8 steps of a sustainable new product development process

In the 21st century, disruption for OEMs is ever-present. New technology is rendering projects and products obsolete even before they hit the manufacturing line. As a result, it’s hard to see which ideas in your pipeline are a real opportunity and which are likely to be a fiscal flop.

What are the steps you need to have in place for repeatable, successful product development?

To get product development decisions right, you need maverick creativity, complete customer focus, a hard-nosed commercial outlook, and of course, a seamless commercialisation process.

And if that sounds like a hard trick to pull off, you’d be right. Estimates put the rate of new product failure at between 30 and 50%. And in a healthy, sustainable business those new products should be accounting for 30% of profits. Creating a repeatable system for creative ideation, idea screening, planning, development and launch can mean the difference between a company that is commercially viable and a company that is losing money and momentum as they struggle to find and execute the ‘next big idea’.

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What are the 8 steps of successful new product development?

  1. Idea generation
  2. Idea screening
  3. Concept development and testing
  4. Marketing strategy development
  5. Business analysis
  6. Product development
  7. Test marketing 
  8. Commercialisation

These are 8 steps that you can formalise into a product development process that will keep you innovating in the most flexible, sustainable, and profitable way:

1. Idea generation

Companies need to have a clear-eyed view of the challenges and feasibility inherent in certain ideas, but they need to have a range of creative wells to draw from as they think of their ‘next big idea’.

Companies should always be ideating, finding ways to feed new product ideas into the organisation from across their internal teams and elsewhere. Formal and informal processes should funnel ideas into the mix, resulting in sound initial proposals for further exploration. These tactics and techniques include:

  • SWOT (strengths, weaknesses, opportunities, and threats) analysis
  • Market research
  • Market scanning
  • Morphological analysis 
  • Focus groups with customers 
  • Value analysis of existing products

At the end of this process there should be a formal means of submitting proposals for further screening by your business. This will entail providing a minimum level of supporting evidence and documentation to share with key decision-makers.

2. Idea screening

Before further resource is allocated to any of these projects, the ideas must be filtered. This is often done by a panel of experts drawn from your internal teams. For each proposal, they should ask the following questions to assess initial feasibility:

  • How will the customer in the target market benefit from the product? 
  • What unmet need will the product fulfill in the marketplace?
  • Why can you fulfill this need where other products fail?
  • Have you got the product design expertise and process in place to do this properly?
  • Have you got the technical expertise to manufacture the product? 
  • Does the proposed product fit with your manufacturing and distribution capabilities?

3. Concept development and testing

After a number of initial ideas are approved for further development, detailed feasibility studies should begin. The business should be working on documentation that captures:

  • Who is the target market and who is the decision-maker in the purchasing process? 
  • What product features must the product incorporate to be a success?
  • How much will the customer be willing to pay for the product?
  • How much will it cost to produce it?
  • Can the product be produced and sold at a profit?
  • How can the product be produced most cost-effectively?

Businesses can help prove feasibility through virtual computer-aided rendering, and rapid prototyping. Answering these questions and seeing a rapid prototype in the flesh, can help validate customer and market needs, as well as your potential design and pricing strategy.

4. Marketing strategy development

To help the company decide what ideas have the most promising future, you should create a potential marketing plan for each. A competitive marketing strategy comprises four key elements. 

  1. It recognises market need and customer requirements should be the driving force behind any product development. If you can’t define and express the unique value your product brings to your customer, it may not be worth pursuing.
  2. It attempts to establish a sustainable, profitable market position: its end target is always creating profit for the company.
  3. It recognises and acknowledges the forces that are determining competition in B2B markets: i.e. government regulation, global competition, the extent of buyers´ knowledge and understanding of a particular market.
  4. It aims to create a sustainable competitive advantage: Since the forces that are determining competition are changing it is necessary to constantly work on adapting and improving the competitive marketing strategy in order to identify a market position that fits the available resources of the company.

5. Business analysis

These are the hard-nosed calculations that will need to feed into your stop/go decision-making at this critical stage of product development.

  • Estimate likely selling price based upon competition and customer feedback
  • Estimate sales volume based upon size of market
  • Estimate profitability and break-even point
  • Is there a high chance of a good pay-off?

If the figures add up and there is a compelling business case for your new product - then the business can approve development to start.

6. Product development

Now, the detailed, exhaustive project requirements are assembled that will guide the design and development phase.

Formal engineering specifications are created. Verification and validation plans are developed for the future. These are the final quality checks that will systematically determine that all agreed deliverables are present and working in the end product. The product is then developed against the designs, with regular checks made throughout the process to assess and mitigate the risk of its failure for the end-user and the project itself. Requirements for this process include:

  • Resource estimation
  • Requirements publication
  • Engineering operations planning
  • Scheduling
  • Supplier collaboration
  • Resource plan publication
  • Program review and monitoring
  • Contingencies (what-if planning)

7. Test marketing

When you have developed the product and the first complete prototype is available, you need to test it thoroughly:

  • Conduct focus groups or customer interviews to assess the product
  • Introduce the product at a trade show 
  • Produce an initial run of the product and sell it in a test market area to determine customer acceptance.

Now is your opportunity to tweak the product based on market feedback, in readiness to bring it to market.

8. Commercialisation

Products that have been carefully developed through this process are ready for release, but the development work doesn’t stop there. Companies need to monitor the success of the product to plan for future upgrades and potential new additions to the product suite: 

  • Produce and place advertisements and other promotions
  • Plan sales channels and activities
  • Activate the marketing plan
  • Fill the distribution pipeline with product
  • Conduct post-market monitoring to capture refinements/new product ideas

VUCA is the enemy

Risk is everywhere for OEMs developing new products right now. 

VUCA - the famous futurist acronym - sums up these challenges perfectly.  In the age of disruptive technology, business success is constantly threatened by Volatility, Uncertainty, Complexity and Ambiguity.

Even those with a suite of highly successful products on the market can be caught off guard as trends change rapidly, components and materials suddenly become unavailable, outmoded, or unprofitable to use. Likewise, entirely new business models and technologies can suddenly change customer demand in unexpected ways. You need to be nimble and sure-footed to address these pressures.

The academic and consultant Bob Johansen has proposed a leadership response to the challenge of VUCA environment which he calls VUCA Prime. According to Johansen, volatility should countered by vision, uncertainty countered by understanding, complexity by clarity, and ambiguity by agility.

Developing a repeatable system for NPD like the one described above is the way to build-in protection from product failure; it provides a space for creativity as well as laser-focused requirements gathering and idea validation. It formalises STOP/GO moments within the process, to assess evidence and decide whether to kill or continue with projects at critical moments depending on their changing potential for success.

If you develop the right structures to bring new ideas to the fore, filter and control them, you can embrace change and risk, while keeping your focus on your customers, profitability, and a sustainable future.

But it may require a new attitude to production. It may require you to partner with an Electronics Manufacturing Services (EMS) provider that can offer both product design and volume manufacturing services to give you the flexibility and confidence you need to develop new kinds of products in new markets.

The reality of a turbulent, ever-changing market demands a new kind of discipline to survive. Are you ready to embrace it?

This post was originally published in January 2022, and updated in May 2023 for accuracy. New call-to-action

Written by Harald Schroeder

Based in Germany, Harald holds a Master's degree in Business Administration and is known for his proactive approach to lead generation and new business development. Harald excels in contract negotiation and adopts a value-based selling approach with clients.