New Product Development Process

Faster Product Development. A Roadmap to Your Next Successful Product.

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What is a New Product Development Process?

A New Product Development Process refers to the entire range of activities where a company conceptualizes and realizes a new offering, often based on emerging market trends. A product concept might originate in the marketplace, a lab, a workspace, or the fuzzy front end. Ideas come from customer requirements, too. A flawless process allows teams to innovate and quickly release differentiated products rapidly.

New product development usually follows a process divided into stages, phases, or steps, by which a company conceives a new product idea and then completes market research, plans, designs, prototypes, and tests it before launching it into the market. Below we will discuss the phases of new product development, some product development examples (for more examples, see our product development strategy page), and concept development strategies.

The product development process is the specific series of steps or stages a company uses to realize new offerings to satisfy a market need. While nearly every company develops new products or services, product development techniques differ substantially from one company to another depending on the industry, the product type, potential customers, and whether the products are incremental improvements or breakthrough innovations. This is probably the most impactful form of process management that a company can undertake besides managing the product life cycle and the product offering itself.

In many cases, since organizations rarely focus on it, a product management consulting engagement can provide the right outside guidance – especially if the gains are in the front end of development.

An accepted approach for more than three decades puts a new product idea through a process that defines the stages of the new product process (or through the product development life cycle.) These steps culminate in an up-or-down decision the Senior Management team makes in a formal review (often called a “gate”) at the end of each phase. At the end of the product development stage is often a commercialization stage (physical products) or a QA stage (software). 

Note this assumes that you have a staged development process and are not following the agile methodology. However, if you want to combine the best of both worlds (Waterfall and Agile), you may be looking for a hybrid approach. If you want to know more about how you may combine the best of Agile and Waterfall methods, check out Agile Product Development.  

Product Development Process – 6 Development Steps
Product Development Process – 6 Development Steps

Are you struggling with your product development? Are your programs not delivering?

  • Products Late and Don’t Meet Expectations?
  • Development unpredictable?
  • Time to Market Too Long?

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New Product Development Process definitive guide

Product Development Process Guide

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The 6 Steps of The New Product Development Process [NPD]

A typical product development process has 6 steps with five gates.

  • Step 1: Idea Generation (Ideation)
  • Step 2: Product Definition
  • Step 3: Prototyping
  • Step 4: Detailed Design
  • Step 5: Validation/Testing
  • Step 6: Commercialization
Product Development Process 6 steps

1. Idea Generation (Ideation)

Product Development Process Step 1

This first step or stage of the Product Development process, often called “Ideation,” is where new product concepts originate. Usually, this step results from an idea screening to select the next product effort and is more clearly defined in new product development. Following best practices, businesses form a small team to explore the product roadmap and perform…

  • Idea generation
  • The initial definition of the product concept
  • Business analysis (including SWOT analysis)
  • Market research
  • Technical and market risk 

The idea stage is often the most crucial step for brainstorming new products because it is where most product ideas come from. Sometimes, this first step uses a SWOT analysis (strengths, weaknesses, opportunities, and threats) to prioritize ideas.

From Idea to Concept to Minimum Viable Product (MVP)

Often, product development starts with a product manager realizing that the sales are lagging behind their forecasts because it is late in the product life cycle. The manager wants to act, but sometimes they lack a methodology. Other times, the motivation is that someone in engineering (or sales) comes up with a new idea out of the blue, not driven by the product development cycle (not all products come from product managers!), but because of some independent brainstorming. Finally, it can come from a deliberate marketing strategy and product roadmap.

It is the early stages of the new product development process where you can get the most significant source of competitive advantage because, at these early product development stages, you have greater flexibility with the product concept. The idea is not yet frozen. Depending on the newness of the product idea, it is sometimes unclear if the process will realize the finer points of the product development strategy. However, the product team can gain more confidence in product-market fit by critically analyzing the product concept early in the NPD process and thoroughly understanding the end-user requirement.

