The New Products Process

Setting

The New Products Process

Chapter 1 provided a view of the overall new products process—that combination of steps/activities/decisions/goals and so on that, if performed well, will churn out the new products the organization needs. This process appeared in Figure 1.4, which serves as a framework for the rest of this book. As noted in the introduction to Part 1, the five figures that introduce each part of this book (Figures 1.1, I.I.1, and so on) are indeed simply the five boxes of Figure 1.4, expanded to show more detail on what happens at each phase in the process.

In this chapter, we go more deeply into the phases of the new products process model of Figure 1.4, illustrating what tasks are required at each phase and who is responsible for what. We then explore several issues important to product managers: how the new products process can be sped up (without sacrificing product quality or running up the budget), how the process would have to be adapted for the development of new services, how to develop breakthrough innovations, and how the skills and resources of external partners can be leveraged to improve the process.

We begin by relating a short new product story to illustrate some of the key activities in the new products process in action. This will lead into a deeper discussion of the new products process and its managerial aspects. In particular, the story clearly shows how the new products process is interwoven with the other strategic elements introduced in Chapter 1, that is, the product innovation charter and the new product portfolio. It also introduces the idea of the cross-functional team and the importance of effective team management in implementing the new products process.

The Procter & Gamble Cosmetics Saga ^{1}

In 1989, leading U.S. consumer goods manufacturer Procter & Gamble established itself in the cosmetics business by acquiring two leading cosmetics brands, Cover Girl and Clarion. By 1991, they also owned Max Factor. P&G established a new Cosmetics strategic business unit (S.B.U) and tried developing and launching new products using the procedures it had mastered in the detergent, food, and other packaged-goods lines. By the mid-1990s, however, P&G senior management was considering its options for its Cosmetics S.B.U. Some new products had done poorly, Clarion was sold, and some managers were even wondering whether P&G should leave the cosmetics business for good.

P&G, one of the leading product developers worldwide, certainly knew the long-term importance of new products to the firm's bottom line. P&G's C.E.O, A. G. Lafley, said that "innovation is a prerequisite for sustained growth. No other path to profitable growth can be sustained over time.

Without continual innovation, markets stagnate, products become commodities, and margins shrink." Senior management felt that this was not the time to get out of cosmetics; rather, the challenge was to turn new product development around within the ailing S.B.U. With this strong commitment to new products at the highest levels within the firm, the Cosmetics S.B.U's challenge was clear: fix the new products process, so that new products can become a sustaining, vital part of their business into the long term.

Cosmetics S.B.U management understood its new product weaknesses. At the time, there was little evidence of a clear product development strategy in the Cosmetics S.B.U. Product initiatives were all over the place, too many different product categories were being pursued, and too many customer segments were being targeted. In short, the S.B.U lacked a product development focus.

Within a few years, P&G's Cosmetics S.B.U had engineered a complete turnaround by following and implementing the three strategic elements we introduced in Chapter 1. It's not so simple, of course; senior management had to recognize new products as the lifeblood of their S.B.U and a key component of their success. They had to adequately fund new products and assign the right people to the tasks. However, the cosmetics S.B.U turnaround is almost a textbook case of the value of the strategic elements.

It also clearly shows that one or two of the strategic elements alone won't be enough. All three were put into action, and each complemented and supported the others. Let's examine each in turn.

The Product Innovation Charter (P.I.C)

The starting point for the turnaround was a clear product innovation charter (P.I.C), which starts with an honest situation assessment and opportunity identification. At the time, the Cosmetics S.B.U was trying to develop products for the entire body and having difficulty carving out a competitive position. The situation assessment showed that there was an underserved consumer market, who wanted quality products for facial use only (facial cleanser, eye or lip products, and so on). Also, a problem was identified in the supply chain, which had become uncoordinated.

Production and shipments were not tied to fluctuations in market demand, with the result that products spent too long in the supply network. Some new products were almost obsolete (not really competitive any more) by the time they were launched! Management realized that the supply chain needed to be under better control, such that market demand forecasts drove production and shipping schedules.

If they succeeded in improving the supply chain, fewer launches would be delayed, and new products would be more competitive at the time of launch.

While you will learn more about the P.I.C in Chapter 3, the important thing to know is that it is a systematic way for managers to develop a new product strategy that considers the goals for their product innovation efforts and how these efforts fit overall business strategy. It involves identifying a strategic focus (which markets and which technologies will be targeted). In this case the market was defined in terms of products for the face. Essentially, this became a statement of the strategic arena or battlefield the Cosmetics S.B.U was going to compete in. Any new product opportunities that did not clearly help Cosmetics achieve its objectives in this arena would no longer be pursued.

