EP103x New Product Development

Professor Ganesh N Prabhu

This course covers how companies can identify some significant existing or latent user needs.
• We will cover how to use this understanding to develop new products or services to meet
those needs.
• We will cover Innovation and Technology led new products.
• We will also cover adapting existing products to new users.
• We will also cover the adaptation of business models to new context.
• We will use both the product-centric as well as the user-centric viewpoints.

Product development involves making many critical trade-offs in features to match the latent
customer requirements and the competitive offers. Most product characteristics and key features are
decided at the early product development stages these may prefix their market scope. Changing such
product characteristics later to meet new demands or correct any mistakes is often expensive,
sometimes unviable, or sometimes just not feasible.

Decisions taken at the early stages can have major strategic and operational impact on the success of
new products when launched. Bad decision at early stages can restrict the range of customers that
may find the new product suitable.

The role of product development is therefore critical in meeting new two major targets:
1. The product is both suitable and viable to users and,
2. The time to reach the market is as less as possible.
We look at both of these.

First, look at the cost of late design changes. As you can see in this diagram, if a design change is made
at the design stage, let's say, it cost $10 to make that change, the same design change, when made at
the process design stage, will cost a $100, 10 times more and the same design change made at the
production stage will cost a $1000 maybe 100 times more and change remains the same. So the effort
involved is much higher at a later design stage and the cost involved is much higher, but the change
that is being made is just the same if it was made earlier.

So, therefore understanding customer requirements and building a correct design right at the early
stage is actually very critical in reducing the time it takes to reach the product into the market as well
as to reduce the cost of making the product.

Look at the time that it takes to develop a new product. A lot of work has happened in this industry in
this context, in this field, to reduce the time taken to develop new products.

So in the most of the major improvements happened between the 80s and the 90s. As you can see in
this chart, Honda used to take 5 years to develop a new car in the 80s and they were able to reduce
the time to 3 years in the 1990s and it's much lower currently.

AT&T took 2 years to develop a telephone exchange and it went down to one-year in the 1990s.

Look at Hewlett-Packard. They used to take 4-1/2 years to make a new printer in the early stages.
Now, they make printers in 2.2 months. Much faster process. Obviously, the printers are not radically
different from one to the other, but there are new products being launched by Hewlett-Packard
almost on a monthly basis because of this faster time to market.

© All Rights Reserved. This document has been authored by Professor Ganesh N Prabhu and is permitted for use only within the course "New
Product Development" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data, illustrations,
pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means – electronic, mechanical,
photocopying, recording or otherwise – without the prior permission of the author.
 EP103x New Product Development
Professor Ganesh N Prabhu

So, what does this mean for companies?

If you have a new technology and you are fast to build that product and bring it into the market, the
new technology is incorporated into the latest product at a much faster pace than the other
companies and that gives you an advantage.

© All Rights Reserved. This document has been authored by Professor Ganesh N Prabhu and is permitted for use only within the course "New
Product Development" delivered in the online course format by IIM Bangalore. No part of this document, including any logo, data, illustrations,
pictures, scripts, may be reproduced, or stored in a retrieval system or transmitted in any form or by any means – electronic, mechanical,
photocopying, recording or otherwise – without the prior permission of the author.