Suppose you still have concerns about product-market fit or product requirements. In that case, you may clarify the product definition (alongside the marketing team) by talking to target market members to understand the existing customer problem (independent of your solution) and pick up a competitive analysis. The so-called “Solution-free” requirements gathering is one of the most important ways to get at hidden needs and avoid solution locks. Also, external sources such as consultants, analysts, researchers, dealers, and distributors can help you access potential customer’s requirements as part of your normal NPD process and augment the voice of the customer.

In a new product development project, because of the novelty of the new idea, you need to make sure your product ideas address the needs of your target audience. This is usually the role of the product manager, but they can include other team members in some scenarios, like customer visits. Market testing during the early stages of product development focuses the team on addressing gaps that can be discovered and fixed early before a successful product launch. This allows the team to iterate quickly with little impact on the timeline.

By doing this early target market testing, you will validate your marketing strategy and the value proposition simultaneously, raising the cross-functional team’s confidence as they confirm the critical success factors for the new product. As the saying goes: “If you have time to do it a second time, why not do it right the first time.”

This extra care at the beginning of your product development will pay dividends downstream. This early work can help you create a value proposition chart and start product messaging activities.

Product Management and Idea Screening Stage

One of the critical responsibilities of a product manager is to screen ideas so the product development department does not waste time pursuing product concepts that fail. Many factors go into idea screening: customer feedback, social media monitoring, and fit to strategy and distribution/customer set. When you are refining existing products or are in a prototyping phase, the product manager can get more specific and directive feedback for the product development department because these are more tangible.

In all cases, product managers must turn a product idea into a concept. Once you have a concept firmly in mind, you can think about concept development and testing with prospective customers to ensure you are on the right course (this is especially true when you have come up with an entirely new idea or new market). If the concept is super simple, you could even go directly to a Minimum Viable Product (MVP) and start getting honest feedback.

Getting the product concept wrong at this early stage wastes time and increases opportunity costs. Not all new product ideas come from the inside – the Corporate Development organization and executives should constantly scan for new product ideas. Marketing efforts should also include active competitive analysis and market scanning. Engineering should be brainstorming, too. 

At this stage, the target market, target audience (including Personas), and target customers are proposed, and the initial marketing strategy is worked out. If the product goes through distribution, the distributors are included as customers in this ideation step. Idea screening is performed in this phase.

2. Product Definition (Discovery)

Product Development Process Step 2

Sometimes called “scoping” or concept development, this step involves refining the definition of the product concept and ensuring that the team understands customer requirements. In a startup, this step is often called Discovery. The design team is assembled in this phase. The team creates the first detailed assessment of the new product concept’s technical, market, and business aspects and determines core functionality. A template or approach for design thinking might help get started.

Sometimes, mockups are used to obtain early feedback on market fit. These mockups can be primitive; for example, paper prototypes are commonly used to get early feedback from test marketing. If this is an incremental product, then concept design can begin. For breakthrough products, the team may consider simulations to get user feedback. The newer the product category is to the company, the more concept testing is required. The fundamental goal of product discovery techniques is to ensure that the ideas are good and will satisfy customers.

Concept design often begins in this phase. The design team can start to visualize the end product and communicate this to potential customers (in software, this is simpler than in a complex system or hardware product). The concept of Minimal Viable Product (MVP) can be an advantageous way to strip the product to its core to ready it for external demos to customers – this is especially true for software development where it is possible to create skins that make early products look pretty polished.

Marketing Strategy Development

Developers and managers explore and define the critical points of differentiation for the new product, incorporating market segmentation to ensure its alignment with target customer segments’ specific needs and preferences. If done improperly, This step in development can increase time to market or cause the product to misunderstand the market’s needs. Because this step is often before really ramping up the team, aligning with the product development strategy is also very important. Although it is early, metrics such as ARR (Annual Recurring Revenue) or acquisition costs are often estimated. Clearly, a product roadmap can be instrumental in guiding (or developing with) the marketing strategy.

In developing new products, including new business ideas (new to the company or the world), you have to manage how this offering fits with the current marketing mix unless your focus is an entirely new market without your other products in distribution. This should be done early in the six or seven stages of typical product development efforts (we favor fewer numbers than seven stages to increase speed) – and only done if it fits your market strategy.

