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product innovation blog

A friend in need is a friend indeed … helping a friend with NPD problems

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A friend contacted me, and he told me that he just left a strategy meeting with his executive team. The news was grim. “I have to cut back my business unit’s budget. They lasered in on my new product development funding because none, repeat none, of my recently launched new products have shown any signs of life now, or in the near future. I don’t know how to fix this, and losing NPD funding is the worst thing that can happen right now!”

Unfortunately, his is not the only business unit experiencing this harsh reality. Many more organizations than you would expect need to improve their new product development (NPD) system.

And, given our current economic conditions, now is certainly NOT the time to eliminate product innovation. So, let’s take a step back and perform a ‘no holds barred’ critique of your current NPD processes.

How does one get started? Following are the four critical questions businesses must ask themselves:

1. What is the process my organization uses to evaluate opportunities?

In today’s challenging economic environment, it is essential to succinctly define, and select the right NPD opportunities in order to maximize profits, grow market share, and efficiently utilize valuable resources.

Yet, we frequently observe that many businesses subscribe to an ad hoc approach because they believe it keeps them nimble. In fact, this approach results in constantly changing priorities, lengthy decision cycles, and tedious meetings that waste precious time and valuable resources.

Research demonstrates that following a structured process when innovating and developing new products is the most reliable predictor of successful outcomes. We firmly believe that innovation can successfully bloom in this environment because the process provides the base for developing and executing new ideas, plans and actions.

2. What are the criteria for opportunity evaluation?

While this question appears to be simple and straight-forward, in reality it is very complex and demands serious, thoughtful analysis by the executives and the NPD teams.

We have consulted with many businesses that have relied on hypothetical financial projections and analyses. While these analyses demand analytical rigor, the results can be highly ambiguous because they are based on assumptions, which in these uncertain economic times can change in an instant, rendering the analyses useless, or worse, misleading.

One business that we worked with relied solely on financial criteria for its strategic decisions. It predicted, at a portfolio level, a 300% growth opportunity in total sales. However, the fact that the market was shrinking by 10% had not been included in the analysis. When incorporated, the results were dismal.

Firms who repeatedly and successfully launch new products include many additional criteria, such as strategic alignment, product advantage, market attractiveness and ability to leverage core competencies. This perspective provides a much wider aperture and lessens the risk of making poor decisions, especially at the portfolio level.

3. Is everyone in your organization pulling in the same direction?

While many executives would wholeheartedly agree that the executive team and the NPD teams are aligned and heading in the same direction, we have seen that this is often not the case.

This misalignment and lack of agreement amongst key stakeholders can be a result of different teams being measured by different dials on the metrics dashboard. For example, at a manufacturing company, the CEO described a large scale technology innovation as a complete failure, while the Chief Technology Officer claimed it as the greatest technical achievement in years.

Successful, innovative businesses follow processes and rigorously operationalize them throughout all levels of the business. They use simple, relevant decision metrics that keep all organizations within the business on the same dials on the metrics dashboard. This means that all parties have a clear goal that is measurable and links all the parties to joint critical success factors.

4. What would your customer/consumer say?

Predicting what new products customers want and will purchase is extremely difficult, but is, perhaps, the most important aspect of successful new product development. We see two common problems:

a. Businesses may provide heavy emphasis on product enhancements, but minimal focus on features that meet customer needs and desires

As an example, a cell phone company focused on providing smaller batteries and smoother flip hinges, yet their customers were concerned with what to use the product for and how to take advantage of already existing functions.

b. While distribution channel and partner requirements must be carefully evaluated within the framework of strategic criteria, end-customer wants and needs must be paramount

We want to make certain that we are tightly linked with our partners in our distribution channels because they are crucial to driving revenue. But, we must also be very aware that their wants and needs may focus on margins, logistics and inventories and NOT on our mutual end-customers’ needs and desires.

Bear in mind that a focus primarily on partner desires can divert your attention from end-customer needs and allow a major competitor to steal market share. Winning it back will be very costly and difficult.

In summary, my friend and I spoke three months later. The transformation of his story is still a ‘work in process’, but we are both optimistic on what the results will be.

Many businesses have been challenged to alter their business model, especially in these difficult economic times. Using a familiar poker analogy, my friend would have preferred being dealt a better hand.

However, now that the cards have been dealt and time has passed, he is over his initial shock to the budget cut mandate. He is fully committed to outplaying his competition with logical, creative, game-changing thinking and a structured, rigorous process for NPD that delivers the right product to the right market at the right price and at the right time.

 

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