New product development has recently emerged as a source of competitive advantage. It contributes to business growth, ensures continuing business success, and enhances profit performance. Therefore, business planning and processes involved in new product development are crucial in strengthening a business’s competitive advantage. This paper addresses the main issues that may be experienced while launching a new software in the market. It also outlines how and when the selected functions and activities will be addressed in the development process and eventual launch.
Common Issues
Time Scheduling
Product development is typically a dynamic process; therefore, scheduling changes can negatively affect the on-time delivery. This situation becomes more complicated when the launch of the new product may not be a priority for each of the organization’s departments. For example, a product engineer involved in daily production may not find a software product whose launch is scheduled in a year a priority. Late deliveries from any department can eventually affect the planned delivery time for a project.
These issues can be resolved through proper project scheduling activities such as keeping track of all projects, setting realistic timeframes, and appropriately assigning resources. Additionally, heuristic algorithms software has been developed to help managers with multiple projects and resource scheduling. For example, the forward-backward heuristic algorithm (FBHA) can shift non-critical activities, allowing integration of project priorities in schedule development. According to Atef et al. (2015), Microsoft has successfully used this approach to improve software package performance and facilitate effective planning. Therefore, such software can be adopted to enhance multiple projects and time scheduling effectiveness.
Poor Communication
Communication with line managers can become a challenge in product development, especially when prioritizing projects. Given the complexity of these projects, it might be difficult for project managers to communicate what needs to be done and when. Additionally, providing line managers with an adequate rationale for why a project should be prioritized over another can also be challenging. Conflicts may emerge when allocating resources due to inadequate consultation with line managers. This problem is especially prevalent when estimating time resources for scheduled functions and activities.
These issues can be addressed by establishing a clear vision and effectively communicate it to all functional areas. The manager should adequately communicate expectations and timelines, define and clarify each member’s roles and responsibilities, and establish clear reporting lines. The communications should be direct and frequent to allow adequate information exchange. This way, misunderstandings and conflicts between line managers may be resolved and organizational collaboration enhanced. According to Oduola and Yakubu (2017), effective communication can resolve disputes, improve team collaboration, and promote social cohesion. A team-oriented process can allow the idea-collection that could potentially lead to an innovative product.
Resource Allocation
High uncertainties characterize NDP, yet resources are often allocated to known project needs and requirements. Because many companies operate with limited resources, little is left to deal with such uncertainties and unexpected events. For example, the technological industry is marked by dynamic changes that may suddenly shift customer preferences. When such market changes occur while a product is still in its development process, the project’s goals will change, requiring additional resources to realign the procedures with new objectives. Accurate cost estimates and contingency planning can resolve these uncertainties.
Commercial Risks
While PD can be a source of competitive advantage, it is a risky and challenging process. The organization can invest heavily in the process without any guarantees that the project will become commercially viable. Customers may not be ready for the new product or understand the technology. Additionally, customers are not interested in the product itself but the solutions to their problems or needs. Loosely translated, a firm can lose the resources invested in NPD unless the product addresses customers’ needs. This problem can be addressed by aiming to create value centered on customers. This way, the new product will be offering solutions to client needs while enhancing their experiences.
Functions and Activities
Marketing and Sales
Marketing and sales functions are crucial in introducing the product into the market, which is the last stage of product development. However, Robert Cooper viewed marketing as an activity that starts just after the ideation process and continues throughout the development process (Mahmutllari, 2014). According to Robert Cooper, the marketing mix should be defined by the customers and then incorporated into the development process (Mahmutllari, 2014). Therefore, marketing the product will require a detailed marketing plan entailing the following:
- The current market situation: This section will describe the significant market segments, product and competition review, and an evaluation of distribution systems, including the sales trends. The product review will show the sales, gross margins, and market prices of relevant product competitors. It will also identify main competitors and their market position
- Threats and opportunities: It will evaluate the significant threats/opportunities the product might experience when introduced in the market. It will guide the marketing strategy and help the stakeholders anticipate any adverse developments.