Business Analysis

After the first stage of development, business analysis is performed. The team would look at similar products, perform a competitive analysis, and begin to map out the distribution strategy, including e-commerce. This ensures the margins returned to the firm will meet thresholds. The market strategy will also guide the estimates of advertising and PR, which again weigh into the ROI calculation for the new product. A three-year Profit and Loss plan is often part of the business analysis. 

Development Costs

As part of the business analysis, and with an understanding of the product definition, the team can develop estimates of development costs at this stage of the development cycle. This cost also goes into the business analysis to calculate ROI or IRR metrics.

New product development refers to bringing product innovations to the market instead of product refinements or product derivatives. In all successful companies, product strategy includes a portion of the overall spending on pure product innovation while the remainder of the budget goes toward existing solutions. For example, a development framework would specify a 20%/80% split where the new product portion gets 20% or more of the funding. This can be much larger in early-stage companies, including those led by entrepreneurs.

3. Prototyping

Product Development Process Step 3

In this prototyping phase in the product development process, the team justifies the company’s investment in product development by requiring the team to create a detailed business plan. Best practices usually involve intensive market research and a transparent project management approach. The team thoroughly explores the competitive landscape for the new product and where the proposed product fits within it while also creating a financial model for the latest offering that makes assumptions about market share. Besides concept testing, pricing strategy is determined in this step.

For tangible new products, such as hardware or mixed systems, the team also considers the manufacturability of the proposed new product, including the sourcing of the product if outsourced. If manufacturing is a focus, you should ensure a New Product Introduction Process. 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 third step in the product development process (the prototyping phase) is critical because it reduces the market risk for the new product. This is the stage where you can perform test marketing because of the existence of prototypes that you can show to customers and get initial feedback from focus groups. Software development can do these tests earlier because of the relative ease of creating realistic user interfaces. In this stage, the initial design work would show technical feasibility.

4. Detailed Design

Product Development Process Step 4

In this phase, the focus is on product design and refinement of the prototype. In most cases, teams alpha-test the prototype, iteratively working with customers, getting their feedback, and incorporating it into the prototype. In parallel, marketing, sales, and manufacturing create the launch and manufacturing platforms to support the emerging product. This fourth step in the product development process is sometimes called development and sometimes incorporates the next step, “Validation/Testing.”

5. Validation and Testing

Product Development Process Step 5

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. The finished product may be available for initial feedback from paying customers at this stage.

Everything in the business case learned from customers during the Development phase comes under scrutiny and is tested as much as possible in “real world” conditions. 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. Test marketing, or beta testing (depending on the type of product), is often performed at this stage to help validate the go-to-market plan.

6. Commercialization

Product Development Process Step 6

During this step of the product development process (including the manufacturing process), the team realizes everything required to bring the final product to market, including product marketing and sales plans (or sales training if necessary) for the market introduction.

Product Launch

The finished product will be built (or released in the case of software) and be able to be sold after final testing. The team, including project management, begins operationalizing the manufacture and customer support for the product and supports the product introduction. That is why this step is called the Commercialization Phase. Test marketing may continue to give the company the most tremendous success with the launch.

Gate Reviews

Each of these six phases ends in a gate review where the team presents specific, pre-defined deliverables to management 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. The meaning of new product development is often translated into Gates – this is obsolete thinking.

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 process aspects with our product development checklist.

Product Development Life Cycle

A more comprehensive view of product development includes the stages where the product is launched, and the company tries to maximize the return on its investment. This process, called the Product Development Life Cycle, describes a series of stages that follow the initial launch and extend the product development workflow. These stages after launch (called Introduction) are Growth, Maturity, and Decline.

Waterfall vs Agile Product Development Processes

Currently, there are two primary approaches to the product development process – and we know this through case study after case study. The first is a waterfall approach, a generic term for traditional product development in which there are discrete steps and milestones. It is called waterfall product development because, in this approach, teams continue to the following stages only after milestones are met, i.e., the flow is one-directional. We often see these stages and gate processes in our management consulting engagements. 

Agile Product Development Process

Agile product development processes, on the other hand, are increasingly more common because they can create new products that delight customers using fewer resources. The Agile approach relies on sprints, cycles that combine development with customer testing. Most organizations that say they are Agile use Agile between major milestones to develop their products.

