With companies like Nike reporting record high shares driven by new product development, it sheds a light on the importance of product innovation for organisations striving to stay competitive in business.
A survey by McKinsey showed that more than 25% of total revenue and profits across industries comes from the launch of new products. Companies are therefore feeling the pressure to generate and execute new product ideas while also mitigating risk and reducing costs.
The 7 steps of NPD
The new product development (NPD) process requires a systematic method to launch and then commercialise a product, whether tangible or intangible. From the initial idea through to its market launch, the process typically comprises 7 stages:
1. Idea generation: Gather your workforce and leverage their expertise and creativity to come up with relevant ideas on focused challenges.
2. Screen ideas: Condense ideas to find those with the highest potential and which will be of value to the company.
3. Concept testing: Test the market viability of a new product and refine the concept to avoid costly mistakes later on.
4. Business analysis: Paint a complete picture of the product, from marketing strategy through to expected revenue, for a more structured evaluation.
5. Product development: Build a basic prototype quickly and at budgeted costs, incorporating a design thinking approach.
6. Test marketing: Assess whether the concept and product actually works through private consumer groups, allowing for iterations and improvements before launch.
7. Commercialisation: Launch the product onto the market, with final marketing and prices in place
As most new products fail because they do not meet consumer expectations, businesses must embrace a transparent and effective process to ensure that the product presented to the market is successful – that it truly has value and will impact the consumer in a positive way.
Incumbent companies can also learn from digital natives to accelerate their innovation. Read more here.