- Marketing strategy: This strategy will advertise features that will bring value to customers and the needs or problems the product will address once launched into the market. It will group customers through targeting and segmentation and define the 4Ps: price, promotion, product, and place.
- Budget: The plan will also contain a marketing budget that will outline the estimated marketing cost.
- Control: This section will focus primarily on monitoring market sales, informing management regarding the product’s success reviews, and measuring return on investments.
A common challenge experienced during marketing is inadequate data to evaluate a product’s market competitiveness. According to Mahmutllari (2014), market research is ineffective in estimating a product’s market size as it often leads to overestimation. This overestimation can incur significant losses to the company, requiring precision in such activities. Software such as Word2Vec uses algorithms to determine a product’s market size automatically. This software’s validity, precision, and accuracy have been empirically tested and determined to be effective in market size estimation (Jung et al., 2020). The software uses accessible demand, sales, and cost data to make estimations.
Advanced software versions can use market size variations to evaluate the product’s price endogeneity to demand shocks. The company can use such technology to estimate the product’s precise market size, market share, and growth rate. An updated internal database can also be resourceful in analyzing purchasing behaviors and identifying new customers. The organization might also fail to deliver its promises when the marketing strategy fails to convey product messages adequately. The organization can resolve such issues by personalizing the promotion to customer preferences. The team will conduct market research to determine the target customers’ media preferences to identify the proper media channels to promote the product.
Finance
A company’s finances are crucial in NPD, especially during the design and development process, testing, and commercialization. According to Chwastyk and Kołosowski (2014), the development stage uses approximately 40% of the NDP total expenditures. Often, the cost estimates will significantly influence the implementation process, meaning that the cost estimation accuracy will influence the decision-making process. Cost estimation, conducted during the planning phase, is heavily reliant on the availability of information. Without adequate information, the measures will be inaccurate, resulting in significant discrepancies between the actual and estimated costs.
Managers are usually aware of these issues and prefer to overestimate the costs because it is safer than undervaluing costs. However, these decisions can have negative consequences, such as the termination of an essential process because it exceeds the budget ((Chwastyk & Kołosowski, 2014). Chwastyk and Kołosowski (2014) developed several models to estimate costs at each product development process accurately. For example, parametric models can estimate the cost of a product’s features (the cost of implementing each component). The cost accounting process will monitor and control the production process’s costs. Analytical methods such as cluster analysis can estimate the product’s manufacturing cost, while analogical techniques can help assess the product’s price. The downside of these models is that their accuracy also depends on the accuracy of information.
Production
Developing a new product can take years, and much can change in the market during that time. Software development is typically an expensive, long, and error-prone process. Ineffective production can lead to serious incompatibility, defects, performance, security, and usability issues. A study conducted by Krasner (2018) showed that 31% of businesses in the software industry are canceled due to quality problems, accounting for approximately $81 billion in losses. Those that successfully reach the market only deliver 42% of the anticipated features (Krasner, 2018). A company’s reputation may be severely damaged when it fails to meet the public’s expectations or deliver its promises to customers.
The software industry is marked by rapid changes that can render software obsolete even before its entrance to the market. An effective strategy for dealing with such issues is reducing production time. According to Thompson (2020), this strategy is a critical competitive weapon because it reduces the likelihood of a product being deemed obsolete in the market and produces benefits associated with strategic timing. For example, companies that are first to adopt or introduce innovative technology enjoy the benefits of premium prices, brand reputation, patents, and copyrights protection and achieve a cost advantage over competitors.
To reduce production time, the company can use software factories. A software factory is a methodology where specific software applications can be rapidly developed and mass customized. These methods not only customize mass production but also reduce production time. Software factories are dynamic and can accommodate changes when sales and campaign features are modified.
Technology
Traditionally, software vendors would make sales from broad market technologies that were mainly horizontally oriented. These gaps were created by economies of scale and diversity in customer preferences. However, market leaders such as Microsoft and Oracle have successfully launched software customized to customer’s preferences. Some companies use built-to-order technologies through third-party service providers to customize customer needs. As previously mentioned, technology can also be used to estimate costs accurately.