The New Products Process

A second strategic element is the new products process, which is the path the new product takes from idea to the time of launch and beyond. P&G's Cosmetics S.B.U did not have an effective new products process in place, with the result that product development often proceeded without clear inputs from customers early in the process. Cosmetics implemented a new products process quite similar to the five-phase process introduced in Chapter 1, which ensured that project teams were established early in the process, that consumer research was done early, and that consumer insights were actually used in the development of new product concepts. (A term you will see in upcoming chapters is the voice of the customer or V.O.C: Think back to this example and consider how the V.O.C was used to drive product development in the Cosmetics S.B.U.) Note here that having a new products process, and actually implementing it correctly, are two different things.

Cosmetics made its new products process work by having tough evaluation steps between the phases. At each phase, the project team had a set of current best practices against which to evaluate the product, as well as clear end-points or expectations. In addition, the evaluations were two-step, consisting of both a team recommendation and a decision by top management. In the past, the evaluations were not so carefully done, with the result that too many poor ideas would be allowed to pass.

The New Product Portfolio

In addition to a well-functioning new products process, there needs also to be an assurance that the firm is developing the right products with respect to its product portfolio. P&G's Cosmetics S.B.U established a plan for managing its product portfolio and systematically adding new products to the portfolio. Given the nature of the products they were making, it was important for new launches to create buzz and excitement in the marketplace—for that reason, excellent launch timing was important.

Cosmetics added new products to the existing portfolio strategically, in terms of both product selection and launch timing. For example, a new eye makeup would not be launched onto the market if there were already too many similar products in the portfolio, or if a similar product had just been launched. S.B.U management spoke of establishing an "initiative rhythm" for its products: New products would come through the development pipeline such that they would be ready for market launch at the best moment. We will see much more about portfolio management in Chapter 14.

Supporting the Strategic Elements: Effective Team Management

Finally, new product team management within the Cosmetics S.B.U was excellent. First and foremost, senior S.B.U management was committed to turning new product development around and to properly implementing the new products process. Certainly, senior P&G management such as C.E.O A. G. Lafley was behind them as well, judging from his quote above.

Cosmetics management ensured that a positive innovative culture was in place within their S.B.U, one in which employees worked effectively in empowered, cross-functional teams. One important step, established in Cosmetics as well as in other S.B.U's, was to create initiative success managers (I.S.M's), who reported to senior S.B.U management. These I.S.M's led strategy development sessions, managed new product evaluation meetings, took part in resource planning, trained employees, and (importantly) shared what they learned with I.S.M's working in other business units, so that their expertise could spread quickly throughout the firm. A solid set of metrics was also established, so that the performance of each development team could be honestly assessed every six or twelve months on key indicators established by S.B.U management. As with all other S.B.U's within P&G, great emphasis was placed on identifying the best team leaders, who could come from any of the functional areas (marketing, engineering, R&D, or elsewhere) and were rewarded based on how they performed relative to the established indicators.

We will see much more about cross-functional teams and related organizational issues in Chapter 14.

What Happened in That Saga?

We just read several years worth of product development activity in a few minutes. The story began with an ongoing operation that was facing a difficult situation. The saga illustrates how the managers involved applied the strategic elements effectively. We also saw how important it was to get support for the process from top management—in this case, from the C.E.O himself.

This situation is typical in that the new products process does not usually begin with a new product idea. It is folklore that someone, somewhere, wakes up in the middle of the night with a great insight. It can happen, but successful new product programs are not built on such slender hopes. As the saga shows, the process usually begins with what amounts to strategy. With top management's support and good execution of all the strategic elements, P&G was able to turn the weak Cosmetics S.B.U around.

Note too that development does not take place behind the closed doors of a research lab. The cross-functional team includes personnel from many departments, not just the product engineers or R&D people. Also, marketing doesn't start when the product is finished. It becomes involved very early in the process—in this saga, marketing provided key information for the development of the P.I.C.

Last, the process is not over when the new product is launched. It ends when the new product is successful, usually after some in-flight corrections. P&G monitors the sales, profits, and market shares of its new products and takes corrective actions if interim goals are not reached.

The next section looks more deeply at the phases of the new products process, first introduced in Chapter 1.

The Phases in the New Products Process

Figure 2.1 summary: A flowchart displaying a five-phase new products process. The sequence flows from Phase 1, Opportunity Identification and Selection, through Concept Generation, Concept/Project Evaluation, and Development, culminating in Phase 5, Launch. Phase 4 specifically divides work into technical tasks, such as prototyping and scaling, and marketing tasks, such as strategy and branding. The diagram maps the systematic transition from high-level market opportunity identification to the final commercialization of a product.

