How do you stay innovative and grow in a competitive market? Effective product development allows companies to sustain, grow, and thrive in both old and new markets. In this article, we'll explain what Product Development is, how to use it, how to customize our template to develop your own product, and if you watch until the end, you'll learn how Nike uses Product Development to beat the market. Our Product Development framework is useful for aspirational product developers who want to learn the product development process and for seasoned product managers who want to improve workflows with additional tools. The customizable template includes some of the best Product Development tools available today, such as Stage-Gate Process, Product Life Cycle, Product Dimensions, Growth Strategies, Scoring Models, and 25 other tools. Read on for a breakdown of how some of these tools can be used to develop a unique and innovative product.
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While new product development is the process companies use to stay competitive and innovative in a crowded market, the risk of failure is high. But with the right strategy, a product manager can streamline the process with an emphasis on the creation of value for the customer.
The stage-gate development process, also referred to as phase-gate development, divides the product development process into different stages. Each stage is separated into decision points that inform the following stage. This slide provides a step-by-step guide that can be used for each new product. For instance, the initial idea for a product is followed by a preliminary screening gate. This gate determines whether or not a product manager wants to move forward with the development process. It's important to conduct market research and competitive analysis here before the project proceeds.
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If it passes the preliminary screening, then the team moves forward to the preliminary investigation stage. The preliminary investigation stage is where the team decides what the development process will entail. If this is approved through a second screening, the next stage is to build a business case. Once a decision has been made on the business case, then it's time to move forward to the stage in which the product is finally developed. After a post-development assessment, the PM decides if it's ready to test and validate. After this validation stage, a post-launch review is conducted to decide if the product is ready for launch. (Slide 7)
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All products follow a similar life cycle. There's an initial introduction period, followed by a period of growth, then maturity, saturation, and possible further development. It's important to pay attention to the revenue curve, as its peak will determine the change from maturity to saturation, which can lead to three common outcomes. Worst case scenario, once revenue reaches its peak, it will either lead to the end of a product's life or a contraction in the product's market. On the positive end of the spectrum, new features could lead to a stage of renewed growth that extends the product's lifecycle. (Slide 10)
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A new product should always provide a customer with unique benefits to differentiate it from the competition. There are three main dimensions to every product. The first dimension is the core product in development. This is surrounded by a second dimension of core customer benefits, which are features or services the product provides to the customer. These could be the product's design, packing, quantity, functionality, or even branding. The third dimension is the extended products or services. These could be product-related services like step-by-step tutorials, payment terms, construction and installation, or free delivery.
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For a company like Amazon, delivery is a core benefit rather than an extended service, while delivery from IKEA is an extended service as it's secondary to IKEA's core product of build-it-yourself furniture that customers select in-store. (Slide 12)
ABC Analysis can be used to analyze revenues over a company's range of products. Plot each product in one of three ranges according to the product's volume of revenue share. In this example, only three products (according to the X-axis) in the A range account for over 60% of revenue (according to the Y-axis). Meanwhile, five products in the B range generate 30% of revenue, while 12 products in the C range generate only 10% of the revenue. When a PM determines the importance of each product range, efforts can be increased and directed towards products that provide maximum value. (Slide 14)
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Having a great product that delivers the right value to customers is a good starting point. But then what? At what price point should you sell the product for? And how do you scale and grow the product? There are five main types of pricing strategies that can be used for a new product. Premium pricing can be used to price a product above current market value to generate more revenue, while price skimming takes a high introductory price and lowers it over time. The less price-sensitive will buy first and other customers will buy-in later at a lower price. Penetration is used to enter the market with a lower price point and then attract as many customers as possible to later raise the price. Freemium provides a free version of a product with additional features that must be paid for, either with a paid version or from ad revenue. Promotional pricing provides temporarily lowered prices via flash sales or discounted entry offers that revert back to the original pricing after a set date. (Slide 16)
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The product innovation process is used to improve an existing product in an old market. An example of this would be a smartphone that comes out with a new model that has additional features every year. Products can be analyzed to identify pain points to generate new ideas that are then incorporated into the product development process and introduced to the market as a new innovation. (Slide 20)
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Product diversification optimizes growth and revenue. Companies can overcome market stagnation and become more "bulletproof" against market swings through the diversification process. For example, risk distribution helps a company put all their eggs in one product basket. It's also a practice to expand from the original market for a product. It can be used to increase sales of an existing product line and is especially helpful if your business has already experienced the decline or stagnant sales that come after market saturation. (Slide 21)
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To determine the type of diversification strategy a product dev team should go over, you can refer to this table and assess each entry's strategies, advantages, disadvantages, and the associated time, cost and risks of each. (Slide 22)
What does that transformation look like in action? In May of 2015, Airbnb had a process problem. Designers had to wait on engineers to write code to visualize mockups on-screen, while engineers had to wait for researchers to validate a product, only to learn some of their fundamental assumptions were off. This approach used research as a validation tool and lacked true engagement between teams at the earliest stages of the process. Their product designers, engineers, and researchers operated in a functional capacity instead of a process-oriented one.
