TECHNOLOGY ENTREPRENEURSHIP

(ENT600)

UNIT 6 :

NEW PRODUCT DEVELOPMENT

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

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(2009) DEVELOPMENT
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 ENT600/UNIT 6 : NEW PRODUCT

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THE IMPORTANCE OF NEW PRODUCT
DEVELOPMENT
1. 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 ENT600/UNIT 6 : NEW PRODUCT
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 Cont.
The Importance of New Product Development

2. 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 ENT600/UNIT 6 : NEW PRODUCT

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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.

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Classifications of New Products

Two Classification of New Products:

1. Completely New Product
2. Improvements on Existing Products
1. 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

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

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DEVELOPMENT
2. Improvements on Existing Products
Addition to Existing Lines
Subsets to the new product lines
Perhaps targeted to different market segments
e.g Pack Size, Flavours

Improvements and Revisions to Existing Products

New products to replace existing products with cosmetic and
functional enhancements.
e.g. Honda Civic Facelift

Cost Reductions
Offer no new benefits to the consumer other than possibly
reduced price
Provides enormous added-value to the firm (financial rewards too)
e.g. Cadburys Five Star from 5Rs pack to 2Rs pack ny using
flavours instead of pure cocoa.

Repositioning
New applications to existing products. Existing products targeted
to new market/market segment.
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
(2009)
More to do with consumer
DEVELOPMENT
perception rather than technical
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 TYPES OF PRODUCT DEVELOPMENT PROGRAM
Potential
Revenue Potentia
Type of Time to Revenue
Contribution l Margin Example
Development Introduce Contribution
to Company Impact
to Economy
Market Cellular
New to the Highest
Longest Developme Highest Phone-
World Potential Startrek
nt
New Market Hyundai,
High Perodua
Product Long Developme High Axia,
Potential
Lines nt Proton Iris
Chilli
Sauce,
Add to Medium Line Mediu
Medium Garlic
Existing Potential Complete m Sauce,
Thai Sauce
Civic
Improve or Medium Market Mediu
Short FaceLift,
Revise Potential Share m Hybrid
Cost Medium Raise Mediu
Shorter -
Reductions Potential Margin m
Brand
Entrepreneurship Dept, ENT600/UNIT 6 : NEW PRODUCT Cereal,
Repositioni
FBM (2009) Medium
DEVELOPMENTMarket Mediu 8
High Fibre,
Shortest
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 ENT600/UNIT 6 : NEW PRODUCT
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Product Dimensions

Packag Pric
ing e

Quality Brand Name

Specificati PRODUCT
ons

Features Technology

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

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(2009) DEVELOPMENT
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, softener
etc.)
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).
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 ENT600/UNIT 6 : NEW PRODUCT
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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 ENT600/UNIT 6 : NEW PRODUCT

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Product Development Process
1. RESEARCH AND DEVELOPMENT

2. PRODUCT
DESIGN
3. CONCEPT TESTING

4. BUILD PROTOTYPE

5. TEST MARKETING

COMMERCIALIZATION
Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT
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(2009) DEVELOPMENT
Midde East, April 22, 2014, IZMIR, After developing the commercial
TURKEY: Two young Turkish scientists prototype, we will start investing in
have built a prototype of talking production, Bavunoglu said. Our
gloves that translate sign dream is to have these gloves
language into vocallanguage, handed out topeople with
helping people with hearing hearing disabilities through the
disabilities make their voices Social Security Institution.
heard.
The revolutionary invention of computer Otherwise, we will work with
engineer Elif Saygi Bavunogluand her several agencies that purchase
husband, Harun Bavunoglu, a Ph.D such equipment and distribute to
student in Mathematics and Computer those in need in order to facilitate
Science, has been chosen as one of the their lives. In that case, we will do
final projects atNew Ideas New our best to ensure that the gloves
Businesses,Turkeys first and largest are handed out for free, or at a very
technology-based entrepreneurship low price.
competition. The competition is
organized by the Middle East Technical
University.
We have developed a pair of gloves to
translate Turkish sign language into
vocal language, Elif Saygi Bavunoglu
told The Anadolu Agency. These
14
gloves are equipped with built-in
 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
Entrepreneurship
Usually,
(2009) innovation
Dept, FBM
is involve in the R&D15
ENT600/UNIT 6 : NEW PRODUCT
DEVELOPMENT
 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.

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 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.
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 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 ENT600/UNIT 6 : NEW PRODUCT 18

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 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 ENT600/UNIT 6 : NEW PRODUCT 19
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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 ENT600/UNIT 6 : NEW PRODUCT

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 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 ENT600/UNIT 6 : NEW PRODUCT

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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 ENT600/UNIT 6 : NEW PRODUCT
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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 ENT600/UNIT 6 : NEW PRODUCT

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

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

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 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
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FBM (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, ENT600/UNIT 6 : NEW PRODUCT

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FBM (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
simpleDept,controls
Entrepreneurship FBM just6 an
ENT600/UNIT accelerator and a27
: NEW PRODUCT
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 Example: Concept Testing for the emPower
Electric Scooter (Sketch)

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

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

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

Entrepreneurship Dept, FBM ENT600/UNIT 6 : NEW PRODUCT

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(2009) DEVELOPMENT
 Example: Concept Testing for the emPower Electric
Scooter (Physical Appearance Model)

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 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

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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?

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(2009) DEVELOPMENT
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

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(2009) DEVELOPMENT
 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

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(2009) DEVELOPMENT
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?

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(2009) DEVELOPMENT
 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

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 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.
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 Usability of Products

Usability is a measure of a users

experience when interacting with
a product.

Five (5) factors determining

USABILITY:
Ease of learning
Efficiency of use
Memorability
Error Frequency and Severity
Satisfaction
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 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
Entrepreneurship the
Dept, FBM user like operating
ENT600/UNIT 6 : NEW PRODUCT the product?
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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 ENT600/UNIT 6 : NEW PRODUCT
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 COMMERCIALIZATION

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 TUTORIAL
a)Discuss why new product development is
important for the survival of a business.
(6 marks)

b)When developing prototype for a new

product, explain why it is important to first
do the concept testing. (8 marks)

c)Give any three (3) changes in the

dimensions of a product for it to be
considered as a new product. Give an
example for
Entrepreneurship Dept,
each.
ENT600/UNIT 6 : NEW PRODUCT
43
FBM (2009) (6 marks)
DEVELOPMENT
 a) Discuss why new product development is
important for the survival of a business.
(6
marks)

Answer
)Introduction of new product provides
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-cyle gets shorter
)Companies face threat of losing market
Entrepreneurship Dept, ENT600/UNIT 6 : NEW PRODUCT
share when competitors
FBM (2009) DEVELOPMENT come up with44
 b) When developing prototype for a new product, explain
why it is important to first do concept testing.
(8 marks)

Answer

)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
(2 marks each x 4 points) = 8 marks

Entrepreneurship Dept, ENT600/UNIT 6 : NEW PRODUCT

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FBM (2009) DEVELOPMENT
b) Give any three (3) changes in the dimensions of a
product for it to be considered as a new product.
Give an example for each.
(6 marks)
Answer

)Changing the PERFOMANCE 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 motorcar
)Changing the PROMOTED IMAGE of the
product
Entrepreneurship Dept, ENT600/UNIT 6 : NEW PRODUCT
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FBM (2009) DEVELOPMENT