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Overview of New ProductDevelopment
Dr Rowan Gilmore
Australian Institute for Commercialisation
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Structure of presentation
1. Product development in the context ofinnovation
2. Product development processes3. Management issues getting back to
basics
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Why is the AIC talking about PD?
The AIC delivers services using itsnetworks and experience that: facilitate collaboration
TechFast, Technology clinics
enhance innovation market research, IP management advice,
Commercialisation Bootcamps
accelerate the commercialisation of IP that ourclients have created
ICT commercialisation brokerage
All of these are part of productdevelopment!
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What is Innovation? Innovation is the practical application of new ideas and
concepts into something of value in the marketplace, whether
it is a new product, service, process or organisational system.
CREATIVITYCREATIVITY PROCESSINGPROCESSING INNOVATIONINNOVATION
INPUTINPUT
Ideas, ConceptsIdeas, ConceptsObservationsObservations
SCREENINGSCREENING
EVALUATIONEVALUATIONIMPLEMENTATIONIMPLEMENTATION
OUTPUTOUTPUT
NewNewValueValue
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Open Innovation
Our currenmarket
Our new
market
Other firms
market
External technology
insourcing
Internal
technology base
External technology base
Source: Prof Henry Chesbrough UC Berkeley, Open Innovation: Renewing Growth from
Industrial R&D, 10th Annual Innovation Convergence, Minneapolis Sept 27, 2004
Internal/externalventure handling
Licence, spin
out, divest
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Four Types of Innovation
Product Innovation
New products or services Enhancing existing products
Technological innovation
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Four Types of Innovation
Process Innovation improving processes within the organisation-
business process innovation
e.g. operations, HRM, finance, better way ofcommunicating, knowledge management system
focus on improving organisational effectiveness andefficiency
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Four Types of Innovation
Marketing Innovation
related to the marketing functions of promotion,
pricing and distribution product related (eg. packaging, advertising) creating a new market or marketing system e.g.
Amazon.com many products were invented before their time
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Four Types of Innovation
Management Innovation
the way the organisation is managed e.g. organisational structure, leadership, work
environment, culture
cross functional work teams - team-based decisionmaking approach
Business Model Innovation
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Sources of Product Opportunities
Competitors Markets Customers Channels
Marketing
Industry
Associations
Business
SchoolsUniversities
Research
Institutes
Marketing
Institutions
Internet
Financial
Institutions
Government
Standards
Institutes
TechnicalBodies
Suppliers
Raw MaterialSuppliers
R&D
Production
Admin
Source: Kapeleris, J. (2003) PhD Thesis (Biotech) UQ
MARKET PULL
TECHNOLOGY/PRODUCT PUSH
EN
VIRONME
NTAL
FA
CTORS
EN
VIRONME
NTAL
FACTORS
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Idea Funnelling
ImplementationImplementation
Idea ScreeningIdea ScreeningFeasibilityFeasibilityIdea GenerationIdea Generation
IDEAS
IDEAS
IDEAS
Recycle IdeasRecycle Ideas
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Market Driven
Unmet Market Need
(the Problem)
Identify Solution
Develop Product or
Service
Intellectual Property
Strategy Development
Implement & Create Value
Review & Refine Strategy
Full Market Analysis
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Importance of New ProductDevelopment (NPD)
Critical to the growth and survival of organisations Source of steady stream of cashflow for
organisations
Satisfies the needs and wants of customers Provides a competitive advantage
Allows organisations to adapt and diversify
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The importance of innovationto the firm
Australian data (IPRIA) The 30 of the top 50 R&D spenders for whom 5-year data wasavailable spent four times the national average on R&D per
revenue. Their return on shareholders funds was 17.1% comparedwith 7.7% for Australias top 1000 enterprises.
Global data (Boston Consulting GroupInnovation Survey) The 25 most innovative companies had a median annualisedreturn of 14.3% from 1996 through 2005, a full 300 basis points
better than that of the S&P Global 1200 median Innovators increased median profit margins by 3.4% per yearover ten years, compared with 0.4% for the median
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Innovation matters!
