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MIT 15 823 - PRODUCT DESIGN AND DEVELOPMENT

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PRODUCT DESIGN AND DEVELOPMENTOUTLINEFAILURESUCCESS OF COMMERCIALIZED NEW PRODUCTSPowerPoint Presentation1990’s (Cooper and Kleinschmidt 1994Causes of FailureSlide 8INTERNET STARTUPSlide 10STATE OF THE ARTSlide 12Slide 13Slide 14Slide 15PRODUCT DESIGN AND DEVELOPMENT15.823 SPRING 2001GLEN L. URBANNewProd01OUTLINE•NEW PRODUCT DEVELOPMENT PROCESS•REALLY NEW PRODUCTS --INFORMATION ACCELERATION•“LISTENING IN” -- Advisor/Virtual Engineer •IMPLICATIONS FOR INTERNET–TESTING CONVENTIONAL PRODUCTS ON THE INTERNET–DESIGNING INTERNET PRODUCTSNewProd01FAILURE•WHAT IS FAILURE RATE OF PRODUCTS INTRODUCED TO THE MARKET?•WHY FAIL?•IMPLICATIONS FOR INTERNET STARTUPS?NewProd01SUCCESS OF COMMERCIALIZED NEW PRODUCTSUnsuccesful33%1976 - 1981Unsuccesful33%1963 - 1968Successful Met CompanyCriteria65%Successful Met CompanyCriteria65%NewProd01ANA - 1984•138 Member Firms•43 of 100 Top Advertisers•74% Packaged Goods•12% Durables•12% Industrial•9% Services•Line Extensions 27%•New Brand/Existing Category 31%•New Brand/New Category 60%FAILURE RATE(Not Meet Business Objectives)NewProd011990’s(Cooper and Kleinschmidt 1994• 203 Industrial New Products -- 50% Fail• 103 Chemicals -- 35% Fail(21 Firms in N. A./Europe)Market Success• Superior Product (Unique, Value, Quality,Physical Benefits, Visible)• Market Driven (Market Study, Customer Tests)• Up Front Homework/Product Definition• Cross functional Team/Strong LeaderNewProd01Causes of Failure•Market Too Small•Not New/Not Different•Poor Positioning•Forecasting Error•Competitive Response•Change in Customer Tastes•Poor Repeat/Diffusion•Low ROI•Organizational Problems•Poor Match for Company•No Real User Benefit•Little Channel Support•Poor Timing•Shift in Technology•Change in Environment•Poor Service•Lack of Coordination•Poor QualityNewProd01PERCENT TRANSITION IN STAGES1968 1981Idea Generation and Screening toBusiness Analysis21.3 67.7Business Analysis to Development 55.9 71.2*Development to Testing 37.8 80.0Testing to Commercialize 62.2 70.2Commercialized to Success 60.7 65.3*i.e. 71.2% of the ideas to enter Business Analysis pass criteria to enter Development phase.Source: Elrod/Booz, Allen, and HamiltonNewProd01INTERNET STARTUP•WHAT IS CHANCE OF SUCCESS?–IDEA–BUSINESS PLAN–LAUNCH–IPO•HOW TO MAXIMIZE SUCCESS?–RESEARCH–TIMINGNewProd01NEWMARKETEXISTINGNEWEXISTINGPRODUCTSNEW PRODUCT ARENASNewProd01STATE OF THE ART•PROCESS ENHANCEMENTS•INFORMATION ACCELERATION•LISTENING IN•IMPLICATIONS FOR INTERNETNewProd01Proven MethodsDESIGNPRE-MARKET TESTINGTEST-MARKETLAUNCH AND LIFE CYCLE MANAGEMENTOPPORTUNITY IDENTIFICATION•Customer Active Paradigm•Focus Groups / Voice of Customer•Order of Entry•Multi-Dimensional Scaling/Conjoint•QFD•Lead Users•Concept/Product Testing•Laboratory Test-marketing•Information Acceleration•Stochastic Models•Electronic Measurement•Life Cycle Modeling•Scanner Data/Brand Management/D.S.S.New Product Process and Proven Marketing MethodsNewProd01ENHANCEMENTOPPORTUNITY IDENTIFICATIONDESIGNTESTINGINTRODUCTIONINNOVATION AND BUSINESS STRATEGY•Proactive Budgeting -- 25%•Technology/Customer/Production/Engineering•Organization -- Large Scale to Start Up•“Really New” -- Create Markets•Needs vs. Desire•Global Team -- 24 Hour work Day•CBP Specs Design Sophistication•Virtual Prototyping•Platforms and Architecture -- Process Intensive•Premarket Forecasting -- Risk Management•Virtual Testing•Model Response - Specs -- Cost•Marketing world-wide•Channel Power/Remote Buying•Little Protection -- Pioneering Benefits•Elaborate For Segments•Rejuvenation Cycle•Learn from FailurePROFIT


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