Management of Technology (OM476) Managing the NPD Process March 1, 2006 S. Fisher

Agenda 30,000 new consumer products are introduced annually, and over 90% of them fail (Christensen, Cook and Hall, 2005, HBR) What’s wrong with the new product development (NPD) process? What are the challenges? How can firms improve? Mid-semester feedback

In-class writing List at least two stakeholder groups who have input on NPD in the auto industry. What can each of these stakeholders offer to the NPD process?

Auto industry: Innovation sources Source: Center for Automotive Research (March 2005). Automotive Product Design and Development Delphi. Retrieved from

NPD Process Three primary objectives  Maximizing fit with customer requirements  Minimizing development cycle time  Controlling development costs How important is each of these to the firm’s ability to make money on the new technology?  How much can we sell?  At what cost to the firm?

Maximizing customer fit Involving customers in NPD Getting feedback on failed products  First Palm product, the Zoomer, failed. Turned out that customers wanted connectivity with their computers, leading to synchronization. Observation Beta testing  Google  But are lead users representative of later user groups?

Minimizing development cycle time Related to first mover advantages Product life cycles generally becoming shorter Shorter cycles allow a company to  Respond to consumer needs/desires, competitor designs  Correct mistakes Downsides of short cycle time?

Development cycle time

Development costs Break-even analysis Example - Honda Today For Option 3 (increase both bore and stroke), how many cars would you have to sell in order to recoup the R&D costs?  Per car profit = 25,600 yen  1.5 billion yen additional investment  Need to sell 59,000 additional cars  In 1987, sold 100,660 Todays

Sequential vs. parallel Benefits of partly parallel process? Potential drawbacks? Outsourcing of development Another approach to the same goal: using cross-functional teams – will discuss more in Chapter 12

Involving the supply chain Firm’s supply chain managers  How hard will it be to get the needed components at the right time?  Assemble in-house or use modular delivery?  Logistical and cost implications of absorbing warranty costs, reverse supply chain Suppliers  Tapping into knowledge base for ideas on products or production process  Can help with overall cost savings

Product Design and Development for Auto Interiors

Product Design and Development for Body/Chassis/Suspension

Project champions Commonly used, but impact on project success is debatable  Appears unrelated to success in the marketplace  Does appear to enhance odds of finishing the project – is this a good thing?

For next class Finish reading chapter 11 (pages )  NPD tools, measuring performance  Will also discuss technology acceptance model On Wed. March 8  Eli Lilly case  Team 5 presenting  Team 1 review/questions  All others – exec summary

Mid-semester feedback Anonymous What do you like about the class so far? What should we keep doing? How can we improve the class for the remainder of the semester?