Human Resources
Human capital is one of the most critical organizational resources involved in each stage of the NPD. Highly skilled managers with an effective workforce and teamwork can create a culture of innovation and organizational learning. The company’s leadership can motivate employees to adapt to change and encourage knowledge sharing to discover creative ideas. Unfortunately, these benefits can only be realized with effective collaboration and coordination between managers. As mentioned earlier, effective communication and leadership would help to resolve collaboration and coordination issues.
The dynamic capability of human resources is based on the resource-based view, which asserts that a firm’s resources can help a company achieve a significant competitive advantage. To this end, the company can use quality management (QM) practices to improve employee’s (organizational resources) performance and encourage innovation. QM practices will help the company pursue high-performance standards (Gutierrez-Gutierrez et al., 2018). For example, training will hone employees’ innovative skills and practices, while teamwork will encourage knowledge sharing and collaboration (Gutierrez-Gutierrez et al., 2018). The team can be empowered by autonomy achieved through horizontal decentralization, which provides decision-making power to general employees.
Budgeting Process
The budgeting process is done for every stage of the new product development process. The project manager needs to estimate the cost of the new product, production costs, promotion and commercialization costs, and contingency costs. As mentioned earlier, models such as parametric models and cluster analysis can accurately estimate the costs of the above processes.
Planning Process
Planning for a newly developed product starts begins at the business analysis stage. Project managers need to research and plan the product’s design, obsolescence, and budgets. However, market uncertainties pose severe challenges to the planning process. Although planning can positively influence various NDP success metrics, some scholars have contended its ability to react to market changes rapidly. The design road-mapping framework is an integrated method that can help managers to respond to cost uncertainties and task durations effectively.
It serves as a framework for financial and strategic planning and can be used in multiple stages of NDP. A study conducted by Kim et al. (2018) showed that road-mapping frameworks could provide future stability and keep companies focused on customer experiences. The framework allows firms to exploit design features, functionality, and technology that make up the product’s concept in a manner that allows for evolution to meet future customer expectations. This way, the company can deal with market uncertainties that make planning ineffective.
Design Process
The design process is critical because it significantly influences customer’s satisfaction with the final product. The goal of software design is to create a user-centered design that is simple, consistent, navigable, and visually appealing. During this stage, the project’s final prototype and mockups are built for the next NDP stages. For the final design to meet customer requirements, the project team needs to seek customer inputs, also known as customers’ voice, throughout the development stage cite. This requirement means that the software engineering team needs to be up-to-date with dominant trends in the market. Creating such designs also requires the software engineering team to test their user behavior assumptions before launching the product.
The lean startup methodology strategy can help the company develop a market-fit product during its early launch. The strategy involves starting the launch with “the minimum viable product” (MVP) instead of the full-featured product (Nguyen-Duc et al., 2019). The MVP is a product with features just enough to attract new customers. This way, the project’s team can capture actual data on user behaviors and use the information to make quick adjustments to the software. As mentioned earlier, inadequate or unavailability of data can limit processes such as planning and cost estimations. However, the lean startup methodology offers managers a way to access real and accurate market data before the actual product launch.
References
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Chwastyk, P., & Kołosowski, M. (2014). Estimating the cost of the new product in development process. Procedia Engineering, 69, 351–360. Web.
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Jung, Y. L., Kim, J. H., & Yoo, H. S. (2020). A study on market size estimation method by product group using Word2Vec algorithm. Journal of Intelligence and Information Systems, 26(1), 1–21. Web.
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Krasner, H. (2018). The cost of poor-quality software in the US: A 2018 report. Consortium for IT Software Quality (CISQ). Web.
Mahmutllari, J. (2014). Developing a new product development & launch process case [Unpublished master’s thesis]. Haaga-Helia University of Applied Sciences.
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