New Product Development Stages

Stage 1 – Environmental Scan and Strategic Direction

Environmental Scan

The environmental scan is the least expensive stage and consists two distinct components. The first component (the industry overview) requires a comprehensive analysis of the industry. The second component (the business assessment)) requires thorough assessment of the internal capabilities of your business. During this environmental scan you will be investigating the defining characteristics of the industry, its competitive structure, the strategic opportunities and threats facing the industry participants. You will assess your firms resource strengths and weaknesses, and your ability to capture the identified opportunities and deal with the threats. If your new product is a technology product you will investigate the state-of-the art and complete your competitive intelligence. Often much of the work can be completed by a one person or a small group. 

Strategic Direction

After completing the environmental scan you must develop a sharply focused strategic direction for your business. There is an old saying that if you don’t know where your going then any road will get you there. 

When Alice in Wonderland asked a grinning Cheshire cat which way she should go, the cat answered, "That depends a good deal on where you want to get to . . . . ."
"I don’t much care where--" said Alice.
"Then it doesn’t matter which way you go," said the Cat.
"--so long as I get somewhere--" Alice added as an explanation.
"Oh, you’re sure to do that," said the Cat, "if you only walk long enough."

Lewis Carroll, Alice's Adventures in Wonderland 

Unlike Alice, successful entrepreneurs have a keen sense of where they’re going, clearly envisioned goals, and a high level of motivation to achieve those goals.

During this stage you will develop clearly defined Vision and Mission Statements. The Mission Statement provides the focus that will be required to keep the project on track. It also becomes a key component of the Go / No Go question. At each succeeding stage one of the Go / No Go questions should ask "Does this project help us achieve our stated mission?" AT this time you will establish your generic business strategy, competitive strategy, and develop your business model.

At the conclusion of Stage 1 you should know where your product is positioned relative to similar products, who the major players are, and how the industry is structured. You will have a clear understanding of your firms strategic strengths and weaknesses and will have developed a sharply focused strategic direction for your business and assembled the key members of your team.

Stage 2 - Proof Of Concept (project feasibility)

At this stage the project will begin to incur significant costs. During Stage 4 the concept will be subjected to four fundamental tests.

  1. Is there a market for this product?

  2. Is the project technically feasible?

  3. Is the project economically sound?

  4. Is it financially feasible?

In order to answer these questions you will have to complete a comprehensive market analysis, detail the technical requirements and IP issues, if you have a technology product,, and develop the production plan. You will establish the economic criteria and develop a full financial plan which establishes the profitability expectations and cash flow requirements, and then decide whether the project is able to meet these requirements.

If the answer to all four questions is "Yes" then appropriate IP protection strategies should be implemented. If patents are to be used then a patent agent should be retained, the patent searches completed, and the patent application(s) filed.

If the product concept fails any one of these four tests then the project should either be modified or abandoned.

Stage 3 – The Pre-production strategy (The Prototype)

During this stage you will develop and test a prototype product. The testing will involve customer trials and feedback, completing the Research and Development, resolving the outstanding IP issues, pre-production runs and the development of a full scale production and Quality Control plan.

Also during this stage you will develop a full scale financial plan. This plan will identify both the amount of capital required and the timeline when it will be needed. A detailed list is prepared of all sources and types of capital available and strategies are developed that will be used to secure access to this capital as it is needed.

The final Go / No Go decision is made at the conclusion of Stage 3.

Stage 4- Commercialization

This is the launch stage and as such it is the point of no return. There are three options that are available for you to launch the product.

  1. License the manufacturing and distribution rights to an existing business.

  2. Develop or purchase in-house manufacturing and distribution capability.

  3. A combination of the above options.

The most appropriate option for commercializing your product will ultimately depend on the scope of your Mission Statement, the management depth of the business, and availability of the required capital.

The Business Plan

If you intend to approach venture capitalists or commercial lenders to help finance your new product venture you will require a formal Business Plan.

What is the Purpose of the Business Plan?

The business plan will detail the strategies that you will use to take your project through each of the six new product development stages.

Who will use the plan?

The plan must address the needs of two groups:

  1. Internal users - Management

  2. External users - Investors and lenders

How the plan will be used?

There are two major reasons for preparing a business plan:

  1. The finished product - the plan - will become an operating tool, which properly used, will help you manage your business and implement your ideas.

  2. The completed plan provides a means for communicating your ideas to others and provides the basis for any financing proposal.

The business plan will provide answers the following questions:

  1. Who are we?

  2. Who do we want to be?

  3. How do we get there?

  4. How will we know when we've arrived?

  5. What resources do we have or require to get there?

These questions will be answered at different stages of the new product development process.


Stage Where Question Is Answered

Who are we?

Stage 1

Who do we want to be?

Stage 1, Stage 2

How do we get there?

Stage 3, Stage 4

How will we know when we've arrived?

Stage 1 Stage 2, Stage 3, Stage 4

What resources do we need?

Stage 3, Stage 4

The completed business plan will generally contain the following elements.

  1. Executive Summary

  2. Overview of the Industry

  3. Description of the Business

  4. Goals & Objectives

  5. Technology Plan (if a technology product)

  6. Marketing Plan

  7. Operations Plan

  8. Human Resources Plan

  9. Financial Plan