Business Dictionary defines Product Development as "the creation of products with new or different characteristics that offer new or additional benefits to the customer." Product development may involve modification of an existing product or its presentation, or formulation of an entirely new product that satisfies a newly defined customer want or market niche.
Definition of Product Development
Product development, also called New Product Development (NPD), is a series of steps that includes the conceptualization, design, development and marketing of newly created or newly rebranded goods or services. The objective of product development is to cultivate, maintain and increase a company's market share by satisfying a consumer demand. Not every product will appeal to every customer or client base, so defining the target market for a product is a critical component that must take place early in the product development process. Quantitative market research should be conducted at all phases of the design process, including before the product or service is conceived, while the product is being designed and after the product has been launched.
Product development is a specialized activity. It is done to improve the existing product or to introduce a new product in the market. It is also done to improve the earlier features or techniques or systems. Generally, it means a new-product development. New-product development means to introduce a brand-new product in the market. It means to add a fresh product to an existing line of products. Normally, a company starts with one or two products. However, after some time it has few more products in its line (say from 15 to 20). This is possible only because of new-product development. Refer following diagram to know the basic meaning of product development.
source: Prof. Mudit Katyani
Product development takes place, works or functions as under:
- Creation of an entirely new product or upgrading an existing product by exploring all possibilities and outcomes.
- Innovation of a new or an existing product to deliver better and enhanced services to end-users.
- Continuous improvement of a new product or enhancing an existing product by giving preference to satisfy the demand of end-users.
- Enhancing the utility of a new product or upgrading features of an existing product, for the personal and/or commercial use, to expand the defined goal (objective).
Product Development Does Not Mean Product Management
When you understand product development this way, you can see that it is not synonymous with product management, although many people mistakenly use the terms interchangeably. Indeed, product development does not refer to a single role at all. You should instead view it as more of a broad process or method for bringing products to market which involves many teams across a company, including:
- Product Management
- Development (or manufacturing)
- Testing or QA
- Shipping or distribution
Product Development Process
Product development is an engineering process to convert product idea into finished products. It’s a series of steps that include the product concept, structure, material, manufacturing, and marketing. Developing a new product can capture a new business opportunity as well as expanding market shares, it's quite important for all of companies, especially for startups. Even thought product development steps might vary a lot from different business size and different project management style, however most projects follow the six main steps in the product design and development process as below:
The process can involve the following eight key stages:
- Idea generation – brainstorming and coming up with innovative new ideas. See generating ideas for new products and services.
- Idea evaluation - filtering out any ideas not worth taking forward. See screening new product or service idea.
- Concept definition - considering specifications such as technical feasibility, product design and market potential. See researching new product and service ideas.
- Strategic analysis - ensuring your ideas fit into your business'strategic plans and determining the demand, the costs and the profit margin.
- Product development and testing - creating a prototype product or pilot service. See concept development and testing.
- Market testing - modifying the product or service according to customer, manufacturer and support organisations' feedback. This involves deciding the best timing and process for piloting your new product or service. See how to test the market.
- Commercialisation – determining the pricing for your product or service and finalising marketing plans. See pricing your proposed service or product.
- Product launch – a detailed launch plan can help ensure a smooth introduction to market.
Conceptual Models Of Product Development
Conceptual models have been designed in order to facilitate a smooth process.
- IDEO approach. The concept adopted by IDEO, a design and consulting firm, is one of the most researched processes in regard to new product development and is a five-step procedure. These steps are listed in chronological order:
- Understand and observe the market, the client, the technology, and the limitations of the problem;
- Synthesize the information collected at the first step;
- Visualise new customers using the product;
- Prototype, evaluate and improve the concept;
- Implementation of design changes which are associated with more technologically advanced procedures and therefore this step will require more time
- BAH Model. One of the first developed models that today companies still use in the NPD process is the Booz, Allen and Hamilton (BAH) Model, published in 1982. This is the best known model because it underlies the NPD systems that have been put forward later. This model represents the foundation of all the other models that have been developed afterwards. Significant work has been conducted in order to propose better models, but in fact these models can be easily linked to BAH model. The seven steps of BAH model are: new product strategy, idea generation, screening and evaluation, business analysis, development, testing, and commercialization.
- Stage-gate model. A pioneer of NPD research in the consumers goods sector is Robert G. Cooper. Over the last two decades he conducted significant work in the area of NPD. The Stage-Gate model developed in the 1980s was proposed as a new tool for managing new products development processes. This was mainly applied to the consumers goods industry. The 2010 APQC benchmarking study reveals that 88% of U.S. businesses employ a stage-gate system to manage new products, from idea to launch. In return, the companies that adopt this system are reported to receive benefits such as improved teamwork, improved success rates, earlier detection of failure, a better launch, and even shorter cycle times – reduced by about 30%. These findings highlight the importance of the stage-gate model in the area of new product development.
