The business strategy, product strategy and new product portfolio of any firm are intrinsically linked. At the core of the business strategy is an integration of a customer's needs, the competitive offerings, the capabilities of the team and business model to generate revenue and profit. From this evolves a new product strategy that culminates in a new product portfolio. The goal of the portfolio is to optimize the potential financial value of the new product mix and to balance the risk. Often, these are developed iteratively.

There is about one commercially successful new product for every ten products that are developed. Moreover, these ten products came from tens if not hundreds of ideas that were tested for business feasibility. This is due to the high degree of uncertainty that exists in the market and/or technology. If the risk is in the technology, a working prototype is an essential milestone to achieve before significant resources are applied. If the risk is in the market, market research and user trials are critical.

In addition to managing risk, another challenge of portfolio management is to decide: (1) which products should be worked on first and (2) how many new products can be worked on at the same time. A common pitfall is to try to do too many new products (relative to the available resources). The result is then that the pipeline gets plugged and nothing gets launched.

It is critical to differentiate between new technology creation and new product development. It is a best practice that technology is created prior to product development. A proof of concept (POC) needs to be unquestionably established before new products can be developed from the emerging technology. Even when the POC has been established, there can still be plenty of technical problems that need to be solved before the risk is eliminated. Numerous resources on technology development are provided in Section 3.

In the past products have been developed sequentially. The design was engineered by the technologists and then it was 'thrown over the wall' to manufacturing. Finally, Sales and Marketing were called on to sell the product that was already in the warehouse. Equally disastrous, is when orders were taken, before the product can be made beyond the pilot scale. As a consequence of these two extreme bad case scenarios, product development has evolved to where marketing, engineering and manufacturing activities are performed concurrently throughout the process-from the time the idea is conceived through to the product launch. Within each phase, marketing, engineering and manufacturing activities are performed in order to reach certain milestones. An early milestone could be completion of quantitative market research on a non-working prototype. Each passing milestone is associated with a reduction in the marketing and/or technology risk. Each subsequent milestone requires more financial and human resources. For example a working prototype will require the same resources required for the non-working prototype plus potentially costly manufacturing and test equipment.

The purpose of the initial activities, sometimes called the 'fuzzy front end' is to make an initial assessment of the financial viability of the new product. Qualitative market research is done and preliminary designs are created based on the 'first cut' customer requirements and product specifications. At this point in time, accurate data on product cost, demand, etc., are not available, so the assessment provides a rough estimate, and more importantly allows the critical parameters for the commercial success of the product to be identified. A preliminary business plan is developed. This will be a living document until the product is launched. The concept phase activities can take from several weeks to several months.

If the preliminary business plan appears to have an acceptable value proposition, then the next set of activities are conducted in a much more rigorous and detailed way.

Based on the preliminary evaluation of the market research and the competition, quantitative market research is performed. This will be used to refine the customer requirements and product specifications and to confirm that there is an adequate customer demand to satisfy the business plan. These data are also used to develop a preliminary product marketing strategy. This includes advertising plans, positioning, promotional and pricing strategies.

On the technical side, a product concept is selected and its architecture is defined. Critical product functions are tested in the laboratory, customer usability tests are conducted and non-working models are created. The patent literature is reviewed to avoid infringement of existing intellectual property. The 'bill of materials' is established when the product architecture is finalized. This bill of materials is essential for the development of the supply chain strategy and the criteria for the 'Design For Manufacturing'(DFM).

The technical and marketing work is ultimately coalesced in the final version of the customer and product requirements.

In the development activity phase, the detailed engineering design is completed when the prototype product performs to specification. Working prototypes are constructed for alpha and beta product testing that is done with potential users. If industrial design is required for the product (certainly for all consumer products), there can be a high degree of conflict between the aesthetics and functional design. Collaborative problem solving is essential here, and tradeoff decisions cannot be made casually. Commercial success requires the product to look good to the customer (not the product development team) and work well.

The design is piloted in the manufacturing facility. Often scale-up issues, caused by raw material variability and inadequate equipment reliability, delay the availability of commercial quantities of the product. While the manufacturing process is being debugged, the sales and marketing launch plans are being prepared. If the product is a consumer product, Christmas is a critical opportunity for launch. This can put extra pressure on coordinating the production scale-up schedule with the launch schedule.

Evaluation of market performance is vital during and soon after the launch. Critical feedback is essential for follow-on products. Another challenging activity during this time is developing a system to determine on-going production quantities. If the cycle time of manufacturing is short, production is based on actual orders. This is known as a pull system. If the cycle time is too long then sales forecasts need to be used as the basis of determining production volumes. This so-called push system is much less desirable as it is prone to back-orders and/or excess inventory.

Another one of the 'best practices' of product development is to have a 'timeout' for the core team to reflect on what they did that went well and what they would have done differently if they were to do it over again. Alignment within the team around what are best practices is the basis of organizational learning and the development of the firm's core competencies.

The role of leadership is to create a high performance team across all of the disciplines required to successfully launch the new product. This can be particularly difficult as the frame of reference of each discipline is so different. The leader must create within each team member a passion for success and the ability to create and solve problems collaboratively.

New product development team members experience extreme 'highs and lows' as a consequence of the passion and high energy level of the team and the every changing competitive environment. The leader must be prepared to both accept the bad news, but at the same time, inspire the team to charge forward.

Cagan, Jonathan, and Craig M. Vogel.Creating Breakthrough Products: Innovation from Product Planning to Program Approval. Upper Saddle River, NJ: Prentice-Hall, Inc., 2002.

Cooper, Robert G., Scott J. Edgett, and Elko J. Kleinschmidt. Portfolio Management for New Products. Cambridge, MA: Perseus Publishing, 2001.

Cooper, Robert G. Winning at New Products. Cambridge, MA: Perseus Publishing, 2001.

McGrath, Michael E. Product Strategy for High-Technology Companies. New York: McGraw-Hill, 1995.

McGrath, Michael E. Setting the Pace in Product Development.M Boston, MA: Butterworth-Heinemann, 1996.

Moore, Geoffrey A. Crossing the Chasm. New York: Harper Business Essentials, 2002.

Rosenau, Milton D., Abbie Griffin, George Castellion, and Ned Anschuetz. The PDMA Handbook of New Product Development. New York: John Wiley & Sons, Inc., 1996.

Smith, Preston G., and Donald G. Reinertsen. Developing Products in Half the Time. New York: John Wiley & Sons, Inc., 1998.

Ulrich, Karl T., and Steven D. Eppinger.Product Design and Development. Boston, MA: McGraw-Hill, 2000.

Utterback, James M. Mastering the Dynamics of Innovation. Boston, MA: Harvard Business School Press, 1994.

Wheelwright, Steven C., and Kim B. Clark. Revolutionizing Product Development. New York: The Free Press, 1992.