New Product Development and Entrepreneurship Analytics

Kennedy Prince Modugu

Higher Colleges of Technology


More than ever before, today’s business environment is rapidly changing than it was some decades ago. This is largely due to increasing technological advancement and globalization. Therefore to survive and stay competitive, industry players must give priority to new product development (NPD) and innovation. This is because NPD is a critical success factor for most companies. According to Chen, Kang, Lee, Xing and Tong (2007), more than 50% of the sales in successful companies come from new products and more than 60% of the total revenue of most companies is attributable to new products. These assertions are testament to the multiplicity of new products that are available in everyday market. For example, each year, large multinational corporations such as Apple, Huawei and Microsoft launch new products into the market while gradually phasing out the old ones to pave way for increased market share. Same goes for companies producing consumables such as dairy products, juice, medicines and office stationery. It is also important to state that not all new products are a money-spinner for companies as the probability of product failure outweighs its success if the right measures are not taken.

Many new products witness high failure rates. About 40% of new products are estimated to fail at launch, even after all the development and testing work; out of every 7-10 new-product concepts, only one is a commercial success; and only 13% of firms report that their total new product efforts achieve their annual profit objectives (Cooper, 2019). Wide variances exist around these and other performance statistics, however, with the best performers doing dramatically better than the rest. A lot depends on the strategic handling of NPD process.

The Concepts of New Product and New Product Development

Attempt at defining what is and what is not a new product is not an easy task for both academics and industry practitioners. Many students of business management have had much fun arguing over whether the Sony Walkman was, indeed, a new product or merely repackage of an existing technology. Another example that illustrates this point is long-life milk, known in the United States as aseptic milk. This product has been consumed for many years in Europe, but it is a relatively new product for most consumers in the United States. Consumers who drink refrigerated milk may be extremely wary of milk sold from a nonrefrigerated shelf. Once again, whilst clearly this product is not absolutely new, it can be seen that it is more useful, from a product manager’s perspective, to adopt a relativistic view.

It is important to note that a new product is a multidimensional concept. It can be defined differently and can take many forms. Some dimensions will be tangible product features and others intangible. One may ask whether the provision of different packaging for a product constitutes a new product. Surely, the answer may be yes or no. New packaging, coupled with additional marketing effort, especially in terms of marketing communications, can help to reposition a product. GlaxoSmithKline successfully achieved this with its beverage product Lucozade. Today, this product is known as a sports drink, yet older readers will recall that the product was packaged originally in a distinctive bottle wrapped in yellow cellophane and commonly purchased at pharmacists for sick children. This illustrates the difficulty of attempting to offer a single definition for a new product. Therefore, if we accept that a product has many dimensions, then it must follow that it is theoretically possible to label a product ‘new’ merely by altering one of these dimensions, for example, packaging (Trott, 2017). In addition, Corrocher and Zirulia (2010) observe that mobile communication operators use pricing tariffs to develop innovative new services. These alterations create a new dimension and, in theory, a new product, even if the change is very minimal. Indeed, Johne and Snelson (1988) suggest that the options for both new and existing product lines centre on altering the variables such as marketing, economics, production management, R&D, and design and engineering as depicted below.

i. Changing the performance capabilities of the product (for example, a new, improved washing detergent)

ii. Changing the application advice for the product (for example, the use of the Persil ball in washing machines)

iii. Changing the after-sales service for the product (for example, frequency of service for a motor car) iv. Changing the promoted image of the product (for example, the use of‘green’- image refill packs)

v. Changing the availability of the product (for example, the use of chocolatevending machines)

vi. Changing the price of the product (for example, the newspaper industry has experienced severe price wars).

From the foregoing, a new product can be described as any product that has witnessed a variability in features, packaging, brand name, level of service, quality specifications, price and technology. Therefore, NPD consists of the activities of the firm that lead to a stream of new or changed product or market offerings over time. This includes the generation of opportunities, their selection and transformation into artefacts (manufactured products) and activities (services) offered to customers, and the institutionalization of improvements in the NPD activities themselves (Loch & Kavadias).

Classification of New Products

There have been many attempts to classify new products into certain categories. Very often, the distinction between one category and another is one of degree and attempting to classify products is subject to judgement. It is worthy of note, however, that only 10% of all new products are truly innovative. These products involve the greatest risk because they are new to both the company and the marketplace. Most new product activity is devoted to improving existing products. At Sony, 80% of new product activity is undertaken to modify and improve the company’s existing products. The following classification identifies the commonly accepted categories ofNPDs as argued by Trott (2017).

New-to-the-World Products

These represent a small proportion of all new products introduced. They are the first of their kind and create a new market. They are inventions that usually contain a significant development in technology, such as a new discovery, or manipulate existing technology in a very different way, leading to revolutionary new designs, such as Dyson’s vacuum cleaner. Other examples include Apple’s iPad, 3M’s Post-it Notes and Guinness’ ‘in-can’ system.

New Product Lines

Although not new to the marketplace, these products are new to the particular company. They provide an opportunity for the company to enter an established market for the first time. For example, Google, Sony and Microsoft have all entered the smartphone market to compete with market leaders Apple and Samsung.

Additions to Existing Lines

This category is a subset of new product lines above. The distinction is that, whilst the company already has a line of products in this market, the product is significantly different from the present product offering, but not so different that it is a new line. The distinction between this category and the former is one of degree. For example, Hewlett-Packard’s colour ink-jet printer was an addition to its established line of ink-jet printers.

Improvements and Revisions to Existing Products

These new products are replacements of existing products in a firm’s product line. For example, Hewlett-Packard’s ink-jet printer has received numerous modifications over time and, with each revision, performance and reliability have been improved. Also, manufacturing cost reductions can be introduced, providing increased added value. This classification represents a significant proportion of all new product introductions.

Cost Reductions

This category of products may not be viewed as new from a marketing perspective, largely because they offer no new benefits to the consumer other than possibly reduced costs. From the firm’s perspective, however, they may be very significant. The ability to offer similar performance whilst reducing production costs provides enormous added-value potential. Indeed, frequently it is this category of new product that can produce the greatest financial rewards for the firm. Improved manufacturing processes and the use of different materials are key contributing factors. The effect may be to reduce the number of moving parts or use more cost-effective materials. The difference between this category and the improvement category is, simply, that a cost reduction may not result in a product improvement.


These new products are, essentially, the discovery of new applications for existing products. This has as much to do with consumer perception and branding as technical development. This is, nonetheless, an important category. Following the medical science discovery that aspirin thins blood, for example, the product has been repositioned from an analgesic to an over-the-counter remedy for blood clots and one that may help to prevent strokes and heart attacks.

In practice, most of the projects in a firm’s portfolio are improvements to products already on the market, additions to existing lines and products new to the firm, but already manufactured by competitors. Figure 8.1 illustrates the average project portfolio within firms. Here, 70% of new products are improvements, cost reductions and additions to existing lines.

New product development portfolio (Adapted from Griffin (1997), © John Wiley & Sons Ltd.)

Figure 8.1 New product development portfolio (Adapted from Griffin (1997), © John Wiley & Sons Ltd.)

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