challenges in fuzzy front-end of new product development
TRANSCRIPT
Halmstad University
School of Business and Engineering Strategic Management and Leadership
Technical Project and Business Management
Master of Science Degree
Challenges in fuzzy front-end of new product development
within medium-sized enterprises
A case study on Swedish manufacturing firms
Dissertation in TPA, 15 ECTS
1st June 2010
Authors:
Agnesa Korityak 850809 - 5166
Yue Cao 871125 - T143
Supervisor: Henrik Florén
Examiner: Bernd Hofmaier
Challenges in fuzzy front-end of new product development within medium-sized enterprises
ii
ACKNOWLEDGEMENT
In writing this dissertation, we have received support and encouragement from our
supervisor, Henrik Florén and we want to particularly thank him. He helped us
greatly in overcoming the challenges that occurred during this process and gave
us valuable suggestions and advices.
We also want to thank to Joakim Tell, our colleagues and other teachers who
provided us valuable feedback and comments in our seminars, helping us to make
this process and its related decisions easier.
We appreciate the help received from the personnel from school who helped us in
contacting the companies that are subject of our research.
The three respondents from the companies in Halmstad that took part in this
research were very open and cooperative with us, making the process of collecting
the field data very interesting.
Our families have been of great support, emotionally and materially, during the
whole master program and, especially, during the period we were focusing on
writing this dissertation.
Halmstad, 2010
Agnesa Korityak
Yue Cao
Challenges in fuzzy front-end of new product development within medium-sized enterprises
iii
ABSTRACT
The business environment is changing rapidly, becoming very competitive and challenging for
all firms, and particularly for small and medium enterprises (SMEs). As innovation and new
product development represent valuable sources for SMEs’ future sustainability and
development, making these processes more effective is essential. Previous literature, with the
focus on large firms, underlined the importance of efficiently managing the early period of new
product development (NPD), as this can reduce the product’s time to market and increase its
performance. For this reason, contributing to a developed understanding of the challenges of
medium-sized firms in managing this phase, the fuzzy front-end (FFE) of NPD, is the aim of this
study.
The theoretical framework of this study combines prior theories that relate to the difficulties,
shortcomings, challenges that SMEs meet during the whole NPD process, including FFE, and
theories that resulted from research on FFE in large firms. The structure is based on four
elements referring to managing the idea generation process, new product development team,
evaluation of product concept feasibility, and the organization of FFE.
A qualitative strategy and a research design with two case studies on high-tech, medium-sized
manufacturing firms were used in reaching the purpose of this study. This methodology choice
reflects the explorative purpose of this research. The empirical data are mainly primary data,
collected during three interviews with development managers and a product developer,
completed as well with secondary data like general company information, collected from
companies’ websites.
The analysis of empirical findings revealed some relevant conclusions, which can bring value to
the research area, and also to the practice. Our findings show that lack of communication with
customers during the whole FFE phase, collecting limited or inaccurate information to be
processed during this phase, finding the right formalization degree of FFE activities, determining
the complexity of the product concept, and assessing external technology and expertise, represent
the main challenges faced by medium-sized firms in the FFE of NPD.
The study’s practical relevance consists in the advices and solutions suggested to managers for
overcoming the challenges of the FFE phase and improving their results in the development
projects. The theoretical implications reflect the importance of organizational size variable in
association with the challenges of FFE.
The sample of only two cases and the quality of the empirical data collected from two high-tech
Swedish manufacturing firms which have a large focus on innovation are the main limitations of
this study, as these medium-sized firms have gained some experience to face the specific
challenges of FFE of NPD and the data they provide may be influenced by this aspect.
Keywords: fuzzy front-end, new product development, small and medium-sized enterprises,
innovation
Challenges in fuzzy front-end of new product development within medium-sized enterprises
iv
Table of Contents
1. INTRODUCTION .................................................................................................... 1
1.1 Background ........................................................................................................1
1.2 Problem discussion ............................................................................................2
1.3 Research purpose ...............................................................................................4
2. THEORETICAL FRAME OF REFERENCES .................................................... 5
2.1 Managing the idea generation process ...............................................................5
2.2 New product development team ........................................................................7
2.3 Evaluation of concept feasibility .......................................................................8
2.4 Organizing the FFE phase ..................................................................................9
2.5 Challenges of FFE within SMEs......................................................................11
3. METHODOLOGY ................................................................................................. 13
3.1 Research approach ...........................................................................................13
3.2 Research strategy .............................................................................................14
3.3 Research design ...............................................................................................14
3.4 Data collection .................................................................................................15
3.5 Data analysis ....................................................................................................15
3.6 Research validity and reliability ......................................................................16
4. EMPIRICAL FINDINGS ...................................................................................... 18
4.1 Company A ......................................................................................................18
4.1.1 General company information .....................................................................18
4.1.2 Managing the idea generation process .........................................................18
4.1.3 New product development team ..................................................................20
4.1.4 Evaluation of concept feasibility .................................................................20
4.1.5 Organizing the FFE phase ............................................................................21
4.2 Company B ......................................................................................................22
4.2.1 General company information .....................................................................22
4.2.2 Managing the idea generation process .........................................................22
4.2.3 New product development team ..................................................................23
4.2.4 Evaluation of concept feasibility .................................................................24
4.2.5 Organizing the FFE phase ............................................................................24
5. ANALYSIS ............................................................................................................. 26
5.1 External linkages ..............................................................................................26
5.2 Formalization of FFE phase .............................................................................28
5.3 Information collection and processing .............................................................29
5.4 Construction of product concept ......................................................................30
5.5 Challenges of medium firms in FFE ................................................................33
6. CONCLUSIONS AND DISCUSSION ................................................................. 35
6.1 Conclusions ......................................................................................................35
6.2 Practical implications .......................................................................................36
6.3 Theoretical implications...................................................................................36
6.4 Shortcomings of the study ...............................................................................37
6.5 Further research ...............................................................................................38
LIST OF REFERENCES .......................................................................................... 39
APPENDIX 1 .............................................................................................................. 44
Challenges in fuzzy front-end of new product development within medium-sized enterprises
v
Table of Figures and Tables
Figure nr.1. The predevelopment activities…………………………….………….………...2
Figure nr.2. Disposition of theoretical frame of reference…………………………………...5
Table nr.1. The expected main challenges in FFE of NPD within SMEs in rapport to success
factors of FFE ……………………………………………………………………………...12
Figure nr. 3. Analysis process for pre-structured case……………………………………...16
Figure nr. 4. Organization of Product Development Department…………………………..23
Table nr.2. Comparison summary of the analysis…………………………………………..31
Figure nr.5. Challenges of medium-sized firms related to FFE of NPD…………………...32
Challenges in fuzzy front-end of new product development within medium-sized enterprises
1
1. INTRODUCTION
1.1 Background
Innovation capability and new product development represent in these times very important tools
for firms to survive and grow in a highly competitive environment. In conditions of constant
market and technical changes, new product development allows firms to successfully adapt,
renew and maintain their competitiveness (Brown & Eisenhardt, 1995). The capacity to innovate
and its pace depend on the intensity of industry competition, technological change, strategic
orientation, organizational resources, and directly affect the costs and success of a newly
developed product (Kessler & Chakrabarti, 1996). Nevertheless, developing new products can
often be a restrictive matter, as the cost of production and marketing can be high and the positive
results are not predictable or certain (Cannon, 2004).
Rothwell (1994) considers that innovation and development activities became, especially for
small manufacturing companies, the foundation for their resistance against the rapidly changing
environment, the shortening of product life cycle and the increasing industrial change and
complexity. Strategic integration of their innovative capabilities and the development of
collaborative networks are often the way these difficulties are overcome and through which
small firms acquire the essential resources and knowledge for innovation (Rothwell, 1994;
Dickson & Hadjimanolis, 1998).
Companies often perceive innovation as being their originator of good profitability and
performance. In order to advance their effectiveness in innovation, companies frequently create
synergies between their product, process and market strategies of innovation, and complement
them with suitable management styles (Otero-Neira, Lindman & Fernandez, 2009). Moreover, an
internal and external orientation towards innovation and a combination of learning capabilities,
customer knowledge and technology, can lead companies to higher performance rates through
innovation. (Salavou, 2005).
Cooper and Kleinschmidt (1987), in their study regarding the critical success factors for new
product development processes, report that product advantage, internal organization,
predevelopment planning and market characteristics are the most important contributors. They
emphasize the role of pre-development activities for NPD, and also conclude that less
competitive, large and growing markets, determine in great measure the success of a new or
developed product.
The manner and effectiveness of executing the pre-development activities and the capability of
defining a project and a product before the actual development part is vital for companies to
distinguish themselves from their competitors (Cooper & Kleinschmidt, 1988). As argued by
Kim and Wilemon (2002), the efficient management of pre-development activities can lead to a
competitive advantage, or may constitute a core competence for those companies which
understand the importance of this early phase in the success of NPD.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
2
1.2 Problem discussion
The front-end stage of innovation, often referred to as fuzzy front-end, represents the period
which lasts from the moment when an opportunity is first seen as being suitable for a new
product development and the actual start of the development (Kim & Wilemon, 1999). It is the
stage consisting of those informal activities performed before the well-defined and structured
process of product development (Koen et al., 2001). FFE can be, as well, divided into sub-phases
or parts, as follows: idea generation, also called “pre-phase zero”, evaluation of the environment
(technology, market, level of competition) as “phase zero”, and validation of a new development
project as “phase one” (Khurana and Rosenthal, 1998). Along the same lines, Herstatt, Verworn
and Nagahira (2004) see the main activities or parts of FFE as the first two phases of the process
of product development: (I) idea generation and assessment, (II) concept development and
project. In an earlier study, Cooper (1990) describes pre-development activities in three stages,
as represented in the next figure: idea generation, which implies finding a product idea;
preliminary assessment, which deals with defining product’s advantages, design or position, and
concept definition, which represents the stage when potential market success or actual
development of the new product is analyzed.
