New Product and Service Development March 2007 PB

Company Background Global Health and Hygiene Company 55,000 people worldwide Since 1996 in Brazil 3,000 employees in Brazil 6 industrial plants Every year, around 10 new products launched

Why do we need a new products development process? Common mistakes of companies in new products development: A lack of market orientation Poor quality of execution Moving too quickly Not enough upfront homework A lack of product value for the customer No focus, too many projects and a lack of resources The lack of a systematic new product process with discipline “Failure rate of new products is 35 %”, Winning at new products - Robert Cooper “46% of the resources that firms spend on the conception, development and launch of new products are spend on products that either fail or never make it.” Winning at new products - Robert Cooper

15 Critical Sucess Factors in Product Innovation 1.A unique superior product to the customer 2.A strong market orientation and customer focus 3.An international orientation 4.More predevelopment work 5.Sharp and early product definition 6.A well-conceived, properly executed launch 7.Right organizational structure 8.Top management support 9. Leveraging core competencies 10. Projects aimed at attractive markets 11. Tough go/kill decision and 12. Completeness, consistency, and quality of execution 13. Enough resources 14. Speed with quality 15. Multistage, disciplined new product process New products account for 33 % of company sales on average.

The Stage Gate Process Launch Discovery Idea Screen Scoping Business Case DevelopmentTesting & validation Post launch review Stage 1Stage 2Stage 3Stage 4Stage 5 Gates: go / kill Action plan

Discovery Generate as many ideas as possible !! Superior products have a success rate of 98% versus only 18 % of undifferentiated Currently doneHow it should be done Team leader + cross functional team IDEAS Brainstorming Internal campaign for ideas voice of customer research Look for disruptions in customer’s industry Research web / trade publications Analyze competitors Define arena of strategic focus Suppliers  NO customer voice at discovery  NO market analysis  NO internal campaign for ideas  NO cross functional team Brainstorming is normally done amongs team members (mkt) Few ideas Many me 2 products Superior product ideas never come from local development (Brazil) – always from other locations X

Gate 1: Idea Screen Currently doneHow it should be done Mkt, operations, legal Screen ideas from discovery stage and select the best ones considering the strategic alignment and “must meet criterias” : fits the business strategy ? Is the market attractive ? Product advantage: unique customer benefits ? Meets environmental, legal & safety policies ? Can be developed and produced ? GO / KILL  Idea screens involves only marketing  No standard criteria for screening  Me2 products mostly approved to continue X

Preliminary and inexpensive research:  Market assessment: concept tests, focus groups, internet search, sales force and in house info: define market size and potential and test preliminary customer acceptance  Technical assessment: preliminary technical feasibility study  Financial assessment: financial sanity check Stage 1: Scoping Currently doneHow it should be done Mkt + Operations + Finance X We go directly do the Business Case

Gate 2 Currently doneHow it should be done Mkt + Operations + Finance + Legal + Sales + Trade mkt Reevaluate the project (Gate 1 Initial Screen) with the new information provided by Stage 1 Does the product respond to a customer need ? Meets legal requirements ? Results of technical assessment: can it be manufactured; if so, what are the requirements ? Can the product be manufactured with the proposed time line and budget? When would be the payback period? GO / KILL X

Stage 2: Business Case Currently doneHow it should be done Mkt + Operations + Finance + Sales Critical homework stage  Detailed market investigation and consumer needs: qualitative researches, in-depth interviews, concept tests and a complete competitive analysis: customer needs are translated into a technically and economically feasible product with superior value  Detailed business and financial analysis (expected sales and revenues)  Sharp business definition: product, benefits, attributes, features and service Research consumer needs concerning more product positioning: concept tests – after the product is defined Financial analysis  We do NOT do an extended competitive analysis We DO have product definition  New product approval amongst board is a non efficient process Mkt + Operations + Finance “ 74% of projects, the detailed market study was deficient “ Very important

Gate 3 Currently doneHow it should be done Mkt + Operations + Finance + Sales+ Trade mkt + senior management Business evaluation more thoroughly.  Gather all analysis and decide if the product solves consumer needs;  If the market is attractive  If the product is technically and financially feasible  If product definitions are ok  If the plan of action is ok FINAL KILL BEFORE HEAVY SPENDING !! X

Stage 3: Development Currently doneHow it should be done Mkt + Operations + Finance Physical development of the product  Production of prototype (as fast as possible)  Lab tests / quality control  Customer feedback at the prototype : in house tests, usage tests, focus groups if necessary, refine product  Run production tests  Continue market analysis  Updated financial analysis Lab tests / quality control Customer feedback at the prototype : in house tests, usage tests, focus groups Run production tests Updated financial analysis We begin our marketing plan and try to do it in a rush  We do NOT continue market analysis Never a KILL decision: what happens is a refinement or different product positioning Sales team in only now involved

Gate 4 Currently doneHow it should be done Mkt + Operations + Finance + senior management Check on continued attractiveness of the product and project  Is the developed product consistent with original definition at Gate 3 ?  Revisit economic question trough revised financial analysis  Is the product ready to move to test ? GO / KILL X

Stage 4: Testing and validation Currently doneHow it should be done Mkt + Operations + Finance + Sales Test of the viability of the project  Product definition, characteristics  Production process  Customer acceptance: research, in house tests, user trials  Seek retailers feedback  Final financial analysis  Trial market  Refine marketing plan  Develop distribution plans X

Gate 5 Currently doneHow it should be done Mkt + Operations + Finance + Sales  Check quality and results of testing  Check quality of validation  Was the feedback positive ?  Are improvements required ?  Was the target market reached ?  Revise marketing plan, production estimates, marketing costs, sales volume, final prices and margins FINAL KILL X

Stage 5: Launch Currently doneHow it should be done Open door to full commercialization  Implementation of marketing launch plan: product positioning, sales team communication, advertisement, marketing strategies and promotions  Implementation of production and operation plans SUCESSFUL PRODUCT DEVELOPMENT !! Open door to full commercialization Implementation of marketing launch plan: product positioning, sales team communication, advertisement, marketing strategies and promotions Implementation of production and operation plans SOME SUCESSES AND SOME DISASTERS: AND A LOT OF RE- WORK !!

Example Me2 Product Consumers didn’t like it Legal issues – removed from the market Feminine pads – economic segment

Post launch review Currently doneHow it should be done Project is reviewed  Latest data of revenues, costs, expenditures, profits and timing are compared to projections  What was learned ?  What can be done better next time ? There is a post launch process, however: - Too buracratic - normally not done

Final observations  The Stage Gate Process requires discipline  With practice, you’ll be able to complete the process better and faster  The process has to be established in your company as a culture Thank you