What is New Product introduction (NPI)?
New Product introduction is the step-by-step process to take an idea at concept stage and move it through a working prototype stage to mass production and commercialization. It is called the new product introduction process, rather than the new product development (NPD) 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
The new product introduction process is a set of repeatable steps or stages a company uses to achieve its realization of the new product to satisfy a market need.
In today’s global environment, this manufacturing process is often carried out by a manufacturing partner in low cost regions. This is called sourcing and is most often done by a contract manufacturer who either designs it for you, builds the product based on your design (the development cost is often built into the product cost if the contract manufacturer does the design and certifications).
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, the amount of innovation, materials, supply chain considerations, key components, time to market constraints, and labor cost. As such, the product development life cycle also differs.
Although cross functional processes differ depending on these factors, an accepted approach to the NPI process is to define a process in a series of steps. At the end of each of the steps, the Senior Management team (and key stakeholders) makes an up-or-down decision in a formal review (often called a “gate”). Lean practices are becoming more common where the rigid steps are replaced by lean cross functional workshops. Product Introduction processes vary depending on the type of product and relative risks. Often it is broken in 5 – 7 stages.
A typical NPI approach has six steps with five gates:
- Step 1: Ideation (Initial Idea)
- 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 a new product idea originates from the product team. Often, businesses form a small team to explore the idea generation and initial definition of the product concept to move the product forward; 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. Getting a contract manufacturer on board should start at this step – because costs and constraints are designed in very early stages. Making the wrong sourcing decisions could result in headaches later on such as cost overruns, schedule delays, or product quality issues.
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, and although early it can be beneficial to review process performance too.
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 manufacturing company.
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. At this stage in the NPI process, the company will begin to make substantial investment in the project (prototypes are expensive).
For tangible new products, such as hardware or mixed systems, the team also considers the manufacturability, or 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 and can be important to optimize performance, and minimize cost to maximize profitability .
In some cases, companies pilot early production runs managed by Manufacturing and the quality control department. This is also the stage where the cross functional team reviews its supply chain management to ensure that they can use the current supply base since new supplier qualification can take a long time.
Step 4: Detailed Design
In this phase, the focus is on the product design process. 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. After this stage, design changes can be very expensive, so this is a critical step in the NPI process.
At this stage of the NPI process, a bill of materials (BOM) 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 or in some cases the responsibility is handed over to the production team. The most effective NPI process have brought in product at even earlier stages than Detailed Design, but better late than never.
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. Note, if the company is planning to move production of existing products, it is at this stage you would enter the NPI Process.
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. A check of product quality is often made at this stage.
Step 6: Manufacturing
During this step, the team realizes everything required to bring the final product to market (often called a product launch), including marketing and sales plans (or sales training if necessary) and large investments by the manufacturing company (or your company, if not outsourcing manufacturing). 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.
Note that even though in the manufacturing stage, the production process is continually optimized and the product lifecycle is managed (which includes the end of product life at some points).
If you visualize the process flow diagram in your mind’s eye, 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.
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.
Lean 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 and much of the development can be done through lean workshops.
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.
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.