New Product Development (NPD)

NPD is perhaps the most critical of all business functions. Think of a business like a shark. It has to keep moving forward to stay alive. NPD is the process by which they keep moving forward.

Customers get bored with the current product or need a fresh product to solve a new problem. Or perhaps other businesses come up with their own new ideas. Whatever the cause, one thing is certain. Companies that produce goods but have nothing new in the pipeline are at a significant disadvantage to their competition.

Sure, there are some ways to shortcut NPD processes. A bigger company can buy a smaller one, or the rights to a patent, or even license technology to use in its own products. But even though they are not doing new product development themselves, someone still is. Companies have to pay for new technology whether they develop it themselves or not.

For those that do choose to develop new products on their own, most companies will have some sort of process for getting a product to market.

Think of the development process like a funnel. A lot of ideas might go in the top, but very few products come out the bottom to the customer.

NPD Steps

1. Somehow, companies must figure out what customers want. If a company is wrong at this stage, there is often a big lag until they figure out they made a mistake. Paying close attention to the voice of the customer and having effective processes to capture customer comments and needs at every contact point are extremely helpful to NPD.
2. Idea filtration. Companies have to weed out bad ideas and select the ones that they think will make the most money for them. A decision matrix is a simple method for paring down ideas. The marketing teams in larger organizations likely have more sophisticated tools at their disposal.
3. Product design and development. Companies must make the idea work, and figure out what it will cost to produce. This is another area where ideas get whittled down. Some ideas just won’t work in a cost-effective manner, given the technology and capabilities of the company. Close communication between the manufacturing and design teams is critical in this stage. Using “Design for Manufacturability” principles or the 3P Process (Production Preparation Process) are two Lean tools that will improve success in this step. General waste reduction efforts will make the design team more effective and efficient as well.
4. Business Case Review. This generally happens throughout the process. It will likely be set up as a series of pass/fail gates as more information is available at each step of the process.
5. Testing. The product is built, and tested both within the company and in the market to make sure previous assumptions are all correct. And, of course, the testing confirms that the design is safe, effective, and reliable.
6. Production Preparation. This stage entails getting the product ready for the production floor. It includes developing necessary tooling, fixtures, workstations, and the like to build the product. It also includes getting the administrative functions prepared, creating a plan to purchase and manage parts, and other ancillary functions. Again, well defined processes and responsibilities smooth this step considerably.
7. Marketing rollout. To sell a product, the sales team needs to make sure that customers know about it. This can add workload that has to be managed. Many product launches create considerable impact on sales and marketing teams when there are special promotions or when there is a pent-up demand that is unleashed.
8. Launch. The product starts flying off the shelves.

From the standpoint of continuous improvement, NPD is a target rich environment. There are many, many processes built into the NPD steps—each of which can be improved.

Like many other projects, you have three main areas of focus.

1. Quality. In this case, quality means success rate. How do you ensure that you can be successful in implementing the new product changes? Most people immediately consider manufacturing when they think of quality. Relatively speaking, manufacturing quality issues are easier to resolve than those originating in other areas. Marketing and engineering, though, have failure modes that can be much more costly to resolve because of all the additional development costs are layered upon earlier decisions. Pay special attention to the effectiveness of teams at reaching their milestones on time and be sure to do a thorough review of design and marketing effectiveness after the product has been released. There is often a large delay between process errors and the resulting defect in these functional groups.
2. Delivery. Most people want to focus on projects to reduce the overall timeline of the NPD process. Equally important is the need to make the timeline less variable. A good starting point for these projects is to look at previous projects and collect data on what happens that slows down projects, or what causes variations. Conduct kaizen events to eliminate those roadblocks.
3. Cost. Project costs, while important, should not be the initial focus of NPD improvement projects. Generally speaking, focusing on quality and delivery improvement initially will also yield substantial cost savings.

I also want to stress that for many creative processes, continuous improvement has some limitations. It doesn’t suddenly make people have strokes of genius. What it does do, however, is enable people to have those moments of brilliance. Strong structures take away a lot of the distraction and nuisances and waste that limits your team from doing their best work. You’ll get more great moments from your team if you reduce the bad moments.

Complete a value stream map of your new product development process. Pay special attention to lead times and the reasons why there are delays in the process. These delays are frequently related to the hidden processes that are used to get a project back on track and provide outstanding opportunities for improvement.