The Analysis of New Product Development Chain and New Product Development Strategies LI Min1, HAN Liguo2 1. School of Economics and Commerce, South China University of Technology, P.R.China, 510006 2. P.G. Logistics Group Co., LTD, P.R.China, 510630 [email protected] Abstract: When a enterprise develops its new products, it requires strategies to guide. From the perspective of resource integration, the paper attempts to advance the conception of new product development chain by analyzing the activities of new product development process. Furthermore, the paper redefines the conception of new product development strategies and brings forward a strategies selection framework for new product development. Keywords: New Product Development Chain, New Product Development Strategies, Resource intergation

1 Introduction Today, in order to cope with fierce competition, more and more enterprises engage in developing new products to gain continuously competitive advantage. New product competition has become one of the main competitive methods for today’s enterprises[1]. However, while by successfully developing new products, enterprises can obtain significant benefits, the activities of new products development have great risks. Constrained by limited resources and capacities, entreprises always try to look for new products development ways that not only can minimize the risk, but also get high success rate. In order to achieve such goals, new product development activities need right strategies to guide. Entrepreneurs need to select some right and adaptive new product development strategies to direct the entire process of new product development. At present, some researches carried out studies on process of new product development[2,3,4]. However, the research that from the perspective of resources integration to investigate and analyze the process of new product development is rare. The paper makes up the deficiency in this area and presents a strategies selection framework for hleping entreprises to carry out activities of new product development.

2. Process Analysis of New Product Development The process of new product development means a sequence of steps or activities of enterprises developing new products, including conception, design, production and commercialization. In the fact, the whole process is a close combination of technology and management and is a complex process involving a lot of complicated factors. Even if two enterprises develop a same product, the development processes may contain many different activities[5]. Basing on present research[2,3], a general process of new product development activities is shown in Figure 1. Furthermore, the paper divides the new product development into four stages: the stage of conception development, the stage of technology development, the stage of production development and the stage of marketing development (Figure 2). In the stage of conception development, the question that new product is market oriented or technology oriented is conceived. The ideas may come from all of the actors, such as customer, manufacturer, supplier and competitor. Meanwhile, new-product ideas must meet the technical feasibility and market demand. Thus, the stage of conception development is the process of gathering information to create appropriate new-product ideas. In this stage, the content of new product development is identified.

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The stage of technology development means the process in which new-product ideas turn into prototypes or samples. In detail, in this stage, enterprise evaluates and selects related technology and products, tests, evaluates and chooses the prototypes. The stage of production development begins with the completion of technology development and lasts until new products go into mass production. The activities including process design, fixture design and manufacture etc. all happen in this stage. In such process prototypes are turned into new products.

Research-Idea

Selection and Design Process

Concept-Prototypes

Trial Sale-Marketing

Production Development

Conception Development

Marketing Development

Technology Development Fig.2 Process of New Product Development

The stage of marketing development means the process in which enterprise turn new products into new commodities which market accept. In the fact, in the stage of conception development, enterprise has to consider questions of marketing development. This stage involves activities of market research (doing prepare for forming conception), market tests and evaluation (building communication channels for new product and market demand), marketing and so on. At last, it needs to be emphasized is that the four stage of new product development are often intertwined and it is difficult to draw a clear dividing line between these four stages. For example, the activities of technology development should begin from the stage of conception development until mass production because developer should consider the technical feasibility of new-product ideas and ensure process development technologically successful during the production. Besides, in the whole process of new product development any activities should be oriented by market demand and the activities of technology development are no exception.

3. New Product Development Chain and Resources Integration 707

The new product development needs resources. There are many viewpoints about what are enterprise’ resources among theorists[2,3].This paper regards that enterprise resources consist of explicit resources and implicit resources. Explicit resources include capital, equipments, raw and processed materials, etc. and implicit resources include organization culture, management knowledge, patents and technology, enterprise brand, etc. The new product development needs both explicit resources and implicit resources, but in fact many enterprises’ resources are limited and can’t satisfy enterprises’ needs of new product development. In this case, enterprise may cooperation with other subjects such as research institutes, colleges, suppliers, auxiliary enterprises and so on. By cooperating and integrating resources, enterprise and other subjects can implement their own function and play their own advantages to achieve the goal of developing new product quickly and successfully. At the same time, by such collaboration, enterprise also disperses risks and reduces costs. Thus, we discuss new product development by the view of resources integration. In management theories, the idea related to resources integration is mainly embodied in the theory of “chain”, such as Porter’s value chain, supply chain, knowledge innovation chain, and knowledge supply chain. In fact, the key idea of all of these “chain” theories is systematization and optimization. For example, the theory of value chain emphasizes that the value creation of an enterprise is composed of a series of activities; the theory of supply chain management emphasizes an enterprise’ internal and external logistics optimization and cooperation with other objects; the theory of knowledge supply chain management emphasizes the optimization of knowledge-flow in a knowledge innovation system. By analyzing and comparing the essences of these concepts of “chain” and by analyzing the process of new product development as above stated, the paper advance the conception of “new product development chain”. We regard that the process of new product development and the process of obtaining related resources compose a new product development chain. There are two resources flows running through the whole chain: one is material flow (explicit resources flow) and the other is knowledge information flow (implicit resources flow). Meanwhile, for each of the activities on the chain, enterprise may choose different means to carry on, such as outsourcing, cooperation, market purchase or doing itself.

