Creating Competitive Advantages Through New Product Development

Creating Competitive Advantages Through New Product Development

The transformation of many diverse forms of customer, supplier, internal development, and research & development (R&D) insights into a consistent and productive platform for product development is key to long-term competitive growth. The reliance on advanced frameworks for organizing these diverse sources of innovation into taxonomies that can eventually be used to fuel new products is often called the New Product Development (NPD) process. As every company has a unique, highly differentiated and often highly customized business model, the same holds true for the NPD process. Companies over time define the NPD process to align with their unique technological and market strengths. Comparing the NPD process at Salesforce, the leading provider of SaaS-based CRM software vs. Apple makes this point clearly. Salesforce is known for very rapid product releases of the CRM applications and exceptionally quick updates. Conversely, Apple is known for being slow and deliberate in their user experience design criterion and extremely secretive about their NPD process. Both companies are market leaders in their fields, one in a digital product and the other, in a physical product. As is the case with any 21st century product, both have electronics and software heavily embedded within each of them. The digital product, which is Salesforces' CRM application, has a much more accelerated product development and testing cycle associated with it, as the company is aggressively pursuing market share against large, entrenched rivals. Conversely, Apple on the hardware side of businesses is often creating their own new markets through efficient use of intellectual capital and innovative, user experience-based designs. Both companies are market leaders in large part due to the success of their continual execution of their NPD processes and strategies.

Comparing...

Physical Products
Starting at the supply chain level and progressing through each area of the value chain, the NPD process for digital vs. physical goods forces an entirely different set of constraint and parameters on systems, processes and platforms. For digital products, the base of developers is in many ways their supply chain; without them the NPD process would come to a grinding halt. The more rapid the product lifecycles, the greater the need for the NPD process to be tightly engrained into every aspect of the design, development, production, pricing and servicing of a given product or service (Bentley, 1992). For digital products the need for having advanced code design and staging systems makes the translation of software concepts into products more fluid and efficient. From an allegorical standpoint, the role of Enterprise Resource Planning (ERP) systems for physical product handles comparable tasks and coordination of the production and delivery of the new product (Sun, Li, Fang, Ye, 2011).

Comparing the timeframes of translating conceptual designs and product prototypes into completed products also illustrates how these respective constraints impact the NPD process. The more dependent a given product is on physical attributes and prerequisites, the more difficult it is to change quickly in response to market requirements and shifts in customer needs. In addition to the inflexibility of modifying physical products relative to digital ones, physical products often have a relatively high percentage of their total costs represented as fixed costs, which in turn can lead to lower-than-average levels of Return on Invested Capital (ROIC) (Porter, 2008).

Comparing physical products to digital products shows the financial advantages of the latter while also showing how the NPD process itself must be agile enough to deal with rapid shifts in product and process development. A highly effective NPD process for digital products delivers…