Guide to New Product Introduction
What is New Product introduction (NPI)?
New Product introduction is the step-by-step process by which a company creates an idea and carries it through to commercialization. It is called the new product introduction process, rather than the new product development process, because NPI looks at the product from the viewpoint of manufacturing. Typical manufacturing processes are about the ongoing production of existing offerings; NPI “introduces” new products into the manufacturing process.
New Product Introduction Steps
New product introduction is the specific series of six steps or stages a company uses to achieve its realization of new offerings to satisfy a market need. In the best companies, a product development strategy links corporate strategy with product development.
While nearly every company develops new products or services, the new product introduction process differs substantially from one company to another. Variables include the industry, the product type, whether the products are an incremental improvement or a breakthrough innovation, and the degree to which you focus on product portfolio management.
Although cross functional processes differ depending on these factors, an accepted approach for at least three decades puts a new product idea through a series of steps. At the end of each of the six steps, the Senior Management team makes an up-or-down decision in a formal review (often called a “gate”). A typical NPI approach has six steps with five gates:
- Step 1: Ideation
- Step 2: Product Definition
- Step 3: Prototyping
- Step 4: Detailed Design
- Step 5: Pre-Production (Validation/Testing)
- Step 6: Manufacturing
Step 1: Ideation
This first step or stage of the new product introduction (NPI), often called “Ideation,” is where new product concepts originate from the product team. Often, businesses form a small team to explore the idea generation and initial definition of the product concept; the team also performs business analysis, and market research, and explores technical and market risk. The idea stage, brainstorming new products, is often the most important step. It is where most product ideas come from.
Getting the product concept wrong at this early stage wastes time and increases opportunity cost for the company and demotivates the product team. Not all new product ideas come from the inside – the Corporate Development organization and executives should be constantly scanning for new product ideas. Marketing efforts should also include product lifecycle management, active competitive analysis, and market scanning too.
Step 2: Product Definition (Discovery)
Sometimes called “scoping,” or concept development, this step involves refining the definition of design concepts, and gathering of product requirements. In a startup this step is often called Discovery. This is where you explore customer needs deeply. The team creates the first detailed assessment of the technical, market and business aspects of the new product concept and determines core functionality. This stage is a make or break to ensure a successful product.
Developers and managers, and especially the project manager, explore and define the key points of differentiation for the new product and get customer feedback. This second step, if done improperly, can increase time to market or cause the product developers to misunderstand the needs of the market. Because this step often comes before you ramp up the team, this is where you define the initial marketing strategy. Although it is early, often teams make estimates of metrics such as ARR (Annual Recurring Revenue) or Acquisition Costs. Also in this stage, the the product development cost is estimated and the design specifications are fixed.
Even though it is early, now is the time to line up a contract manufacturer or several manufacturing companies (for competitive quotes). Teamwork between procurement, manufacturing and R&D is very important to minimize product cost by shopping for the best providers.
Step 3: Prototyping
This phase in the NPI process justifies the company’s investment in the development of a product by requiring the team to create a detailed business plan. This plan usually involves intensive market research in parallel with proving the product feasibility. The team thoroughly explores the competitive landscape and where the proposed product fits within it. They also create a financial model for the new offering that makes assumptions about market share. Pricing is determined at this step.
For tangible new products, such as hardware or mixed systems, the team also considers the manufacturability (Design for Manufacturing (DFM)) of the proposed new product. By the end of this phase, Senior Management should have a clear idea of what they’re investing in and how it will perform in the marketplace. This step in the product development process is critical because it reduces the market risk for the new product in all businesses.
In some cases, companies pilot early production runs managed by Manufacturing and the quality control department. This is also the stage where a team reviews its supply chain management to ensure that they can use the current supply base supplier qualification takes a long time.
Step 4: Detailed Design
In this phase, the focus is on the product design. It begins by refining the prototype of the product. By this point, the prototype is largely full featured and working as a real product would. In most cases teams alpha-test the prototype, working with customers in an iterative fashion: getting their feedback and incorporating it into the prototype.