Phase 1: Opportunity Identification and Selection

The first phase is strategic in nature and is the most difficult to describe or define. The best approach probably is to tell you what businesses actually do, and then show how this yields strategic guidance to the firm.

At least three main streams of activity feed strategic planning for new products. They are (with an example for each) as follows.

- Ongoing marketing planning. Example: The annual marketing plan for a C.D-ROM line calls for a line extension to meet encroachment of a new competitor selling primarily on price.

- Ongoing corporate planning. Example: Top management adopts a strategy that says either own a market (meaning get either a first-or second-place share) or get out of it. This will require new product activity in all desirable markets where the firm holds a minor position.

- Special opportunity analysis. One or more persons (in the firm or a consulting firm) are assigned to take an inventory of the firm's resources (people, facilities, reputations, whatever). Example: A firm in the auto parts business called for an audit of its manufacturing operation. It turned out that manufacturing process engineering had been overlooked or just not appreciated—that skill could serve as the base for a new products program.

From these activities, the opportunities identified sort naturally into four categories, again with examples:

• An underutilized resource. Example: A bottling operation, a strong franchise with dealers, or that manufacturing process engineering department.

- A new resource. Example: DuPont's discovery of Surlyn, a material with hundreds of potential uses.

- An external mandate. Example: The market may be stagnant, the competition may be threatening, or customer needs may be evolving. Challenges like this will cause the firm to search for new opportunities, as did the Tasty Baking Company in the case at the end of this chapter.

- An internal mandate. Example: Long-range planning often establishes a five-year-out dollar sales target, and new products people often must fill part of the gap between current sales and that target. That assignment is called the product innovation (and/or acquisition) gap. Other common internal mandates are simply upper management desires.

The process of creatively recognizing such opportunities is called opportunity identification. The opportunities are carefully and thoroughly described, then analyzed to confirm that a sales potential does, indeed, exist. Recall that one of the first things P&G Cosmetics did was recognize that the new products process for cosmetics could be fixed, and that new products in this category could be a viable business direction.

Of course, no firm wants to exploit all opportunities; some are better than others. Some may not fit with company skills, some are too risky, some require more money than the firm has. So, most firms have ongoing strategies covering product innovation. For example, Waterford had a strategy that no new product would jeopardize the firm's great image. Cincinnati Milicron's strategy demanded that any new product be highly innovative, not a me-too. Gillette and Sony usually choose leading-edge innovation strategies.

Once an opportunity is approved, managers turn to various techniques to guide new product people in exploiting it. This we will call the product innovation charter (P.I.C), and it will be explained in Chapter 3.

Phase 2: Concept Generation

in some cases, merely identifying an opportunity pretty well spells out what is wanted (for example, an opportunity to add a small size of deodorant for travelers). Most times, however, it's not so clear, so an immense set of ideation tools has evolved. Creating new product ideas, usually called product concepts by new products people, is not the simple, fun-and-games thing it might appear.

The most fruitful ideation involves identifying problems people or businesses have and suggesting solutions to them. For example, if the opportunity focused on “people moving their families over long distances,” the first ideation step is to study those people and find what problems they have. This problem-finding-and-solving activity has become quite sophisticated; it is no longer the caricature of a group sitting around a table, pouring out ideas.

While the systematic problem-based ideation is going on, unsolicited ideas are pouring in on phone, mail, and e-mail from customers, potential or former customers, employees (especially sales, technical, and operations), and every other source imaginable. These ideas are reviewed briefly by whomever receives them to see if they are even relevant to the firm and its strategies. They are then put into the pool with the ideas that came from problem-solving activities.

Concept generation is covered in Part 2, Chapters 4 through 7.

Phase 3: Concept/Project Evaluation

Before development work can begin on new ideas, they need to be evaluated, screened, sorted out. This activity, sometimes called screening or pretechnical evaluation, varies tremendously. But most firms more or less follow a sequence from quick looks to complete discounted cash flows and a net present value. The quick look is necessary because the flow of new product concepts is huge—into the thousands in many firms.

But what happens next is the first formal type of evaluation. Depending on the idea, this may be end-user screening or technical screening, or both. The work may be extensive and difficult, or it may take no more than a few telephone calls. In the P&G Cosmetics example, some of the proposed new products may have originated among the technical people; this would have to be followed by a concept test to see what potential consumers thought about it. Ultimately, these views all come together in what is often called the full screen. It uses a scoring model of some type and results in a decision to either undertake development or quit.

