A Study on Factors Influencing New Product Development

A Study on Factors Influencing New Product Development 

M.R. Muhamad & S. Ariyanti 

School of Mechanical Engineering

Universiti Sains Malaysia

Engineering Campus

14300 Nibong Tebal

 

ABSTRACT 

New product development (NPD) is a key indication of successful product strategy and NPD is normally considered as one of the most important components of a firm’s competitiveness. NPD puts emphasis on product development by a multifunctional team to produce new product that meets customer requirement and competitive in market. 

The objective of the paper is to describe the research work carried out to identify the important internal and external factors that influence the success of NPD project. In addition it also elaborates the level and extends of NPD activities among the Malaysian manufacturing industries particularly the plastic and telecommunication industries.  

The method to gather the data is questionnaire survey. The questionnaire was sent by post to plastic and telecommunication industries in Malaysia that are randomly selected. The data was analyzed using statistical analysis including linear correlation.  

The results indicate that companies with higher annual turnover, larger workforce and better access ability to high technology stand a better chance of being successful in their NPD projects. The presence of a specific manager to oversee the NPD implementation also contributes towards effective NPD.

1. Introduction

Development always related with exchange. The growth of economic and technology development make a manufacturing environment to be advanced and dynamic.  In order to win a competition, an industry must to do research and development to produce an innovation product and to improve the exist product.  Therefore, designing and developing a new product continuously is a management strategy.

A developing country such as Malaysia will be a developed country in industry if the local industries continuously developing and improving the existing product. The success product will make the small and middle scale firms to win the competition either in domestic or international market.

Based on the work of Ibrahim (2001), there are any problems causes the new product development (NPD) is not success, i.e. industries in Malaysia not use NPD process model, the executive hold authority in NPD project so all of project decision dominated by executive decision and not based on the agreement of the project members. 

Propose of this study aim to give any contribution in the increasing of knowledge about NPD in order to implement NPD effectively and efficiently and to identify external and internal factors in success of new product in the market.

Generally, NPD is defined as an important activities required by a firm to increase the economic level in the future that focused to product development with special characteristics satisfy consumer and in order to compete in the market. NPD work team consists of members from any functions in the firm that has an important role based on experiences and knowledge and smooth communication among the members. NPD process is a complex process need an analysis and good decision to produce the qualified the new product.

2. The important factors in NPD

NPD is a complex process involves any factors either internal or external factors for its successful. These factors are:

2.1  NPD Process

NPD process is a determinant factor in the success of NPD that involves any activities and decisions and times needed from the idea generation to launch selling of product to the market (Craig & Hart, 1992). NPD process involves more scientific knowledge and inputs from marketing, engineering, R&D and production departments (Cooper, 1983). Activities in NPD process as a basic of this research are activities developed by Cooper in 1988 such as:

a. Initial Screening

NPD process is beginning by defining of new product idea using a new technology of an advanced product into another product (Lee et. al., 2001). The idea of new product must be choose and screened on the available ideas that fulfill any criteria of customer needs. This step is a first decision in a project.

b. Preliminary Market Assessment

After the choosing of new product idea, the next step is to make a marketing analysis. This step involves a short and simple marketing research (Cooper, 1993). This is aim to analyze the market size, competitive situation and the target of marketing in addition to study the selling system, promotion and distribution.

c. Preliminary Technical Assessment
This analysis aim to review whether may new product idea develop? How to produce it? (Cooper, 1993) and to make any choosing and building of technology applied in the new product manufacturing (Karlsson, 1997).

d. Marketing Studies

Marketing studies is a success key in NPD. The information gathered from this analysis is used in design process such as to know the demand and need of customers, characteristics of product, preference of consumer and the list of competitors.

e. Business/Financial Analysis

This analysis is performed after to make a decision for develop of new product.  This step involves financial, risk analysis and the market attractive (Cooper, 1993). This analysis also estimates the gain profit and this analysis need more information about the production cost, product price, currency, income taxes and investment.

f. Design and Development

In this is a physical building of a real product (Cooper, 1993).  This is an important step in the success of product because; in this step the new product will be built (Wilson, et. al., 1996).  This step needs an imagination, detail engineering, prototype, and process design. For the commercial success, the product design must be prepared well from the available product in the market (Wilson, et. al., 1996).

