New Product Development

Fall 2016

Professor Rajeev Kohli

506 Uris Hall

212-854-4361
rk35@columbia.edu

Class 1
Course objective

To examine
Strategies for developing new products
Processes for developing new products

Readings and cases are available on Canvas.

Steve Jobs (by Walter Isaacson) is widely available in
electronic and print formats.
Assignments and grading

1. Attendance and class participation 25%

2. Two (group) assignments 25%
3. Group project 50%

Groups of 3-4 students.

You can (but do not have to) work with the same group on the
homework and final project.
Attendance and class participation

1. Do not use any devices (e.g., phones, laptops, smart

watches) during class. Doing so will take away from your
class participation grade.
2. Attendance is required for all sessions.
3. Good preparation is essential for a good grade on class
participation. Analyze each case using the discussion
questions for guidance. Make decisions if required.
Prepare to explain your analysis to the class.
Homework (25%)
Objective
Redesign the backpack

Target market
College students

Selling price
$35 to $75. Assume cost of materials and manufacturing of
about 50% of the final selling price.

Readings
(1) Backpack makers rethink a student staple
(2) Three levels of design: visceral, behavioral and reflective
Homework

Deliverable
A PowerPoint presentation with 6-7 slides.

Due date
Upload on Canvas by 7 pm on Sunday, Sept. 25.

Selected groups will present their strategy in class on

Monday, Sept. 26.
Homework instructions

1. Identify competing products.

2. Talk to a retailer about
consumer trends
retail margin
their needs
3. Maintain a log of your own backpack use over the term.
Record the problems encountered when packing, carrying, using
and storing the backpack.
Classify these in terms of their importance (major, minor, trivial).
4. Use the preceding information to identify features that a
backpack (i) must have and (ii) must not have.
Homework instructions

5. Develop three concepts, one each focusing on the

visceral, behavioral and reflective aspect of design.
6. Integrate the three concepts into a single overall concept.
Explain the tradeoffs you made when combining the three
concepts into the final concept.
7. Describe how different products in your product line are
differentiated.
Group Project (50%)

Select an industry with broad appeal. Markets with few customers, and
business-to-business projects, are not appropriate for this course.
Choose a perspective: an entrepreneur, or an entrenched firm.

Deliverables
- One page proposal by the end of class 4 (week 2).
- PowerPoint presentation with 10-15 slides.

Due date
Upload on Canvas by 7 pm on Oct 11 (Tuesday).

All groups will present their projects in the last week of class.

You must attend both presentation sessions.

Group project (50%)
Option 1: Identify an opportunity and develop a concept
Choose an industry. Identify the stage of its life cycle.
Predict how the market is likely to evolve over the next 3-5 years.
Identify three market opportunities from the chosen perspective.
Choose one to further develop.
Develop the selected idea into a concept for a product or product
line for a target segment(s).
Assess the potential market size.
Evaluate alternative business models.

Option 2: Develop your own idea

Appropriate if you already have an idea for a product and have done
some work on it. The proposal should describe the current stage of
product development and the intended progress over the course.
Cases

1. Tesla Motors - market entry strategy, platform strategy,

building capabilities

2. Launch of the Indian Premier League - business model

3. Dropbox - product testing, development process

Discussion questions for each case are available on Canvas.

Overview of todays class and next weeks classes

Successful and unsuccessful products.

Strategies for new product development over the product

life cycle.

Tesla Motors.
Successful and unsuccessful new products

Failure rates of new products

Factors affecting failure and success
Successful and unsuccessful new products

Failure rates of new products

Factors affecting failure and success
84.0%
78.0%

Yr. 1 sales 48% of 608 new products in 20 categories

($ million) met their performance goals in 2008

9.0% 7.0% 6.0%

6.0%
3.0% 4.0% 2.0% 0.2% 0.3% 0.3%

<$7.5 $7.5-$10 $10-$20 $20-$50 $50-$100 $100+

Total Food & Beverage Total Non-Foods

Includes brand extensions and new brands.

Why do products fail?

30% Poor positioning (no unique benefit)

30% Failed to meet expectations of consumers

20% Insufficient awareness

10% Insufficient promotion

10% Inadequate distribution

SOURCE: Clancy & Shulman, Marketing Myths that are Killing Business
 Percentage of successful new products that were brand
extensions

94% 93%

Food & Beverage Non-Foods

Are brand extensions more successful than new brands?

Across Food, Drug & Mass Channels (excluding Walmart)

Source: IRI New Product Profiler 2008
 Average year-one sales ($ millions) in 2008 - new brands v brand
extensions

$87

$27 $26
$20

Food & Beverage Non-Foods

New Brands Brand Extensions

*Across Food, Drug & Mass Channels (excluding Walmart)

Source: IRI New Product Profiler
What do these product have in common?

$76 M

$331 M (yr. 1)

$1.2 billion (yr. 1) $29 million (yr. 1)

$3.3 billion (yr. 3) $308 million (yr. 3)

$109 M (yr. 1)
What do these products have in common?
 Evaluate the following product development strategy:

... to take the lead in meeting the needs of

the company's customers for improved and
new products, to develop new uses for
existing products, and to develop high-profit
products for existing and potential
customers.
 Developing products over the life cycle

Overhead projectors Telephone answering machines

14000 1982-1993
1960-1970

120000 12000

100000 10000

80000 8000
Units

60000 6000

40000 4000

20000 2000

0 0
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 82 83 84 85 86 87 88 89 90 91 92 93
Year
Year
How does product development depend on the stage of
the life cycle?
Sales
Profits

Lead Users Early adopters Early majority Late majority Laggards

Sales
+
Profits

Time
Product
- Development Introduction Growth Maturity Decline