This hybrid approach offers the best of both worlds and an approach used in our agile consulting.

Minimum Viable Process: A Modern Approach

The traditional six-step process described above is the established process you’ve read about in the textbooks and seen in the training videos. Some of these processes might have five 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 waterfall and agile to create a modern development product process. This way, you get the best advantages of both systems. We also recommend that you have a rapid and simple escalation process. This is a bit of contrast from Robert Cooper, who has historically advocated for a fixed series of phases and reviews.

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 needs:

  • 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, create too much bureaucracy and leave 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 final product, and that everything is prepared for the product launch. These check-ins demonstrate that continued investment is warranted.

New Product Development Process - Minimum Viable Process
New Product Development Process

Rather than having pre-set deliverables and outcomes that the team must meet to pass a review, the team continues to affirm throughout the process that it is meeting a set of broad parameters that define the project. Often these key deliverables are determined in a product development consulting engagement, where best practices are imported and modified to fit your unique situation. If it meets these parameters, management should leave the team alone; if it does not meet them, then the team needs a lean escalation process to inform the senior management and get back on track.

Here’s how it works. At the beginning of a project, possibly after having a product idea but before the company invests big dollars, the development staff and Senior Management team come to an agreement around key parameters for the project, such as:

  • Product Cost
  • Features
  • Schedule
  • Quality
  • Reliability

As in the diagram below, these parameters must have a quantitative threshold the team must not exceed. We call these quantitative parameters boundary conditions. This approach implies that the team has already done sufficient homework to accurately set these parameters and make them quantitative.

New Product Development Process - Boundary Conditions Diagram
Boundary Conditions Diagram for New Product Development

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 a Minimum Viable Process, there are no rigid reviews with a pre-fabricated set of deliverables. These reviews are streamlined by the three check-ins throughout the process. These check-ins still meet Management’s need to protect its investment. The team demonstrates the viability of continued investment by showing that the development staff 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”). The development informs the Senior Management team, and there follows an escalation process called an Out-of-Bounds Review.

The team communicates about their anticipated boundary condition break in such a review. The team also proposes a solution to the boundary break. If the management team agrees with this solution, they will approve it, and the team will move forward on this basis. If the management team does not agree with the proposed solution, then a face-to-face meeting will follow, and all stakeholders will 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.

New Product Development Process - Out-of-bounds diagram
Escalation Map for New Product Development

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 continually guiding the development department to reduce risk by working with a clear set of objective parameters.

From Six Steps to Three

A Minimum Viable Process has a maximum of three significant steps, with three check-ins after each step.

  • Step 1: Concept Fit
  • Step 2: Product/Market Fit
  • Step 3: Development

Consider each phase as having a set of associated activities and exit criteria the team must fulfill to enter the following stage. Here are the typical activities and criteria for each of these three phases:

Step 1: Concept Fit

Activities for the Concept Fit stage ensure that product ideas are the best product ideas…

  • Product ideas are congruent with the vision
  • The team is free to innovate and iterate
  • The technology is tested
  • Projects are staffed properly with the right resources
  • Projects are free from anything that impedes fast and iterative development
  • There is a meaningful commercial potential

By the end of this phase, the team should have a clear leader with entrepreneurial capability. The team should demonstrate to management that the time-to-revenue is foreseeable, the potential market share is large, and the revenue potential is large enough to make a difference to the company. The proposed business model should be adjacent to the company’s overall model. That means that the business model for the project should resemble how the company generally does business.

There are also brand and customer pain points to consider in this phase. This phase should include market research and clarify how the proposed product will leverage the company’s brand to address customer pain points. The team should be able to describe the product’s unique value proposition that solves these pain points. The team should also consider the proposed product’s fit with the current distribution channels and its projected customer base, including any potential challenges in reaching them and addressing their pain points.

At the end of this phase, the development staff briefs management to establish the project’s Boundary Conditions and ensure that the proposed project meets the company’s current strategic priorities.