g. In House Test

Prototype testing in laboratory is known as alpha test (Cooper 1993). In this step involves any test to the new product in order to study any discrepancy of the product design.

h. Customer Test

After the product testing, the customers use the product prototype this activity is known as beta test (Cooper, 1993). The customers asked any thing about new product whether the product satisfy the customer or not and to take any improvement action.

i. Test Market

Marketing experiments is applied using suggested marketing design.  This experiment will be applied by the limited user (Cooper, 1993). This experiment did not only to the product but also to any marketing components. Based on this research, the marketing concept and product strategy will be choosing.

j. Trial Production

The new production process must be trying in the firm limited on the number of production (Cooper, 1993).  This step tries using any facilities, material, production method and the skill operator. This aim to study any problems caused before the real production.

k. Pre-Commercialize business analysis

This is a last business and financial analysis before the product launched into the market (Cooper, 1993). This is aim to provide the certainty to the firm whether the new product will give any profit or not.

l. Production Start-Up

The production will be started if the project group has able to prepare and to distribute the product to the users or consumers that will satisfy them.

m. Market Launch
Launching of a new product is an important step in product marketing. Nowadays, the new product will be marketing based on marketing design (Cooper, 1993).

2.2 Management

NPD is a complex process involves any functions in an organization. Therefore, it must to realize a suitable management’s situation.  In order to achieve a new product strategy that related to the objective and strategy of the firm, it need support from the top management and a suitable organization structure as an important factor in the success of NPD (Dwyer, 1990).

2.2.1 Structure and Function of Management

7S of McKinsey is a combination of applied elements in factor analysis of NPD organization, i.e.:

a. Strategy

New product strategy is a formulation of activities planning in order to realize the objectives of the firm through guidance of product development and strategy (Shipley & Armacost, 1993). Strategy in product improvement must be clear and based on the environment development (Johne & Snelson, 1990).

b. Structure

Structure is a way to achieve the objectives and the aim of an organization. Structure indicates any responsibilities and functions of the members of organization.  Any functions are required to develop a project improvement (Johne & Snelson, 1990).

c. Staff

Staff has an important role in all of NPD activities focused to function, coordination, especially on R & D and marketing function. Structure of organization, project management and skill are required to develop of a new product (Craig & Hart, 1992).

d. Skill
Skill is required in determination of the type of worker involved in NPD. The skills of employee depend on their experiences in NPD project (Barclay, et. al., 1990).

e. System

Coordination system and efficient process is an objective of an organization.  The innovation activities involve any cooperation and intensive efforts of professionals and function of another team.

f. Leadership style
Any research shows an important factor in the success of NPD, such as the support of top management. A best leadership will maintain the relationship between strategy and structure in the job description and understanding of strategies or functions.

g. Shared value

In a NPD organization, there are responsibility and trust to the direction of the project leader. The shared value has an important role to get the support from the senior managers. Generally, the characteristics of the level and steps of development process are to understand the preference and the need of customers.

2.2.2 Technical Aspect

There are any questions that must be answered in technical aspect such as whether the product may be developed? What its price? What duration required producing the product and what the material resources (Cooper, 1988).

Technical skill is an important contribution (Souder, 1987). The first: technical skill is required in marketing needed. The second: the high of technical skill is very important in R&D and marketing section.

2.2.3 Communication

Communication between marketing and R&D in NPD is a factor of the success of NPD (Gima & Evangelista, 2000). R&D requires any information about the need of user and supported from the marketing section because the effective product strategy in the development of the new product.

2.3 Information
Information is a factor in the success of NPD because any information is required in process activities of NPD.  Information of this aspect is required to realize the new product and in building the marketing activities.

2.3.1 Marketing
In order to make a decision, it is important to integrate customer’s needs and technical in order to determine the accurate decision (Karlsson, 1997). The decision may be taken through a marketing research.

2.3.2 Competition

The input about new product idea obtained from the competitive in two different ways. First, competitive analysis can give idea for the new product design. Second, competitive make an important innovation in the new product design (Gotzsh, 1999).

2.3.3 Technology Advancement

Information about the technology is very important in NPD because the best technology application and suits can make the new product will compete in the market and to produce the new product efficiently and effectively (Rosenau, 1999).

