified use cases and found best fits in the market.
The technical and market risks associated with the project. There should be a detailed budget,
with identified calculation of the costs associated with developing the product, and its profit
potential should be defined. The product in greater detail, and demonstrates its technical
feasibility. The time and budget for the proposal and the business model should also be
worked out.

Step 3: Development: This process involves:

Developing the Minimum Viable Product (MVP)

Confirming the business plan

Research on consumer behavior

Acquiring infrastructure required for consumers use.

Training for the sales force

The product prototype is created and communication strategies for customer contact are
devised. To exit this phase is to enter the selling phase. The market plan is hence clearly
created.

The management-by-exception approach is the lean way to develop new products. Combined
with the three-step, Minimum Viable Process ensures that organizations have the
predictability and process quality that management needs to make good investment
decisions. Reducing product risk and adding value is done in this method.

SUMMARY

Thus, this module has consolidated the steps in new product development and briefed out
the emerging modern approaches.

LEARNING OUTCOMES

• Classify the phases of product development process.

• Enumerate the activities undertaken in each phase of product development
• Analyse the emerging approaches in PD
• Compile the efforts of organizations in bringing out a new product