CHP 7 PART 1

Project Evaluation Overview

Key Questions in Evaluation

• Question 1: Is the program in the implementation or operational stage?

• Question 2: What was done in the project?

• Question 3: How much did it cost?

• Question 4: What difference did it make?

Financial Summary

• Cost Analysis:

  • Product A:

    • Price: $50

    • Costs: -$25

    • Conversion Cost: -$5

    • Total Costs: $300

    • Profit: $20

  • Product B:

    • Price: $130

    • Costs: -$150

    • Conversion Costs: -$20

    • Profit: $20

Sales Data by Region

• Products categorized by Electronics and Housewares.

Development Phase at Hollingsworth & Vose

• **Testing Procedures:

  • Gaskets undergo a variety of tests:**

  • Pass: 4 times

  • Fail: 4 times

Cumulative Expenditures Curve

Timeline Analysis

• Many high-tech and consumer products show different trajectories in terms of R&D and marketing expenses.

• Products launched require a substantial investment in R&D.

Opportunities and Costs

• Opportunity Costs:

  • Identification of alternative projects waiting for funding is crucial.

  • Potential gains must be compared to costs and delays.

  • Example: High-tech companies like Nvidia, Samsung, and Sony rushed to market while Vaseline has been in testing since 1859.

Risk/Payoff Matrix

Evaluating Product Success

• Failed Products:

  • Appleeasy, Presweetened Baked Beans, Vegetable Yogurt

• Successful Product:

  • Totino’s Crispy Crust Frozen Pizza

Planning the Evaluation System

• Core Question Framework:

  • Utilizing four questions to replace traditional performance evaluations.

Rolling Evaluation Process

• Continuous Assessment:

  • Financial analyses should build up continuously.

  • Early marketing and project assessment help avoid premature closures.

• Example of General Electric's gradual ramp-up for product marketing.

Evaluation Potholes

• Key areas to focus on:

  • Product design

  • User interface issues (taking Apple as a case study).

Examples of Common Potholes

• Quick market entry by price competitors (Flour Miller).

• Customer resistance to complex product functionalities (Software Developers).

• Uncertainties related to FDA approval (Pharmaceutical Manufacturers).

Addressing Challenges in New Product Development

• Importance of buy-in at early stages can complicate project stoppage.

• Establishing strict quality hurdles late in the process is critical to mitigate risks.

Utilizing Six Sigma Methodologies

• Reference to 3M’s DFSS (Design for Six Sigma) in guiding new product development processes.

Prototype Development Checks

• Skills Assessment:

  • Alignment with required skills.

  • Prototype production efficiency.

Surrogate Questions Framework

• Surrogate Indicators:

  • Gauging potential user preference based on dataset queries.

  • Monitoring competition and cost competitiveness through historical reference.

A-T-A-R Model Overview

Key Components

• Awareness: Who is aware of the product?

• Trial: Who wants to try the product?

• Availability: Who has access to the product?

• Repeat Purchase: Will customers buy it again?

A-T-A-R Data Sources

• Market Research, Product Testing, and Market Size Assessment are crucial in obtaining data.

Application of A-T-A-R Model

• Profit calculations through units sold and repeat purchase factors.

Points on A-T-A-R Model Implementation

• Factors must be estimated adequately; making revisions can lead to better profit forecasts.

A-T-A-R Model Data Estimates

• Framework for data research methodologies and effectiveness across different evaluation stages.