TECHNOLOGY ENTREPRENEURSHIP

(ENT600)

UNIT 6 :
NEW PRODUCT DEVELOPMENT

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 1

 Definition of New Product Development

New product development is defined as

the process by which entrepreneur
designs and creates new product or
service that will be sold to customers

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 2

 The Importance of New Product
Development
For Survival
Introduction of new product provides a platform for
the company to compete
Companies that are able to develop and introduce
new and improved products will have a distinct
advantage to compete
Competition has become more intense as
technological products become more complex and
the technological product life-cycle getting shorter
Companies face threat of losing market share when
competitors come up with their new products
Thus company have to come up with new products to
ensure survival

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 3

 The Importance of New Product
Development

Strategy for growth

Development of new products can ensure
business to grow by:
Introducing new products to existing
markets
Introducing new products to new
markets

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 4

 Defining a New Product

The outcome of product development process is

a new product
The new product can be:
a completely new product
not a completely new product but an existing
product that has undergone significant
improvements
A new product is any product perceived to be
new in the mind of the consumers

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 5

 Classifications of new products
Two classification of new products:

Completely New Product

Improvements on Existing Products

Completely New Product

New-to-the world products
The first of its kind (new inventions)
Create new market
New to the firm (new product lines)
New to the company but not new to the
marketplace
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Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 6
 Improvements on Existing Products

Addition to existing lines

Subsets to the new product lines
Perhaps targeted to different market segments
Improvements and revisions to existing products
New products to replace existing products with cosmetic and
functional enhancements
Cost reductions
Offer no new benefits to the consumer other than possibly
reduced price
Provides enormous added-value to the firm (financial rewards
too)
Repositioning
New applications to existing products
More to do with consumer perception rather than technical
development

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 7

 Product and New Product Development

A product is an item or service that serves the needs

of customers
A product has many dimensions, which includes:
Features
Quality Specifications
Packaging
Price
Brand Name
Technology
Theoretically, it is possible to label a product as new
when any changes or modifications are made to any
of the product dimensions

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 8

 Product Dimensions

Packaging
Price

Quality Brand Name

Specifications PRODUCT

Technology
Features

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 9

 Different examples of changes in product dimensions
that can create a new product:

Changing the performance capabilities of the

product (e.g. a new, improved washing detergent)

Changing the application advice for the product

(e.g. the use of liquid instead of powder
detergent)

Changing the after-sales service for the product

(e.g. frequency of service for a motor car)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 10

 Different examples of changes in product
dimensions that can create a new product
(cont.):
Changing the promoted image of the
product (e.g. the use of bio-degradable
packaging material)

Changing the availability of the product

(e.g. the use of vending machines for top-
up cards)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 11

 New Product Development
Process
New product development process for
technology ventures usually begins with
research and development to product
design to concept testing to building
prototypes and to test marketing (before
full-scale commercialization)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 12

 Product Development Process
1. RESEARCH AND DEVELOPMENT

2. PRODUCT DESIGN

3. CONCEPT TESTING

4. BUILD PROTOTYPE

5. TEST MARKETING

COMMERCIALIZATION

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 13

 Product Development Process:
1. Research and Development
New product is often characterized by very high rate
of failures

This may be due to very limited historical or

preliminary data

Therefore, research and development is a critical

step in the new product development

Research and development (R & D) refers to

organized efforts that are directed towards
discovering new knowledge, product or process

Usually, innovation is involve in the R & D for new

product

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 14

 Product Development Process:
1. Research and Development (cont.)

Product development research is conducted

to:
helps company to response to market
changes more effectively
understand the attitudes of customers
towards the new technology that is going
to be introduced

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 15

 Product Development Process:
2. Product Design

Product design refers to the conceptual

translation of a new product idea or concept

It includes design of the product and its

architecture (physical design), artistic design
(aesthetics) as well as the required
parameters to satisfy the market needs

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 16

 Product Development Process:
2. Product Design (cont.)

When designing the product, the basic

product performance criteria must be taken
into consideration. This includes:
Performance
Reliability
Safety in use
Durability
Special features

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 17

 Product Design:
Product Performance Criteria
Performance
The main characteristics of the product or services

Reliability
The consistency of performance and dependability

Safety in use
Risk of injury or harm

Durability
The useful life of the product

Special features
extra characteristics

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 18

 Product Development Process:
3. Concept Testing

Concept testing is the initial test for most new

product designed

It involves the process of using quantitative

and qualitative methods to evaluate
consumer response to a product idea prior to
the introduction of product to the market

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 19

 Product Development Process:
3. Concept Testing (cont.)