Step 2: Product/Market Fit

Activities during this phase of the development process include:

  • Competitor analysis & vetting of the technology
  • Defining use cases
  • Estimating the cost of development
  • Confirming and quantifying the commercial potential

By the end of this phase, the team should have tested prototypes with users to confirm they fit the intended market. They should have identified use cases and pegged where the solution best fits its market. The team should also have considered the technical and market risks associated with the project. For genuinely new products, extra emphasis should be on idea generation. Still, we should also be very careful in selecting the best from the set of potential new products.

To exit this phase, the team also needs to demonstrate that it has a detailed budget, has calculated accurately the costs associated with developing the product, and has defined its profit potential.

During a check-in at the end of this phase, the team defines the product in greater detail and demonstrates its technical feasibility. The team roughs out the timing and budget for the project and perfects the business model.

Step 3: Development

Activities in this phase of the development process include:

  • Developing the Minimum Viable Product (MVP)
  • Confirming the business plan
  • Drilling into the market research to learn more about who customers are and how to reach them
  • Developing any supporting infrastructure that the customer needs to use the product
  • Training the salesforce (if required)

The product is prepared to meet actual customers in the Market Launch phase. Project teams typically use specialized tools such as task management software to manage the workload and stay connected with all people involved in the development phase.

This is also the point-of-no-return where a company assesses the product’s launch readiness. Areas of focus include product quality, product performance, getting the optimal feature set, and demonstrating customer support capability.

To exit this phase is to enter the selling phase. Management must approve the team’s marketing spend and go-to-market plan. The team may also plan for the future by identifying the product features they will realize in future product generations. The team must demonstrate that the MVP works as planned and that the market and sales plan are ready.

A Series of Releases

Think of the final result of each of these phases or steps as a product release. In this three-stage scheme, each step is an element in a larger release plan.

  • The Concept Fit phase ends with a release to a funded team
  • The Product/Market Fit phase ends in a release to the organization
  • The Development phase releases the product to the world

With this mindset, Agile methods dovetail with this three-step Minimum Viable Process to create a hybrid approach that combines the best elements of old-fashioned milestones-based, phases and gates processes and more nimble, lean methods. For instance, for each project, the development team and Senior Management should craft a set of exit criteria for the three phases, the “must haves” that the team needs to continue to the next phase, in keeping with the boundary conditions they have established.

Example of Minimum Viable Process

To tie the Minimum Viable Process to the Agile approach, the development team could tie each exit criterion to a specific sprint iteration. For example, to exit the Product/Market Fit stage, the management and development staff may decide that they need to map the dependencies the development department has on other teams. It might tie the creation of this map to a sprint, planning that it will have the dependency map on hand by the end of Sprint 1, a detailed budget at the end of Sprint 2, and a clear statement of profit potential by the end of Sprint 3.

A Modern, Lean Product Development Process

Old-fashioned, sequential phases and gates processes tend to take a one-size-fits-all approach to new product development. They put projects through rigid milestones, whether or not they apply to the project. In a Minimum Viable Process, the project only needs the milestones.

Example of Incremental Products

For example, if you are developing an incremental improvement on an existing app, there may be no need to demonstrate the Concept Fit. If your product succeeds, you’ve already proved the concept and 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! 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 overall boundary conditions that the product 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 like the team will 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 sound investment decisions while also ensuring that teams spend most of their time reducing risk and adding value to products in ways customers care about.

The Minimum Viable Process is about achieving the Goldilocks Approach to maximize the product’s success. It’s finding the right balance between process and agility. 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.

TCGen Principal & Founder

John Carter

John Carter specializes in product development, from the strategy and innovation processes to product definition, execution, and launch. He has helped companies cut time to market, rapidly scale their product program, and improve innovation with customer-led insights. His work leads to greater profitability, reduced costs, and improved customer satisfaction.

John currently serves on the Board of Directors of Cirrus Logic (CRUS), a leading supplier of mixed-signal semiconductors. He is involved with company strategy and sits on the Compensation and Audit Committees.

Before starting the consulting firm TCGen, John was the Chief Engineer of BOSE Corporation. John is the inventor of the Bose Noise Cancelling Headphones and shares the original patent with Dr. Amar Bose. He was one of the initial contributors to BOSE’s entry into the automobile OEM business. He led the product and business development of BOSE’s patented noise reduction technology for the military market.

John Carter, TCGen Principal & Founder