Technology Assessment International

Innovation and new product development are major contributors to long term growth and prosperity of successful companies. Yet, this activity presents a number of organizational challenges. Understanding what these challenges are is the first step in addressing them on the road to securing profits through efficient new product development and commercialization.

Shared Responsibility, Low Priority for Most

First, NPD is not “owned” by just one department. For commercial success, all business functions have to coordinate their NPD activities. But NPD is a small portion of their preoccupations. As a result, decisions are made that appear to serve the main interests of the company, but at the expense of maximizing returns on NPD investments.

For example, contribution to New Product success likely never enters the mind of the HR Manager revising the Performance Review criteria. When the head of Operations evaluates a capital investment in a more efficient production line, he does not consider how to address the need to produce small lots while sales of new products ramp up. Most CFOs have no articulated way to use discounting rates for NPD projects that discriminate between different risk profiles. Will the next Sales hire have the right profile to sell the new products launched during his likely tenure? This question is probably not considered in the hiring decision.

Predominant Thought Process Does Not Apply

The next challenge is that teams need to interact differently for NPD and for established business. Operations might need to allow time on its equipment to try production of the new product. For this purpose, the best equipment is flexible and instrumented. The work force must tolerate the chaos created by lack of instructions, procedures or experience and the presence of development engineers. The required time might exceed what was predicted, further disrupting the production schedule. Contrast this with the keys to success in main stream operations: predictable, repetitive, uninterrupted production runs on rigidly optimized equipment and according to detailed documented procedures.

For the Sales function, the predominant daily preoccupation is mostly tactical: increasing revenue during the next Sales cycle (3 months? 6 months? One year?). By contrast, NPD success starts with evaluating structural issues. Are the current sales channels appropriate for the new products? Can my Sales force go from responding to inquiries and negotiating on price to pushing a new product in the market? A “no” answer could unleash a major transformation of the Sales function possibly impacting its leader: Strength in the tactical skills does not imply strength in organization building.

New Product Development "Conductor" Needed

An organization developing new products is comparable to an orchestra. Musicians usually play together in an orchestra only for a set of performances of a given program before disbanding. This remarkable achievement is made possible by the role of conductor. Compare this with New Product Development. There is no leader to bring together the performance of the various parts of the company for the only purpose of developing new products. If a natural leader emerges, he is likely a peer of the function leaders or one level below that, and has no formal authority over them. Clearly, this is a model that requires accommodations to succeed.

Cycle Time a Challenge to Continuous Improvement

In NPD as in everything else, continuous improvement comes from repeated experience. Yet, it is difficult for the organization to feed back this experience to the early parts of the process due to the average time elapsed between idea and commercial revenue (5 to 10 years). In large organizations, this cycle likely exceeds several professional rotations. It also makes it difficult to hold individuals accountable for the success or failure of their involvement. Those rewarded today because of strong revenue probably deserve little of the credit. The success apparent today was created mostly by the actions of employees involved earlier in the process. In smaller organizations, the small number of iterations (new products) makes it challenging to quickly get to a functioning process.

Conclusion

Companies routinely experiencing success in New Products have established a self-sustaining culture to deal with these challenges. Going from the culture of a “cash cow” business or a one-product-line business to that of growth business through new products is an evolution more likely to succeed under the guidance of someone who has experienced it. Few companies want to discuss the practical details of what makes them successful at innovation and often those who participate in the process have never experienced another way to do it. By contrast, we distill our insider experience from multiple companies and adapt it to guide your organization towards an approach that works for you. We invite you to contact us to explore how we can assist you.