THE IMPACT OF NEW PRODUCT DEVELOPMENT AND INNOVATION ON THE PERFORMANCE OF AN ORGANIZATION

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

Product development and innovation is a crucial business consideration for today’s turbulent dynamic environment. For organization’s success, continuous innovation and effective product development become requirement for all organizations. As a result, innovation, product development among others has been a frequently survey topic over the last few decades. Innovation is a process of developing some principles for managing new product development while a product is something that is sold by an organization to its customers. It can be referred to as goods (physical, tangible products) or services (intangible products). Product development is the set of activities beginning with perception of a market opportunity and ending with production, sale and delivery of a product (Ulrich and Eppinger, 2007). Product development demands the integration of many actors of different knowledge and expertise in order to develop a high technological product (Chux Gervse Iwe, 2010). There are a number of remarkable studies that emphasized product development innovation, and performance, relationship (Zirger et al., 1990; Drucker, 1997; ImS and Workman, 2004; Wei and Morgan, 2004; Yannele, 2005), Wheelwright and Clark (1992), Page (1993) among others, they found a strong support for the basic proposition that product development and innovation influence the overall performance of an organization. However, this field of study has received less attention by academic researchers in developing economies such as Nigeria. This paper aims to investigate the relationship between product development, innovation and organizational performance in Nigeria. The success of any organization can be traced or linked with successful products and this depends on their ability to identify the needs of customers and to quickly create products that meet these needs.

Therefore, product development can be described as the life blood of any business organization Brown and Eisenhardt (1995), Balbutin et al. (2000), Efcharis et al. (2008), Chux Gervse Iwe (2010). Satisfying the needs of customers is not solely a marketing problem, nor is it solely a design problem or manufacturing problem. It is a product development problem. Product development is an interdisciplinary activity that requires contributions from nearly all the functions of a firm, however three functions are almost central to a product development effort. These include marketing, design and manufacturing (Ulrich and Steven Eppinger, 1995; Ulrich and Eppinger, 2007). The marketing function mediates interactions between the firm and its customers. Marketing oen facilitates the identification of customer needs. Marketing also typically arranges for communication between the firm and its customers, set prices, and overseas the launch and promotion of the product (Ulrich and Eppinger, 2007). The design function leads the definition of the physical form of the product to best meet customers’ needs.

The design function could be engineering, industrial, promotional or all of the above, (Ulrich and Steven Eppinger, 1995). The manufacturing function is primarily responsible for designing and operating the production system in order to produce the product. Broadly defined, the manufacturing function also includes purchasing, distribution and installation (Ulrich and Eppinger, 2007). Product development means oering new or improved product for present markets. By knowing the present market’s needs, a firm may observe ways to add or modify product features, create several quality levels, or add more types or sizes by introducing new versions of popular program, i.e. attributes of innovations. An innovation is defined as an idea or object that is perceived as new by an individual or an agency. “The perceived newness of the idea from the individual’s point of view determines his or her reaction to it. If the idea seems new to the individual, it is an innovation (Robertson and Tu, 2001). An innovation consists of certain technical knowledge about how the things can be done better than existing state of the art. The innovativeness of a new product and firm innovation capability is important for several reasons.

Innovation products present opportunities for firms in terms of growth and expansions into new areas as well as allows firms to gain competitive advantage, innovation by itself is defined as the generation, acceptance, and implementation of new ideas, processes, products or better services. The innovation process includes the acquisition, dissemination and use of new knowledge (Calantone et al., 2002) and successful implementation of creative ideas within an organization (Calantone et al., 2002)

1.2 Statement of the problem

Since the advent of the industrial revolution, business environment has become sensitive and highly competitive. In order to survive and achieve their goals and objectives, it behooves business organizations to systematically adapt to changing needs of the consumers and create products that meet their yearnings and desires. Successful New product development is necessary for the survival of marketing organizations. It is however a challenging and risky business, often because of the following reasons. It is a common knowledge in Nigeria to see a lot of organizational resources committed into product ideas that have not undergone proper research, especially market-based research. As a result, it is either that the product fails out rightly or gains marginal success. No wonder we have so many of such products wasting in the market places begging for demand. When a product idea carries a weight of benefits to give to the market, even the market will be anxiously waiting for it to be launched. Besides proper research into developing a quality product, there is also the need for a wide range of management activities of the product from its conception to maturity or until it is being disposed. Such management activities include providing appropriate strategies for pricing, promotion distribution as well as on-going support to customers who have purchase the new product. New product development requires enormous funding, even from the stage of idea generation and up to the time such product is withdrawn from the market.

It is expected that the management, having determined the source of financing the new product development project, prepares in advance an estimated cash flow statement on the project based on estimated sales revenue and the total cost involved. They (management) should also prepare a contingency budget to take care of all exigencies so that the variances and discrepancies would be brought to light. New Product development imposes a greater task on the manufacturers/producers to strive in satisfying their customers and retain their loyalty if their goals and objectives are to be achieved, this calls for a good leadership. And given that the project (new product development) requires enormous funding, management should adopt both short and long term marketing programs to ensure that a new product survives its cycle profitably. New product, for the purposes of this work, will include original products, improved products, modified products and new brands that the firm develops through its own Research and development efforts. The development of a new product should be a continuous process and should be given serious management supports for the survival of business organization.