Companies that consistently bring new goods to market follow a process called new product development (NPD). The steps may vary depending on the company and good, but many successful new product launches follow roughly the same operating procedure. The process begins with formulating an idea for a new good or service.
The idea is then handed over to a project manager (PM) so they can further refine the concept. Once the PM has chosen a concept, the company’s legal department will test, prepare and, if necessary, register the concept with the proper government agencies. Finally, the company will test the new good, mass-produce the product and analyze whether the new product launch is successful. Planning structures such as these help firms develop new product lines that not only replace but financially outperform existing goods and services.
New Concept Development
Forming new product or service ideas starts out as a chaotic process. Executives who spearhead new product launches may gather a new idea from many different sources. Additionally, once an executive chooses a new product or service, there are many variables to consider before developing an estimate as to what will benefit the company the most. Businesses often develop new product lines by listening to clients’ wants and needs. Throughout this stage, project managers often use a SWOT (strength/weakness – opportunity/threat) analysis to discern whether an idea is credible. Using this rubric, they can eliminate ideas that do not meet company goals and save a company’s limited resources.
Hypothesizing Product Success
An analysis, such as a SWOT analysis, is important for identifying nonstarter concepts. NDP project managers must question whether there is a demand for exactly what they are trying to build. If there is a demand, they must then determine whether the demand is strong enough to produce profits within a reasonable time frame. Potential market share is also an important variable to consider. Additionally, it is important to analyze whether the new product fits in with current industry trends. Once a project manager weighs these considerations, they must then decide whether their firm can produce the new product cost-effectively. Finally, they must calculate if consumer demand is high enough to create a long-term profit margin.
Moving Closer to Finalization
At this point, a firm’s project manager has a solid grasp on what new good or service they want to produce. The PM will, through a company’s legal department, investigate and register any trademarks or patents before proceeding further. Once the legal department completes this work, the project can move forward and the PM will work up a profile of the new product’s target demographic. They will also identify the new product’s features and benefits. Through tools such as focus groups and polls, they will then begin to gauge how their consumers or clients will respond to the new product. Armed with this information, the PM can then more accurately forecast the new product’s production costs and potential revenue.
Market Performance Variables
Now that the PM has gone over almost every detail they can about the new product, it is time to turn their attention to analyzing their company’s business environment. They will need to reexamine profitability and take a close look at what their competitors are charging for similar goods. The analyst will also have to reexamine the new product’s anticipated sales volume. Once this financial research is complete, the project manager can perform a break even analysis and take the first steps to make the new product idea a reality.
Real World Product Testing
Businesses who deploy these modern NPD frameworks charge gatekeepers with making progressive decisions during project implementation. At each development stage, the gatekeepers will decide whether to continue with the product launch, make project adjustments or shut the launch down completely if the gatekeeper deems the project unfeasible. Once the company develops a prototype, the PM will move on to testing the product to see how well it performs its intended use. Once a project manager has tested a new good as much as they can within their organization, they will then poll the opinions of people who are likely to use the good. With this information, the project manager can make any necessary changes to the product then produce the product for a small test market. This small market test is commonly called a soft launch.
Making Long-term Plans
Once the firm proves the new good in a live market, the project manager will move on to producing any supporting documentation for the good or service. Depending on the good, this may also take place during the soft launch if necessary. It is at this stage that the project manager will make solid long-term commitments as to what resources a company will use to produce the new line. These resources include assets such as raw materials, real estate, capital and labor. The PM also must identify how the company will measure the new product’s success on an ongoing basis. At this time, the project manager will also consider what events could take place that may undermine the new product’s success and develop contingency plans to deal with those issues should they arise.
Obtaining Market Share
Once a firm has fully committed to a new good, they will formulate a plan to market that good and exploit it as much as they can. This includes such marketing activities as advertising and product placement. A firm may also increase consumer awareness of a new product by participating in trade shows or conducting other activities to highlight their new good. The firm will also make sure the new good is ready for delivery on demand, and conduct a final review of any planning processes supporting the new good to make sure that it remains in the market and succeeds in generating revenue.
Finalizing Price Points
Once a project manager has completed the final NPD stage, the onus is on a company’s finance department to use any available data to determine how that new good impacts the company finances. Finance must also determine what real value the new product has to the company. The department must also consider who the company’s real competitors are once they see how the new good is performing in the marketplace. Once a new product has sufficient time on the market, the finance department also looks at the costs related to producing the new good throughout its useful lifespan. With these data points, the company finance department can forecast important metrics such as production levels, gross income and net proceeds.
United States companies have successfully used a these methods to successfully bring new products to market. They may not use this process exactly the same way as each other, and companies may use different framework variations depending on their needs. Using this framework, a company can take a simple idea and turn it into a profit-generating reality. Project managers oversee the many new product development phases and make sure that the company completes the project on time and within budget. After multiple market tests, the company will launch the new product into full-scale production. Following this basic format, companies develop new products regularly with the hopes that each one will outperform the last.
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