How to Effectively Mitigate Risk in New Product Introductions

Strong consumer demand for the latest electronic products requires manufacturers to develop innovative, smart, connected products with fewer resources, shorter timelines, and reasonable costs. A major challenge for manufacturers is that the new product introduction (NPI) process gets complex quickly. 

To launch and deliver new products on time and within the right price range, manufacturers must have the necessary information to support all the factors that impact success. These include ideation, a clear product definition, prototyping, detailed design, pre-production, and manufacturing. 

Why New Product Introductions Typically Have Low Success Rates

Launching new products is among the most challenging business decisions any company can make. The track record of successful new product launches is very low. For example, one faculty member at a top-ranked East Coast university estimated that only 5% of new products survive launch. 

One reason for the low success rate is there is no real need in the eyes of the buyer to purchase the product. Another reason is that decision-makers don’t take enough time to evaluate the customer’s needs. One high-profile failure from a decade ago was Google Glass wearable technology because it was bulky, too expensive, and impractical. 

To avoid marketing a lemon, companies need to conduct in-depth market research and testing of new products before launch. The company must do the research to gain key insights and opportunities. Another area for improvement is misaligning the price and value balance. If the product is priced too high or too low, it will likely not provide the right value to customers. 

For example, the Amazon Fire phone failed because it was priced too high and lacked focus. Most users were confused about what to do with it, making it difficult to understand and use. If the product doesn’t fit the needs and preferences of the target market, it will struggle to gain traction and eventually fail.

If a company creates something challenging for the customer to use, it increases the odds of failure. For example, the Google Wave collaboration tool failed because it was difficult to explain and understand, leading to low adoption and usage. The original video to explain this hybrid product-platform protocol was 80 minutes long.

If your product is similar to existing products and doesn’t offer unique or compelling advantages, it may not stand out and succeed. For example, the BlackBerry PlayBook tablet failed because it was too similar to the iPad but lacked the same app ecosystem and intuitive user experience.

There are many other cases of avoidable product failures. For example, the Samsung Galaxy Note 7 smartphone failed because of faulty battery design and manufacturing, leading to fires and recalls. 

Managing NPI Product Complexity

The study findings quantified the increasing complexity organizations must manage in their NPI processes. As a result, it has become more difficult to ensure NPI criteria are met deep into the overall product’s structure. 

The number and depth of components embedded in each product’s BOM have sharply increased. This means the hierarchy of those components is deeper than before, extending into more complex, nested groupings.

Many companies need help because traditional manufacturing methods and processes cannot handle this complexity. Therefore, many organizations are pursuing NPI DX initiatives to help streamline processes, mitigate risks, and save cost and time.

Supplyframe collaborated with Lifecycle Insights on an NPI and Sourcing Study, which found that nearly two-thirds (63%) of products include more components in the bill of materials (BOM) than prior versions of the same product. 

The reason for this change is simple: Today’s customers expect far more from today’s products. Their expectations manifest as unique requirements that demand new engineering solutions. With more complexity comes more functions, and with more functions, more groupings. In turn, that results in a deeper, more nested BOM overall.

Mitigating ongoing supply chain hurdles is also more difficult. More components need to be checked against their NPI criteria. As those components are buried deeper in the product’s BOM, companies must employ more due diligence to mitigate any NPI risks successfully.

Increasing Complexity of Electronics

Organizations are also reporting heightened electronics complexity in new products. The NPI and Sourcing Study findings illustrate the effects of the transition from traditional, mechanical products to today’s smart, connected ones. 

Some of this movement, of course, is driven by increased demand for the kind of connected features enabled by electronics. But this transition is also driven by the products-as-a-service (PaaS) offerings where customers pay for a capability instead of purchasing a physical product. The service provider must support high product performance in these PaaS scenarios to deliver a strong service. This requires remote connectivity, monitoring, and Internet-of-Things (IoT) tracking.

As a result, companies must equip their products with more electronics and sensors. The sensors track the product’s environment and performance. Electronic systems process the sensor readings and send signals to electrically actuated components to change product behavior or offer new user interface options.

Applying NPI due diligence around sensors and electronic systems is more challenging today. Processors and other electronic components are in higher demand as industries shift toward smart, connected offerings. Additionally, disruptions like the COVID-19 pandemic and the recent spate of unusually inclement weather have hampered the ability of many organizations to secure such components. Companies have had to focus more attention on simply sourcing electronics.

Increasing the Number of Suppliers

The Supplyframe NPI and Sourcing Study uncovered another issue driving NPI process change: the need to work with more suppliers. Sixty-two percent of respondents in the survey stated that the number of suppliers per product has increased by more than 20% in recent years. 

For some, this increase in suppliers is merely the byproduct of each product requiring more unique components. For others, the increase can be linked to a conscious effort to avoid relying on too few suppliers when the industry faces supply chain disruptions. 

However, whether the increase in suppliers is due to one of these two reasons or other matters entirely, the result is that manufacturers need to work with more suppliers. This means more suppliers will be involved in their NPI processes, too.

This increase in the number of suppliers puts yet another strain on manufacturers. NPI and sourcing managers must assess a much larger volume of companies against a range of different risk factors—and they likely have to do so for a larger volume of product components. The result is a remarkably heavier workload and a higher risk of missing various NPI criteria.

Five Ways Real-Time Intelligence Transforms the NPI Process 

With Supplyframe NPI, you gain access to complex, real-time data that allows your teams to anticipate risk, optimize product launches, and reduce costs.

This level of intelligence allows today’s organizations to understand better where risk exists in their designs. Quick access to alternate components ensures that costly redesigns don’t slow time to market.

Typically, 80% of a product’s lifetime risk is locked in during the design phase, according to Supplyframe research. Here are five ways that Supplyframe’s real-time intelligence can help your teams transform risk management and NPI processes: 

• Access to real-time insights and market intelligence on over 600 million components in the Supplyframe database
• Reliable forecasts and forward-looking insights into prices, lead times, and years to end-of-life status
• Enhanced collaboration between teams on a “living BOM” within the platform
• Streamlined processes that validate and optimize BOMs in minutes, identifying high-risk parts and viewing functional alternates in just a few clicks.
• Operationalized Risk Mitigation that brings risk management to the design phase of the product lifecycle so teams can design better products faster.

Better Designs Today, Smarter Sourcing Tomorrow 

Executing the NPI process is more complex than ever. NPI managers must mitigate various risks across multiple axes, ranging from more components to more suppliers for each component. These different factors act as amplifiers, making the overall process more taxing.

Manufacturing organizations must rely on something other than the status quo to manage the NPI process in the face of this complexity. Companies that do not proactively address these issues will face a far greater number of disruptions as they introduce new products.

The result will be missed launch or delivery windows, undercut margins, and even, in more extreme cases, a higher probability of regulatory penalties and fines.