Many companies face the daunting task of screening or assessing dozens, if not hundreds, of new products. The proposals come from both internal and external sources. Even firms dealing with only a few concepts may be limited in resources, or have other constraints.
To screen and budget, many firms use net-present-value (NPV) estimates, or other financial analysis. However, essentially no product is ever proposed that does not show positive results under these measures. Yet, many products fail, showing that this may not be the best first screen. Moreover, most often there are limited resources to robustly assess the financials for new product concepts.
This is where a practical and direct framework is valuable. Below is a presentation that lays out the strategic framework for initial screening and assessment. As the diagram to the right illustrates, it advises using three high-level screening and assessment criteria: the same or associated customers, technology, and medical condition.
One way the framework can be used is at this summary level, using only the top categories. This may appear basic, but the more detailed level illustrates why even that high-level abstraction is likely to be robust and parsimonious.
The detailed level shows aspects underlying the framework. It can serve as a test to the interpretation, or real-world leverage of the highest level. Additionally, it can be used as a secondary screen or checklist for further straightforward, rapid analysis.
For those new product proposals that pass this initial assessment, financial, marketing and other resources can be more efficiently spent. Financial and market sensitivity analysis at this phase is probably best used.
After this financial gauntlet, final and robust new product proposals should emerge. At that point, detailed NPV, or other financial analysis and estimates would be a solid, valuable use of resources.
Attached is the presentation.
For reference, this infographic is also attached.
© 2013 Winton Gibbons