The 7 stages of NPD and how to effectively manage product innovation

We’ve seen why your organisation should be applying innovation management to new product development (NPD). The process of developing a new product  – whether it is a tangible, physical good or intangible, like a service, experience or belief – requires a systematic method to launch and commercialise it.

NPD typically comprises 7 stages, from the initial idea through to its introduction on the market, and can be aligned with good idea management practices:


1. Idea Generation: the need to gather and focus efforts in relevant challenges

The first stage of a new product is ideation, which involves creating a large pool of ideas from various resources. While they include internal and external sources, market research and competitor analysis, a McKinsey study showed that the single most important driving force behind successful commercial launches was team collaboration. Backing up the maxim that ideas can come from anywhere, studies reveal that 55% of new ideas come from internal sources – an organisation’s workforce.

Most large companies, however, struggle to leverage this valuable asset across departments and geographies and so should draw on the help of innovation management tools designed to centralise the best ideas. This same approach can be applied to gathering the wisdom of external sources, such as partners and suppliers.

Innovation management software encourages employees to create ideas by launching challenges for everyone to take part in. These should be aligned with the strategic and operational needs of the company.

By launching challenges such as, for example, ‘How can we make our washing machine tablets more effective?’ or ‘What new service can we provide to make customers feel valued?’, everyone can share their ideas and comment on them, therefore helping their refinement and improvement through collaboration.


2. Adequate Screening of Ideas: to find the ones with higher potential and not the most popular

The first stage will have generated numerous ideas; the harder task is to assess which of those are workable and of value to the company. Selection criteria might include if it meets customer needs, technical feasibility, profitability of the idea, the resources required or the marketing potential. This evaluation stage is vital to condense the number of brainstormed ideas, a process enabled by innovation management platforms, which feature mechanisms that concentrate expertise and various perspectives.

Evaluation mechanisms, such as ‘likes’ or star ratings, or more complex and engaging mechanisms such as predictive markets, are efficient ways to make accurate selections from the bulk of ideas. These mechanisms promote transparency and reward accurate evaluations, thus ensuring quality results – selecting truly the best ideas and not simply the most popular. After all, running with a bad idea because the screening stage failed could cost a company dearly.


3. Concept Testing: the importance of building ideas collaboratively

An idea is selected. This is where organisations need to test the concept. Concept testing is a research tool that assesses the market viability of a new product. It also involves studying the legal and practical aspects of developing and launching a new product, researching patents and undertaking due diligence. Identifying the target market is also important to understand the marketing message and knowing where it will work best.

When sharing an idea on an innovation management platform, the required information fields can be defined from the start to tie in with these requirements, so as to accelerate this process.

Like in the screening phase, the role of the participants is a vital one to provide their inputs in the presented ideas and thus challenge and refine the proposed concept. They should also look to share best practices and current trends, helping idea authors and evaluators refine these concepts and work in the same direction. This is a key part of product development, and done early on and more efficiently through collaboration can avoid costly mistakes or delays.


4. Business Analysis: and involving idea authors and other experts

With the concept reviewed, the business analysis stage should paint a complete picture of the product, from the marketing strategy through to the expected revenue. It enables companies to understand the cost and profits of a new product, by developing a system of metrics to monitor progress. They include development time, operational costs, the value of launched products and sales figures, for example.

These parameters can be assessed in the aforementioned idea fields, such as asking for expected ROI and other complementary information. This is also the most fitting time to involve the authors and co-authors of an idea, along with other experts and challenge sponsors who can take a more critical look at the concept at hand.

By creating dedicated bodies, such as special committees, for business analysis sessions with the heads of each department, a more structured and detailed evaluation can take place.


5. Product Development: building basic prototypes

This stage is when the concept is turned into a physical product. The design and prototypes should be completed in preparation for the next stage, produced quickly and at budgeted costs for testing. The product development stage should also involve completing beta versions, selecting manufacturing methods and addressing packaging.

A solutions-based approach to solving problems such as design thinking has the power to enhance product, service and experience. Following the user observation and ideation stages, the design thinking cycle involves prototyping and subsequent iterations, if necessary, to arrive at a final product. For those following the design thinking approach, its various stages can effortlessly tie in with each phase defined in an innovation management system.


6. Test Marketing: assessing whether the product actually works

Once a beta version or prototype has been developed, it should be tested to validate the concept and product in general. Private consumer test groups will assess whether the product is of value to the market and will provide any feedback on practical or technical issues. This allows for last-minute improvements or tweaks to the marketing mix before the expense of a product launch. The design thinking approach defends there can be several iterations before the product is finalised, returning back to prototyping stage and back again for testing.


7. Commercialisation: the new product hits the market

The final step in the NPD process is launching the product onto the market. Final marketing and prices will have been completed, and consumers will be purchasing the product or service. This is the result of a process that draws on collaboration and the mobilisation of the expertise and knowledge of the community right from the start, increasing the chances of a product’s success.

Rather than launching a new product or service that has little value or impact to the real world simply for the sake of it, this transparent, effective and critical structure challenges the proposal and builds upon it in a collaborative manner to prepare the product to be presented to the market.

It is also worth remembering that a new product benefits from ongoing and refreshed marketing, to appeal to those who are still contemplating the purchase.

Diana Neves de Carvalho, Exago’s CEO



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