If the decision is to go ahead, the evaluation turns into project evaluation, where we no longer evaluate the idea but rather the plan we propose for capitalizing on that idea. This involves preparing a statement of what is wanted from the new product. Firms using Quality Function Deployment (a method of project management and control) see this as the first list of customer needs. A more common generic term is product description or product definition.

In this book it will be called product protocol. Protocol means agreement, and it is important that there be agreement between the various groups before extensive technical work gets under way. The protocol should, to the extent possible, be benefits the new item is to yield, not the features the new item is to have.

The lack of good hard information complicates all pretechnical evaluation. In fact, the first three phases (strategic planning, concept generation, and, especially, concept/project evaluation) comprise what is popularly called the fuzzy front end (of the new product process). By the end of the project, most fuzz will have been removed, but for now, we move with more daring than the data allow. The various pretechnical evaluation actions are covered in Part 3, Chapters 8 through 12.

Phase 4: Development

This is the phase during which the item acquires finite form—a tangible good or a specific sequence of resources and activities that will perform an intangible service. It is also the phase during which the marketing plan is sketched and gradually fleshed out. Business practice varies all over the map, but we often find the following pieces.

Resource Preparation

Often overlooked by new products managers is a step called resource preparation. For product improvements and some line extensions, this is fine, because a firm is already up and going in a mode that fits products that are close to home. The culture is right, market data are more reliable, and ongoing managers are ready to do the work. But a particular innovation charter may leave familiar territory, forcing problems of fit. If a firm wants new-to-the-world products (more about them later in this chapter), then the team may need special training, new reward systems, revisions in the firm's usual project review system, and special permissions. Without adequate preparation of the ball field, a firm doesn't get much home advantage.

The Major Body of Effort

Next comes what all of the previous steps have been leading up to—the actual development of, not one thing, but three—the item or service itself, the marketing plan for it, and a business (or financial) plan that final approval will require. The product (or better, the concept) stream involves industrial design and bench work (goods) or systems design (services), prototypes, product specifications, and so on. It culminates in a product that the developers hope is finished—produced, tested, and costed out.

While the technical developers are at work, marketing planners are busy making periodic market scans (to keep up with changes out there) and making marketing decisions as early as they can be made—first strategic and then tactical. Marketing decisions are completely interlaced with technical ones and involve package design, brand name selection, and tentative marketing budgets. A technical disappointment down the line may junk the early package design, name, or whatever. But we have to pay that price; we can't wait for each step to be conclusive before going to the next one.

Along the way, concept evaluation continues; we evaluated the concept well enough to permit development work (discussed earlier), but we have to keep evaluating technical and marketing planning results. We evaluate prototypes primarily, checking to be sure that the technology being developed meets the needs and desires of the customers in a way that creates value for them, while at the same time being profitable commercially. By the time this phase winds down, we want to be assured that the new product actually does solve those problems we began with.

The fuzzy front end has been the subject of much research the past few years. A good resource is Peter A. Koen, Greg A. Ajamian, Scott Boyce, Allen Clamen, Eden Fisher, Stavros Fountoulakis, Albert Johnson, Pushpinder Puri, and Rebecca Seibert, "Fuzzy Front End: Effective Methods, Tools, and Techniques," in P. Belliveau, A. Griffin, and S. M. Somermeyer, The PDMA Toolbook for New Product Development (New York: John Wiley, 2002), Ch. 1.

Comprehensive Business Analysis

If the product is real and customers like it, some firms make a comprehensive business analysis before moving into launch. The financial analysis is still not firm, but it is good enough to assure management that this project will be worthwhile. The financials will gradually be tightened during the launch phase, and where the actual Go/No Go point is reached varies with the nature of the industry. Approval for a new food product can be held until just before signing T.V advertising contracts, but a new chemical that requires a new manufacturing facility has to Go much earlier, and the pharmaceutical industry really makes the Go decision when it undertakes the 10-year, $50 million R&D research effort. The development phase is covered in Part 4, Chapters 13 through 15.

Phase 5: Launch

Traditionally, the term launch, or commercialization, has described that time or that decision when the firm decides to market a product (the Go in Go/No Go). We associate this decision with building factories or authorizing agencies to proceed with multimillion-dollar advertising campaigns.

It's more subtle than that now. The launch decision has a healthy component of attitude. A firm can always pull out, even during a test market, so some people say most projects actually don't have a Go/No Go decision. Regardless, the last few weeks or months just before and after announcing the new product is really a launch phase. New products teams are enjoying life in the fast lane (or, unfortunately, life in a pressure cooker). Manufacturing is now doing a gradual scale-up of output. The marketing planners, who got a good glimpse of their ultimate target market as early as the opportunity, are now deep into the hundreds of tactical details required for launch. The critical step—if a company takes it—is the market test, the first time the marketing program and the product dance together. This step is pure dress rehearsal, and managers hope any problems discovered are fixable between dress rehearsal and opening night.

