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min read

New Product Development Process: Stages, Examples, and Tips

New Product Development Process: Stages, Examples, and Tips
Andriy Sambir
Andriy Sambir
Chief Executive Officer
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Whether you're an aspiring entrepreneur or a seasoned product manager, the process for new product development hardly ever gets any less exciting – or stressful. According to the Standish Group's 2020 Chaos Report, 66% of new software products fail. The troublesome development process of a new product might entail insufficient preparation, underestimated production costs, delays and unpredictable deliveries, and high costs of modification. Because of this, around 20% of new products die unremarkable and unnoticed death before they are even launched. Not exactly optimistic.

Still, launching new products is not something you can avoid if you want to stay afloat and grow. According to various reports spanning across the last decade (the latest being McKinsey one), more than 25% revenue and profits come from launching new products.

So, how do you build the developing a new product process in a way that isn't setting you up for failure from the very beginning? In this article, you'll find specifics, step-by-step stages breakdown, and some helpful examples. Let's dive in!

What is new product development?

Before we're ready to get into the nitty-gritty details of the new product development process, let's cover the basics first.

When it comes to growing your business and staying ahead in the market, introducing new products is a must. That's where new product development (NPD) comes into play. NPD covers everything from generating ideas to getting those shiny new products out there for people to enjoy. The goal? To expand product offerings, attract new customers, and boost those revenue numbers.

Types of new digital products

Now, let's talk about the different flavors of new products. Here are some common types you'll come across:

New-to-the-world products

These bad boys are true innovators, breaking new ground with never-before-seen ideas or technologies. They're the ones that turn industries on their heads and create entirely new product categories. Think back to the first personal computers, electric cars, or those game-changing smartphones when they first hit the scene.

New-to-the-firm products

These products might not be brand-new to the market, but they're new to a particular company. It's like a company finding a treasure chest in a market segment they've never explored before. Think of Netflix. Known initially as a DVD rental service, it expanded its offerings by venturing into original content production. It created a new product line within their existing streaming platform. Obviously, Netflix didn't invent TV shows, or even streaming them. Still, with popular shows like "House of Cards," and "Orange is the New Black," Netflix became a trailblazer in the world of online streaming and original programming.

Additions to existing product lines

Sometimes, it's all about expanding the family. This happens when companies introduce new versions or variations of their existing products. It's like adding more flavors to the ice cream parlor or releasing a smartphone with a better camera or upgraded features. It gives customers more options and keeps things fresh.

Improvements and revisions of existing products

Ah, let's not forget about those improvements and revisions! Here, companies take their existing products and make them even better. They might tweak the design, add fancy new features, or use the latest tech to give their offerings a fresh glow. For instance, a software company releasing an update with improved user-friendliness and extra functionalities.

Repositionings

Moving on, we've got the repositionings. This is when a product decides to change its vibe and target a whole new set of customers. Let's think of Slack. Originally designed as an internal communication tool for a gaming company, Slack underwent a repositioning to become a comprehensive collaboration platform for teams across industries. Recognizing the need for efficient and streamlined communication in workplaces, Slack expanded its scope and transformed into a go-to platform.

Cost reductions

Last but not least, let's talk about cost reductions. One effective approach is optimizing the software development process itself. By streamlining workflows, adopting agile methodologies, and leveraging automation tools, companies can significantly reduce development time and costs. This allows to lower the price for the consumers and engage new audiences.
Now that we know about the "whats," let's move on to "whys" of developing new products.

Why do you need to develop new products?

We've already talked a bit about staying ahead of competitors and those revenue percentages. Still, at the first glance it might seem that introducing new products is more pain than gain. So, let's explore the benefits of new product development.

why to develop new products

Increased revenue and market share

By introducing new products, you have the opportunity to tap into additional revenue streams. Expanding your product portfolio allows you to attract new customers, retain existing ones, and ultimately increase your market share. Innovative and desirable products can stimulate customer interest, drive sales growth, and enhance overall profitability.

Competitive advantage and differentiation

In today's fast-paced and highly competitive business landscape, standing out from the crowd is essential. NPD enables your company to differentiate itself from competitors by offering unique, innovative, and superior products. Continuously introducing fresh offerings positions your business as an industry leader, capturing the attention and loyalty of customers who constantly seek the latest and most compelling products.