2.4 The characteristic of firm
The characteristics of the firm are an important factor influence the success of NPD. The characteristics are:

2.4.1 Technology

An effective NPD is achieved by implementation of high technology (Maidique & Zirger, 1984). In order to produce the new product effectively and efficiently, it required the improvement of the available technology (Gotzsh, 1999) and will change the characteristics of product (Karlsson, 1997).

2.4.2 The realization of trust

All of employee who involved in the project of NPD must have any trust that they able to implement NPD to produce the required product by the consumer and will satisfy the consumer or users. Technical and marketing is an important factor to support the success of competition (Craig & Hart, 1992).

3. Research Methodology

On this research, the data collection system is performed at three levels, namely: questionnaire supply, questionnaire escorting and data collection. Those questions included at questions are required in order to know the criteria of company, management, NPD process and identify factors toward the successful of NPD on the related industry. The questionnaire is sent to 400 plastics and telecommunication industries available in Malaysia. Only 14% or 56 industries gave the respond on this research. It is caused by plenty of companies do not perform NPD activities, so that they are not interested at giving the respond. It is known from the accepted respond through e-mail and interview by phone with the companies.

The qualified and trusted data obtained, since such as respond is from top-manager, product development manager and chief sub-section of R & D.

In performing analysis toward the obtained data is by using statistics analysis consisting of descriptive and linear correlation. Descriptive method is performed for calculating the frequency of NPD factors. Whereas, linear correlation has function to known the relationship between NPD factors with new product success at market. Pearson correlation is used on this research analysis, since it is intended to know the correlation between independent variable (X) and dependent variable (Y) (Nazir, 1983). Whereas, independent variable are NPD factors and the dependent variable is the new product which have been success on the market.

4. Result and Discussion

From the research performed toward the industries at Malaysia, particularly plastic industry and telecommunication, we obtain that those industries with great annual income are for (RM 500,000 – 5,000,000) and the more workers and frequently used NPD. The bigger and better of its technology will be followed by the rising up of its technology and products on the market, as it is shown on the Table 1.

Background of Company	Pearson Correlation	Significant	N
Annual Turn Over	.090	.598	37
Number Employees
.228	.174	37
Level of Technology
.042	.804	37

 Table 1 Correlation at the background of company.

The objective of NPD is as important component from the strategy of new product which will be built. In this case the objective of NPD must be known by all members involved at NPD. To ensure direction of new product that will built. As shown in Table 2. From Table 2, we can see the objective of NPD for fulfilling the demand of market is as the objective with positive correlation toward NPD. The product to be made for fulfilling the market demand will be successful on the market. Other objective has positive correlation, namely by using the available technology. By sophisticated technology, the product will be better than the available products on the market.

Objective of NPD	Pearson Correlation	Significant	N
Fulfill Market Demand	.034	.840	37
Try Out New Market
-.200	.234	37
Compete in Local Market
-.244	.145	37
Use the Available Technology
.136	.421	37
Implement Research Result
-.079	.643	37

Table 2 The Objective Correlation of NPD with Product Success on the Market.

Table 3 shows the predisposing determinant factors in NPD at local industry. Those factors with positive correlation is the contributed factors for the success of  NPD, whereas those factors with negative correlation is the factors with less influences toward the success of NPD for local industry, especially telecommunication and plastic industries.

Determinant Factors in NPD	Pearson Correlation	Significant	N
Company technical Capability	.459	004	37
Worker’s technical ability	.302	.069	37
Steady funds inflow	.086	.613	37
Inter department co-operation	-.094	.579	37
Top Management support	.360	.029	37
Clear product strategy	-.187	.267	37
Good planning and control system	-.194	.251	37
Product fulfill customers’ needs	-.142	.401	37
In depth market study	.050	.768	37
Supplier comment	-.314	.058	37
Good leadership style	-.354	.031	37
Understanding of competitor’s product	-.326	.049	37
Supportive government policy	-.463	.004	37

Table 3 Correlation determinant factors in NPD

From Table 4, we can see that the activity process of NPD proposed by Cooper (1988). Not all of activities have positive correlation for new products success in the market. Those activities with negative correlation show the level of its use of activities and followed by the reduction of product amount which is successful on the market and not suit to use in NPD process at industries in Malaysia. It’s such as activities includes:

1. Initial market assessment

This activity is neglected because there has been the research on market after the initial technical assessment. On this case, it is not necessary for the repeated activity with similar objective.

