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A Little Help From a Friend: How To Win At Today’s NPD Game

Martin Zummersch, Ph.D.

I arrived home from my office late one evening recently when my phone rang. It was a good friend I hadn’t heard from in several weeks.

 “Martin, I need your help. Can we talk?” He had just come out of a strategy meeting with his executive team.

“They’re telling me that I have to cut back my business unit’s budget. They took a look at my P&L and new product development stuck out like a sore thumb. None of the projects we’ve recently launched have shown any signs of life yet. None.” He sounded absolutely dejected.

“Talk to me Martin, I know it’s the economy. Customers have curtailed spending. But we expected that would have changed by now. I know we have to alter our approach, cut back, control costs, deal with less funding, and even shelve certain initiatives. What would you do?”

I assured him he was not alone in the situation he was facing. The current economic environment is forcing many organizations to make their new product development processes much more efficient and effective, or cut them out completely.

Fortunately, there are a few things you can do.

1) What is the process your organization uses to evaluate opportunities?

Face it, innovation and product development endeavors are characterized by uncertainty and risk. Unstructured, ad hoc planning and endless project prioritization sessions are justified by the belief that they keep companies nimble. But they don’t yield winning results. What they generate are ever-changing priorities, long decision-making cycles, and precious time wasted in endless meetings.

Of course, decision making in product development and innovation is a dynamic process. However, research has shown that following a structured process when making decisions about innovation and new product development is the most reliable predictor of successful outcomes.

In today’s economic environment it is essential to define, select and describe the right opportunity rather than using a shotgun approach to innovation and product development. However, few companies have a process for doing so. The new product development process in a successful company functions like a foundation providing the basis for the development and execution of new ideas, plans and actions.

Successful organizations have the ability to articulate their process for evaluating opportunities. They have a product strategy, with strategically driven criteria to evaluate opportunities.

2) What are the criteria for opportunity evaluation?

One of the most difficult questions an organization must answer is a simple yet complex one. What constitutes a good opportunity? Or put another way, when and how is a good opportunity specifically beneficial to your organization? Many organizations rely on hypothetical financial projections and analyses that may produce highly ambiguous results. Since they are based on current assumptions— that especially during these economic times can change in an instant—most of these projections are out of date as soon as the numbers are calculated.

For example, one company relied solely on financial criteria when making strategic decisions. Adding up all innovation projects and initiatives and aggregating them at the portfolio level, it predicted a 300% growth opportunity in total sales. At the same time, the market was shrinking by 10% resulting in dismal results.

Successful firms recognize the importance of quantifying a product’s projected performance when sizing an innovation opportunities. But they also look at information from a broader perspective. To do otherwise skews the picture and heightens the risk of making bad decisions, especially at the portfolio level.

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

Lack of alignment across an organization with regards to decision-making in product development and innovation can result in wasted time, money and missed opportunities.

The lack of agreement and alignment amongst key stakeholders, because each is looking at a different dial on the dashboard, is quite common in underperforming organizations. For example, the CEO of a manufacturing firm described a large scale technology development effort as a complete failure. At the same time, the Chief Technology Officer called it the greatest technical achievement in years.

The most successful organizations not only follow a process but operationalize it throughout all levels of the organization. They do so by using simple but relevant decision metrics so everyone is the same page. Having the right measures and linking them to key success factors provides a clear goal for all.

4) What would your customer /consumer say?

It is difficult to predict what new products customers and consumers want, and two common problems occur:

First, too much focus on product can lead to tunnel vision. Consider the example of executives in a mobile phone company focused on product features that could be improved by using smaller batteries, smoother performing flip hinges, etc. Consumers, on the other hand, were much more concerned with what they would use the product for and what help they would need to take advantage of existing product functions.

Second, while it is important to be on the same side of the table as all partners along distribution channels, information coming through those channels must be carefully applied against strategic criteria. For instance, information from channel partners may have more to do with margin or logistics or inventory and may be completely out of touch with consumer preferences. Acting on such criteria can open the door for a major competitor to take a foothold in the market.

My friend and I spoke 3 months later. His story is not yet at the point where I can report a happy ending. His business is like a lot—like most—businesses right now. Just about every business has been challenged to alter its business model. Applying a poker analogy, he would have preferred a better hand. But once he got over his initial reaction to the budget cut mandate, he resolved to outplay his competition by using creative, logical, sensible, game-changing thinking.

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