It involves showing a preliminary description

of the product or service idea to prospective
customers to gauge customer interest and
purchase intent

If strong acceptance is found, the next step

will be the preparation of the prototype

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 20

 Purpose of Concept Testing

The main purpose of concept testing are:

To choose the most promising alternative from a

set of alternatives

To get an initial notion of the commercial

prospects of a concept

To find out who is most interested in the concept

To indicate what direction further development

work should take

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 21

 Concept Testing: The Process

Define the purpose of the test

Choose a survey population

Choose a survey format

Communicate the concept

Measure customer response

Interpret the results

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 22

 Example: Concept Testing for the emPower
Electric Scooter (shown below)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 23

 Example: Concept Testing for the emPower
Electric Scooter

The purpose of concept test:

To identify what market to be in?

Sample population
College students who live 2-5 km from
campus
Commercial transportation

Survey format:
Face-to face interview

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

24
(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter

Communicating the concept can be done by:

Verbal description
Sketch
Rendering (a drawing in perspective of a
proposed structure)
Storyboard (illustrations or images displayed
in sequence for the purpose of pre-
visualizing)
Physical appearance model
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
 Example: Concept Testing for the
emPower Electric Scooter
Example of Verbal Description
The product is a lightweight electric scooter that can
be easily folded and taken with you inside a building
or on a public transportation
The scooter weighs about 15 kilos. It travels at speed
of up to 20 km/hr and can go about 20 km on a single
charge
The scooter can be recharged in about 2 hours from a
standard electric outlet.
The scooter is easy to ride and has a simple controls
just an accelerator and a brake

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 26

 Example: Concept Testing for the emPower
Electric Scooter (Sketch)

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

27
(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter (Rendering)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 28

 Example: Concept Testing for the emPower
Electric Scooter (Storyboard)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 29

 Example: Concept Testing for the emPower Electric
Scooter (Physical Appearance Model)

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 30

 Example: Concept Testing for the emPower
Electric Scooter : Customer Response

Measure of customer response through

survey:
Part 1: Qualification
Part 2: Product Description
Part 3: Purchase Intent
Part 4: Comments
Part 5: Interpret Results

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

31
(2009) DEVELOPMENT
 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

Part 1: Qualification
How far do you live from campus?
If not within the specified radius, thank the
respondent and end interview

How do you currently get to campus from

home?

How do you currently get around campus?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 32

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

Part 2: Product Description

Present the concept description as in the
previous verbal description

Get comments from respondents

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 33

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

Part 3: Purchase Intent

If the product were priced according to your expectations, how
likely would you be to purchase the scooter within the next year?

I would I would I might or I would I would

definitely not probably not might not probably definitely
purchase the purchase purchase purchase purchase
scooter the scooter the scooter the scooter the scooter

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 34

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

Part 4: Comments
What would you expect the price of the
scooter to be?

What concerns do you have about the product

concept?

Can you make any suggestions for improving

the product concept?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 35

 Example: Concept Testing for the emPower
Electric Scooter: Measure Customer Response

Part 5: Interpreting the results

From the data set gathered during the
interview, forecast the potential of the product
for commercialization

Make estimate in terms of:

Size of the market
Selling price
Sales forecast

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

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(2009) DEVELOPMENT
 Product Development Process:
4. Build Prototype
A prototype is the first physical depiction
model of the new product or service
It is usually in a rough or tentative mode
This model has the essential features of the
proposed product or services but the model is
open to modification
Prototypes can be used to elicit comments
from designers and users to learn more about
the product
One of the objectives of having prototype is it
permits usability testing

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 37

 Usability of Products

Usability is a measure of a users experience

when interacting with a product

Five factors determining usability:

Ease of learning
Efficiency of use
Memorability
Error frequency and severity
Satisfaction

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 38

 Usability of Products
Ease of learning
How long does it take to learn the products operation?

Efficiency of use
Once experienced, how fast can the user complete the
necessary steps?

Memorability
Can the user remember how to use the product?
Error frequency and severity
How often do the users make errors, and how serious are
these errors?

Satisfaction
Does the user like operating the product?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 39

 Product Development Process:
5. Test Marketing

Test marketing is usually carried out prior to a

full-scale launching of a new product

In test marketing, the new developed product

will be introduced to a representative sample
of population to assess the markets reaction

The purpose of carrying out test marketing is

to predict sales and profits from a major
product launch

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 6 : NEW PRODUCT DEVELOPMENT 40