Customer satisfaction and loyalty

By developing new products that meet the evolving needs and preferences of customers, you can significantly enhance customer satisfaction. Addressing unmet needs, resolving pain points, or providing innovative solutions strengthens your customer relationships. Satisfied customers are more likely to become loyal advocates for your brand, leading to increased customer retention, repeat purchases, and positive word-of-mouth referrals.

Market expansion and diversification

NPD provides an avenue for market expansion and diversification. By introducing products that cater to different demographics, lifestyles, or geographic regions, you can unlock new growth opportunities and mitigate risks associated with relying heavily on a single product or market segment. Market expansion and diversification allow for sustained growth and reduce vulnerability to market fluctuations.

Technological advancement and industry leadership

Development of a new product often involves incorporating technological advancements, pushing the boundaries of innovation within your industry. Embracing emerging technologies enables your company to position itself as a pioneer, driving progress and shaping industry trends. Technological advancements not only enhance product performance but also streamline operations, improve efficiency, and create a competitive edge in the marketplace.

Brand enhancement and reputation

Successful innovation and new product launches contribute to building a positive brand image and reputation. Companies that consistently deliver high-quality, innovative products are perceived as trustworthy, reliable, and forward-thinking. A strong brand reputation fosters customer loyalty, attracts top talent, and opens doors to partnerships and collaborations, further fueling business growth.

From our experience, this should have convinced you that NPD is not something you can forego if you want your business to flourish. But then the next, practical question arises: how to develop a new product? For you to be able to tailor a viable strategy for new product development, we'll walk you through the process step-by-step.

Stages of the new product development process

To bring a new product to market successfully, businesses follow a structured and iterative process known as the new product life cycle development process. This process consists of several stages, each playing a critical role in the overall NPD journey. Let's delve into the key stages involved.

Stages of the new product development process

Stage 1: Idea generation

The first phase of new product development is idea generation, where potential product concepts are generated and explored. Idea generation can be sourced from both internal and external sources.

New product ideas from internal and external sources

Internal sources of new product ideas involve tapping into the creativity and expertise of individuals within the company. Employees at all levels can contribute ideas based on their industry knowledge, market insights, or customer interactions. These ideas can stem from R&D departments, marketing teams, sales representatives, or even customer service staff who have a deep understanding of customer pain points and possible solutions.

External sources of new product ideas include gathering insights from outside the company. This can be achieved through market scanning, competitor analysis, value analysis of existing products, customer feedback, and industry trends. External sources might also involve partnerships, collaborations, or acquisitions that bring in new ideas or technologies.

Product discovery

During the idea generation stage, it is essential to focus on product discovery. This involves exploring unmet customer needs, identifying market gaps, and understanding emerging trends. By analyzing customer problems, preferences, and behaviors, businesses can gain valuable insights that drive the creation of innovative and impactful product ideas.

Customer problems

A key aspect of idea generation is identifying customer problems and pain points. By empathizing with customers and understanding their challenges, businesses can develop solutions that address their needs effectively. This customer-centric approach ensures that the new product is aligned with the target market's demands and provides value. Analyzing customer feedback, conducting surveys, and observing market trends are some ways to uncover customer problems and generate ideas that cater to these needs.

Stage 2: Idea screening

Once a range of potential new product ideas has been generated, the next one of the new product development stages is idea screening. Idea screening involves evaluating and selecting the most promising ideas for further development. This stage aims to filter out ideas that are not aligned with the company's strategic objectives or do not have sufficient market potential.

SWOT analysis

Source

One commonly used method during the idea screening stage is conducting a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). This analysis helps assess the internal strengths and weaknesses of the company, as well as the external opportunities and threats present in the market. By evaluating the fit between each idea and the company's capabilities and market dynamics, the SWOT analysis enables informed decision-making and the identification of ideas with the highest potential for success.

Product validation

Next in the list of the steps in developing new product is product validation. This involves conducting preliminary market research, concept testing, and gathering feedback from potential target audience. By seeking input from the intended users, businesses can validate whether the proposed product idea addresses their needs, solves their problems, and provides value. This stage helps ensure that the selected ideas have a strong market demand and are worth investing resources in for further development.

