Re-Thinking the Product Development Funnel
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1 Re-Thinking the Product Development Funnel Gerry Katz ISBM Webinars September 28,
2 My Objectives for Today Review some of the best known graphical depictions of the New Product Development Process How they have evolved over time Their strengths and weaknesses Propose a new one How it differs from previous funnels The steps needed to get through the funnel 2
3 About AMS Co-founded in 1989 by Prof. John Hauser of the MIT Sloan School of Management Co-author of the landmark papers, The Voice of the Customer (1993) and The House of Quality (1988) Co-Director of MIT s Center for Innovation in Product Development (CIPD) More than 400 marketing science engagements Voice of the Customer (VOC), Quality Function Deployment (QFD), Web-Based Brainstorming and Ideation, Concept and Prototype Evaluation, Conjoint Analysis Training and coaching 3
4 The Evolution of the Product Development Process 4
5 Source: Urban and Hauser Design and Marketing of New Products (1980) 5
6 Source: Urban and Hauser Design and Marketing of New Products (1980) 6
7 Source: Urban and Hauser Design and Marketing of New Products (1980) 7
8 Source: Cooper Winning at New Products (1986, 1993, 2001) 8
9 9
10 Source: Wheelwright & Clark Revolutionizing Product Development (1992) 10
11 11
12 Source: McGrath Setting the PACE in Product Development (1992) 12
13 13
14 Source: MIT Center for Innovation in Product Development (CIPD, 2005) 14
15 Poll Question #1 Does your company use a standardized New Product Development Process, and if so, which of these does it most resemble? 1. No standardized process 2. Cooper: Stage-Gates 3. Wheelwright and Clark 4. McGrath: PACE 5. MIT: CIPD 15
16 A Few Observations All of the funnels are horizontal!! 2. All begin with the idea or concept, usually preceding the entry point of the funnel 3. All seem to gloss over or minimize the Fuzzy Front End 16
17 A New Funnel for the Product Development Process 17
18 A New, New Product Development Funnel Discovery Definition Design Development Delivery What s the opportunity? Who s the customer? What are their problems? What needs must we satisfy? What specifications should we build to? How can we satisfy these needs? How should we describe our solutions? What solutions do we invest in? Which features should we include? How much will people pay for them? Can we produce it, sell it, and make money with it? 18
19 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 19
20 Navigating Our Way Through the Funnel 20
21 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 21
22 The Purpose of Using Secondary Sources Get smart inexpensively Don t reinvent the wheel Piece together facts that nobody else has quite pieced together yet Connect the dots 22
23 Market Research Using Secondary Sources Internal sources Publications Syndicated / industry studies Internet resources 23
24 Internet Sources: Search Engines Google.com Bing.com AltaVista.com Excite.com Ask.com Go.com (Yahoo search) Northern Light business oriented OneKey.com (A kid-safe Google search) 24
25 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 25
26 Ethnography / Contextual Inquiry Advantages What they say vs. what they do Can observe the customer actually using product or service accomplishing jobs / tasks Understand the customer s environment Persuasive power of snapshots and video Disadvantages Interviews are time intensive and costly Finding customers willing to have you observe them in the workplace Hawthorne Effect, especially involving safety 26
27 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 27
28 On-Line Communities Goes by many names: Social Networks Communities of Interest Communities of Enthusiasts Very good for problem identification Less good as a source of new ideas Easier for B2C, harder for B2B 28
29 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 29
30 Some Interesting Numbers According to the PDMA s 2004 Comparative Performance Assessment Study (CPAS) of 416 firms engaged in NPD: Almost 50% of all companies in the study now use VOC methods on about half of all their new product development initiatives Voice of the Customer is one of the strongest differentiators between the best performers and the rest Source: Product Development & Management Association Foundation 30
31 More Interesting Numbers According to an article by Bob Cooper and Scott Edgett in the March 2008 issue of PDMA s Visions Magazine: In a study of over 160 companies, asking for managerial evaluations of 18 different sources for insight and discovery for new products and services: Most Effective VOC Techniques: Ethnography Customer Visits Focus Groups Lead User Analysis Least Effective Open Innovation Techniques: Partners and Vendors Less Well Than Expected: Disruptive technologies Communities of enthusiasts Source: PDMA Visions Magazine, March
32 So, let s go talk to some customers and ask them what they want! 32
33 33
34 What the Voice of the Customer Is Not Any kind of market research Demanded or desired solutions and features Customer-provided technical specifications Opinions of industry luminaries or so-called experts Anecdotes from sales or tech support 34
35 What the Voice of the Customer Is A complete set of customer wants and needs Expressed in the customer s own language Organized by customers into a hierarchy Prioritized by customers for relative importance and current performance / satisfaction 35
36 36
37 37
38 Importance Score Using Importance and Performance to prioritize the needs High Focus Areas Minimum Requirements Mod Low Hidden Opportunities Over- Emphasized Low Mod High Performance/Satisfaction Rating 38
39 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 39
40 QFD Helps Translate Needs into Specs Interactions Customer Needs Performance Measures Planning Matrix Correlations Prioritization Benchmarks Target Values 40
41 Poll Question #2 Which of the following research techniques are a common part of your company s New Product Development process (check as many as apply)? 1. Secondary Source research 2. Ethnography 3. On-Line Communities 4. Voice of the Customer (VOC) 5. Quality Function Deployment (QFD) 41
42 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 42