.
Figure nr.1. The predevelopment activities (Cooper, 1990)
There are several previous studies underlying the idea that front-end period is dominated by
uncertainty, unclear vision, lack of proper organization (e.g. Khurana & Rosenthal, 1998;
Herstatt et al., 2004; Frishammar, Florén & Wincent, 2009). In such conditions of uncertainty,
lack of structure and formalization, effectively organizing the FFE requires firms to gain more
systematical and applied knowledge about the FFE in order to face the challenges of this phase,
and create a positive system for rapid results by using different types of leaders and project team
structures (Kim & Wilemon, 2002). Furthermore, to construct and create formality in the FFE, so
that effectiveness and stability of following product development is improved, this phase needs
to be largely recognized in the firm, be unequivocal, with proper decision-making processes and
with specific measurement of performance (Khurana & Rosenthal, 1997). However, some
studies (e.g. Freel, 2000; Kaminski et al., 2008) suggest that a high degree of formalization
during the innovation process proves to be more efficient for large firms, whereas for smaller or
medium firms, this has not been yet verified and researched.
Idea
generation
Preliminary
assessment
Concept
definition
Challenges in fuzzy front-end of new product development within medium-sized enterprises
3
Koen et al. (2001) emphasize in their study the FFE’s functionality and proficiency in several
large companies, analyzing elements like opportunity identification and analysis, idea genesis
and selection, and concept and technology development, the results showing that mainly highly
innovative companies are more successful in organizing the FFE. In addition, Reinertsen (1994)
supports that the fuzzy front-end period can be a valuable tool for firms in shortening their
product’s time to market and, thus, improve their performance. The author argues that a better
management of the front-end phase would reduce the development cycle time and, implicitly the
costs with product development. Moreover, Verganti (1999) claims that FFE needs to anticipate
and take into consideration aspects of future functionality, manufacturability or product design,
so that following development stages will not necessitate engineering changes implying new
costs and more time.
The main activities and actions which ought to be executed in the FFE period are represented by
idea generation, market and technology analysis, the construction of a product concept, product
strategy, feasibility testing, and project planning (Khurana & Rosenthal, 1998). High
performance of FFE, as analyzed by Kim and Wilemon (2002) who developed a framework
containing the main forces influencing the predevelopment activities, is determined by factors
like project team, FFE idea, and relations between the project team, senior management,
functional groups and external groups, all being extremely significant in providing a viable
concept of product.
Even though multi-functional teams in large firms are confirmed as being useful for FFE’s
performance and for diminishing the uncertainty (Verganti, 1997), as one of the earlier papers
describes, still one of the difficulties and challenges of the FFE of NPD consists of the incapacity
to create solid connections between the marketing and R&D functions, and to create a thorough
product concept (Kohn, 2006).
As becomes evident when studying the previous literature on NPD, most of the empirical
research on NPD and, specifically, on FFE, has been made in large companies or in different
sectors and industries without referring to the size of the company. The process of NPD in small
and medium-sized enterprises (SMEs)1 has, however, received some attention in earlier research
and the findings showed that the lack of skilled personnel, the low level of resources allocated
(Mohamad & Muhamad, 2000), the limited competencies of management and poor contact to
external information (De Toni & Nassimbeni, 2003) represent important barriers towards
innovation in small and medium firms. Furthermore, the association of the pre-development
period, the firm size and the success of NPD, has been made in some studies (e.g. Abeele &
Christaens, 1986; Murphy & Kumar, 1996; Ledwith, 2000), providing more knowledge on NPD
in SMEs. More precisely, the first two studies (Abeele & Christaens, 1986; Murphy & Kumar,
1996) acknowledged that small firms have fewer R&D projects and develop fewer new products
1 Small and medium-sized enterprises (SMEs): in the industry area, SMEs are characterized and
defined by European Union (2003) as being the organizations that fulfill the following characteristics: less
than 250 workers; a maximum annual turnover of 50 million euro; a maximum of 43 million euro annual
balance-sheet total. Further division of SMEs within this classification comprises micro-companies (0 to
9 employees), small companies (10 to 49 employees) and medium companies (50 to 249 employees).
Challenges in fuzzy front-end of new product development within medium-sized enterprises
4
than the large firms, but show higher levels of market success than the large firms. Also, Ledwith
(2000) found that small firms register higher level of outsourcing and involvement with external
organizations in developing new products than the larger firms.
As the literature presents, organizing the FFE activities depends in large degree on the resources
and capabilities that the company has, thus, a differentiation between small, medium and large
firms may occur in terms of the challenges they encounter during FFE phase. Therefore, this
study, in connection to its main purpose, will try to find the possible distinctions in FFE aspects,
using the size factor as the basis for comparison.
A number of studies have analyzed the problems and challenges in the FFE of product
development (Khurana & Rosenthal, 1998; Zhang & Doll, 2001; Herstatt et al., 2004), but there
is still a lack of knowledge on what happens specifically in SMEs in this early phase of product
innovation. Whether similar problems may occur also for SMEs needs to be researched, and this
study will try to clear up this uncertainty, along with providing new information about specific
challenges in FFE of SMEs.
This is the reason why this study, sustained with empirical evidence, will try to provide new
valuable information on FFE in SMEs and, more precisely, will try to underline the main
difficulties that are faced during this phase. Showing the gap in theory and prior research on the
FFE with regard to the main challenges, incapacities and difficulties facing SMEs during the
fuzzy front-end of NPD, the research question of this paper is formulated as follows:
What are the challenges faced by medium-sized enterprises in the fuzzy front-end of new product
development?
1.3 Research purpose
The purpose of this paper is to explore the challenges encountered by medium-sized enterprises
in the fuzzy front-end of product development, as knowing these, can be very helpful for these
types of companies in improving their future processes of new product development. More
knowledge in the area of fuzzy front-end, particularly in the case of medium firms can lead to a
better management of this stage and, in the end, to increased success of development projects
and competitiveness of the firm.
The study is aiming to offer some specific advice for managers within medium-sized firms of
how to overcome and deal with the challenges occurring within fuzzy front-end phase.
Furthermore, this study’s objective is to see the relevance of the organizational size variable in
relation to challenges within the fuzzy front-end of new product development.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
5
2. THEORETICAL FRAME OF REFERENCES
The model that is presented below is a construction of four elements that follows to comprise the
main challenges within SMEs during FFE, by delimitating four sources of possible challenges. In
order to encompass a large variety of possible challenges within FFE, the success factors of FFE,
as presented and reviewed by Frishammar and Florén (2008) were considered a relevant point of
departure in separating related challenges in different constructions. Previous models of Cooper
(1990) and Kim and Wilemon (2002), mentioned in the introduction part of the paper, the former
describing the sub-phases of FFE and the latter the influencing factors of FFE, have contributed
to a better understanding of the subject and in creating these constructions. The model aims to be
the basis for a clear theoretical framework and to help structuring the reviewed literature, directly
or indirectly connected to the FFE area within SMEs.
Figure nr.2. Disposition of theoretical frame of reference
.
2.1 Managing the idea generation process
Frishammar and Florén (2008) reviewed the previous literature on FFE and found several
success factors for this part of product development. Their paper takes into consideration a large
number of studies on the area, making a comprehensive scanning of the relevant issues of this
Challenges in
FFE within SMEs
Managing the idea
generation process
New product
development team
Organizing the FFE
phase
Evaluation of concept
feasibility
Challenges in fuzzy front-end of new product development within medium-sized enterprises
6
phase. Some of the success factors are related to idea generation process and the most important
ones are idea refinement, adequate idea screening and early customer involvement. Related to
these factors, some prior research for SMEs has been made, as further presented.
SMEs, and especially those in manufacturing areas, are currently facing multiple problems in
new product development processes as the resources are limited, the life cycle of products is
shortening and poor knowledge in NPD makes them more exposed to related threats (Woy,
2007). As highlighted by Hoffman, Parejo, Bessant and Perren (1998) in their review, one of the
main solutions for SMEs facing these problems is to create external linkages and networks with
firms from their supply chain, with institutions, and with research centers that can contribute
with a diversity of knowledge and complementary technological capabilities. Considering that
the level of allocated resources is high, the difficulty in this situation, as argued by the authors, is
to manage properly these linkages.
One proposed method for effectively generating new product ideas is to complete a business
environmental scan that includes information about market trends and needs (Kohn, 2005). The
focus in this screening, according to Kohn (2005), should be not just on collecting the data and
analyzing them, but more on interpreting them according to the company’s strategy and specific
competences. The author argues that, by using this method in evaluating new product ideas,
companies are putting more emphasis on identifying new opportunities rather than on reducing
the uncertainty specific for the FFE of NPD. Nonetheless, unlike large companies, SMEs often
lack complex market research to support their decisions and investment in new product ideas.
This is why the personal, in-depth knowledge of the product or even intuition, are frequently the
basis for starting a new development project (Trott, 2001; Lindman, 2002). From this point of
view, previous research shows that SMEs encounter difficulties in supporting their new ideas on
complex market research and on broad scanning of their business environment (Lindman, 2002).
It remains to be further explored what sort of methods are the basis for SMEs in scrutinizing the
environment for new ideas.
Ozer (2007) sees as one of the possible challenges for many companies, including SMEs, when
screening for a new product idea, the difficulty to predict customers’ behavior intentions and
market acceptance. Moreover, another issue stressed by Mosey, Clare and Woodcock (2002) is
related to the high degree of uncertainty in quantifying potential needs of customers. The authors
add that many small manufacturing firms, part of the category of “incremental improvers”, as
opposed to “radical innovators”, often neglect valuable external information or discuss it just
informally. Their findings showed that this information offered by customers about functionality
of a new product leads to a productive, multi-disciplined decision making when choosing the
development strategy.