At this stage a bill of materials is generated. The design team can become quite large given the volume of work required. In this phase, the organization will scale up manufacturing services as well, to ensure that the design is high quality (so yields will be high). Procurement will also be heavily involved at this step.
In parallel, marketing, sales and manufacturing begin to create the launch and manufacturing platforms to support the emerging product. They may begin implementing early stage marketing tests. This fourth step in the new product development process is sometimes called Development, and sometimes incorporates the next step, “Validation/Testing.” Program Management may lead this step.
Step 5: Pre-Production (Validation/Testing)
Validation and testing means ensuring the prototype works as planned. It also means validating the product in the eyes of the customers and markets, while testing the viability of the financial model for the product.
Everything in the business case, and everything learned from customers during the Development phase comes under scrutiny and is tested in “real world” conditions as much as possible. The marketing strategy is also confirmed at this point. If anything in the business case or prototype needs revising, this is the team’s last chance to do so. This is the last step before the final product is ready for the market.
Step 6: Manufacturing
During this step, the team realizes everything required to bring the final product to market, including marketing and sales plans (or sales training if necessary). The team begins to operationalize the manufacture and customer support for the product. A manufacturing organization that employs continuous improvement, will have the ongoing assurance that they are building high quality products.
Each of these six phases ends in a gate review where the team presents to management specific, pre-defined deliverables, and demonstrates the outcomes required to move on to the next phase of the product development process. Each of these reviews ends in a go/no-go decision. In other words, Management has five opportunities to kill the project before committing to its launch.
Agile for NPI – Yes!
Waterfall Product Development
Currently, there are two primary approaches to the product development process. The first is a waterfall approach, a generic term for a traditional new product development process in which there are discrete steps and milestones. It is called waterfall product development because, in this approach, teams continue on to the next stages only after milestones are met, i.e. the flow is one directional only. We often see these stages in management consulting engagements.
However, the world is moving away from this waterfall product development approach. It is too process heavy and encourages unnecessary meddling from Senior Management. Compare your gate reviews and other aspects of the process with our product development checklist.
Agile Product Development
Agile product development processes, on the other hand, are increasingly more common because they can create new products that delight customers while economizing on resources. The Agile approach relies on sprints, cycles that combine development with customer testing. Almost all organizations that say they are Agile are really using it between major milestones, to develop their products. This is a hybrid approach that offers the best of both worlds. It is the approach we take in our agile consulting.
Who is involved in New Product Introduction?
New Product Introduction is a cross-functional activity in process management performed by product developers (from all different functions in businesses). It is common for a cross-functional team to assemble to realize new products in the idea generation stages to develop the initial product concept. In many industries, these functions might include design engineering or coding, testing, product management, sales, finance, and others, led by a team leader or scrum master. A cross-functional team stays together throughout the new product development process.
In addition, a Senior Management team oversees and approves the project as it develops. They have a responsibility for the investments they make in new product development. The best product development processes have roles and responsibilities that are clearly defined – for the development team and for the Senior Management team – so as to limit meddling by management.
Minimum Viable Process: A Modern Approach
The traditional six-steps of NPI described above is derived from the established new product development process you’ve read about in the textbooks and seen in the training videos. Some of these processes might have five steps, or even seven or eight steps, but the basic idea is the same. This is state-of-the-art product development — for 1985. But today’s fast-moving markets, rapidly changing technology, and agile teams need a lean approach.
We recommend drawing elements from both waterfall and agile to create a modern NPI.
This new approach is to have a Minimum Viable Process: enough process but never too much. It begins with a simple realization that any product development process boils down to two requirements:
- Enable executive oversight at the inflection points where they need to make investment decisions and,
- Guide the team toward risk reduction.
Lengthy, onerous reviews, where the team must justify its continued existence every few weeks or months, creates too much bureaucracy and leaves the team with too little flexibility. It makes Senior Management the customer throughout the process. Further, while adherents of the traditional phases and gates approach acknowledge that product development is an iterative activity, they continue to try to make it fit into a sequential, linear scheme.