If they aren't, the opening has to be delayed. Given the time pressures involved, managers have come up with many new ways to do reliable market tests quickly, to complement the familiar test market, which can be inordinately time-consuming and costly. We will review many market test techniques in Chapter 18.

Sooner or later (it is hoped), these preparation activities lead to a public announcement of the new product—advertising, sales calls, and so forth. The announcement is often called launch, meaning that launch takes place one day, or even at one hour. Dramatically, yes, but practically most firms today are gradually moving the new item into commerce over a period of at least several weeks—there are suppliers to bring on line, sales forces to be trained, distributors to be stocked and trained, and a large set of market support people to be educated (columnists, scientists, government people, and thousands more). These things cannot happen one day, nor can the secret be kept—details yes, but the emergence of a new item, no.

One thing that is often overlooked at this point is the activity of planning for launch management. Everyone knows that when space shuttles leave the launch pad in Florida, a plan of tracking has been carefully prepared. “Houston Control” runs it, seeking to spot every glitch that comes up during launch and hoping it was anticipated so that a solution is on board, ready to use. New products managers often do the same thing, sometimes formally but often very informally.

The launch phase is covered in Part 5, Chapters 16 through 20.

$ ^{3} $Edward U. Bond, III and Mark B. Houston, “Barriers to Matching New Technologies and Market Opportunities in Established Firms,” Journal of Product Innovation Management, 20(2), March 2003, pp. 120–135.

Evaluation Tasks Throughout the New Products Process

Figure 2.2 illustrates the evaluation tasks encountered in the new products process. As shown, different kinds of questions need to be asked after different phases. For example, once concepts are generated, each is subject to an initial review: Is it any good, and is it worth refining?

Figure 2.2 summary: A flowchart mapping New Product Process Phases to their corresponding Evaluation Tasks. The process moves linearly from opportunity identification and selection through concept generation, concept/project evaluation, development, and finally launch, with evaluation tasks such as initial review and full screen providing feedback loops back to earlier phases. This structure demonstrates how continuous evaluation informs and redirects the product development cycle to ensure project viability.

At the concept evaluation phase, careful screening is required, as concepts that pass this phase move on to development and begin incurring significant costs. In development, relevant questions are “Are we done yet?” and “If not, should we continue to try?” These questions are best answered through progress reports. Finally, at launch, the main questions concern whether the product should be launched, and later, how well it has done relative to expectation. We pick up discussion of Figure 2.2 later, in Chapter 8, when we go much more in depth into which evaluation techniques are the most useful at each point in the new products process.

You may have noticed by now that the new products process essentially turns an opportunity (the real start) into a profit flow (the real finish). It begins with something that is not a product (the opportunity) and ends up with another thing that is not a product (the profit). The product comes from a situation and turns into an end.

What we have, then, is an evolving product, or better, an evolving concept that, at the end, if it is successful, becomes a new product. Even a new product announcement just tells the world about a concept, hopefully a winner, but actually just in temporary form. Forces are standing by to see what revisions need to be made, even now, if it is off track.

This evolution is linked to the phases of the new products process (see Figure 2.3). Here are the phases in that process, using a new skim milk product as an example:

Figure 2.3 summary: A diagram plotting Clarity against Market value across five project phases, from Opportunity Identification to Launch. As a project progresses through the phases, it moves from an Opportunity concept toward a Successful concept, with clarity increasing as the concept evolves through stages such as Idea, Tested, Protocol, Prototype, and Pilot concepts. The takeaway is that advancing through the project development lifecycle systematically increases both the clarity of the concept and its projected market value.

The Evaluation Tasks in the New Products Process

Phase 1: Opportunity Identification

- Opportunity concept—a company skill or resource, or a customer problem. (Assume that skim milk drinkers tell us they don't like the watered look of their favorite beverage.)

FIGURE 2.3 The Evolution from Concept to New Product

Phase 2: Concept Generation

- Idea concept—the first appearance of an idea. ("Maybe we could change the color …")

• Stated concept—a form or a technology, plus a clear statement of benefit. (See Chapter 4.) (Our firm's patented method of breaking down protein globules might make the liquid more cloudy; emphasis on the might, at this time.)

Phase 3: Concept/Project Evaluation

- Tested concept—it has passed an end-user concept test; need is confirmed. (Consumers say they would very much like to have such a milk product, and the method of getting it sounds fine.)