Thus, new product development chain is identified as following: Basing on the consensus of market demand and technology development, all enterprises (objects) participating in a new product development activities use their own unique resources and capabilities and undertake their own tasks according to the requirements of the new product development (such as technology requirement, time requirement, quality 708

requirement and cost requirement) to develop new products effectively and successfully. As shown in Figure 3, establishing new product development chain enables enterprises cooperate with others and get away from resource constraints, increase the success rate of new product development and decrease risks. Obviously, the final results will benefit all of the objects on the new product development chain. About the conception of new product development chain, it needs to be emphasized is the following four points. First, there are two kinds of bodied on the chain, “core body” and “auxiliary body”. Core body is the body that organizes, manages, coordinates and controls all of the main activities in the chain. Most of the time, core body is also called “core enterprise”. “Auxiliary body” includes auxiliary enterprises, colleges, research institutes and agencies and so on. Second, on new product development chain, core enterprise and auxiliary enterprises should work interdependently and they should be coordinated to complete their tasks together. A high level of collaboration directly determines the efficiency of the operation of the chain. Third, internet, management information system and other information technology is the technology base by which the objects on the chain could carry out their cooperation successfully. Four, the goal of new product development chain is to seek resources integration and an overall optimization. Such goal requires all enterprise change the old thinking modes and establish the relationship of complementary advantages, strategic innovation and joint development.

4. The Analysis of New Product Development Strategies As above stated, at the conception development stage, we should decide that the new product is based on market-oriented or technology-oriented; at the technology development stage, we should choose and decide the methods of obtaining technology, such as independent development, cooperative development or purchase patented technology in market. All of such questions belong to strategy selection of new product development. We will discuss these problems in this part. In fact, in the field of new product development, most of present concepts about strategy focus on a high degree of planning but not adaptability. However, with the rapid changes in technology and diversity of customer needs, enterprises are facing increasingly unstable environment. In such dynamic conditions, plan alone is difficult to achieve success. Strategies with planning only cannot ensure enterprise to react effectively to the actual competitive situation. Thus, the strategies of new product development should be has both planning and adaptability. Tab.1 A Strategies System of New Product Development and Main Factor Main Factor Level

Strategy

Position Strategies

Process Oriented

Resources Capability Oriented

Market-oriented

Market demand

Technology-oriented

Technology

Analysis of enterprise

Outsourcing, cooperation development and

Strategic Level

Resources Integration Strategies

A Strategies Conception Development

System of

capability,

independence development,

Distribution of Resources

Plan product development chain

Ideas source, Selection

Information gathering system and the creation

Strategies

New Product

Technology Development

Development Operational

Strategies

Level

Production Development

and maintenance of expert tank Obtaining technology

Establishment and management of

Technology scope, product

Establishment and management of

cooperative R&D

Strategies

scope

cooperative manufacture

Marketing Development

Price, channel, deliver,

Establishment and management of

Strategies

communicate

cooperative marketing

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Basing on the analysis of the process of new product development above stated and the extensive studies of the literature on the conception of strategy, the paper advance that the definition of “new product development strategy” is the rules and plans by which in a dynamic environment, for an enterprise’ present existence and future development and for it taking the initiative to use, to adapt and to create new market opportunities, the enterprise uses to guide its activities of new product development in the process of planning its new product development chain to effectively using its own and others resources and capabilities. The definition has both planning and adaptability. It not only emphasizes opportunity-oriented, but also emphasizes capability-oriented. It also focuses on resources integration by designing and planning new product development chain to gasp of new products’ market opportunities and enhance enterprise’ competitiveness. Besides, the definition pays attention not only to the process of new product development, but also to the effectively use of exterior resources. According the analysis above stated, we regard that a complete system of new product development strategy is composed of two parts: strategic level and operational level. Strategic level consists of new product development position strategies and new product development resources integration strategies; operational level consists of conception development strategies, technology development strategies, product development strategies and market development strategies (as shown in Table.1). Strategy selection is a series of feasible actions which organizations can take to achieve a more favorable position in a competitive environment. Therefore, we consider that the strategy selection for new product development is a series of feasible actions that enterprises can choose to ensure new product development successful in a competitive environment. In Figure 4, we bring forward the strategies selection framework of new product development. Selection in Strategic Level

Position Strategies Resources Integration Strategies

Selection in Operational Level

Operation Level

Conception Development Strategies

Technology Development Strategies

Production Development Strategies

Marketing Development Strategies

Implementation, Evaluation

Fig.4 Strategies Selection Framework of New Product Development

5. Conclusion New product development is a comprehensive and complex process. With limited resources, enterprise should integrate various resources reasonably by establishing new product development chain with other enterprises and organizations to make material flow and information flow interact and integrate effectively and completely. Furthermore, enterprise also needs an adaptable strategy selection system to guide the specific activities in each stage of new product development process. In such framework, enterprise can develop new product quickly and successfully with lower cost and risk.

References [1]. Li Sui-cheng; Jiang Yin-hao; Zhu Zhong-hua, Study on radical product innovation of manufacturing enterprises based on supplier involvement, Soft Science, 2009.1. (in Chinese)

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[2]. Susan Walsh Sandeson, Cost models for evaluation virtual design strategies in multicycle product families, Journal of Engineering and Technology Management, 1991.8:339-358. [3]. S. Onkvist, J. J.Shaw,Product life cycles and product assurance principles, McGraw-Hill Inc,1988. [4]. Eirth Richard W., New product strategies of large, dominant product manufacturing firms: an exploratory, Prod.Innov.Manag. 1996,13(4):334-347. [5]. Zhai, Integrated product development process and its conceptual model,Science Research Management, 1999.

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