- Lean Start-up approach. Over the last few years, the Lean Startup movement has grown in popularity, challenging many of the assumptions inherent in the stage-gate model.
- Exploratory product development model. Exploratory product development, which often goes by the acronym ExPD, is an emerging approach to new product development. Consultants Mary Drotar and Kathy Morrissey first introduced ExPD at the 2015 Product Development and Management Association annual meeting and later outlined their approach in the Product Development and Management Association’s magazine Visions. In 2015, their firm Strategy2Market received the trademark on the term “Exploratory PD.” Rather than going through a set of discrete phases, like the phase-gate process, exploratory product development allows organizations to adapt to a landscape of shifting market circumstances and uncertainty by using a more flexible and adaptable product development process for both hardware and software. Where the traditional phase-gate approach works best in a stable market environment, ExPD is more suitable for product development in markets that are unstable and less predictable. Unstable and unpredictable markets cause uncertainty and risk in product development. Many factors contribute to the outcome of a project, and ExPD works on the assumption that the ones that the product team doesn’t know enough about or are unaware of are the factors that create uncertainty and risk. The primary goal of ExPD is to reduce uncertainty and risk by reducing the unknown. When organizations adapt quickly to the changing environment (market, technology, regulations, globalization, etc.), they reduce uncertainty and risk, which leads to product success. ExPD is described as a two-pronged, integrated systems approach. Drotar and Morrissey state that product development is complex and needs to be managed as a system, integrating essential elements: strategy, portfolio management, organization/teams/culture, metrics, market/customer understanding, and process.
New Product Development Success Factors
Bringing a successful product to market is a team effort. While designers are responsible for usability, utility and the rest of the user experience there are many factors which contribute to the success or failure of new product development and many of these are outside of the designer’s direct control.
source: Interaction Design Foundation
The figure above shows the main factors which contribute to new product development success as promoted by Gonzales and Palacios in 2002:
- Top Management Support: At first glance, this appears to be completely out of control of the design team. After all, top managers make the decision as to what to support and what not to support right? Unfortunately, it’s not that simple. The support of top management is critical to a project’s success. Without that support, budget or resources are not likely to be granted to the project and it may not get the priority it needs within the business as a whole. However, while the design team cannot force management to support their projects they can develop the political savvy to persuade management to support the best projects. Learning to influence managers is a critical skill for design teams. Embarking on projects without managerial support is a recipe for failure but winning over support is a question of leadership and communication.
- Market Orientation: Investopedia defines market orientation as follows: “Market orientation is a company philosophy focused on discovering and meeting the needs and desires of its customers through its product mix.” It seems reasonable to suggest that while a design team does not have control over company philosophy it should be in a good position to influence this. Conducting user research and where appropriate market research – two fundamentals of developing high quality user experiences; will enable the discovery of customer/user needs and how to meet them.
- Technology: The technology used to create and deliver the product must be suitable for the market. While it is unlikely that the design team will have the final say in technology budgets or appropriation it is likely that they will be able to influence the development teams in their choice of technology. It is clear that, for example, multi-million dollar hardware and software requirements will make a product inaccessible to the consumer market but may not be an insurmountable hurdle for government or corporate markets. Technology must be chosen with the end-users in mind.
- Knowledge Management: In many organizations today; knowledge is treated like gold dust and guarded by its owners as they would stolen treasure. Unfortunately, the creation of knowledge silos like these makes it impossible for knowledge to be effective. Market research data, for example, can be incredibly useful to a design team but only if they can access that data and it’s not kept securely in the marketing department under lock and key. Likewise user research data can be highly valuable to the marketing team but once again – only if they can access it. Knowledge management structures will normally fall outside of the design team’s remit. However, there is nothing preventing the design team from advocating for open knowledge management structures or indeed persuading senior management to support such structures.
- New Product Development Strategies: Strategy, despite the way it is often abused in management speak is simply; “a plan of action designed to achieve a long-term or overall aim.” Responsibility for new product development strategies is likely to be shared between design, product management and development. This means that the design team will have some input into the strategies chosen and will be able to influence these strategies with their user research to guide the strategy to fit the needs of their users. It is probably fair to say that product management will normally have the final say on a strategic direction but designers have plenty of room to negotiate with product managers to ensure better outcomes.
- New Product Development Speed: Speed to market is a critical factor in success. If your new product development process takes 5 years but your competitor’s takes 2 years – it is likely that no matter how good your designs are; they will have been eclipsed by the time they get to market. Refining the design process to maximize speed whilst protecting the user experience is a delicate balancing act and it is fully within the designer’s remit. However, the development process speed is much less likely to be within the design team’s control and their ability to influence that speed may be marginal at best.
- New Product Development Process: Having clear processes for design and development are essential. While these may be tailored to fit specific circumstances – a methodology for working that is clearly understood and agreed to by all members of the product development team is highly likely to product better results than those created with no formal process. The design team will, normally, have some input into these processes and be able to negotiate modifications to processes when they fail to produce optimal results. There is little control for the design team over the way other teams execute these processes. Failure in execution, from other teams, is one of the few areas where it is reasonable to say that failure was completely outside of the design team’s control.
