Keys to new product success and failure 13 Consumer benefits Accessibility Pnce relative to alternatives Fun happiness, prestige Price related to qualty Consumerimanufacturer interface Brand Avalability Standard Product Anowledge Skas and wty Knowledge Protts Equipmet Product Manufacture Distribution Market Finance Manufacturer benefits Fig. 1.3 Benefits as seen by the consumer and the manufacturer 1. 2. 2 Product development project success The product development project is also part of the success analysis-its efficiency and effectiveness. The project's efficiency as regards time and costs and use of resources is a basic part of product development. But it is also judged on its effectiveness-the success in developing the product. How often is the product not quite the right quality, does not have the optimum product haracteristics. is not what the consumer needs and wants How near does the new product come to meeting these targets? Companies need to evaluate the success of the product development process(PD Process) at the end of each project, so that they can learn from success and failure, improve their PD Process and achieve better outputs 1. 2.3 Product development programme success The long-term success is related to the changes in the companys product mix the structure of the product mix, the sales and profit relationships between old nd new products, the growth of the market and the market share. It affects the ompany value in terms of goodwill, product range depth and potential, brand power, market impact and morale. Product success has also an effect on the innovation level in the company and the technological standard of the company compared with competitors( Campbell, 1999). Weak product development has a long-term effect on the production facilities, which are not renewed or updated gularly, and also on the marketing technology, which tends to become conservative. Most important is the slow growth in company knowledge. With little active product development for a number of years, the knowledge in a company is certainly less than the knowledge in the most innovative companies, and may even be less than in the direct competitors. Griffin(1997), in surveying
1.2.2 Product development project success The product development project is also part of the success analysis – its efficiency and effectiveness. The project’s efficiency as regards time and costs and use of resources is a basic part of product development. But it is also judged on its effectiveness – the success in developing the product. How often is the product not quite the right quality, does not have the optimum product characteristics, is not what the consumer needs and wants? How near does the new product come to meeting these targets? Companies need to evaluate the success of the product development process (PD Process) at the end of each project, so that they can learn from success and failure, improve their PD Process and achieve better outputs. 1.2.3 Product development programme success The long-term success is related to the changes in the company’s product mix – the structure of the product mix, the sales and profit relationships between old and new products, the growth of the market and the market share. It affects the company value in terms of goodwill, product range depth and potential, brand power, market impact and morale. Product success has also an effect on the innovation level in the company and the technological standard of the company compared with competitors (Campbell, 1999). Weak product development has a long-term effect on the production facilities, which are not renewed or updated regularly, and also on the marketing technology, which tends to become conservative. Most important is the slow growth in company knowledge. With little active product development for a number of years, the knowledge in a company is certainly less than the knowledge in the most innovative companies, and may even be less than in the direct competitors. Griffin (1997), in surveying Fig. 1.3 Benefits as seen by the consumer and the manufacturer. Keys to new product success and failure 13
14 Food product development Sale 4 Profits from Anova test<.01 Fig. 1. 4 Long-term success of a product do Success rate: of categorised as successes in the al success rat oducts categorised as finan in the last five years S sales of products commercialised in the last five years as of total Profits from new products: S profits of products commercialised in the last five years as % of total ce:From Griffin, 1997 by permission of Product Development and Mangement Association, town, New Jersey. nearly 400 companies in America, used four product programme criteria to measure financial and market success of their product development programmes product success rate, financial success rate, sales from new products (NPs), profits from new products and the number of new products in the last five years Figure 1. 4 shows a comparison of the best 85 firms and 298 other firms The best companies had a higher percentage of successful new products, and Iso higher percentages of sales and profits from new products. In research with 800 companies in 26 industry sectors in seven countries, the food and drink dustry as a whole had 21% of its turnover as new products and services, far elow the leader, technology, with 69%(Anon, 2000). This survey showed that 10% increase in the proportion of turnover generated from new products and ervices led to a 2.5% increase in revenue growth, year on year 1. 2. 4 Selecting success measures for product development The measures selected are related to the companys business strategy and the level of knowledge and skills in the company. The company must be clear about the measures and if possible choose quantitative measurements(Beaumont, 1996; Hultink and robben, 1996). The degree of detail in a measure can be very pecific, such as the time taken for product design, or can be general such as the