2. Trial Marketing

This activity has negative correlation, since on the previous activities, there has been product trial by the users which can give information for the products produced fulfilling the expectation and the wish of users. In this case, activity trial is less performed.

3. Pre-Commercial Business Analysis

On the previous activity, there has been business/financial analysis, and then it’s not necessary to have repeated activity.

Activities of NPD	Pearson Correlation	Significant	N
Initial Screening	.048	.776	37
Preliminary Market Assessment	-.138	.654	37
Preliminary Tech. Assessment	.508	.076	37
Market studies	.451	.122	37
Business Analysis	.033	.846	37
Design and Development	.206	.222	37
In-house Test	.482	.095	37
Customers Test	.094	.759	37
Test Market/Trial Sell	-.183	.550	37
Trial Production	.017	.955	37
Pre-commercialize Business Analysis	-.526	.065	37
Production Start-Up	.045	.790	37
Market Launch	.037	.829	37

Table 4 Correlation NPD activities with new product success in the market.

By the existence of such as activity reduction, the process of NPD can be performed more effective and efficient as well as cost and time reduction on the process of NPD.

Information is important thing required at NPD process. In the creation of new products, information source such as available at Table 5 is helpful for creation new product.

Information Resources	Pearson Correlation	Significant	N
Customer feedback	.096	.570	37
In house panel	.420	.010	37
Competitor product	-.246	.143	37
Sales and technical people in company	.084	.622	37
Universities/Polytechnics	-.278	.096	37
Independent researches	-.250	.136	37

Table 5 Information source used at the creation of new product

Nowadays, there are many techniques for making design. The best technology is on computer system, since by using such as the technique, design process can be performed easier and faster. The analysis decision shows that on design and new product development, only CAD (Computer Aided Design) has positive correlation. It shows less understanding and usage of computer on design process and development in NPD process.

Techniques	Pearson Correlation	Significant	N
CAD	.478	.099	13
DFMA	-.438	.134	13
QFD	-.444	.128	13
Reverse Engineering	-.160	.602	13

Table 6 Design technique/development using computer

On Table 7, it shows that the trial by users using customers group for assessing the new product subtype produced is one method having positive correlation. This method is more effective since its shows the users on assessing the new product produced for more guarantying the successful of new product.

Method of test product by customers	Pearson Correlation	Significant	N
Bringing the potential user to development site to view and try out the new product	-.193	.252	37
Selling the product to a limited number of customers using the proposed marketing plan	-.061	.722	37
Using a focus group of customers who collectively evaluate the product	.183	.278	37
Using a customers/user panel' that acts as an advisory team along and after the development process	-.069	.687	37
Enabling the customers to use a product over a longer time period usually at his/her own premises	-.171	.310	37

Table 7 The Method Used on the Test product by Users

From the result of survey performed, management system shows that project assignment system of NPD for working team with across functional is the best assignment system. It is shown by positive correlation value toward the success of product on the market, value correlation 0,069 (Sig 0,689). Whereas, for determining the leader on NPD project, it shows that the leader of project is manager R & D is a appropriate leader on this project. Such as this decision is shown by the result of survey from 43 respondents, 22 respondent states that the project of NPD is led by manager R & D.

From the result of survey, it is obtained appropriate NPD process with industry available in Malaysia. Such process can be shown on Figure 1.

The model of this process is one process with members consisting of variety functions. On each steps, it is given clear task. The result of that projects steps, expectation of working team and project leader can be seen clearly. On that model, the additional process is not only on efficiency process, but also effectively of new products.  This process model has capability for repairing the successful average for new products, signs of project failure to be known since the initial process and better result. Market orientation is strong since it is able to know  the users needs, competition circumstances, and market situation which is as important part in the successful of new product.

 3. Conclusion

From the result of survey and correlation analysis, it can be concluded that the industry with great annual income, great amount number of workers, and higher technology is trying to make better result of NPD. In performing NPD process, the companies at Malaysia assign Manager R & D for leading NPD project. Technical capability, worker technical capability, available financial, support from top-manager and products fulfilling the expectation of users is the predisposing factors toward the successful of NPD. The activity of NPD process such as idea screening, technical assessment, market research, product development, in-house product test, customer test, production test, production start-up and product launch is the process activities that more help the success of new product at the market.

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