- New Product Development Teams: New product development normally brings together teams of diverse people from all across an enterprise. It is strongly suggested that these diverse teams tend to be highly creative and more successful than teams of a more standardized nature. The way teams work together is a critical factor in their success and designers operating as part of such a team have their part to play in this. Professionalism and leadership can be displayed by any member of a team (including those without official leadership and management roles) and while the design team cannot bear any responsibility for the actions of others within a team – they bear complete responsibility for their own actions. As Michael Jordan, the world famous athlete and basketball superstar says; “Talent wins games, but teamwork and intelligence wins championships.”
Symptoms of a Declining Product
How do you know when you need new products? Early detection of a problem with existing products is critical. The following eight symptoms of a declining product line will provide clues far enough in advance to help you do something about the problem before it's too late. Not all the symptoms will be evident in every situation, but you can start suspecting your product line when more than just one or two crop up.
- You're experiencing slow growth or no growth. A short-term glitch in product sales can happen any time. If, however, company revenue either flattens or declines over an extended period, you have to look for explanations and solutions. If it isn't the economy or some outside force beyond your control, if your competitors didn't suddenly become more brilliant, if you still have confidence in your sales force, and if there are no major problems with suppliers, examine your product line.
- Your top customers are giving you less and less business. It may not be worth your trouble to determine your exact market share when a rough idea of where you stand will suffice. But knowing how much business you get compared to your competitors is critical. Every piece of business your competitors are getting is business you aren't getting--and may never get. If your customers' businesses are growing and the business you get from them isn't, your product may be the culprit. Chances are, someone else is meeting your customers' needs.
- You find yourself competing with companies you've never heard of. If you've never heard of a new competitor or don't know much about them, watch out! They have found a way to jump into a market with new products and technology that could leave you wondering what hit you. It might not be that your product has a fundamental flaw. It's more often the case that someone has brought innovation to the industry. You earn no points for status quo thinking.
- You're under increasing pressure to lower your prices. No one likes to compete strictly on price. When your product is clearly superior and offers more value than lower-priced competitors, you don't have to. Everyone understands that great new products eventually run their course and turn into commodities. One day, a customer tells you she can't distinguish the benefits of your widget from those of one or more of your competitors, and now you are in a price squeeze. If you want the business, you have to lower your prices to stay competitive. If that was where it ended, things might stabilize, although at a lower price level. But lower prices usually mean lower profit margins, which usually mean less investment in keeping the product current, which means more price pressure, lower margins?and so it goes.
- You're experiencing higher-than-normal turnover in your sales force. Good salespeople want to win customers so they can make more money. When they have trouble competing, they can't win customers or make money. So they look for new opportunities and challenges that will bring them what they want. You'll always have turnover, but heavy turnover is a symptom of something very wrong. It could be an ill-advised change in the compensation scheme or a new sales manager coming in with a negative attitude. But it could also be that members of your sales team are frustrated because they're having trouble selling your products. When business owners start to pressure their sales forces to get order levels up, morale drops because the salespeople know there isn't much they can do.
- You're getting fewer and fewer inquiries from prospective customers. We all dread the time when the phone stops ringing and prospects stop coming in. When advertising or other forms of promotion aren't creating the results you want, and you see fewer positive results from the money spent, something could be wrong with the way customers see your company. An obsolete product line positions you as an obsolete company.
- Customers are asking for product changes you can't or don't want to make. Here is a not-too-subtle sign that your product may no longer meet market needs. There will be times when you have to decide whether filling a customer's request is in your company's best interests. When customers say "I want it this way," you may want to say no because you doubt you could ever recover the costs of the change, even by raising the selling price. But when the customer says "I want it this way, and it's standard at ABC Widgets," you should suspect you aren't keeping up with changing customer needs. When your competitors have leapt ahead of you in features and benefits, you must either catch up or leap ahead of them with innovations of your own, or you'll fall so far behind you become a marketplace postscript.
- Some of your competitors are leaving the market. In the short term, this sounds great. Your competitors drop out, and you pick up the business they leave behind. The pie is shrinking, and as it does, business gets better than ever. But beware: This is a classic signal of a declining market. Nobody walks away from a growth business. Vibrant growth markets attract new competitors; they don't discourage them.
Product Data Management (PDM)
Product Information Management (PIM)
Product Life Cycle
Product Lifecycle Management
- Defining Product Development Business Dictionary
- What is Product Development Techtarget
- Understanding Product Development Kalyan City
- Product Development Does Not Mean Product Management Product Plan
- The Eight key stages of Product Development NI BusinessInfo
- The Various Conceptual Models of Product Development Wikipedia
- An Overview of The Factors of Success for New Product Development interaction-design.org
- What are the Symptoms of a Declining Product Entrepreneur