Business case sales planning concept for new products and product portfolio

FOR THESIS University of Oulu Faculty of Technology Degree Programme (Bachelor's Thesis, Master’s Thesis) Major Subject (Licentiate Thesis) Industrial engineering and management Author Thesis Supervisor Kokkonen, Tatu Petteri Haapasalo H, professor Tolonen A, D. Sc. (Tech) Title of Thesis Business case sales planning concept for new products and product portfolio Major Subject Type of Thesis Submission Date Number of Pages Product management Master’s Thesis September 2017 81 + 7 Abstract Companies are demanded to introduce new products to market in order to satisfy diverse customer needs and be competent in relation to competitors. In addition to traditional, full-scale new product development (NPD), lighter development models have recently been researched. Rapid product development (RaDe) is a new agile product development model aiming to aid companies to adjust quickly to changing customer needs. Whether new products are introduced by lengthy NPD or quick and agile RaDe, it should be ensured that development activities are aligned with company strategy and that new products enhance the overall profitability of the company.Companies are demanded to introduce new products to market in order to satisfy diverse customer needs and be competent in relation to competitors. In addition to traditional, full-scale new product development (NPD), lighter development models have recently been researched. Rapid product development (RaDe) is a new agile product development model aiming to aid companies to adjust quickly to changing customer needs. Whether new products are introduced by lengthy NPD or quick and agile RaDe, it should be ensured that development activities are aligned with company strategy and that new products enhance the overall profitability of the company. Business case analysis investigates the business value of a new product initiative. Generally, market assessment inputs estimations of market potential and attractiveness into the business case analysis and thus functions as the basis for anticipated sales volumes and sales prices. Expected revenues are compared with life cycle cost predictions in order to conduct financial analysis presenting the attractiveness of the new product initiative in chosen financial metrics. However, there is a lack of business case analysis methodology on product portfolio level, and this study seeks to address this research gap. This research is an explorative and qualitative case study using constructive approach. The results of this study include a concept for calculating financial metrics for new sales item so that product portfolio level changes in sales are taken into account. The developed concept seeks to be eligible for NPDand RaDe-contexts alike. The essence of the concept is comparison of the anticipated net cash flows for the sales items that are affected by the new item’s introduction in two scenarios. In first scenario, it is assumed that the new item is not introduced at all and the anticipated net cash flows are calculated based on that assumption over the new item’s life cycle. The second scenario calculates the net cash flows for the affected items taking into account the likely impact the new item has on the sales of those items. The differences of net cash flows between these two scenarios are taken into account as a cash outflow or inflow for corresponding time period when calculating net cash flow based financial metrics for the new sales item. In addition, this study introduces a proposition of a concept for product portfolio level sales planning and follow-up. In this concept, the sales plan consists of the planned sales volumes and the planned sales prices for individual sales items. Both target setting and follow-up of actual execution should be implemented on the level of volume and price so that the unit of planning is revenue (volume * price). Targeted and actual sales figures for individual sales items are further rolled up to upper commercial product portfolio levels. This enables analysis and comparison of targeted and actual sales performance on each product portfolio level. Additional Information