Customer involvement, as discovered by Bala Subrahmanya (2005) in a comparative study, is
more encountered in the case of incremental innovations, when small improvements of the
product are suggested. Nevertheless, as the author presents, self-efforts of SMEs’ managers are
to a large extent, responsible for the technological innovations, external factors comprising
expressed customers’ needs are as well very motivating in starting incremental projects. The
long-term strategic partnerships of SMEs with their customers follow to generate innovative
projects by identifying trends or product customization (Kaminski, de Oliveira & Lopes, 2008).
In addition, those companies which are able to integrate and act on customers’ needs in NPD,
Challenges in fuzzy front-end of new product development within medium-sized enterprises
7
will develop skills in responding efficiently to growing demands (Souder, Buisson & Garrett,
1997). These findings suggest that SMEs need to communicate well with their customers and
incorporate their ideas, starting with the product concept developed during FFE.
Other findings related to product innovation in small firms and influencing the FFE, as illustrated
by White et al. (1988), can be summated as: ideas can be generated both internally and externally,
with the help of customers; within firms there is a diversity of idea originators, from managers to
workers; the uncertainty of customer demand can be an even a greater impediment than the lack
of financial resources; the dependence on local suppliers does not necessarily affect the process
of innovation, since external information from them and collaboration lead to successful projects.
In managing the idea generation phase, as presented by the prior literature, SMEs are expected to
face challenges in supporting the new product ideas with complex market research, in involving
external partners or keeping good contact with the customers. The relation and good
communication with customers are considered as being very important during FFE, as the
following customer demand for the new developed product may be uncertain.
2.2 New product development team
Some of the success factors of FFE related to the ability of the human factor to manage and
effectively coordinate the FFE of NPD, are highlighted by Frishamar and Florén (2008) as the
presence of idea visionaries or product champions, senior management involvement and cross-
functional integration, which underlines the importance of implicating more functions or
departments of the company in this process.
In his comparison of the success determinants of NPD between large firms and small firms,
Ledwith (2000) argues that organizational factors of small firms, including here project team
characteristics, project leadership, cross-functionality and top management involvement in NPD
process are not considered such important success factors since they regularly are the basis for
any small firm’s activity. Instead, the author underlines the fact that small firms, unlike the large
ones, due to their limited financial and technical resources, focus more on managing well their
external relations, consisting in outsourcing, collaborative R&D, networks. Implicitly, during
FFE these external relations would be advantageous, since a multi-functional group would
define more clearly a new product idea and would assess more easily the technology needed.
Moreover, the skills and competences of the owner manager in development projects are quite
important (Ledwith, 2000).
The above arguments reflect that, in the FFE phase, SMEs most often do not face challenges like
lack of cross-functional integration, top management involvement or presence of idea visionaries,
but most likely challenges occur in getting external support for a new product project. This
support may consist in prompt feedback to an idea from product beneficiary or from
components’ suppliers, or in putting at SMEs’ disposal the resources necessary for effectively
defining a new product, for creating a solid new product concept. However, as Nassimbeni (2001)
argues, it may often happen in SMEs that external opportunities are mistreated or ignored and
individualistic positions affect negatively the NPD process, starting with its early times.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
8
SMEs are frequently collaborating and creating interface management techniques with their
suppliers in product development, since they have limited resources (Koufteros, Cheng & Lai,
2007; Hartley, Zirger & Kamath, 1997). Koufteros et al. (2007) state that the integration of
SMEs’ development capabilities is necessary for a higher quality of product innovation. The
authors found that the selection of the suppliers, based on their product development potential,
affects positively the “gray-box” integration, expressed in the common involvement of the
suppliers’ and customers’ engineers in product development. In some cases, this collaboration
between buyer-supplier does not create positive results. The development project, as explained
by Hartley et al. (1997), can frequently be delayed due to suppliers’ faults. Even though the
communication is good and continuous, and the supplier involvement and its contribution to
design is considered even from the FFE of NPD, there is no clear evidence that time can be
saved by applying these management techniques (Hartley et al., 1997). Since actions like idea
selection, evaluation of technology necessary and concept feasibility need joint participation
within the FFE phase, lack of suppliers’ active and constructive involvement can lead to
extension of the FFE period and it can affect FFE’s outcomes.
In terms of the expected challenges during FFE of NPD related to the development team, the
previous literature underlines the importance of SMEs’ capacity to manage efficiently the
external relations. Common development projects with external partners or integrating buyer-
supplier competences are relevant in increasing the FFE’s performance, but the NPD team’s
capability to coordinate these relations remains a challenge.
2.3 Evaluation of concept feasibility
In order to reach success, starting with FFE, firms initially need to evaluate their technology
efficiently and well define the new product concept before continuing with its development
(Cooper, 1988; Cooper and Kleinschmidt, 1987). All firms should take into account their
technical capacity before starting the development of a new product, they should evaluate
whether the manufacture is possible, the cost is affordable and whether they posses all the
necessary technology (Cooper, 1988). Nevertheless, small manufacturing firms are often in
shortage of professional, technical or research competences and, due to this, they use external
networks and informal linkages for technical input (Macpherson, 1991). Thus, as highlighted
previously, it is difficult to manage the FFE and make a preliminary assessment of the
technology necessary for the new product, since the in-house technology is not enough and
external input is required.
Although, compared to large firms, SMEs have difficulties in achieving a high market
performance by offering lower relative prices and reducing their cycle time of NPD, they can
shorten their products’ time to market by focusing on maintaining the quality through simple
technical innovations (Ali, Krapfel, & LaBahn, 1995). It can be challenging during FFE to
conceive a product concept that fulfils the quality requirements but still keeps the technical
content simple and uses only SMEs’ available technology.
Information processing and sharing, including information about competitors, market standards,
is, according to Bacon, Beckman, Mowey & Wilson (1994), extremely valuable for a project
Challenges in fuzzy front-end of new product development within medium-sized enterprises
9
development team. In the case of SMEs, many studies (see Macpherson & Wilson, 2003;
Kaminski et al., 2008) assert that, beside competitor awareness, the information from their value
chain and other institutional sources are relevant in effectively managing product development.
Still, they found that some SMEs are deficient in competencies and abilities to integrate and
assess properly this information. This can be considered as an important challenge to be
overcome, even from the front-end of NPD, since often competitors, suppliers, dealers or final
users are the ones who provide the best suggestions or new ideas for a new product. Lack of
processing and assessing these ideas within FFE can lead to failed projects, waste of resources
for developing a less need-addressed product.
During the FFE, product developers are responsible for defining a new product concept,
including its relative design. According to De Toni and Nassimbeni (2003), it is a challenge for
SMEs’ developers to capture a vision, all the marketing requirements and innovation sources in a
new product design. Consequently, it is even more problematic for them to take into
consideration all these aspects when defining a concept of a new product.
In Montoya-Weiss and Driscoll’s (2000) study in which processes and tools for technology
support in FFE are elaborated, it is established that, during concept development phase, the ideas
generated previously need to be separately evaluated, assessed, compared, completely
documented and finally transformed in thorough concepts. Also, they argue that, during this
phase, formal decisions should be taken that can be both flexible and tolerant of change. From a
technological perspective, flexibility of the product concept is recommended to be considered by
any company, not just by SMEs.
In defining the new product during FFE of NPD, SMEs can meet challenges in making the new
product concept flexible and with an appropriate technical content. Besides that, the product
concept needs to be the result of a thorough information processing and of a complete evaluation
of the necessary technology for its development.
2.4 Organizing the FFE phase
Very important aspects to be considered when organizing this phase are associated with the
alignment of NPD with the firm’s strategy, starting with FFE, and with putting an adequate
degree of formalization in the activities performed in this period (Khurana & Rosenthal, 1997;
1998). Thus, by organizing the FFE activities which precede the NPD process, companies set a
clear strategy for the new product, choose the most effective way, formal or informal, to identify
market opportunities, to generate ad screen ideas, to discuss and analyze them or to define the
new product. Khurana and Rosenthal (1997) propose that the alignment between NPD and
product strategy needs to be considered, even from the FFE period when the product concept.
The authors assert that all the decisions need to be taken according to company’s overall strategy
and not based on specific conditions of the development projects. SMEs’ strategies can, however,
be less complex or differently conceived on a long-term in comparison to large companies. As a
consequence, the alignment of the FFE idea with the overall strategy may be, in a smaller
measure, challenging for SMEs.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
10
The most important strategy, which directly affects the FFE phase within SMEs, concerns the
choice between open or closed innovation strategies (Lindman, 2002). By adopting an open
strategy, an SME uses not only in-house knowledge and resources for product development, but
remains flexible to any external collaboration which can improve the process. In contrast, the
closed strategy implies acquiring new knowledge only from own resources (ibid). Some
challenges of SMEs related to FFE when focusing on closed strategy, as found by Lindman
(2002), are that they miss in-depth market knowledge because they use just internal information
or from their distributors, instead of formal screening methods and advanced market research.
This deficit leads also to inability of positioning and defining specification for the product
concept according to customer preferences.
From the formalization point of view, the innovation process in SMEs is less structured and more
informal than in large firms, but this can, however, be an advantage since the decisions are taken
more rapidly (Freel, 2000). This would mean a reduced period of FFE and less time spent on the
process of evaluating generated ideas, on selecting the most viable ones and transforming them
in clear product concepts. A further description is provided in the literature review of Hoffman et
al. (1998) on SMEs’ innovation, in which it is stated that innovative capabilities are more likely
to be formally structured within larger SMEs and less organized in smaller SMEs where
development projects are conducted by few persons and not a department. More formality in the
development department of SMEs has proved to be very helpful for a better integration of the
NPD process with other partners and for an easier assessment of the market opportunities
(Kaminski et al., 2008).