The following stages require a team. Linkup Studio is a Ukrainian outsourcing team, and in the video, we share how to integrate an offshore dev team into your business successfully.

Stage 3: Concept development & testing

After the idea screening stage, the selected ideas move into the concept development and testing phases in new product development. This stage involves translating the chosen ideas into well-defined product concepts and conducting concept testing to gather feedback and assess their viability.

Consideration

During concept development, careful consideration is given to refining and shaping the selected ideas into tangible product concepts. This involves clearly defining the product's features, benefits, target market, positioning, and pricing. The goal is to create a compelling and comprehensive description of the product concept that captures its essence and potential value to customers.

Product concepts

Product concepts are the tangible representations of the selected ideas. They provide a clear vision and description of the proposed product, including its unique selling points, functionalities, and overall value proposition. These concepts serve as the foundation for further development and testing, providing a reference point for evaluating the product's potential.

Concept testing

Concept testing involves gathering feedback and reactions from a target audience to assess their perception, interest, and acceptance of the product concept. This can be done through surveys, focus groups, interviews, or online platforms. The feedback collected during concept testing helps validate the viability and appeal of the product concept, uncover potential concerns or improvements, and guide further refinements in the development process.

Practical tips:

To have some practical tools for this stage, consider morphological analysis. This problem-solving technique helps identify and explore different possible combinations of features or attributes for a new product or solution. It allows teams to systematically break down a complex problem or product concept into its constituent parts and then generate a range of potential solutions by combining different attributes or features.

Concept-test surveys are another research method used to gather feedback and evaluate the viability and appeal of a new product concept or idea. These surveys are designed to assess consumer perceptions, preferences, and purchase intent regarding a proposed product before it is fully developed and launched.

Stage 4: Marketing strategy development

Once the product concepts have been validated through concept testing, the next stage is developing a new product strategy. In this phase, businesses define their marketing approach and formulate a comprehensive plan to introduce and promote the new product effectively.

During this stage, several key activities take place:

Target market identification

Businesses identify the specific target market or customer segment(s) that will be the primary focus for their new product. This involves analyzing market research data, customer demographics, and psychographics to understand the characteristics and preferences of the target audience. By clearly defining the target market, companies can tailor their marketing strategies and messages to resonate with the intended customers.

Positioning and differentiation

Positioning the new product in the market is crucial for its success. Companies determine how they want their product to be perceived by the target market and identify unique potential value propositions that differentiate it from competitors.

Marketing mix development

The marketing mix comprises the elements that businesses use to influence customer perceptions and drive product adoption. These elements include product, price, promotion, and place (distribution). During this stage, companies develop strategies for each element of the marketing mix to create a coherent and compelling marketing approach.

Sales and revenue forecasting

During these steps of the new product development process, businesses also forecast sales and revenue projections based on market research, customer insights, and competitor analysis. This helps estimate the potential demand for the new product and provides insights into the financial implications and expected return on investment. Sales and revenue forecasting guide resource allocation, production planning, and overall strategy of new product development.

Stage 5: Business analysis

Once the marketing strategy has been developed, the process of new product development progresses to the business analysis stage. During this stage, businesses conduct a comprehensive assessment to evaluate the financial and operational feasibility of introducing the new product. Business analysis might include:

Cost and profitability analysis

Businesses analyze the costs associated with developing, producing, marketing, and distributing the new product. This includes evaluating the expenses related to research and development, manufacturing, packaging, advertising, sales, and ongoing support. By estimating the costs and projecting potential revenues, companies assess the profitability and financial viability of the new product.

Sales projections and demand forecasting

Building upon the sales and revenue forecasting conducted in the marketing strategy development stage, businesses refine their projections and make more detailed assessments of anticipated sales volumes and demand. This includes analyzing market trends, competitors, consumer behavior, and any potential factors that could influence the demand for the product.

Risk assessment and mitigation

Businesses identify and evaluate potential risks associated with the new product. This includes assessing market risks, such as changes in consumer preferences or increased competition, as well as operational risks, such as production challenges. By identifying and understanding these risks, companies can develop strategies to mitigate or minimize their impact, ensuring a smoother product launch.

