Transcript BSM180 Business Creativity and Innovation

BS4163 Business Creativity
Innovation and the new product
development process
Andrew Turnbull
Outline
PDMA Product Development Management Association
Background to the study of new product development
Lessons
• Leadership
• Cross functional teams
• Portfolio management
• Communication
• Old product development vs. new product development
• Organisation
• Project management
• Communication
PDMA Product Development and Management Association
According to its website; PDMA is the premier advocate and
comprehensive resource for the profession of product development
and innovation. It was founded in 1976, which is fairly recent in
terms of areas of management science.
•PDMA • Product Development and Management Association
The BOK (Body of Knowledge) covers:
•Co-Development & Alliances
•Customer & Market Research
•Intellectual Property
•Metrics
•New Product Process & Execution
•People, Teams and Culture
•Portfolio Management
•Strategy
•Technology
Study of New Product Development (NPD)
The first major study of NPD to be
disseminated was by Booz Allen and Hamilton
(a strategy and consulting firm) in 1968.
This put forward the first systematic model of
new product development.
• The model which has appeared in all marketing text books until
recently
Booz Allen & Hamilton (1968)
Information
Inputs
Corporate objectives;
Market analysis
Techno-environmental
scanning;
Competitor analysis.
Customer needs;
Technological opportunities
in targeted markets.
Market & technical
assessment;
Initial financial assessment;
Corporate fit.
Customer needs analysis;
Market analysis;
Technical analysis.
Model Stage
Decision/Outputs
New Product
Strategy
Market opportunities for
new products, which meet
corporate objectives.
Idea Generation
Screening
Concept
Development
Body of acceptable ideas.
Acceptable ideas for
further development
work.
Identification of:
Key product dimensions;
Key technical costs;
Target markets and potential.
Information Inputs
Explicit market analysis
including potential;
Explicit technical feasibility
analysis, including costs;
Production implications;
Check with corporate objectives.
Market research;
Production requirements
Market research;
Finalised product;
Marketing plan
•Promotion
•Price
•Distribution.
Results of test marketing.
Model Stage
Business Analysis
Product
Development
Market Testing
Launch
(commercialisation)
Decision/Outputs
GO/NO GO decision;
Initial marketing plan and
budget;
Product development plan.
Finalised product
Production plan;
Marketing plan
Product take up;
Final adjustments to the
marketing plan.
Adjustments as a result of take
up
Long term commitment.
Next Milestone
R.G., The New Product Process: A Decision Guide
for Management, Journal of Marketing
Management, 1988,3, 238-255
The aim of the research was to:
• To identify the criteria which separates ‘winners’ and ‘losers’.
• To take the findings from the research study and formulate
them into guide for those managers involved in NPD.
• The study in 1985 involved a retrospective analysis of 203
new industrial products in 120 firms.
The State-Gate New Product Process, with Six Stages and Gates
Stage Gate Articles, Research, Knowledge and Working Papers
Production
& technical
activities
Idea
Marketing
activities
Stage
Preliminary
technical
appraisal
Technical
concept
definition&
production
possibility
Gate 2
Preliminary
assessment
Gate 1
Initial
screen
Preliminary
market
appraisal
l Assessment
In-house
product
tests
Product
development
Gate 3
Project definition &
pre-development
business
analysis
Concept
identification
& concept
testing
Development
of marketing
plan
ll Definition lll Development
Gate 4
Pre-test
review
Trial/test
production
Gate 6
Precommercialisation
business
analysis
Gate 5
Pre-trial
review
Customer
tests of
product
lV Testing
Full
production
Test
market
V Trial
Review &
adjust
Market
launch
Vl Commercialisation
Source: Cooper R.G., The New Product Process: A decision Guide for Management, Journal of Marketing Management, 1988,3, 238-255
Cooper’s Stage Gate Model Today
• Rugby scrum approach as opposed to the relay race
approach of the Booz Allen and Hamilton model.
• Stage Gate - official site - Product Development
Institute
The last 4 slides give a picture of evolutionary thinking in NPD.
The move from a linear model to parallel processing – shortens
the NPD lead time => greater profitability. (see- next slide)
This involves the use of cross functional teams and parallel
strands
There are more evaluation points – gates. Reduces risk.
