6.1.2 Why new product development methods are important?

Partly as a consequence of the increasing rate of new product introductions but also because of the drive of technology advances, product life cycles are shortening. As a result, companies and especially SMEs are increasingly dependent on revenues from new products to drive their growth and sometimes sustain their existence. The rapid development of new technologies, the shift change in customer needs and attributes, and the gradual increase of the competition in the knowledge economy has forced all businesses and particularly the innovative sectors to adopt NPD as a necessary and unavoidable business practice. However, NPD is a complex and time-consuming process, which cannot be taken lightly, since it holds more perils than first meets the eye. According to David S. Hopkins and Earl L. Baily, research has shown that 40% of new consumer products, 20% of new industrial products and 18% of new services related products have failed completely as products.1

Did you know that in most markets and especially those relating to consumer products, the number of new product introductions per annum has increased dramatically? For example, a study into the consumer packaged goods market showed that new product introductions had increased around tenfold over an 18-year period.2
Driven by consumer demand and fuelled by advances in technology, SMEs have to bring more and more products to market in order to remain competitive. SMEs best able to execute NPD will clearly have an advantage and this is partly about reducing time to market but also about making effective use of scarce internal resources.

1 InnoSupport: Supporting Innovations in SME. 6.1 New product development methods, 2005
Tidd, J., J. Bessant, and K. Pavitt, 2001