nearly 400 companies in America, used four product programme criteria to measure financial and market success of their product development programmes – product success rate, financial success rate, sales from new products (NPs), profits from new products and the number of new products in the last five years. Figure 1.4 shows a comparison of the best 85 firms and 298 other firms. The best companies had a higher percentage of successful new products, and also higher percentages of sales and profits from new products. In research with 800 companies in 26 industry sectors in seven countries, the food and drink industry as a whole had 21% of its turnover as new products and services, far below the leader, technology, with 69% (Anon., 2000). This survey showed that a 10% increase in the proportion of turnover generated from new products and services led to a 2.5% increase in revenue growth, year on year. 1.2.4 Selecting success measures for product development The measures selected are related to the company’s business strategy and the level of knowledge and skills in the company. The company must be clear about the measures and if possible choose quantitative measurements (Beaumont, 1996; Hultink and Robben, 1996). The degree of detail in a measure can be very specific, such as the time taken for product design, or can be general such as the percentage of sales that are new products, but it needs to be appropriate, considered, specified and agreed. There is a need to set the measures, Fig. 1.4 Long-term success of a product development programme. Success rate: % of products categorised as successes in the last five years. Financial success rate: % of products categorised as financial successes in the last five years. % Sales from new products: $ sales of products commercialised in the last five years as % of total sales. % Profits from new products: $ profits of products commercialised in the last five years as % of total profits. (Source: From Griffin, 1997 by permission of Product Development and Mangement Association, Moorestown, New Jersey.) 14 Food product development
Keys to new product success and failure 15 benchmarking and targets before the product development programme individual product development project are started, so that everyone involved realises how the final success and failure is to be judged(Zangwill, 1993) Benchmarks set beforehand tend to be less influenced by particular events and Performance measures- Benchmarking Targets against performance measures There is a need to look forward, to set up measures for the projects likely success, and also to look backward to assess actual performance against the predicted targets. Once the targets are set, they need to be communicated to all the people and departments involved in product development. At the end of the project, the data from the project are collected and analysed, and improvements identified. For every project, the measures need to be reviewed and set again (Beaumont, 1996). The aim is to have one of the highest success rates for product development in the industry and measures, benchmarks and targets have to be set for the product development programme to achieve this The balance of products in the product portfolio, on which the product development programme is based, is also another important measure. The product portfolio is the collection of products manufactured and/or marketed by a company, and it needs to be analysed to give the maximum long-term effects from scarce company resources. The long-term success of the company depends on having some products that generate cash now and other products that use cash to develop the future. All product portfolios include the new product, the growing product, the present breadwinner and the dying product; this succession needs to be preserved for long-term company viability. The product development programme needs to be measured to see it is ensuring the entry of new products and helping the growing product by quality improvements and variety, the mature product by major relaunches, and the dying product by cost reductions The techniques used to measure success depend on the knowledge already in the company and the amount of information that can be collected during the project and product launch. Obviously some large companies have detailed databases, extensive staff knowledge and money to collect and summarise the project data. Their measures are more quantitative than with the small company out for a specific market, the small company can have as accurate a success measure because of close relationships within the market and the company hink break 1. Speed to market is the most important performance measure for product development. Do you agree with this or are there other performance measures that you think are important or maybe even more important? 2. For two product families in your company, mark the relative success of their product development programmes on the following scales(from Griffin, 1997)
benchmarking and targets before the product development programme and the individual product development project are started, so that everyone involved realises how the final success and failure is to be judged (Zangwill, 1993). Benchmarks set beforehand tend to be less influenced by particular events and circumstances. Performance measures Benchmarking Targets against performance measures There is a need to look forward, to set up measures for the project’s likely success; and also to look backward to assess actual performance against the predicted targets. Once the targets are set, they need to be communicated to all the people and departments involved in product development. At the end of the project, the data from the project are collected and analysed, and improvements identified. For every project, the measures need to be reviewed and set again (Beaumont, 1996). The aim is to have one of the highest success rates for product development in the industry and measures, benchmarks and targets have to be set for the product development programme to achieve this. The balance of products in the product portfolio, on which the product development programme is based, is also another important measure. The product portfolio is the collection of products manufactured and/or marketed by a company, and it needs to be analysed to give the maximum long-term effects from scarce company resources. The long-term success of the company depends on having some products that generate cash now and other products that use cash to develop the future. All product portfolios include the new product, the growing product, the present breadwinner and the dying product; this succession needs to be preserved for long-term company viability. The product development programme needs to be measured to see it is ensuring the entry of new products and helping the growing product by quality improvements and variety, the mature product by major relaunches, and the dying product by cost reductions. The techniques used to measure success depend on the knowledge already in the company and the amount of information that can be collected during the project and product launch. Obviously some large companies have detailed databases, extensive staff knowledge and money to collect and summarise the project data. Their measures are more quantitative than with the small company, but for a specific market, the small company can have as accurate a success measure because of close relationships within the market and the company. Think break 1. Speed to market is the most important performance measure for product development. Do you agree with this or are there other performance measures that you think are important or maybe even more important? 2. For two product families in your company, mark the relative success of their product development programmes on the following scales (from Griffin,1997): Keys to new product success and failure 15