The financial impact of shorter time to
market
(As cited in Shepherd & Ahmed, (2000) pg 170)
Stages
Each stage needs to be well defined – clear goals and purpose
and proficiently executed (doing the right things and doing
things right)
Each stage aims to reduce uncertainties and risk
Each stage costs more than the previous one – also cumulative
investment (can make it hard to pull out in the latter stages –
ugly baby)
Each stage is cross functional i.e. every stage is R&D,
marketing, production, engineering etc. No function ‘owns’ any
one stage.
Costs and risk
High
Costs
Risks
Low
No. of stages/time
Funnel not tunnel
Key themes from the product development literature
Management
authority
support
technical aspects
communication
Information
general
marketing
external
communication
Process
timing
pre-development activities
development activities
marketing activities
launch activities
Successful
new products
Source: Hart (1995) in Bruce & Biemans, Wiley; Trott (2005), Prentice Hall
Organisational
structure
mechanism
style
People
multifunctional
co-ordination
product champion
communication
Strategy
orientation
objectives
synergy
product characteristics
Efficiency and creativity
Managing the tension between the need for creativity and efficiency
The development of
new products and
services requires
creativity and room to
try out new ideas.
This is usually
achieved in a loose
and flexible
environment
Creativity gains
Efficiency gains
The efficient day-today operations within
an organisation require
stable routines. This is
usually achieved in
stable and controlled
environments
Technology push vs. market pull
Source: Adapted from B. Rothwell and W. Zegveld (1985) Reindustrialisation and
Technology, Longman, London.
Pearson’s uncertainty map
High
Applications
engineering
Exploratory
research
Combining
market
opportunities
with
technical
capabilities
Development
engineering
Uncertainty
about output
Low
As cited in Trott, P. (2008) Innovation
Management and New Product Development.
FT Prentice Hall, Harlow England
Low
High
Uncertainty about process
Revamps vs NPD
The requirements are different
Revamps are more defined and amenable
to project management techniques.
NPD has a much fuzzier front end, is
riskier, eats money, is complex to manage
Characteristics of Successful Product Innovators
Old Product Development
New Product Development
Strategy
Top management determines Top management sets broad
explicit plans and budgets
objectives for organic growth
for development work
Shared
values
Top management fosters
understanding of the need
for product evolution
Style
Top management is support
Top management is intimately
-tive but does not meddle in involved, often on a day to day
development projects.
basis
Progress is checked regularly
Structure
Top management uses the
existing organisation which
acknowledges the need to
manage updates within a
matrix of responsibilities
Top management fosters
understanding of the need for
really new products
Top management uses new
organisational forms, such as
business teams, to nurture
important developments outside
the mainstream organisation
Characteristics of Successful Product Innovators
Old Product Development
New Product Development
Skills
There is efficient product
planning using sophisticated
market analysis techniques
Techno-commercial idea
generation, screening and
testing in concept.
Development work often based
on new technology
Staff
Existing line managers are
used with some staff advice.
When product leaders are
appointed, they may be
quite junior but receive a
commission from top
management.
An intrapreneur is allowed to
select his/her own team with
whom rewards are shared.
Failures are viewed as a
learning experience
Systems
Loose-tight using
Loose-tight using simultaneous
simultaneous or rugby scrum or rugby scrum approach. More
approach. More tight than
loose than tight.
loose.
The Performance Diamond
Product
innovation &
technology
strategy for
the business
Climate,
culture, teams
& leadership
Business’s
new product
performance
Idea-to-launch
system:
stage-gate
Resources:
commitment &
portfolio
management
Portfolio Management
Portfolio management is a dynamic decision process
whereby a business’s list of active new product (and
R&D) projects is constantly up-dated and revised.
In this process, new projects are evaluated, selected
and prioritised: existing projects may be:
accelerated, killed or de-prioritised; and resources
are allocated and re-allocated to the active attractive
projects.
Dynamic process
Strategic
objectives
Portfolio
management
tools
Internal
resource
allocation
External
transactions
and
partnerships
It’s about getting your ducks lined up
Evaluation criteria for projects
Technical – do we have experience?
Research direction and balance – compatability?
Competitive rationale – is it superior/necessary?
Patentability
Stability of the market – time enough for ROI?
Integration and synergy – a good fit?
Evaluation criteria for projects (cont.)
Market - what is the size, is it growing, is there an
existing customer base, is the potential big enough?