• Fully screened concept—it passes the test of fit with the company's situation.

- Protocol concept—a product definition that includes the intended market user, the problem perceived, the benefits that a less watery skim milk would have to have, plus any mandatory features. (Our new product must taste as good or better than current skim milk, and it must yield exactly the same nutritional values.)

Phase 4: Development

- Prototype concept—a tentative physical product or system procedure, including features and benefits. (A small supply of a full-bodied skim milk, ready to consume, though not yet produced in quantity.)

- Batch concept—first full test-of-fit with manufacturing; it can be made. Specifications are written stating exactly what the product is to be, including features, characteristics, and standards. (Skim milk ingredients: Vitamin A source, fat, fiber, and so on.)

- Process concept—the full manufacturing process is complete.

- Pilot concept—a supply of the new product, produced in quantity from a pilot production line, enough for field testing with end users.

Phase 5: Launch

- Marketed concept—output of the scale-up process from pilot—milk product that is actually marketed, either for a market test or for full-scale launch.

- Successful concept (i.e., new product)—it meets the goals set for it at the start of the project. (New, Full Body Skim has achieved 24 percent of the market, is very profitable, and already competitors are negotiating licenses on our technology.)

The idea that a new product suddenly emerges from R&D—like a chicken from an egg—is simply incorrect. In fact, throughout this book we will be examining how analytical techniques are applied throughout the new product process, from early idea generation and concept evaluation, through screening, and on to positioning, market testing, and launch management.

Speeding the Product to Market

One of today's most discussed management goals in product development is accelerated product development (A.P.D), or speeding the product to market. Accelerating time to market offers many benefits to the firm. The product will be on the market for a longer period of time before becoming obsolete, it can attract customers early and possibly block competitors with similar products that hit the market at a later time, or it can help to build or support a firm's reputation. A firm that implements the strategic elements outlined in Chapter 1—the product innovation charter, the new products process, and portfolio management—has advantages in reducing cycle time. New products consultant Robert Cooper identifies five sure methods to accelerating time to market, some of which have been mentioned previously:

- A clear product innovation charter—doing the opportunity identification homework and having a clean product definition—leads to better product design specifications and less time lost due to “recycling” (returning to earlier phases in the process to fix errors).

- A third-generation new products process that permits overlapping phases or parallel processing results in more getting accomplished in a shorter span of time; streamlined evaluation tasks means that less time is wasted in evaluation.

- A portfolio management approach minimizes the chance that the firm's human and financial resources are spread too thinly over too many projects; better project selection focuses the firm's scarce resources and uses them more efficiently.

- A focus on quality at every phase complements the P.I.C; by following the adage “do it right the first time,” the firm will avoid unnecessary recycling.

- An empowered cross-functional team, including individuals from marketing, R&D, manufacturing, and other functional areas, that works on the project from the earliest phases, supports parallel processing and eliminates “over-the-wall” product development (for example, marketing or production do not even begin their participation until the product is out of technical product development).

Notice that the first three methods are the three strategic elements, while the last two (focus on quality and multifunctional product teams) are methods that help the firm to implement the strategic elements.

There is plenty of evidence that these techniques contribute greatly to increasing speed to market. Software development is often marked by intensive “crunch time” periods due to approaching deadlines, and many firms in this industry rely on small, cohesive cross-functional teams to meet time goals while at the same time not sacrificing quality. Parallel processing is typical in the car industry: A car's drive train may be 70 or 80 percent designed (but not 100 percent) before body design work is initiated. Then, an early prototype (but not the final car) may be built and ready for controlled test-driving. Some observers have noted that the use of parallel processing by the Japanese automakers was a big factor in their emergence on the world market. Figure 2.4 shows many techniques that have been advocated for shortening cycle times.

Note that the cycle time metric, that is, the way management measures speed to market (or, frequently, time to market), is often “getting the idea to the shipping dock faster.” This assumes that there has already been technical accomplishment—the R of R&D has been concluded successfully. But from the point of view of technical development, speed to market success means not just time to the shipping dock, but also postshipping technical speed: For example, are corporate services (such as legal and environmental) in place? Also, if one uses the metric of

$ ^{4} $Robert G. Cooper, Winning at New Products: Accelerating the Process from Idea to Launch, 2nd ed. (Reading, MA: Addison-Wesley, 1993), p. 210.