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Through a collaborative BPR process, the 300-person product team spent nine months to entirely revamp the process to improve efficiency and capture more value. They created a single digital collaboration environment where designers and engineers could work together in real-time to update and redesign prototypes. This took a process that used to take days for product revisions and reengineered it to take 45 minutes. In this instance, Airbnb used IT to streamline their systems, change management to coach the team through a nine-month whole system redesign, and changed their internal value chain to prioritize outcomes instead of features. And they incorporated the research team early into the process so the design could be iterative, streamlined, and tested early to achieve the best results.
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This process orientation ultimately made the product team more lean, holistic, team-oriented, and autonomous as workers knew they could trust each other since the digital platform showed all updates and data in one place. If your current workflows are holding back more profitable outcomes, you need this presentation. Download the Product Development presentation for more slides on Gap Analysis, benchmarking, value chain analysis, and top BPR strategies, plus many more to save time and hours of work.
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In a customer-centric product development approach, customer satisfaction can be visualized with the Kano diagram. The Y-axis on this graph is the level of enthusiasm (or delight) that customers feel, while the X-axis measures product features from fully integrated to absent. It can also be used to measure features from basic to advanced. If a product doesn't have a ton of features and is somewhat satisfying to customers, it is considered basic. If it's adequate and pleases consumers, it could be considered a value buy. If it has high satisfaction and some special features, it could be a performance product. While a product with very advanced and comprehensive features that are considered delightful by most customers then it's likely a premium product with a cult following. (Slide 24)
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Ansoff's matrix, also known as the product/market expansion grid, can be used to plan product growth strategies. Diversification and marketing strategies are separated into related and unrelated technology groups. Related means there are synergies between new and existing products, while unrelated has no such synergies. For instance, a phone company that develops a camera would be a new related product with synergy to the company's existing product, while an example of an unrelated product would be a taxi service that launches a new shoe brand. (Slide 25)
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Target costing is another growth strategy related to getting the right price point to attract the most people. You want to be in the middle with an adequate mixture of benefits and price. Determine target costs, how target costs are split, and finally decide the target cost. (Slide 26)
At the end of the product development process, it's time for an evaluation via a post-launch review. Assess different areas of a product's development, how they did or didn't benefit the company or impacted the customer and retailer relationship. Other questions to ask are how much is the company lagging behind or exceeding its competitors because of this product? Or how is the company adhering to regulatory compliance and environmental regulations?
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The scoring model ensures each category can be weighted to what a company's main values are. For instance, the company's business needs, competitive advantage, and customer happiness could be the most important so they have a higher weight on the score. Once the weight is assigned, score each category from 1-10 on how well the company has met its criteria being evaluated. The end score will show where the team succeeded or where the product needs to be improved. (Slide 28)
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Founded in 1964, Nike has maintained market leadership because of its attention to customer needs and its success in new product development. Founder Phil Knight says "Nike is a marketing-oriented company, and the product is our most important marketing tool." Nike uses a version of the stage-gate process as part of its product development process. The company's first stage is idea generation. At this stage, companies have a choice to source ideas internally or externally. Knight says "We used to think that everything started in the lab. Now we realize that everything spins off the consumer." Nike engages with customers for product ideas, whether it's through shoe design competitions or direct feedback through its websites.
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Second in the process comes idea screening. Nike uses a creative team of 75 product designers to sift through ideas and determine which shoe will most improve athletic performance. After idea screening, Nike implements concept development and testing. Here, Nike seeks customer reactions about their product ideas and conducts market research. Product teams determine whether the shoe will be accepted in the market. If not, alternative shoe ideas are tested. A marketing team then develops the promotional strategy.
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Once the concept and marketing is approved, Nike conducts business analysis to ensure the product is in line with its long-term objectives. Analysis of expected sales and budget outlook is also conducted here. If a shoe passes this gate, it is finally ready for development and Nike's R&D department goes to work. After development, Nike conducts marketing tests with a limited number of the final products, and if all goes to plan, it's ready for mass commercialization. Most of Nike's time and energy goes into preliminary screening and testing stages to ensure every product is fit for the company and won't be a waste of resources.
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If you want to develop successful products like Nike, you need this presentation. Download the Product Development presentation for more slides on Influencing Factors, ABC Analysis, Innovation, Customer Satisfaction, and Product Marketing to save time and hours of work.