“Enable executive oversight at the inflection points where they need to make investment decisions and guide the team toward risk reduction”
The Minimum Viable Process approach involves a subtle but important change in thinking. While the phases and gates approach contains a series of sequential steps, the Minimum Viable Process recognizes that each portion of the process has many activities done concurrently and iteratively. Rather than fulfilling a rigid set of deliverables, the team engages with Senior Management in three check-ins that show that the concept is sound, that there is a fit between the market and the product, and that everything is prepared for the product launch. These check-ins demonstrate that continued investment is warranted.
- Product Cost
Each of these parameters must have a quantitative threshold that the team must not exceed, as in the diagram below. We call these quantitative parameters boundary conditions. This approach implies that the team has already done sufficient homework to set these parameters accurately and to make them quantitative.
Once the team and management agree to these boundary conditions, the team is left alone to reduce the risks associated with meeting each condition. If it looks as though the team is on track to achieve its aims, then Management does not meddle.
In addition, in a Minimum Viable Process there are no rigid reviews with a pre-fabricated set of deliverables. These reviews are replaced by the three check-ins throughout the process where the development team meets Management’s need to ensure that its investment is protected. They demonstrate the viability of this continued investment by showing that the development team is reducing risk in every conceivable category: market risk, technical risk, competitive risk, etc.
If at any time – and not merely at predetermined “gates” – the team perceives that it will not achieve one or more of its boundary conditions (called a “boundary break”), then the development team informs the Senior Management team and there follows an escalation process called an Out-of-Bounds Review.
In such a review, the team communicates about the boundary condition break they anticipate. The team also proposes a solution to the boundary break. If the Management team agrees with this solution, then they approve it and the team moves forward on this basis. If the Management team does not agree with the proposed solution, then there follows a face-to-face meeting where all stakeholders negotiate a new boundary condition. The team then proceeds based on this new specification. Such reviews should take place in days or in a week, and not in weeks or months.
Establishing Boundary Conditions coupled with the Out-of-Bounds reviews reduces bureaucracy and paperwork. It is a lean approach to new product development where issues are resolved quickly. Most importantly it preserves the Management team’s confidence in their investment, while guiding the development team to continually reduce risk, by working to a clear set of objective parameters.
A Modern, Lean Approach to New Product Introduction [NPI]
Old-fashioned, sequential phases and gates processes tend to take a one-size-fits-all approach to new product development. They put projects through a set of rigid milestones, whether or not these milestones apply to the project at hand. In a Minimum Viable Process, the project has only the milestones it needs.
New Product Introduction Example: for Incremental Products
For example, if you are developing an incremental improvement on an existing product, there may be no need to demonstrate the Concept Fit. If your existing product is successful, then you’ve already proved the concept as well as the Product/Market Fit. Such a project might need only one check-in between the team and management.
There’s no need to have three check-ins where they don’t add value – and if there’s no reason to have three, there’s certainly no reason to have five! In fact, having three check-ins might subtract value by adding waste and bureaucracy. Have only the milestones that make sense for your project.
Define the exit criteria for each check-in in terms of the set of boundary conditions that the development team and Senior Management have defined for the project. This approach, combined with a Minimum Viable Process with only three check-ins, enables Management by exception. This means that Management intervenes only when it looks as though the team is going to violate one or more boundary conditions.
This management-by-exception approach is the lean way to develop new products. Combined with the three-step, Minimum Viable Process described above, it ensures that companies have the predictability and process quality that management needs to make good investment decisions, while also ensuring that teams spend most of their time reducing risk and adding value to products in ways that customers actually care about.
And this is what the Minimum Viable Process is all about. Call it the Goldilocks Approach: getting the process just right. Not so little process that chaos ensues, but not so much process that the team is distracted from its most important priority: creating products that delight customers and meet business objectives.