$ ^{5} $B. J. Zirger and Janet L. Hartley, “The Effect of Acceleration Techniques on Product Development Time,” IEEE Transactions on Engineering Management, May 1996, pp. 143–152, look at cross-functional teams in electronics firms; and Alfredo M. Choperena, “Fast Cycle Time: Driver of Innovation and Quality,” Research-Technology Management, May–June 1996, pp. 36–40, examines the development of an immunoassay diagnostic system. Both found evidence that teams drive speed to market without sacrificing quality.

$ ^{6} $K. B. Clark and T. Fujimoto, Product Development Performance: Strategy, Organization, and Management in the World Auto Industry (Boston, MA: Harvard Business School Press, 1991).

Figure 2.4 Techniques for Attaining Speed in a New Product Project

Organization Phase

1. Use dedicated cross-functional teams.

2. Use small groups and other techniques to minimize bureaucracy.

3. Empower a team, motivate it through incentives and rewards, and protect it.

4. Destroy turf and territory.

5. Make sure the supporting departments are ready when called on.

6. Develop effective team leadership.

7. Encourage organizational learning; transfer knowledge from one project to the next.

Intensify Resource Commitments

1. Integrate vendors; reduce numbers as necessary.

2. Integrate other technology resources.

3. Integrate resellers; reduce numbers as necessary.

4. Get users involved early; capture the Voice of the Customer.

5. Use simultaneous or concurrent engineering.

6. Get suppliers involved through alliances, ventures, etc; develop long-term relations with them.

Design for Speed

1. Computer-aided design and other forms of rapid prototyping.

2. Design-aided manufacturing, reduce number of parts, consider the manufacturing process.

3. Use common components across families.

4. Make the product easy to test.

5. Design in the qualities that lead to fast trial, including relative advantage.

6. Use effective design practices; minimize costly design changes late in the new products process.

Prepare for Rapid Manufacturing

1. Simplify documentation.

2. Use standardized process plans.

3. Use computer-aided manufacturing.

4. Go to just-in-time delivery of materials and components (flexible manufacturing).

5. Integrate product use testing, and start it early.

Prepare for Rapid Marketing

1. Use rollouts in place of test markets.

2. Seed the firm's reputation ahead of marketing.

3. Spend what it takes to get immediate market awareness.

4. Make trial purchasing as easy as possible.

5. Get customer service capability in place ahead of need, and test it. “time to success” rather than “time to the shipping dock,” marketing has a much bigger role to play in accelerating cycle time. Marketing can strive to accelerate premarket speed (i.e., pretesting the marketing plan more quickly, or getting up to speed on field coverage through alliance formation), and also postannouncement speed (i.e., speeding up coupon redemption, or getting the sales reps into the field more quickly).

We are now also hearing about the value of being first to mindshare rather than being first to market. The firm with mindshare in a given product category is the one that the target market associates with the product category and that is seen as the standard for competitors to match (such as Intel microprocessors or Hewlett-Packard laser printers). Firms that strive for mindshare think not about the speed of an individual product's development and launch, but rather about creating a dominant position in the mind of the customer.

Finally, the role of top management in speeding products to market cannot be ignored. It is not enough for top management simply to say "Cycle times are to be cut by 50 percent, effective now!" Employees will no doubt interpret such blanket statements as a thinly disguised command to work twice as hard. Real resources need to be committed to a cycle time reduction program. An expert in cycle time reduction, Preston Smith, reports that many firms expect the process to be quick and easy.

Executives sometimes ask for a one-or two-day training program in cycle-time reduction, believing that to be adequate training. The idea is not to skip critical steps in the new products process—the goal is to figure out how to get through the process faster without sacrificing quality. In the early 1990s, Chrysler spent over 1 billion on a development center designed to allow colocation of its project teams, while at the same time investing heavily in new C-A-D systems, team training, and supplier development.

Senior management will also know the value of strategic alliances to obtain technical and marketing resources and assistance. Alliances can be upstream to vendors, downstream to resellers and customers, and even sideways to competitors. Apple, for example, turned to Sony for assistance in speeding up the development of the PowerBook notebook.

Sources: Compiled from many sources, but some particularly useful articles on the subject are: Edward F. McDonough III and Gloria Barczak, "Speeding Up New Product Development: The Effects of Leadership Style and Source of Technology," Journal of Product Innovation Management, 8(3), September 1991, pp. 203–211; Murray R. Millson, S. P. Raj, and David Wilemon, "A Survey of Major Approaches for Accelerating New Product Development," Journal of Product Innovation Management, 9(2), March 1992, pp. 53–69; Ed. J. Nijssen, Arthur R. L. Arbouw, and Harry F. Commandeur, "Accelerating NPD: A Preliminary Empirical Test of a Hierarchy of Implementation," Journal of Product Innovation Management, 12(2), March 1995, pp. 99–109; Ashok K. Gupta and William E. Souder, "Key Drivers of Reduced Cycle Time," Research-Technology Management, 41(4), July-August 1998, pp. 38–43; J. Daniel Sherman, William E. Souder, and Svenn A. Jenssen, "Differential Effects of the Primary Forms of Cross-Functional Integration on Product Development Cycle Time," Journal of Product Innovation Management, 17(4), July 2000, pp. 257–267; Morgan Swink, "Product Development – Faster, On-Time," Research-Technology Management, 45(4), July-August 2002, pp. 50–58.