Source: IBM Global CEO Survey, Expanding the Innovation horizon July 2006
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Product Development Processes
1. First Generation Processes NASAs Phased review process activities brokendown into different phases
Similar to the departmental staged model passthe parcel
Independent functions no integration
Can still be successful if customer needs areunderstood and met
R&D
Ideas and
Development
Manufacturing
Produced
Product
Marketing
Sells the
Product
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Product Development Processes
2. Second Generation Processes
Staged based models Functions integrated across the process
Examples include: Booz-Allen Hamiltons simple 6 step NPD
process
Crawfords 6 step process
Coopers 7 stage model
Cooper and Kleinschmidts stage gate
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Examples of Second GenerationNPD Processes
1. Exploration
2. Screening
3. Business Analysis
4. Development
5. Testing
6. Commercialisation
Booz-Allen Hamilton Process
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Examples of Second GenerationNPD ProcessesCrawfords Process
1. New Product Planning
2. Idea Generation
3. Screening and Evaluation
4. Technical Development
5. Market appraisal
6. Launch
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Examples of Second GenerationNPD ProcessesCooper and Kleinschmidts Stage Gate process
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Example of Third Generation NPDProcesses
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Portfolio ManagementOrganisational tool to focus resources on the most
promising product opportunities.
High Reward (NPV) Low Reward
High Probability
Of Success
Low ProbabilityOf Success
Q1 Q2
Q3 Q4
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Evaluating New Product Opportunities- Parallel activities
1. Addressable MarketNeed
2. Industry Structure3. Customer
4. Competitor5. Value Proposition
1. Disclosure2. IP Ownership3. Novelty / Patentability4. IP Search
5. Freedom to Operate6. Enforceability
1. Summary of theInvention
2. Literature Review3. Requirement
Specification4. Research &
Development Plan
5. Competitive
Advantage
MarketIntellectualProperty
Technology/
Product
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Product Development Lifecycle
Time
Innovation Cycle Time
Product
Development
Investment
Net Profit
Period
Break Even
Time
Obsolescence
Initial
Evaluation
Opportunity
Identification
Cash
Flow
Product
Return
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Innovation Speed
Developing products faster offers a numberof advantages
Increased profits and sales Beat the competition to market
Maintain market leadership
Responsive to changing markets, styles andtechnologies
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Development
Speed
Product
Cost
ProductPerformance ProjectBudget
Source: Smith and Reinersten; Developing Products in Half the Time
Product Development Trade Offs
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The management dilemma of PD
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Experimental design to reduce time tomarket
Source: Harvard Business Review, E. Bonabeau et al, A more rational approach to new product
development March 2008
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Segmenting PD into truth-seekingand success seeking phases
Source: Harvard Business Review, E.
Bonabeau et al, A more rational
approach to new product development
March 2008
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When should early-stage be separated
from late-stage development?
Source: Harvard Business Review, E. Bonabeau et al, A more rational approach to new product
development March 2008
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Collaboration Driving Speed to Market
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Examples of Successful NPD
Art Fry - Failed glue
Patsy Sherman Spill in
the laboratory
George de Mestral -
Observation in nature
Steve Jobs Marketing
innovation
Bill Gates standardised
operating system
3MPostIt Notes
Scotchguard
Velcro
Apple iPod
Microsoft
Windows
SourceInnovation
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Summary some take home thoughts
New product (or service) development is the lifeblood oforganisationsInnovation requires Board leadership
Successful product development processes focus onthe customer
value decision = function (brand, price,
performance)time to market
fast failure
Incentive systems need to reward both truth andsuccess at the appropriate point in the process
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Questions?
Our website is www.ausicom.com
Dr Rowan Gilmore
CEOAustralian Institute for Commercialisation
(07) 3853 5225
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