Flint (2002) argues that ideation process can be more efficient if more formality, instead of
improvised decisions, is provided in the process of understanding customers’ current and future
needs. The author claims that many managers choose to develop wrong new product ideas
because they do not base their decisions on a more precise and organized process of idea
generation with customer focus. For this, creativity and scenario exercises, part of an integrative
process, should be employed for benefiting from customer intelligence. Thus, overall
organizational learning and market orientation of the firm actually improves the NPD process
and increases the chances for the developed product to be addressed for real market opportunities
(Flint, 2002). Organizational learning should be implicitly important, starting with the FFE phase
as, for generating valuable new product ideas, SMEs need to have insights of their customers’
expectations from them. Therefore, the challenge of uncertainty that the product idea and
concept are not addressed to customers’ preferences can be avoided.
Atuahene-Gima and Evangelista (2000) examine in their study the influence of marketing and
R&D departments on NPD performance, referring mainly to its idea generation stage. Their
results address also findings regarding the suitable degree of formalization. According to the
authors, the marketing function of a company, through its personnel, is more likely to influence
FFE results through informal networks rather than through formal procedures. From a product
development perspective, formalization gets in the way of marketing's positive influence but, for
R&D, it provides more benefits (Atuahene-Gima & Evangelista, 2000). Finding a balance in this
respect is often challenging, not only for large companies, but as well for SMEs.
To summarize, in organizing the FFE of NPD, SMEs can meet challenges in having an open and
flexible strategy towards external collaboration. Moreover, the FFE’s performance depends on
Challenges in fuzzy front-end of new product development within medium-sized enterprises
11
the level of structure, formalization that SMEs will use when taking decisions, when generating
and screening ideas or when doing market research.
2.5 Challenges of FFE within SMEs
In this part, the main challenges of FFE within SMEs that might be expected, from reading the
literature and presented in the previous sections of the theoretical frame of references, will be
outlined. The success factors presented in Frishammar and Florén’s (2008) paper were used as
departing points for looking into prior research evidence of problems, challenges met by SMEs
in the FFE of NPD. For each factor, some specific challenges were found. Thus, for each of the
four elements of the model presented graphically at the beginning of the chapter, some
challenges are recognized.
Main overall success factors
in FFE
Main expected specific challenges of FFE
within SMEs
Idea refinement
Adequate idea screening
Early customer involvement
Create external linkages and networks (Hoffman et al.,
1998)
Complete a business environmental scanning (Kohn,
2005)
Support of idea generation with complex market
research (Trott, 2001; Lindman, 2002)
Consideration of valuable external information, by not
discussing it just informally (Mosey et al, 2002)
Keeping good communication with the customers
(Souder et al., 1997)
Integration of customers’ needs in the product idea (Kaminski et al., 2008)
Uncertainty of customer demand (White et al., 1988)
Challenges in fuzzy front-end of new product development within medium-sized enterprises
12
Presence of idea visionaries
Top management involvement
Cross-functional integration
Managing external relations very well (Ledwith, 2000)
External opportunities are mishandled or ignored
(Nassimbeni, 2001)
“Gray-box” integration (Koufteros et al., 2007)
Applying management techniques that help integrate
buyer-supplier efforts (Hartley et al., 1997)
Preliminary technology
assessment
Information processing
Early and well defined product
definition
Assessment of in-house and external necessary
technology for the new product (Macpherson, 1991)
Processing information from the value chain and other
institutional sources (Macpherson & Wilson, 2003)
Fulfilling the quality requirements and keeping the
technical content simple in the product concept
definition (Ali et al., 1995)
Product concept flexibility (Montoya-Weiss &
Driscoll, 2000)
Alignment of NPD with firm
strategy
Adequate degree of formalization
Remaining flexible to any external collaboration,
adopting open strategy (Lindman, 2002)
Use of formal screening methods and advanced market
research (Lindman, 2002)
Taking formal decisions instead of improvised
decisions (Flint, 2002)
Organizing formally the process of idea generation
with customer focus (Flint, 2002)
Table nr.1.The expected main challenges in FFE of NPD within SMEs in rapport with the
success factors of FFE
It can be seen through listing the challenges from literature, it is expected that SMEs will
confront quite a number a challenges during the FFE of NPD. However, some of them may be
present more or less during FFE, as the literature attributed them to the whole NPD process and
just indirectly to FFE. The table makes more obvious that many problems and challenges are
related to degree of formality that SMEs adopt in facing FFE activities, to their flexibility in
managing external contribution, information, internal resources and competences.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
13
3. METHODOLOGY
3.1 Research approach
Qualitative research is considered to generate and develop new theories, whereas quantitative
research has the aim to verify and test previous theories (Bryman & Bell, 2007). In this paper,
the approach considered for research is abductive, a combination of the inductive and deductive
approach where empirical data are the basis for generating new theories, and previous theories
and literature serve as “a source of inspiration for the discovery of patterns that bring
understanding” (Alvesson & Sköldberg, 2009, p.4). Empirical facts and prior theories
complement and reinterpret each other while the research is carried out (ibid). The theories used
for the analysis of the empirical findings are structured around four themes which describe the
main problems and challenges of SMEs, analyzed in relation with the success factors of FFE
described in previous studies and grouped in Frishammar and Florén’s (2008) review. This
structure will simplify our analysis and find more easily the connection between categories.
However, we are not testing an existing theoretical model, but still we use previous studies to
enrich our knowledge on the field and to serve as support in our data collection and interview
guide’s construction. Thus, the deductive perspective of our abductive approach is reflected.
Nevertheless, the thesis studies a quite specific and narrow area, FFE within SMEs, and
empirical findings can provide us new knowledge about it. This knowledge can contribute to
generating new theories or a theoretical model and, from this point of view, our thesis’ approach
reveals its inductive side.
From the perspective of epistemological positions, qualitative studies are more related to
interpretivism and not to positivism which is the basis for quantitative research, as it employs the
same methods to test theories as in natural sciences (Bryman & Bell, 2007). In qualitative studies,
the researchers try with great attention to “capture data on the perceptions of local actors”
(Miles & Huberman, 1994, p.6). Our study aims to provide the perspectives of development
managers with regard to a period or phase preceding NPD process, which is often less structured,
chaotic, not delimited or without any formality. That is why an interpretivist approach allows us
to capture better the essential, interesting and subjective view of the participants about the
subject of this thesis. Furthermore, we can find ourselves in the position of generating new
theories, as the area of study still lacks knowledge and the empirical findings do not correspond
in large extent to existing data. Thus, the qualitative strategy could provide us the best results and
a deeper insight into what happens within SMEs, during the FFE.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
14
3.2 Research strategy
In this thesis, we will use the qualitative research strategy, since this strategy suits better with
studying more in-depth social phenomena and facilitates the gaining of more knowledge and
understanding of a particular subject (Bryman & Bell, 2007). The explorative and interactive
features of research methods are representative of the qualitative strategy (Alvesson & Sköldberg,
2009). Since this paper's research problem is about an area in which there is still lack of data,
theories and empirical evidence, we consider that the qualitative approach will serve more
effectively in reaching the goal of this thesis. As the fuzzy front-end remains a complex topic
and to be further explored by other researchers, we chose to examine it through this strategy
because our focus on the challenges specific for this sub-part of new product development within
SMEs can represent a quite provocative and difficult subject to be described by the respondents.
In order for them to be able to describe the actual process of FFE, there are necessary extra
explanations and face-to-face meetings. Moreover, given the limited access to SMEs, the short
period for research and the complexity of the topic, we consider that the qualitative strategy is
more in line with our thesis’s purpose.
In qualitative studies, as Bryman and Bell (2007) argue, the emphasis is on the context and
details of the social setting of the phenomena being studied. Moreover, the authors say that the
processes and patterns over time of social events are important for qualitative researchers. This
reasoning is reinforced also by Miles and Huberman (1994) who assert that qualitative studies
capture better the context of the research. As this paper studies a phenomenon which is often an
informal process and differently perceived by companies, the contextual elements are very
important since they can provide us a deeper understanding and a clearer explanation of the
front-end activities. The respondents of this study are objective informants of the way this phase
is organized within their company.
3.3 Research design
For this thesis, we selected a research design consisting in two case studies because this choice
allows us to compare or find similarities and distinctions between the cases, according to the
variables expressed in the theoretical part and increase the generality of the study’s results
(Bryman & Bell, 2007). The comparability across cases is valuable in effectively analyzing the
collected data and in achieving warranted results and conclusions, in conditions of limited time
for research (Miles & Huberman, 1994). Using two cases only, can be considered by some to be
a limitation of our study. However, we think that comparison is possible between cases and
valuable conclusions can be drawn, as the sampling procedures were thought through.
For the sampling part in multiple-case studies, the conceptual framework and the research
question are the most important delimitation criteria and parameters in the sampling choices
(Miles & Huberman, 1994). Theoretical sampling in qualitative studies is made either through
minimizing or through maximizing the differences between cases and the technique used to
generate new theories is the comparison of data (Alvesson & Sköldberg, 2009). Our study has a
specific research question that limited from the start the sampling procedure, but still we needed
Challenges in fuzzy front-end of new product development within medium-sized enterprises
15
to consider criteria like the size of the SMEs, whether low-tech or high-tech industry, and the
level of emphasis that the company puts on the NPD activity. For allowing a greater flexibility of
the analysis, we chose two companies that have similar settings and fewer differences between
them. Both companies are situated in Halmstad, are medium-sized manufacturers, and are both
producing high-tech products, and they have a separate and well organized department for
product development within the company, so the focus on NPD process is high. As mentioned
before, due to the limited access and time for the research, we chose to focus only on mid-size
firms, as a first step towards opening the research on FFE within SMEs and for a better
understanding of how organizational size affects the challenges companies face during FFE. We
considered as relevant and important respondents for our study the product manager,
development manager or product developers. These persons are the most suitable for describing
what difficulties and challenges they encounter in managing the FFE activities, since they
coordinate the whole process of idea generation, technology assessment and conceptualization.