Risks and Guidelines in Speeding to Market

There are plenty of advantages to speeding to market, not the least of which is that the product that is launched early is on the market for a longer period of time before becoming obsolete. A launch delay of, say, six months means six months less to earn profits and may give a competitor a chance to be first to market and establish a positive reputation.

Nevertheless, there are lots of costs involved in speed, costs that are not evident and which can sometimes be disastrous. A firm facing increased competitive intensity, rapid technological change, and fast-changing market demographics may be tempted to concentrate on only easy, incremental product projects, or to cut critical steps in the new products process in order to get cycle time down. Cutting corners in technical product development may result in quality sacrifices, resulting in annoyed customers and distributors. By rushing the early steps, the firm may decide late in the process that the product quality is inadequate, which delays the launch, further infuriates dealers, and encourages customers to drift to the competition.

Alternatively, rushing through the marketing ramp-up may result in inadequate attention to key marketing tasks in readying the product for launch. In these cases, the firm wins the speed-to-market battle but may lose the war.

The temptation to go too fast must be resisted, so that the firm does not mishandle a new-to-the-world opportunity, miss out on key customer information, or develop a technologically inferior product. A better way to cope when facing a high-turbulence environment is to keep product development as flexible as possible: Do not freeze the product concept until the last possible moment, but allow later phases in the new products process to run concurrently with concept development.

Another related concern is that accelerating time to market might result in bringing the product out too soon, while it still has bugs. In some situations, where there are high opportunity costs and relatively low development risks (such as with a new personal computer), it would be better to speed up cycle time. When Boeing develops and launches a new aircraft, however, there are relatively low opportunity costs (less direct competitors) but much higher development risks. In this case, getting the product “100 percent right” is the more appropriate goal. Another risk of focusing exclusively on speed to market is that management might be tempted to concentrate on quick, close-to-home innovations at the expense of really new products, thus putting new product development efforts out of strategic balance.

7Denis Lambert and Stanley F. Slater, "First, Fast, and On-Time: The Path to Success. Or Is It?" Journal of Product Innovation Management, 16(5), September 1999, pp. 427–438.

$ ^{8} $Preston G. Smith, “From Experience: Reaping Benefit from Speed to Market,” Journal of Product Innovation Management, 16(3), May 1999, pp. 222–230.

$ ^{9} $For the Apple example, see Douglas W. LaBahn, Abdul Ali, and Robert Krapfel, “New Product Development Cycle Time: The Influence of Project and Process Functions in Small Manufacturing Companies,” Journal of Business Research, June 1996, pp. 179–188.

$ ^{10} $Christer Karlsson and Pär Ahlström, “Technological Level and Product Development Cycle Time,” Journal of Product Innovation Management, 16(4), July 1999, pp. 352–362; R. G. Cooper and S. J. Edgett, “The Dark Side of Time and Time Metrics in Product Innovation,” Visions, April–May 2002, pp. 14–16; see also C. Merle Crawford, “The Hidden Cost of Accelerated Product Development,” Journal of Product Innovation Management, 9(3), September 1992, pp. 188–199; and Abdul Ali, Robert Krapfel, Jr., and Douglas LaBahn, “Product Innovativeness and Entry Strategy: Impact on Cycle Time and Break-Even Time,” Journal of Product Innovation Management, 12(1), January 1995, pp. 54–69. $ ^{11} $Marco Iansiti, “Shooting the Rapids: Managing Product Development in Turbulent Environments,” California Management Review, Fall 1995, pp. 37–58. Roger J. Calantone, Jeffrey B. Schmidt, and C. Anthony Di Benedetto, “New Product Activities and Performance: The Moderating Role of Environmental Hostility,” Journal of Product Innovation Management, 14(3), May 1997, pp. 179–189, looked specifically at high-hostility environments. $ ^{12} $E. G. Krubasik, “Customize Your Product Development,” Harvard Business Review, 66, November–December 1988, pp. 46–52.

$ ^{13} $C. Merle Crawford, op. cit.