Product Development Lingo
Part of the New Product Development For Dummies Cheat Sheet
Get to know the following product development language so you’re on top of your game and your head isn’t spinning from all the jargon used during new product development meetings and conventions:
Product development acronyms
B-2-B, B-2-C: When a business sells to another business, it sells B-2-B; when a business sells to a customer, it sells B-2-C.
COGS (cost of goods sold): You have to make more than the COGS to make an ROI (return on investment).
DFX (Design for X): Product developers on cross-functional teams design products so they can be manufactured, serviced, and so on.
IP (intellectual property): Knowledge that someone owns and can potentially use to make a profit.
JVs (joint ventures): JVs help multiple companies develop new products. All firms contribute equity and share in the profits and expenses.
P&L (profit and loss): The basic calculation of money in/money out in a project or a business.
R&D (research and development): The name of the business function that carries out research and the design and engineering part of the product development process.
ROI (return on investment): The amount of revenue a company gets after making an investment.
QFD (Quality Function Deployment): A matrix that enables product developers to match up customer needs (usually the Y-axis) with product features (usually the X-axis).
SBU (strategic business unit): A division of a company that focuses on a particular market or set of opportunities. New product strategies often vary among SBUs in a single organization.
SVA (shareholder value added): The amount of value a project is expected to return to shareholders.
VOC (voice of the customer): How companies and new product teams find out what moves, inspires, and frustrates their customers.
Other important product development terms to know
Alpha testing: Testing new products to make sure that they work in customers’ hands. Often, people within the company, or very friendly customers, participate in these tests.
Beta testing: Testing your product with real customers to make sure that it works in their environments.
Business case: This describes in business terms the benefit a concept or product will provide the company.
Cannibalization: When your new products eat up the sales of products you already have in the market.
Commodity: When a product no longer competes on differentiation and earns low margins, it has become a commodity.
Cross-functional team: A group of people brought together from several different functions within a company to develop a product.
Cycle time: The length of time it takes to deliver a new product, from idea to commercialization.
Portfolio: The collection of products in development and products in the market that focuses on achieving the company’s strategic goals.
Value chain: The companies that share in the value that new products create, including materials suppliers, parts makers, firms that assemble full products, dealers and distributors, and many others.
Value proposition: A succinct expression of what a new product will do for customers and for the company.
Take a look at the glossary on the Product Development and Management Association Web site for more NPD terms. The list keeps growing, and PDMA is keeping up with it!