3.4 Data collection
The collected data in qualitative studies may consist of primary data like interviews and
observations or secondary data like documents, websites, etc. (Bryman & Bell, 2007). In our
research, the collection of data started with establishing the contact with the selected participants
and with the construction of the interview guide. The interview guide used in the collection of
data is semi-structured and follows the main sections from the theoretical framework. However,
the approach we undertook during the three interviews was to let the respondents to speak openly
about the FFE of NPD and its challenges within their company and then we used the questions
from the interview guide to touch upon different aspects of the FFE area that were not described
before.
In Company A’s case, we had two consecutive and separate interviews, firstly with the product
developer and secondly with the product manager. For Company B’s case, as the access was
quite limited, we took just one interview with the head of the R&D department, the development
manager. The discussions were recorded and transcribed, as these operations are helpful for the
further process of analysis (Bryman & Bell, 2007). Beside primary data, like face-to-face
interviews, we also used in the display of our empirical findings, observations made during the
interview and secondary data like information from the companies’ websites. This information is
about the organizational structure of the company and its departments and general data about the
company’s history, strategy, markets or innovational emphasis.
3.5 Data analysis
In our paper, the research question and the theoretical framework are well specified and the
sampling part is well outlined. Thus, we can say that we have a pre-structured case. In this
situation, as stated by Miles and Huberman (1994, p. 85), the analysis follows the next order:
Challenges in fuzzy front-end of new product development within medium-sized enterprises
16
A combination of within-case analysis and cross-case analysis will be used in examining the
empirical data. Cross-case analysis, according to Miles and Huberman (1994) presents numerous
advantages compared to analysis of single case study. It increases the level of generalizability, so
the findings are applicable to comparable settings; it deepens the understanding and explanation
of the phenomena by using multiple comparison groups, finding the negative cases that do not
follow the theory; it maintains uniqueness but still allows comparisons. There are two
approaches underlined by Miles and Huberman (1994) for analyzing multiple cases, case-
oriented or variable oriented. The former one provides specific and clear patterns for a small set
of cases, but the results cannot be generalizable to a large extent, whereas the variable-oriented
approach leads to probabilistic relationships valid for large populations, but does not take into
consideration causal complexities or multiple subsamples (ibid). In our study we have used the
variable oriented method, as this was more suitable in the context in which the focus is not so
much on finding particular challenges for some cases, but to attempt a generalization of the
challenges in the FFE of NPD, specific to a large population of medium-sized firms.
3.6 Research validity and reliability
In order to reach a high degree of quality, any qualitative research needs to fulfill several criteria
like internal and external validity and internal and external reliability (Bryman & Bell, 2007,
p.410). Internal validity represents the “match between researcher’s observations and the
theoretical ideas they develop” and the external validity refers to “the degree to which findings
can be generalized across social setting” (ibid, p.410). The findings of our study can be
generalized for populations that fulfill the same conditions as we have described in the sampling
part. The conclusions of the study will be the result of trustworthy and correct data obtained from
qualified people in the area, the development managers or product developers, who are regularly
dealing with FFE activities and confront the challenges specific to this phase. The data collected
from the interviews is valuable and precise, as the respondents described the FFE phase and its
challenges as they see it, but also answered researchers’ questions that were related to the
established framework of the research.
The external reliability consists of the capability to replicate a study, and to adopt a similar social
role to that of the initial ethnographic research. Researching FFE of NPD within SMEs can be
further a subject of other studies, as all the theories we used in our theoretical framework were
OUTLINE Field notes Coding Display data Conclusions Report
Pre-structured case
Figure nr. 3. Analysis process for pre-structured case
Challenges in fuzzy front-end of new product development within medium-sized enterprises
17
verified and tested before. The agreement between researchers over the observed events
determines the internal reliability of the qualitative study (Bryman & Bell, 2007). In our study,
both researchers took part at the interviews, at transcribing the collected data, and at the further
analysis. All the decisions, and the findings of the study, resulted from the agreement of both
researchers.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
18
4. EMPIRICAL FINDINGS
4.1 Company A
4.1.1 General company information
Company A is a medium-sized manufacturer, with 130 employees, located in the city of
Halmstad, on the west coast of Sweden. The company has a leading position within the
worldwide market in products like saunas, showers and steam baths, intended both for home use
and public facilities. The company has competitive advantages and strategic strengths in aspects
like breadth of product range, quality and design of the products and the level of technical
innovation incorporated in products. For assuring a high quality of the operations and of the final
product, Company A manufactures the components and assembles all the equipment within its
own production facility.
Company A has a long-standing history in innovation, aesthetics and quality. Starting with its
founder who, in 1950, invented a machine with heating elements for heaters and appliances, the
company focused over the time on continuously innovating and improving its products.
Company A has, at present, its own product development department that is constantly seeking
to develop and perfect the existing products and set the benchmark for quality in its industry. The
company has engaged itself in developing not only heating systems for saunas and steam rooms,
but also on adjusting the component materials and the aesthetic aspects of saunas and steam
rooms. Due to its policy towards NPD and advanced technologies, the company managed to
reach high growth and market leadership.
The company sells its products in Sweden, as 15% of total sales, the rest being exported to more
than 80 countries, the most important markets being Germany and France. One part of the sales
is made directly to final users; the other part is made through dealers. The material purchases are
made mainly from Swedish suppliers. The company has collaborations with external partners
like engineers, test laboratories, universities and other institutions for being able to implement
the latest techniques in manufacturing processes, in safety developments and consumer
legislation. Moreover, Company A is part of a group of three companies, the other two being
from Finland and USA that have the same activity profile and share part of their knowledge and
experiences in different aspects including NPD projects.
4.1.2 Managing the idea generation process
The need for a new product within Company A grows when the old one does not work well, or
specific customer demand appears. Mostly indirectly, and through distributors, the customers
communicate to Company A that they should update the products, or add more functionality.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
19
However, there are occasions when they generate new ideas within the company, without any
suggestion from outside the company. The marketing department of the company is occasionally
involved in the idea generation process, as they have a closer connection with the end-users and
constantly receive feedback from them. Moreover, the sales personnel, technical support and
production personnel, may also influence this idea generation phase.
In the FFE phase, the company has difficulties, to a large extent, consulting the customers
because, in this very early stage, the customers usually cannot give concrete answers. However,
they provide their suggestions after using a product for a longer time, and this represents a
constant input in all the NPD related phases. There are occasions when Company A invites the
customers to visit the company, so that direct contact with product developers is possible.
Furthermore, at the entrance in the factory, there is a showroom of saunas, so that clients can see
the old products and suggest their ideas. Besides that, they have meetings with customers every
year, when the company participates at exhibitions and fairs, where some new products are
presented, and customers can make comments and offer potential new ideas.
The company does not use market research for generating the new product ideas; this is not a
regular tool or method they employ. The company will make the strategy according to what is
happening in the market. A large part of the input of ideas comes from company’s dealers who
filter the information they receive and transmit it to the company when a competitor is ahead,
when costumers have complaints or when an older product reaches the peak point of its life
curve and starts declining. Nevertheless, this process is time-consuming and may delay decisions.
Benchmarking, magazines and catalogues in their business line are also used as sources for new
ideas.
The company focuses on a good relation with glass and metal suppliers, as these materials are
important components of the final products. Both Company A and the suppliers come with ideas
for upgrading and developing these materials. Moreover, as the company aims at providing well-
being to final users, they need to add extra-options like appealing fragrances, aromas, sounds or
lights. For this, they need to seek help from other specialists, who advise them how to
incorporate these options within the new product concept. Their collaboration is useful, as it
helps the company to define the new product in a shorter time.
The selection and evaluation of the potential ideas to be further developed is not made according
to some clear and pre-determined criteria, but still it is not completely random. This idea
screening process is quite natural, since they have a bunch of ideas written down and it is just a
matter of priority. They evaluate whether the new product can be profitable, the time needed for
its launch, the costs and the necessary technology to be incorporated. Lack of time or market
pressure is the biggest difficulty in this idea formulation stage. The company would engage in
developing many new products, but the constant high volume of work forces them to give up at
many new ideas.
Besides the customers and direct suppliers, the company has also relations with other external
partners like engineering students from Halmstad University, consultants, engineers, designers.
Their involvement and idea contribution is important, as they have the expertise and the specific
knowledge to program, set the software or conceptualize and create, the early design of the
Challenges in fuzzy front-end of new product development within medium-sized enterprises
20
different new functions of the product. As they are from outside the company, with less contact
with the older products, they have the advantage of presenting totally innovative ideas.
4.1.3 New product development team
The department of product development in Company A plays a great role within the company, as
it is in charge of managing all the new product ideas and coordinating NPD projects. The product
developer is responsible for project planning and the technical part of the development of heaters,
steam generators and control systems of the saunas. The product manager has a major role in the
organization and coordination of the product range; he follows which products have increased or
decreased in sales, he analyzes and evaluates these statistics and then takes the necessary actions
for implementing the changes.
The product developer, development manager, product manager, marketing manager, quality and
production manager are the ones that take part in the decision process regarding a new product
design, concept or functionality. If a new product concept implies future high investments, the
CEO of the company will also take part in the decision making. Their meetings are formal
meetings called “product council meetings”, occurring every sixth week, and in which they
discuss new ideas and put ahead the advantages and difficulties for implementing them.
The company does not have a specific person acting as a product champion to promote the new
ideas, or keep in track of the development of the new product. The whole department is
responsible for the part of idea generation and product definition. The product developers have a
long list of new ideas written down, but the lack of manpower, skilled people or production
capacity, limits the number of ideas transformed into real projects. There are key targets to be
reached constantly by the product development personnel, so they cannot start new projects
before finishing the old projects.
When new opportunities occur on the market, the product development team prioritizes which
project is more important by considering mainly the competitors’ actions. Many times, the
willingness to perfect the definition of a new product concept takes more time, thus it prevents
the team taking other, potentially good, ideas into consideration.
