TECHNOLOGY ENTREPRENEURSHIP

(ENT600)

UNIT 6 :
NEW PRODUCT DEVELOPMENT

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 1

 Definition of New Product Development

• New product development is defined as the process by

which entrepreneur designs and creates new product or
service that will be sold to customers

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 2

 The Importance of New Product Dec 2015

Development
• For Survival
– Introduction of new product provides a platform for the
company to compete
– Companies that are able to develop and introduce new
and improved products will have a distinct advantage to
compete
– Competition has become more intense as technological
products become more complex and the technological
product life-cycle getting shorter
– Companies face threat of losing market share when
competitors come up with their new products
– Thus company have to come up with new products to
ensure survival
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 3
 The Importance of New Product
Development

• Strategy for growth

– Development of new products can ensure business to

grow by:
• Introducing new products to existing markets
• Introducing new products to new markets

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 4

 Defining a New Product

• The outcome of product development process is a

new product
• The new product can be:
– a completely new product
– not a completely new product but an existing
product that has undergone significant
improvements
• A new product is any product “perceived to be
new” in the mind of the consumers

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 5

 Classifications of new products
Two classification of new products:
• Completely New Product
• Improvements on Existing Products

Completely New Product

• New-to-the world products
– The first of its kind (new inventions)
– Create new market
• New to the firm (new product lines)
– New to the company but not new to the
marketplace
6
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 6
 Improvements on Existing Products

• Addition to existing lines

– Subsets to the new product lines
– Perhaps targeted to different market segments

• Improvements and revisions to existing products

– New products to replace existing products with cosmetic and
functional enhancements

• Cost reductions
– Offer no new benefits to the consumer other than possibly reduced
price
– Provides enormous added-value to the firm (financial rewards too)

• Repositioning
– New applications to existing products
– More to do with consumer perception rather than technical
development

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 7

 Product and New Product Development

• A product is an item or service that serves the needs of

customers
• A product has many dimensions, which includes:
• Features
• Quality Specifications
• Packaging
• Price
• Brand Name
• Technology
• Theoretically, it is possible to label a product as new when
any changes or modifications are made to any of the
product dimensions

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 8

 Product Dimensions

Packaging
Price

Quality Brand Name

Specifications PRODUCT

Technology
Features

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 9

Different examples of changes in product dimensions that can
create a new product:

• Changing the performance capabilities of the product

(e.g. a new, improved washing detergent)

• Changing the application advice for the product (e.g. the

use of liquid instead of powder detergent)

• Changing the after-sales service for the product (e.g.

frequency of service for a motor car)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 10

Different examples of changes in product
dimensions that can create a new product (cont.):
• Changing the promoted image of the product
(e.g. the use of bio-degradable packaging
material)

• Changing the availability of the product (e.g. the

use of vending machines for top-up cards)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 11

 New Product Development
Process
• New product development process for technology
ventures usually begins with research and
development to product design to concept testing
to building prototypes and to test marketing
(before full-scale commercialization)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 12

 Product Development Process Dec 2015

1. RESEARCH AND DEVELOPMENT

2. PRODUCT DESIGN

3. CONCEPT TESTING

4. BUILD PROTOTYPE

5. TEST MARKETING

COMMERCIALIZATION

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 13

 Product Development Process:
1. Research and Development
• New product is often characterized by very high rate of
failures

• This may be due to very limited historical or preliminary

data

• Therefore, research and development is a critical step in

the new product development

• Research and development (R & D) refers to organized

efforts that are directed towards discovering new
knowledge, product or process

• Usually, innovation is involve in the R & D for new product

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 14

 Product Development Process:
1. Research and Development (cont.)

• Product development research is conducted to:

– helps company to response to market changes more
effectively
– understand the attitudes of customers towards the new
technology that is going to be introduced

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 15

 Product Development Process:
2. Product Design

• Product design refers to the conceptual translation of a

new product idea or concept

• It includes design of the product and its architecture

(physical design), artistic design (aesthetics) as well as the
required parameters to satisfy the market needs

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 16

 Product Development Process:
2. Product Design (cont.)

• When designing the product, the basic product

performance criteria must be taken into
consideration. This includes:
– Performance
– Reliability
– Safety in use
– Durability
– Special features

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 17

 Product Design:
Product Performance Criteria
• Performance
– The main characteristics of the product or services

• Reliability
– The consistency of performance and dependability

• Safety in use
– Risk of injury or harm

• Durability
– The useful life of the product

• Special features
– extra characteristics

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 18

 Product Development Process:
3. Concept Testing

• Concept testing is the initial test for most new

product designed

• It involves the process of using quantitative and

qualitative methods to evaluate consumer
response to a product idea prior to the introduction
of product to the market

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 19

 Product Development Process:
3. Concept Testing (cont.)