Market entry strategy

Businesses also determine the most appropriate market entry strategy for the new product. This involves considering factors such as distribution channels, sales force requirements, pricing strategies, and competitive positioning.

We covered the product discovery phase of the new product development process in detail in the video.

Stage 6: Product development

In this video on our YouTube channel, Linkup Studio’s CEO, Andriy Sambir, has discussed things to consider before building an app.

Only now in our stages in the development of a new product we move to, well, actual development. In this stage, businesses focus on transforming the concept into a tangible product through various activities. This includes prototyping and the creation of a minimum viable product (MVP).

Prototype

Businesses create prototypes, which are early-stage models or samples of the new product. Prototypes allow for testing and evaluation of the product's design, functionality, and performance. They provide an opportunity to identify any design flaws, make necessary improvements, and ensure that the final product meets the desired specifications. Prototyping helps businesses refine the product before proceeding to full-scale production, saving time and resources in the long run.

According to an older McKinsey report, 60% of the companies prototype quite late in the development stage and only for internal use. However (and the 2022 report confirms it) rapid prototyping and introducing the users early on allows to develop a product with the better product-market fit and nip in the bud many issues.

Prototype

Source

Minimum viable product (MVP)

In addition to prototyping, MVP is often used during the product development stage. An MVP is a version of the product with the limited set of major product features required to meet the needs of early adopters and gather feedback for further development. By launching an MVP, businesses can test the market, gather valuable user insights, and iterate on the product based on user feedback. This iterative approach allows for continuous improvement and ensures that the final product aligns with customer expectations.

Our CEO gave grounded basics of MVP: its benefits, tips to use, and successful examples in the video:

Testing and iteration

Process for developing new products also involves rigorous testing and iteration to refine the service or app. This includes understanding product usage through conducting usability tests, functionality tests, and performance tests to ensure that the product meets quality standards. Feedback from internal testing teams and external beta testers helps identify areas for improvement and guides the iteration process.

Stage 7: Deployment

On these stages in new product development process, businesses focus on implementing and launching the new product into the market.

Technical implementation

This step includes finalizing the product design, integrating any necessary software or hardware components, and ensuring compatibility with existing systems or infrastructure. The technical implementation phase aims to ensure that the product is ready for production and can be effectively deployed to customers.

Resource estimation

Resource estimation is crucial in the deployment stage as it involves assessing the resources required for the launch, promotion, and support of the new product. This includes estimating the workforce, equipment, and facilities necessary to meet production demands and deliver the product to the market.

Requirements publication

Publishing the product requirements is an important step in the deployment stage. This involves documenting and communicating the product specifications, standards, and expectations to internal stakeholders, such as manufacturing teams, and customer support personnel.

Engineering operations planning

This step is aimed to ensure smooth production and delivery of the new product. This involves creating detailed plans and workflows, coordinating activities among different departments or teams, and addressing any operational considerations or challenges.

Scheduling and supplier collaboration

Scheduling plays a vital role in the deployment stage. Businesses establish timelines and milestones for production, distribution, and customer delivery. This includes coordinating with external teams you might work with.

Resource plan publication

Similar to requirements publication, businesses publish a resource plan. This includes documenting and communicating the allocation of resources, such as personnel, equipment, and facilities, to relevant stakeholders.

Program review and monitoring

Regular program reviews and monitoring activities are conducted during the deployment steps of developing a new product to assess progress, identify potential issues or bottlenecks, and ensure adherence to the deployment plan. This includes monitoring key performance indicators, tracking production and delivery metrics, and conducting periodic reviews to evaluate the effectiveness of the deployment process.

Contingencies (what-if planning)

Contingency planning is an essential part of the deployment stage. Businesses identify potential risks, challenges, or disruptions that could impact the deployment process and develop contingency plans to mitigate these risks. This includes conducting "what-if" planning scenarios to anticipate and address unforeseen circumstances.

Stage 8: Test marketing

Once the product has been deployed, businesses often undertake test marketing as a critical step before a full-scale product launch. Test marketing involves introducing the product to a limited market segment to evaluate its performance, gather feedback, and identify potential areas for improvement.