4.1.4 Evaluation of concept feasibility
For the product developers of Company A, the need to update of some functions, options or
materials of the products becomes evident as a result of the opinions they receive from different
sources. Even though they intend to make the product as simple and flexible as possible when
they work on the new product, what they must always keep in mind is making the product
competitive. Before developing the new product, the company sees what the competitors` are
producing and try to make their own products better. It is a changing market, so the company
regularly needs to make sure that they will create the correct design and the correct functions.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
21
Drawing the line, or stopping some part of generated new ideas, is the most difficult part when
defining the new product concept. The product developers try to make the product concept
strictly for customers’ preferences and with the technical content simple. For this, they aim to
define it more narrowly but, as the costs of adding more functions or options are reduced and the
focus on competitiveness being so high, they often create a complex product concept. If in the
further phases, the complexity of the concept will becomes problem, the product developers will
redefine it.
Before defining the new functions, the company usually evaluates its own technology and
capacities, but also considers the necessary external support. The company’s products must
fulfill high quality standards and have durability, as the environmental conditions, like humidity
and heat, are extreme. This fact implies that the materials they use from suppliers also need
improvements and changes. Evaluating a supplier’s capacity and their technical ability to
develop the components necessary for the new final product is more difficult. Since, in a new
project, not all the features or functions are developed, the company will assess only that
technology that is currently needed.
4.1.5 Organizing the FFE phase
The high level of innovation is one of the strategies of Company A to get a top place in the
whole industry. The company has consistently a high demand to develop new products and
increase the brand influence, mainly due to competitors’ actions. The vision and overall strategy
of Company A highlights the large focus the company directs to continuous innovation,
developing better, new products and coming up with improvements to the old products.
In time, as the company has increased its sales in other external markets, it had changed its
process of NPD, including FFE, focusing on a more formal system of decision’s adoption and on
involving more departments in this process. When the company intends to start the development
of a new product or a new function, a formal meeting is organized with the personnel of the
product development department, with the responsible people with the quality control and with
the marketing function. They decide which external partners need to be involved and what
technology, and knowledge, should be imported from them. This kind of meeting is, however,
not organized very often. The most common discussions are the informal ones, between those
directly involved in NPD.
When a new product idea reaches the product conceptualization phase, the company usually has
a formal meeting to discuss it. They evaluate its design, functions, the technology needed for
producing it, the costs and the effect on the market. When they reach a consensus, then the
project can be effectively started.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
22
4.2 Company B
4.2.1 General company information
Company B is a medium-sized, high-tech company, which has 110 employees in Sweden and 50
employees in countries like Germany, China, USA, Italy, and Japan. Thirty five employees are
full-time engaged with R&D. The company produces network interface cards and products for
connecting together different industrial networks. All development is conducted at the head
office in Halmstad as are the majority of the manufacturing processes. Now, the company is a
world-leading supplier of communication technology for industrial automation.
The company focuses on industrial network products based on internally developed technical
solutions. It has evolved into one of the leading independent global suppliers of communication
solutions for industrial networks. The R&D team of the company develops both software and
hardware products with a special focus on developing protocol software for all industrial
networks. The company`s development efforts can be divided into development of new products,
maintenance and improvement of existing products and custom design.
Operations are conducted in close cooperation with production, and sales and marketing, in order
to develop efficient solutions. Our interviewee is the development manager of the company; he is
responsible for coordination of R&D department. The company has a basic technology as its core
knowledge which is used in 50% of the projects where customized products are developed. This
technology is modified for each project, so that it fits the customers` needs.
4.2.2 Managing the idea generation process
The company has three ways main to generate the new product ideas: one is through their
customers` requirements; another is when the product manager communicates with the sales
people who meet different customers with new product ideas; and the third is when the company
conducts market surveys and market analyses which show if some new products can be enhanced,
or if some function can be added to meet a specific need. The product manager and external
consultant companies conduct the market research for some specific areas, markets or segments.
The internal product development starts with the creation of a working group, where the
specifications of the new product are discussed. The company puts its efforts into having a close
connection with the customers and for this they organize formal meetings with them every year
to get their ideas for product improvements. However, for non-customized products, working
closely with customers is rather difficult.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
23
Company B does not receive any information from their suppliers or other external partners in
the FFE phase; the only suggestions are concerned with the manufacturing aspects. This lack of
closeness between Company B and its suppliers is due to the fact that idea generation is made in-
house, and because Company B aims at being self-sufficient, without needing to import or
outsource parts of their development process.
The selection of ideas is made in the product council meetings in which operating managers, the
development manager, other key account managers and the CEO, participate, and they discuss
the business case for each idea, the sales volume, similarities or overlapping with company’s
strategies, the evolution in 5 -10 years of the product and the technology required. The decisions
are taken by consensus. Some of the ideas are not further developed because there is a lack of
resources for transforming each idea into an attractive product concept and, later on, into a final
product.
4.2.3 New product development team
The development team represents a large part of the total number of employees, almost 35%.
The organizational structure of this department reflects how the company tries to have the
development process formalized and clearly defined.
Figure nr. 4. Organization of Product Development Department
Development Manager
Product Manager
Design team1
manager
Hardware
manager
Design team2
manager
Embedded
design
engineers
Embedded
design
engineers
Hardware
designers
Core technology R&D
PC software designers
Test Engineers
Industrialization team
Challenges in fuzzy front-end of new product development within medium-sized enterprises
24
As the focus in company B is on developing high-tech products, many specialists are needed in
embedded design, hardware design, PC software design and in other areas. Thus, there is not just
one person that generates the new ideas and decides upon their transformation into concepts.
Other departments within the company are not largely involved, regularly consulted, in the FFE
phase, nor in the further stages of NPD.
The development manager, the product manager and the CEO are the highest decisional organs
in the FFE of NPD. The product manager, as is shown in the above figure, is the link between the
sales department, thus, the customers and the development department. He contributes a lot in
putting a customer-focused direction in the idea generation process.
4.2.4 Evaluation of concept feasibility
When the product council takes a decision about a product concept, usually this is quite complex
and firm, and not easily changed. If a small change is required, then it is not a problem to
redefine the product again but, if it implies greater efforts, then the council needs to reconsider
its decision, as the project schedule will be affected.
As almost half of the developed products are customized, clients’ needs are the most important.
The projects for specific customers have prior specifications established and, in this situation, the
concept feasibility is pre-determined and unnecessary. For own generated ideas, benchmarking is
a common method of examining whether a new product concept can register success.
Most of the technology is internal. When they evaluate ideas and conceptualize new products,
customers are not involved due to the fact, that, they cannot provide professional and specialized
suggestions. Only the product council meeting has the right to select ideas. However, Company
B needs also a lot of software which comes from outside the company. For this, previous
collaboration helps them to assess and be aware of the external technology needed for future
products. Still, the company does not want a major involvement of its partners in a new project.
4.2.5 Organizing the FFE phase
The company’s strategy is to grow through innovation, which is why each idea that can bring
high returns is carefully examined and formally discussed in council meetings, but also in
informal discussions within the R&D department and between departments. Using innovation
and product development is the main tool of Company B in expanding into other markets and
keeping their customers loyal. It has a very precise structure and delimitation of roles within the
development department. The new ideas have their foundation in consumers’ needs, expressed
either directly or through market surveys.
All decisions are made as a team after participants express their views of the new idea; individual
decisions are strongly avoided within Company B. The openness towards external collaborators
Challenges in fuzzy front-end of new product development within medium-sized enterprises
25
is limited, as a high-tech product development requires a very specialized input, and this can be
the best acquired by developing internal core technology and competences.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
26
5. ANALYSIS
From our empirical findings we have deduced that the main categories of interest for analysis
which are related to the challenges that medium-firms encounter during FFE phase are different
from the categories we chose previous to collecting the data. Therefore, the analysis will be
structured in parts like external linkages, formalization of FFE phase, information collection and
processing, and construction of product concept. In the last sub-part, we summarize the result of
analysis and display them in a model.
5.1 External linkages
In Company A, the communication with customers on a general basis is quite good but, during
the FFE of NPD, when the new ideas for products are discussed, their involvement is rather
small. Furthermore, direct contact with customers is partly restrained due to the sales methods
the company mainly uses, through dealers. This may hinder the accuracy of the input ideas from
customers and can be later reflected in an uncertainty or lack of customers’ demand or market
acceptance for the developed product (Ozer, 2007; Mosey et al., 2002; White et al., 1988). In
Company B, since 50% of the total sales represent customized products, the connection and
communication with the customers are good. These close partnerships resulting from the
customization of products can be strategically used in identifying trends and developing skills for
market response (Kaminski et al., 2008; Souder et al., 1997). Nevertheless, in the actual FFE
phase of company’s own projects, the company does not communicate closely with its customers.
Therefore, from the perspective of good communication with the customers in the FFE period
(Souder et al., 1997), it can be argued that both companies use their customers as idea providers
for new products, but do not consult them in the further steps of evaluation of ideas or
conceptualization. This lack of communication, in some parts of the FFE phase, may result in
the further stages of NPD, in an increase of costs for developing wrong or unnecessary functions
or later on, in a poor market performance of the new product.
Both companies are open to external linkages and networks (Hoffman et al., 1998). Yet, these
linkages are employed to different extents by each company. In the case of Company A, besides
the connections with the customers, suppliers and distributors, they benefit from help in the idea
generation part from students, private consultants and engineers, and visitors at fairs. Its strategy
of openness towards any useful ideas and suggestions for improving its products is larger than
the one of Company B, in which the emergence of new ideas comes mainly from inside the
company, from customers or market research. Both for Company A and Company B, the
customers’ needs and wishes expressed through various channels represent the main factor for
starting to improve products through incremental projects (Bala Subrahmanya, 2005). Being
more open towards external contribution can be a tool of proactiveness for medium firms which
are often forced to import resources. Thus, collaboration and networking helps preventing FFE’s
problems to occur.