Channel fit – do we have existing customers?
Manufacturing – can we use existing resources?
Financial - what investment/ROR is expected/needed?
Strategic fit – does it support short/long term plans?
Budgets allocated according
to strategic priority
New Products
Improvement to existing
products
Project
Score
Rank
Score
Rank
Alpha
Beta
Gamma
Delta
Cost reductions
Project
Project
Alpha
Beta
Gamma
Delta
Score
Rank
Alpha
Beta
Gamma
Delta
Projects are scored and ranked
within allocated budgets. The most
promising projects are selected.
Pharmaceutical R&D by type
Source: ABPI (1993) Pharma Facts and
Figures, Association of the British
Pharmaceutical Industry, London.
Importance of Portfolio Management
Financial
• To maximise return; to maximise R&D productivity; to achieve financial
goals
To maintain the competitive position of the business
• To increase sales and market share
To allocate scarce resources properly and efficiently
To forge the link between project selection and business strategy:
• The portfolio is the expression of strategy: it must support the strategy
Importance of Portfolio Management
To achieve focus:
• Not doing too many projects, focusing limited resources on the
‘great’ projects.
To achieve balance:
• The right balance between long and short term/high risk and
low risk projects, consistent with the business’s goals
To communicate priorities better within the organisation, both
vertically and horizontally
To provide better objectivity in project selection – to weed out bad
projects
Platform Development
Differentiation vs. standardisation?
Key questions:
Product
platforms:
• How to deliver distinctive products to market whilst
building on core capabilities and conserving
development, production and marketing resources?
• How to balance the needs of high-volume
manufacturing/service delivery with the needs of
individual customers?
• Common platforms for a range of products
• Shared components/parts, production processes,
knowledge, people and relationships
• Improves efficiency.
VAG interfirm product platform
development
Single platform
Many common parts
Platform development creates the architecture for a family of
products
Brand positioning
Product platforms
The benefits of product platforms include:
• Increased product variety and ability to serve multiple
market segments (mass customisation)
• Greater speed to market
• Improved management of demand and uncertainty
• Accommodating differential technology change
• Reducing production costs
• Supports late-stage differentiation of products
• Reduces service infrastructure requirements
• Greater speed and efficiency in technological learning
and knowledge creation.
The organisation’s
reputation for innovation
High morale and retention of
creative people
Ability to attract
creative people
Organisational
encouragement
of creativity and
innovation
Motivates people within
the organisation and
reduces frustration
A willingness within the
organisation to accept
new ideas
Development of
innovative
products
Fig 3.7 Propagating a virtuous circle of innovation.
References
•
•
•
•
•
•
•
•
•
•
Chao, R. O., & Kavadias, S. (2008). A Theoretical Framework for Managing the New
Product Development Portfolio: When and How to Use Strategic Buckets. Management
Science, 54(5), 907-921. Retrieved from EBSCOhost.
Cooper, R.G.,(1988)The New Product Process: A decision Guide for Management,
Journal of Marketing Management,,3, 238-255
Cooper, R.G. (2008) Perspective: The Stage-Gate® Idea to launch Process – Update,
What’s New, and NexGen Systems. Journal of Product Innovation management; 25:
213 -232
Cooper, R, Edgett, S, & Kleinschmidt, (2001), 'Portfolio management for new product
development: results of an industry practices study', R&D Management, 31, 4, p. 361,
Business Source Premier, EBSCOhost, viewed 12 September 2011.
Cooper, R, Edgett, S, & Kleinschmidt, (2007), "Winning Businesses in Product
Development: The Critical Success Factors" Revisited. Research Technology
Management, May/Jun, Vol. 50 Issue 3, p60-61, 2p
Johne A. & Snelson P.(1988), Successful Product Innovation in UK and US Firms,
European Journal of Marketing 24,12
PDMA • Product Development and Management Association [accessed 29.8.11]
Pons, D. (2008) Project management for new product development. Project
Management Journal, Jun, Vol. 39 Issue 2, p82-97
Shepherd, C. & Ahmed P.K (2000). NPD frameworks: a holistic examination.
European Journal of Innovation Management V3. No 3. pp160-173.
Trott, P. (2008) Innovation Management and New Product Development. FT Prentice
Hall, Harlow England. 4th edition.