Planning for New Product Development
A famous quote by Eisenhower tells us that we should plan well but know that our plans will be disrupted. Planning includes creating a set of activities, tasks, and milestones to achieve specific goals and objectives. You can think of planning as a roadmap to a destination with rest stops (checkpoints) built into the route.
New product development (NPD) is important for every organization, regardless of size or industry. Technology and markets are changing constantly. Globalization introduces changes in raw material supplies, labor, and distribution. Digitization has brought forth changes in how we manage relationships with customers and a dependence on sophisticated data models. Without designing and launching new products, services, and applications, organizations will fall behind their competitors.
As Eisenhower’s quote describes, our ability to anticipate and manage risks is the purpose of planning. NPD is risky. Financial investments are lost if the technology or markets failed to materialize. Revenue shrinks and expenses soar if customers express dissatisfaction with an existing or new product. The organization’s reputation suffers irreparable harm if a commercial product fails to meet expected quality and reliability standards.
So, instead of anticipating doom and gloom, let’s look at how planning can improve the execution and outcomes of NPD.
NPD Processes Manage Risk
Implementing and following a step-by-step NPD process reduces risk. For example, a standard waterfall process (see the figure below), simultaneously minimizes investment risk and technology risk. In a traditional staged-and-gated NPD process, work is done in stages and decisions are made at gates.
Each subsequent phase of work requires additional investment as R&D work scales to commercial production through the process steps. Fortunately, technology risk is minimized because the knowledge, data, and information gained in each stage frames a go/no-go decision at the next gate. If the business case and markets continue to look attractive, the new product development effort moves to the next stage of work.
One element of planning that helps us to reduce risk is estimating. The most successful organizations use both cost estimates and resource estimates to plan an NPD project. Furthermore, the best organizations also use actual project data and metrics to create future project plans.
What do we mean by using current data for future planning? Most organizations create new products in just a handful of categories:
· Derivative, and
In many organizations, the bulk of NPD work is tweaking features of existing products to deliver a “new product” to existing markets or to introduce existing products to a new market. These “derivative” products are common enough that it is easy to establish a database to improve estimates of future, similar projects. That is, we can take averages of elapsed time and actual costs from a set of completed projects to plan a better estimate for a similar project in the future.
Let’s say you are the Product Development Manager at a food and beverage company. The company is constantly on the lookout for new flavors and considers any novel combination of juices as a new product. Upon investigating the last three new flavors of juices launched in the past three years, you uncover the following data.
· Stage 1 (Brainstorming): 3 days, 10 people
· Stage 2 (Concept Testing): 2 weeks, 4 people
· Stage 3 (Business Case Development): 6 weeks, 3 people
· Stage 4 (Prototype Testing): 12 weeks, 10 people
· Stage 5 (Scale-Up): 15 weeks, 18 people
As the Product Development Manager, you can use this “average” data to estimate, to plan the next similar new product development project. The result includes an estimated project schedule in Gantt chart format (see figure below), resource estimates, and cost estimates (see the table below).
For this project, the innovation team has estimated a profit of $1 per bottle of juice sold with 5-year sales of 100M bottles. Thus, we can get a rough estimate of profitability (approximately $99.2M). A rough business case estimate can help the organization determine whether to continue this project or allocate scarce resources to another one.
NPD Project Planning
Planning is the act of creating tasks, activities, and milestones to drive completion of goals and objectives. Planning does not prevent all risks from occurring but minimizes uncertainties in technology and market development. Even though new product development (NPD) is risky by its very nature, planning via a structured process allows us to create more accurate cost and resource estimates, thereby reducing investment risk.
To learn more about NPD Processes, join the two-part workshop sponsored by PDMA and Global NP Solutions. Register here — the first session is 17 June 2021. Contact me at info at Simple-PDH.com to learn more about utilizing effective planning as a Product Development Manager.
Learn more about building a successful NPD team at any of these upcoming events.
· Innovation Best Practice and NPDP Workshop starting 2 June 2021 (online)
· PDMA Process Workshop starting 17 June 2021 (online)
· WAGILE Product Development Workshop 15 & 16 July 2021 (online)
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