It can be noticed that comparing the two companies from the perspective of the management of
external relations, results are partly different from what Ledwith (2000) was describing. Since
Challenges in fuzzy front-end of new product development within medium-sized enterprises
27
both companies are medium-sized, with a less significant lack of resources and in a growing
trend, they are not in as much need of external and outsourcing as small firms so much external
help and outsourcing, even though they still engage partners outside the company and have some
collaborative R&D projects. Company A involves more outside resources and manages better the
relations created, whereas Company B focuses mainly on the networks it has with its customers
who are greatly involved in the development projects, especially in the idea production part. This
situation can be challenging for Company B, since internalizing FFE activities may lead to the
risk of using just pieces of information, and being unaware of the latest technology or capacities
that external partners use and thus, create a product concept that does not fulfils market’s
standards.
The above empirical facts can, be, however, be justified, as the products of Company B
necessitate more specialized and high-tech input which is harder to obtain from diverse sources.
For Company A, the saunas and the steam rooms are products which bring well-being, thus,
repeatedly consulting the final users prevents the failure of FFE’s results. From this point of view,
remaining flexible and open to all external help may seem challenging for some medium-sized
companies like Company B (Lindman, 2002).
In its relation with its suppliers, Company A is more involved than Company B, not just to the
extent of sharing the new ideas for improved materials, but also at the level of “gray-box”
integration, as this, Koufteros et al. (2007) argue, is helpful for SMEs in improving the product
development process. Company A has close relations with private consultants and engineers who
add their own capabilities in developing the new product concept. Instead, Company B uses just
the services of market research suppliers and some software suppliers. It does not involve other
suppliers or external collaborators so much in the FFE stage, since it has a large development
department and a more in-house approach towards NPD. Since Company A’s products reflect a
large focus on manufacturing, whereas in Company B, the products need to incorporate
advanced technologies and need several competences, it is explicable why the structure of the
relations with suppliers differs during FFE.
The management techniques used by Company A in the coordination of its relations with the
suppliers of materials or services during FFE include good communication, knowledge sharing
and use of supplier’s specific expertise. Hartley et al. (1997) assert that the efforts of buyers to
involve suppliers, and jointly to shorten the NPD period, including FFE, may not always turn in
positive outcomes. Yet, in the case of Company A, the development manager considers that the
collaboration with its suppliers improved their performance of FFE and reduced its period. In
Company B, as the main support from suppliers comes from consulting companies in market
surveys and software providers, this did not affect greatly the period of the whole NPD process,
but it helps to keep direct contact with the market and increase the performance of the new
product. Shortening FFE period is claimed to be a common challenge for all firms, thus
managing to reduce it with the help of suppliers can lead to an earlier launching of the new
product, and implicitly to a market advantage.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
28
5.2 Formalization of FFE phase
The ideas that both companies receive from external partners are discussed formally in the
product council meetings (Mosey et al., 2002). In Company A, the participation of several head
departments like marketing, production, quality or product development, makes possible a
complete analysis of the new ideas, evaluation and screening of each one, and discussion over
the new product concept and its later functionality. Still, not all decisions and information are
formally approached. Within Company B, these formal meetings are organized in the same
manner. The analysis of the new product ideas and the feasibility of the concept are most often
discussed within them. However, these meetings involve fewer people than in Company A, the
product manager representing other departments as well. This fact may affect to some way the
FFE outcome, since the other departments are not involved in this formal structure of decision
making. Some important information may be left out, the feedback from customers or other
relevant data can be omitted.
From the perspective of formalization of FFE phase, it can be noticed that in the two medium-
sized companies, the process is more formal than informal, in several respects. The product
council meetings are organized on a regular basis, but not that often, every sixth week in
Company A and when needed in Company B. Flint (2002) presents that a more organized and
formalized idea generation and selection process which keeps, as the main priority, the
customers’ needs in mind, may influence positively the success of that product after launching.
In both companies, the generation of ideas is an informal process, whereas their analysis and
selection is formal. There are also informal discussions between the members of product
development department or with other departments like marketing and sales, but these are not the
premises for many of the choices made in this stage of NPD. From this point of view, finding a
balance between formal and informal approach is difficult for both companies. The empirical
findings reflect that these medium firms are still searching for the right formula of how to deal
with the FFE activities. Nonetheless, we notice that for high-tech innovative firms which are
developing products of high complexity, an approach towards more formalization is more
appropriate, but still challenging to reach.
In Company A, the formalization of the FFE phase has increased over time, as the company was
growing and expanding in more markets and became more competitive. In Company B, since the
emphasis on NPD is so high from the beginning, and the R&D department represents 35% of the
total number of employees, it had to implement a more precise and formalized system of
procedures for decision making, and internal and external collaboration. Yet, informal meetings
between members of the same or different department take place regularly within both
companies. These findings are in accordance with the theory of Atuahene-Gima and Evangelista
(2000) who argue that the R&D department’s collaboration with the marketing department
should be more informal rather than formal, the latter aspect being a barrier towards a positive
influence on NPD process. More cross-functionality within FFE in a formalized way will be
necessary for these two medium firms in the future, as they will expand. Until then, finding the
best combination of formal/informal systems of work within and between departments represents
a challenge.
As noticed in Company A and Company B, the FFE activities, the data analysis and the decision
process are formalized, since this allows the companies to better assess external information and
Challenges in fuzzy front-end of new product development within medium-sized enterprises
29
be aware of the market threats and opportunities (Kaminski et al., 2008). Both companies have a
separate, well organized department focusing on NPD projects. The companies are aware of the
importance of making the FFE process more formalized, as this will allow them to reduce the
uncertainty specific to this early phase, to screen the product ideas and analyze information more
efficiently. A more formalized approach towards NPD, including here FFE of NPD, is more
specific for larger SMEs rather than for smaller SMEs (Hoffman et al., 1998). Nonetheless,
within the product development department and other departments there are informal relations,
thus, the distribution of information and the decisions are made more rapidly (Freel, 2000).
Both companies are highly competitive and have good strategies for improving their market
position. Their key strategy involves continuous innovation and improvement of the products.
More formalization is required, argues Khurana and Rosenthal, (1997; 1998) in order to reach
the alignment of the product strategy with the overall strategy, starting with FFE of NPD. The
two medium firms already use formalization in some activities of FFE, but there is still the need
to organize more often the formal meetings and to involve more people from other departments.
Even though, more formality can prove to be advantageous for these medium firms in some way,
there is the risk of inhibiting the creativity of employees. This is why, finding a balanced
approach towards formalization can represent a continuous challenge.
5.3 Information collection and processing
The main sources of information for Company A for the FFE phase are the distributors, the
customers, the private consultants and engineers, the students, the glass and metal suppliers and
the other members of their group. The information received from them is analyzed and processed
and the most valuable suggestions, ideas, proposals are discussed within the product council
meetings. In Company B, the main information providers are the customers, the consultant firms
and the competitors, through benchmarking. Thus, we can state that both companies proceed in
accordance with what the literature advocates by processing and sharing various information
from their value chain or other sources (Bacon et al., 1994; Macpherson & Wilson, 2003;
Kaminski et al., 2008). Still, depending on much external help makes the medium firms
vulnerable in terms of the amount and accuracy of information received.
As shown by previous studies (Kohn, 2005; Trott, 2001; Lindman, 2002), scanning the business
environment and doing market research are important actions to be taken before starting a new
project in product development, since these can increase its subsequent success. In practice, as
we discovered in the two medium-sized companies, Company A and Company B, these actions
are partially completed. In the first case, of Company A, it is more difficult to complete a market
research, as the product buyers, like hotels, spas or different sports facilities, are different from
the final users, people. That is why for Company A, a scanning of the environment to see the
trends and consumers’ preferences, seems more appropriately made by participating at fairs and
exhibitions, by reading in magazines or catalogues about the newest technology and innovation
in the specific area of business or by keeping a close relationship with distributors, who are in
contact with the market and are aware of the competitors’ positions. On the other side, Company
B collects the information for FFE from the projects in partnership with its customers, from its
sales offices, through market surveys and annual meetings with its main customers. The data
Challenges in fuzzy front-end of new product development within medium-sized enterprises
30
analysis in both firms during the FFE phase needs to be based on complete and actual
information but, as the companies do not have the resources to collect it by themselves, there
appears the problem with the quality of data.
The literature indicates that SMEs often mistreat or ignore information about opportunities
(Nassimbeni, 2001), which are usually the trigging factor for the start of a new project, implicitly
the start of the FFE phase. The first medium-sized company, Company A, even though it sees
many opportunities in the market, has to focus just on some of them, due to a lack of resources,
mainly of manpower which could facilitate more projects in the same time. Also, high
competitiveness forces the company to choose only those opportunities that will bring them a
better market position. Since Company A does not have its own sales offices abroad and works
with distributors, it may lose or ignore some occasions due to lack of clear information
transmitted by distributors or their incapacity to analyze the business environment. In the case of
Company B which has its own sales offices in several countries, it is easier for it to collect the
relevant information about the market shifts, customer demand or other situations which may
constitute opportunities. However, working with consultants in market research and focusing on
the work with one category of customers, may limit the company’s access to a variety of
information.
5.4 Construction of product concept
In terms of the results of FFE phase, underlined in the literature (Cooper, 1988; Cooper and
Kleinschmidt, 1987) as being represented by a new product concept, the two medium-sized
companies deal with problems in finding a balance in the number of options, functions to be
included, in assessing the necessary level of technology incorporated in the new product and in
establishing the quality standards to be fulfilled. Most of the development projects that both
companies organize are incremental ones, when small or larger changes are made to older
products, thus the challenge emphasized by De Toni and Nassimbeni (2003) of not capturing all
the marketing requirements and innovation sources within a new product definition is less
pronounced.
Company A tries to include as many customers’ options and preferences possible in the product
concept, either by considering their suggestions and feedback received through distributors, by
direct contact when visiting the company headquarters or by meeting at fairs and exhibitions.