43 Ideation to Develop New Concepts Internal brainstorming + Inexpensive, fast, and confidential - Isolated and subject to politics and cynicism External brainstorming + Allows outside the box ideas from people who use the product or service + Creates goodwill among customers - More costly and risks falling into the hands of the competition - Intellectual property issues Traditional brainstorming + Dedicated attention from participants for the duration of the meeting - Expensive to involve geographically dispersed participants - Traditional limitations of group activities (e.g., free-riders, bullies, etc.) Online brainstorming + Relatively inexpensive to conduct; no geographical boundaries + Allows for privacy and permits discrete management of disruptions + Time delay in interaction; more time for careful thought ( soak time ) - Risk of competitive espionage if external participants are not chosen wisely 43
44 Poll Question #3 and #4 When your company uses formal brainstorming / ideation techniques, which of these is most common? Q Internal brainstorming 2. External brainstorming 3. Both about equally Q Face-to-face brainstorming 2. On-line brainstorming 3. Both about equally 44
45 A Recent Academic Source 45
46 Background and Theory Traditional brainstorming methods have limitations: Participant personalities and politics tend to complicate the brainstorming process. In face-to-face sessions, participants often get defensive about their own ideas. The Free-rider problem is difficult to overcome. Bringing all participants to a central location is inconvenient for participants and expensive for companies. Single-session format prevents extended feedback; participants have a limited amount of time in which to think of or respond to ideas. 46
47 Individual vs. Group Incentives Traditionally, ideation participants have been incented in two ways: Participants are rewarded based on their individual contribution Participants are rewarded based on the group s collective output Neither incentive scheme is ideal. Rewarding participants based only on their individual contribution ignores the important collaborative aspect of ideation. But rewarding participants based only on the group s collective output encourages free-riding. The most useful ideas are those that stimulate others to build upon them 47
48 The Solution? 1. Move the ideation process to the web. Anonymity removes all personalities and politics from the process. Don t need to co-locate the participants. The process can be carried out asynchronously, allowing for extended thought. 2. Reward participants based not only on their own individual contributions, but on the impact of their contributions on others. Participants are rewarded based on the ideas they contribute and the number of times their ideas are built upon by others. Make it fun! 48
49 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 49
50 Definition: What is Concept Testing? Concept Testing: A mid-stage NPD research activity that helps establish proof of an idea s functional and commercial viability The Goal: Determine whether we have something here, and if not, what needs to be reworked to improve our odds? 50
51 Concept Testing answers these questions: Do customers understand the concept? What about this concept do customers like or dislike? Do customers believe that the concept is viable? How might customers want to use this product or service? How likely is it that customers might want to buy it? 51
52 Concept Testing cannot answer these questions: How large is the market for this product? How many units will we sell? How much will people pay? Is the product technically viable? How will competitors respond to the product s introduction? 52
53 The First Decision: Qualitative or Quantitative? The case for qualitative research Concept requires detailed explanation Limited or expensive population to recruit Primary goal is diagnostic The case for quantitative research Concept can be conveyed via common media Target population can be easily found and recruited Primary goal is evaluative The case for both Strong need for both diagnostic and evaluative information You have sufficient time and money! 53
54 Poll Question #5 When your company does concept testing, which of these is the most common method? 1. Qualitative concept testing 2. Quantitative concept testing 3. Both about equally 54
55 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 55
56 What is Conjoint Analysis? Conjoint Analysis is: A market research technique used to measure customer preferences for specific features and attributes in products and services Underlying assumption: Customers overall value or utility for a product is a weighted sum of the value of each of its parts Utility = C 0 + C 1 X 1 + C 2 X C n X n Conjoint Analysis forces people to make trade-offs between specific attributes and features Its name comes from Considered Jointly because it usually involves a comparison of one product with another 56
57 Why Use Conjoint Analysis? Conjoint Analysis is particularly useful for: Evaluating non-continuous variables Evaluating price sensitivity How much is a given feature worth? 57
58 Key Terms and Concepts Attributes Levels Also known as Features Body Style Miles per Gallon Price These are the possible values each feature can have SUV, Minivan, Sedan, Sports Car 4 mpg, 12 mpg, 25 mpg, 50 mpg $20,000, $30,000, $50,000 58
59 The Conjoint Task Respondents are asked to rank, rate, or choose among sets of products which are made up of various combinations of attributes and levels By rotating through various combinations of the attributes and levels, we can derive the relative importance and value of each attribute and level 59
60 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 60
61 Product Testing An almost identical process to concept testing, except that it occurs after actual use of the product or service Alpha testing Beta testing Gamma testing 61
62 A New, New Product Development Funnel Discovery Definition Exploratory Research Target Definition Secondary Sources Needs Assessment Ethnography Online Communities Define Specifications The Fuzzy Front End Design Ideation Concept Development Concept Eval Development Feature Prototype Trade-Off Eval Delivery Positioning & Launch 62
63 Summary A New, New Product Development Funnel Strengths More detail, more emphasis on the Fuzzy Front End Ideation has now been put in its proper place It s vertical!! Caveats Deliberate emphasis on market research Little detail on Product Launch 63
64 Questions and Answers? To Receive a Copy of any of our extensive publications on Product and Process Innovation, please visit: Feel free to contact me: Gerry Katz gkatz@ams-inc.com We invite you to attend one of our upcoming public training courses. Our next one will take place on November 9-10 in Chicago. Thank You! 64
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