Alpha testing

During the test marketing steps in development of a new product, businesses may conduct alpha testing. It involves testing the product within an internal or controlled environment. It allows businesses to closely monitor the product's performance, functionality, and user experience in real-world scenarios. Feedback from alpha testing helps identify any bugs, issues, or usability concerns that need to be addressed before the product is introduced to a wider audience.

Beta testing

Beta testing is another key component of the test marketing stage. It involves releasing the product to a select group of external users, often referred to as beta testers or early adopters. Beta testing allows businesses to gather valuable feedback on the product's performance, usability, and overall customer satisfaction. Beta testers provide insights into their experience with the product, uncover any potential issues or glitches, and offer suggestions for improvement. This feedback is invaluable for identifying and resolving any remaining issues before the product's full-scale launch.

Stage 9: Product launch

At this point in time, from 6 to 18 months have passed, and you're finally ready to reach the final new product development steps: actually bringing your baby into the wider world.

Commercialization

Commercialization is a crucial aspect of the product launch stage. It involves the strategic planning and execution of various activities to maximize the product's market potential and generate sales. Businesses develop comprehensive marketing and promotional campaigns, determine pricing strategies, finalize distribution channels, and create compelling messaging to communicate the product's value proposition to the target audience. Commercialisation activities aim to create awareness, generate interest, and drive customer adoption of the new product.

Launch

The launch itself is a significant milestone in the new product development process. It involves orchestrating a well-coordinated effort to introduce the product to the market. The launch typically includes activities such as public announcement, press releases, product demonstrations, events, advertising campaigns, and social media promotions. The goal is to generate excitement, attract customer attention, and drive initial sales momentum. A successful launch sets the stage for the product's market penetration and long-term success.

There are few bonus advice on how not to lose intellectual software property rights in our video.

Here are 5 more thoughts on building digital products from successful founders we've talked to in our Building Digital Product podcast episodes.

Examples of new product development process

That was quite the journey! Now, let's take a look at how this process (or at least bits of it) works in real life with some famous products.

Secrets of successful NPD from market leaders

Airbnb

Airbnb spent a lot of time on preliminary research to identify pain points in traditional accommodation options and designed a user-friendly interface that streamlined the booking process. They prioritized creating a seamless experience for users, incorporating features like real-time availability, secure payment systems, and robust search functionality.

Figma

Figma started off in 2012 as the first professional-grade browser-based UI Kit. Since then, it has launched an app and became a major market player. At Figma, the team actively uses brainstorming for the ideation stage. However, an even more important lesson you can learn from their idea screening process. To narrow down the brainstormed ideas, their product manager uses a "buy a feature" exercise. The employees start with a certain amount of "currency," and then have a limited amount of time to “invest” in different product ideas or focus areas.

figma branstorm

Asana

Asana follows roughly the same steps in new product development process that we discussed above. However, during their ideation stage they also use the SCAMPER method.

Atlassian

Known for products like Jira and Confluence, Atlassian follows an iterative and customer-centric product development approach. They emphasize continuous improvement, user feedback, and rapid iteration.

Google

The same can be said for Google. It is known for its "Design, Develop, and Deploy" approach to product development. They prioritize user-centric design, rapid prototyping, and continuous iteration. Google is also an example of a company that heavily relies on A/B testing.

Alleo

At Linkup Studio, we built Alleo, the AI tool to help people optimize their lives. In just nine months, we made an MVP (Minimum Viable Product) that was a big help for our client to get enough funding. This tool, called the ALLEO app, lets our customers break into the US market as a life-optimizing tool - it was a real game-changer in managing tasks. Plus, its design and quality checks make it easy and quick to upgrade to new versions. Read the full case study.

Final thoughts

As you can see, developing a new product is quite a lengthy and demanding process. What's worse, the longest part of it is actually devoted to the preliminary research, strategizing, and design. However, we don't advise you to skip these stages. Obviously, speed is of essence for any startup. Still, most companies that fail do cite lack of preparation as the major reason for it. It's better to spend more time on ideation, research, and finding the right product-market fit than for your product to fall into those 80% that don't survive two years after their launch.

To develop new products successfully, research, iterate, and, most important, don't forget to listen to your users an all stages of the journey.

Get the 7 key takeaways from Linkup Studio after 100 digital product launches in the video.

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Andriy Sambir
Andriy Sambir
Chief Executive Officer
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