• It involves showing a preliminary description of

the product or service idea to prospective
customers to gauge customer interest and
purchase intent

• If strong acceptance is found, the next step will be

the preparation of the prototype

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 20

 Purpose of Concept Testing

• The main purpose of concept testing are:

– To choose the most promising alternative from a set of

alternatives

– To get an initial notion of the commercial prospects of a

concept

– To find out who is most interested in the concept

– To indicate what direction further development work

should take
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 21
 Concept Testing: The Process

• Define the purpose of the test

• Choose a survey population
• Choose a survey format
• Communicate the concept
• Measure customer response
• Interpret the results

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 22

 Example: Concept Testing for the emPower
Electric Scooter (shown below)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 23

 Example: Concept Testing for the emPower
Electric Scooter

• The purpose of concept test:

– To identify what market to be in?

• Sample population
– College students who live 2-5 km from campus
– Commercial transportation

• Survey format:
– Face-to face interview
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
24
(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter

• Communicating the concept can be done by:

– Verbal description
– Sketch
– Rendering (a drawing in perspective of a
proposed structure)
– Storyboard (illustrations or images displayed in
sequence for the purpose of pre-visualizing)
– Physical appearance model

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

25
(2009) DEVELOPMENT
 Example: Concept Testing for the
emPower Electric Scooter
Example of Verbal Description
• The product is a lightweight electric scooter that can be
easily folded and taken with you inside a building or on a
public transportation
• The scooter weighs about 15 kilos. It travels at speed of
up to 20 km/hr and can go about 20 km on a single charge
• The scooter can be recharged in about 2 hours from a
standard electric outlet.
• The scooter is easy to ride and has a simple controls – just
an accelerator and a brake

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 26

 Example: Concept Testing for the emPower
Electric Scooter (Sketch)

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

27
(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter (Rendering)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 28

 Example: Concept Testing for the emPower
Electric Scooter (Storyboard)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 29

 Example: Concept Testing for the emPower Electric
Scooter (Physical Appearance Model)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 30

 Example: Concept Testing for the emPower
Electric Scooter : Customer Response

• Measure of customer response through survey:

– Part 1: Qualification

– Part 2: Product Description

– Part 3: Purchase Intent

– Part 4: Comments
– Part 5: Interpret Results
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
31
(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 1: Qualification
– How far do you live from campus?
• If not within the specified radius, thank the
respondent and end interview

– How do you currently get to campus from

home?

– How do you currently get around campus?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 32

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 2: Product Description

– Present the concept description as in the
previous verbal description

– Get comments from respondents

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 33

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 3: Purchase Intent

– If the product were priced according to your expectations, how
likely would you be to purchase the scooter within the next year?

I would I would I might or I would I would

definitely not probably not might not probably definitely
purchase the purchase purchase purchase purchase
scooter the scooter the scooter the scooter the scooter

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 34

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 4: Comments
– What would you expect the price of the scooter
to be?

– What concerns do you have about the product

concept?

– Can you make any suggestions for improving

the product concept?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 35

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

• Part 5: Interpreting the results

– From the data set gathered during the interview,
forecast the potential of the product for
commercialization

– Make estimate in terms of:

• Size of the market
• Selling price
• Sales forecast

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

36
(2009) DEVELOPMENT
 Product Development Process:
4. Build Prototype
• A prototype is the first physical depiction model of
the new product or service
• It is usually in a rough or tentative mode
• This model has the essential features of the
proposed product or services but the model is
open to modification
• Prototypes can be used to elicit comments from
designers and users to learn more about the
product
• One of the objectives of having prototype is it
permits usability testing

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 37

 Usability of Products

• Usability is a measure of a user’s experience

Dec 2015

when interacting with a product

• Five factors determining usability:

Dec 2015

– Ease of learning
– Efficiency of use
– Memorability
– Error frequency and severity
– Satisfaction

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 38

 Usability of Products
• Ease of learning
– How long does it take to learn the product’s operation?

• Efficiency of use
– Once experienced, how fast can the user complete the necessary
steps?

• Memorability
– Can the user remember how to use the product?
• Error frequency and severity
– How often do the users make errors, and how serious are these
errors?

• Satisfaction
– Does the user like operating the product?
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 39
 Product Development Process:
5. Test Marketing
• Test marketing is usually carried out prior to a full-
scale launching of a new product

• In test marketing, the new developed product will

be introduced to a representative sample of
population to assess the market’s reaction

• The purpose of carrying out test marketing is to

predict sales and profits from a major product
launch

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 40