The Value of Faster Product Development
May
5
Written by:
5/5/2009 8:33 AM
The Value of Faster Product Development
How much is it worth to develop new products better and faster than competition? Product development success is seen in the delivery of a differentiated product with clear and unique customer benefits—and superior value. But what is that worth? The answer is millions or even hundreds of millions of dollars. Here’s a case study.
Constar, one of the largest suppliers of PET containers for conventional applications in soft drinks and water throughout North America and Europe, recently introduced software that can accelerate the packaging development process. Their proprietary i-Design software tool enables automation of modeling and analysis of new package creation.
Constar claims that by using i-Design, they have cut product development timelines by as much as 90 per cent, while also minimizing prototyping and concept testing, enabling its customers to be first to market with the best package.
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This raises the question of the value of that potential 90 percent gain to a packaging manufacturer. Gains can accrue from a number of factors:
- potentially avoiding producing packages that do not meet performance, sustainability or cost requirements,
- producing prototypes faster for consumer and laboratory testing,
- comparing more package design options,
- adapting faster to changing market conditions,
- increasing the period of time the application is used,
- decreasing the risk necessary to realize the benefits of the application.
In a stage-gate process, companies are encouraged to make hard and fast go/no-go decisions on new products at pre-defined points throughout the development process. The first decision point is at the concept. A number of attributes are frequently cited as characteristic of an effective stage-gate process. Here are some of those attributes:
- completing extensive pre-development homework,
- using voice of the customer (VOC) throughout the development process,
- defining the product before the start of development efforts,
- dedicating resources (people, dollars) early to the ultimate product launch,
- utilizing true cross-functional project teams,
- leveraging the business’s core competencies,
- having the support of top management,
- being willing to make hard and fast go/no-go decision at pre-defined points.
If design, testing and prototyping can be completed faster, the resulting product is more likely to benefit from higher quality of pre-development homework, better incorporate VOC, have better definition up front, and have improved levels of top management support. Those changes translate into dollars.
Especially in a market with rapid technological progress and intense competition, gains in product design or features may be lost to competitors that are effective at reverse engineering or simply copying key features of a leading product. However, manufacturers that launch new models closer to the technological edge have been shown to create more value for their shareholders than other companies. Taking a technological lead is seen by customers and end users as an indicator of long-term viability and profitability, even though a current successful product may be copied or imitated fairly easily.
Claims of faster time-to-market for should not be blindly accepted and must be financially evaluated. Documented gains have reached between 5% and 20% of the value of the application to an organization. In other words, a $100 million brand would be worth between $105 and $120 million if it got to market faster.