Logic - Product Development

The traditional role of the product development function is to develop new products. However, more recently the emphasis has been on their ability to work with the rest of the organization to identify the market as well as technological possibilities and then to develop the products and the production processes to maximize organizational performance.

Specifically there are 3 types of product development:

• Product enhancement, which takes an existing product and improves it.
• New product development, which develops a completely new product and process usually for a new market segment.
• Process enhancement (value engineering), which improves the process so that an existing product can be produced more cheaply, at better quality or more quickly.

For each of these cases it is necessary to make decisions on the positioning of the project, the target cost, and the development cost, and then whether the project should be attempted in the first case (e.g. by using NPV analysis).