Company B, through its large market surveys, its annual meetings with customers and through its
orders for customized products, gets the necessary input of the functions and options that
customers request, in order to be included within the product concept. Therefore, when
developing the product concept and its specifications, both companies take into consideration the
customers’ needs and preferences, transmitted through different channels (Kaminski et al., 2008;
Lindman, 2002).
In defining the future products, Company A is aiming to keep the quality and competitiveness
high (Ali et al., 1995), but still the product concept comprises many options and functions, since
these do not involve extra costs. For Company B, defining the concept implies the same
procedures of considering the quality standards and its effect on the market. However, both
Challenges in fuzzy front-end of new product development within medium-sized enterprises
31
companies create a product concept with a complex technical content, despite the fact that
research claims the opposite as being more effective and less challenging for SMEs, as they often
do not own many of the resources to develop complex products (Ali et al., 1995). The two
companies create complex concepts due to the fact that both are high-tech firms, and these extra
functions are targeting for market advantage. Regarding the flexibility of the product concept,
both in Company A and in Company B, the definition of the product allows future changes or
redefining (Montoya-Weiss & Driscoll, 2000), except when the formal decision was made for
proceeding with the project.
Previous research of Macpherson (1991) shows that, in evaluating the technology needed for the
actual development of the new product, smaller firms, unlike large firms are often required to
consider also external participation. In our findings, we discovered that the two medium-sized
companies, during the FFE period, also need to make a preliminary assessment of own and
external technology and capabilities, since besides in-house technology, they necessitate external
services, expertise and knowledge. In Company A, the quality of the services of private
engineers and consultants needed in incipient phases must be evaluated, whereas in Company B,
the capacity of software providers is assessed when creating the concept for improved industrial
networks connectors and interface cards. From the perspective of needing to assess external
competencies, both companies share difficulties. They do not know precisely the quality of the
services and technology provided by partners before working with them. Therefore, it is
challenging and in the same time important for these firms to evaluate the external contribution,
as the risk of low feasibility of the product concept may affect the further activities of NPD.
The next table will summarize the above analysis aiming to emphasize the comparison between
the two cases on the four dimensions that are the basis for the analysis and research’s findings:
Company A
Company B
Result of
comparison
External linkages
- Customers act as
idea providers, but
are not involved in
idea evaluation or
concept
construction;
- It involves in the
FFE activities
external partners
like suppliers,
distributors,
students, private
consultants and
engineers
- The connection
with customers is
better when the
company has
customized products
than for its own
products, where
customers are
involved just at the
beginning of FFE;
- The new ideas
come mainly from
inside the company,
customers, and
market surveys, less
from external
partners;
- For both A and B,
the lack of
communication with
customers during
the whole FFE
period can result in
an extension of this
phase, increased
costs of the NPD or
poor market
performance of the
new product;
Challenges in fuzzy front-end of new product development within medium-sized enterprises
32
Formalization of
FFE phase
- The evaluation and
screening of the new
ideas are made
within regular
product council
meetings in which
the heads of
departments
participate;
- Product council
meetings are
organized every six
weeks, whereas
between these
meetings, informal
discussions are
common;
- Formal product
council meetings are
organized when
necessary during
FFE, whereas
informal
- The people who
are involved in these
formal meetings do
not represent all the
relevant
departments, this
may lead to
important
information being
left out;
- Both companies
have a formal
approach towards
analysis and
selection of ideas,
but for distribution
of information
within FFE and
idea-generation
process, they use no
formal structure;
- Finding an
effective balanced
way towards
formalization of
FFE remains a
challenge for the
two companies;
Information
collection and
processing
- The main sources
of information are
the distributors;
- The company uses
benchmarking,
participates to fairs
and exhibitions for
collecting necessary
information for
developing the new
products;
- The main sources
for collecting the
information are the
own sales offices,
distributors, market
surveys and
customers;
Both companies are
dependent on
external parties,
mainly distributors,
for collecting
information, thus
the challenge of
processing limited
or inaccurate
information occurs
during FFE;
Construction of the
product concept
- The company
needs to assess the
external technology,
competences and
expertise before
defining the new
product;
- The market
pressure forces the
company to create a
complex product
concept, comprising
many options or
specifications;
- The company
needs to evaluate
within FFE phase
the software
suppliers’
contribution for
NPD project;
- It usually creates a
firm and complex
product concept as it
aims to reach high
quality standards
and strong effect on
the market;
Both companies
face challenges in
assessing, during
FFE, the external
input necessary for
developing the new
product; the
companies meet a
challenge when
defining the new
product, in
determining the
complexity of the
product concept;
Table nr.2. Comparison summary of the analysis
Challenges in fuzzy front-end of new product development within medium-sized enterprises
33
5.5 Challenges of medium firms in FFE
Many of the authors who made studies on NPD with a focus on SMEs, including Woy (2007),
state that these types of firms usually face more challenges than the large firms, since they lack
resources for a proper NPD process and the market conditions are more restrained at present. In
this study in which two medium-sized companies are analyzed, the lack of human capital,
knowledge and specific expertise seem to be the basic cause for many of the challenges and
difficulties met in the FFE of NPD activities.
From the list of the expected challenges presented in relation with the success factors of FFE
illustrated by Frishammar and Florén (2008) on a general level, including for large firms, we can
state that for the two medium-sized companies, the most significant ones are related to
communication with the customers, following the opportunities on the market based on
information, keeping the technical content simple in product definition, and formally organizing
the idea generation process. In other aspects, Company A and Company B are quite different in
how they handle the FFE phase, thus the challenges they encounter differ.
In aspects of external linkages, the two medium firms face communication problems with their
customers. They cannot be consulted on an ordinary basis during the whole FFE phase, as they
are not able to offer specialized advice. When processing the information during FFE, these
medium firms often encounter the difficulty of lacking accurate or sufficient information, and
this occurs mainly because they do not have the resources to collect by themselves valuable
market data and so they need to use intermediaries, such as external agents for these activities.
The outcome of the FFE of NPD process is a new product concept, including some descriptions
of the functions, specifications, design or manufacturability. However, the companies A and B,
in order to develop a product concept that will be the basis for a competitive new product, need
external help, expertise, competences, in many cases, thus the construction of product concept
implies challenges in finding its appropriate complexity and assessing this external contribution.
Regarding the organization and the level of structure of the FFE activities, these medium firms
meet challenges in finding the right level of formalization, balancing between informal and
formal approaches. Decision making and data analysis are formalized activities, whereas
information distribution and assimilation are made informally between and within departments.
The result of our analysis is reflected in the next figure. The main challenges that medium firms
face in FFE phase belong to four categories, found as the most relevant after analyzing all the
data.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
34
Figure nr.5. Challenges of medium-sized firms related to FFE of NPD
Challenges in
FFE phase within
medium-sized
firms
Information
collection and
processing ◊ Processing limited or
inaccurate information
Formalization of
FFE phase ◊ Finding a balance
between formal and
informal structure and
approach
Construction of the
product concept ◊ Determining the
complexity of product
concept
◊ Assessing external
technology and expertise
External linkages ◊ Communication with
customers during FFE
Challenges in fuzzy front-end of new product development within medium-sized enterprises
35
6. CONCLUSIONS AND DISCUSSION
6.1 Conclusions
Based on our research findings, we have deduced that there are several challenges met by
medium-sized enterprises during FFE of NPD process. As reflected in the analysis part, the main
challenges encountered by these types of companies are related to the external linkages used for
increasing the FFE performance, to formalization and structure of the FFE activities, to the
collection and processing of information from different sources, and to the value and quality of
product concept’ construction.
In terms of external linkages, our findings show that the most significant challenge for high-tech
medium-sized companies is to communicate closely with their customers during the whole FFE
phase, not only in idea generation aspects. Because of the fact that the technology they employ is
advanced, it is rather difficult to consult and involve customers, as they often do not have the
knowledge and the capabilities for providing valuable suggestions. This represents a problem, as
the new developed product needs to be fully addressed to customers in order to register success
on the market.
From the formalization perspective, our findings show that in managing the FFE phase, medium-
sized enterprises tend to formalize the decision making and data analysis process, but still keep
the informal approach in the collaboration between departments and within development
department. The informal aspects help them to be more flexible in information distribution and
sharing, and in taking decisions more rapidly. Nonetheless, finding a balance in this combination
of formal and informal aspects is challenging during FFE phase, as the market pressure is high
and stressing the companies to take rapid decisions. Our findings imply that the higher the
technology used in new product development process, the more formalized and structured the
FFE activities are.
The challenge in collecting and processing information during FFE depends in great measure on
the resources of medium-sized firms. If a medium firm is not resourceful enough to use its own
means for collecting the information about market, then it will face the challenge of processing
limited or inaccurate information, which will lead to missing opportunities.
One challenge in the construction of product concept is to determine its complexity. Finding the
right options, functions, specifications to be included or considered for the new product is
difficult. The quality of the product concept can be affected by the in-house technology and
internal resources, which are more easily assessed during FFE, are not always enough for
medium-sized companies. This is a challenge that occurs in connection with another challenge,
assessing external resources. These appear because medium-sized companies producing high-
complexity products cannot evaluate so well in such an early stage the external technology or
expertise, thus the product concept can be less precisely defined.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
36
6.2 Practical implications
This study has managerial implications, providing more information and knowledge about the
FFE phase within medium-sized firms and, more specifically of the challenges, difficulties,
deficiencies that these firms deal with in the early times of product development. Our findings
can be helpful for all managers or heads of departments who want to increase the effectiveness of
the FFE period, to shorten the time to market of the new products and to reduce the costs of the
NPD projects.
We can suggest managers take some actions in order to avoid these challenges. With regard to
the problem of communication with the customers during the FFE, medium firms should try to
organize more projects in close collaboration with them and consult them repeatedly during FFE
period. Even though their support does not involve professional or specialized input or ideas,
they can contribute with feedback by describing their needs and expectations form the new
product. Furthermore, we consider that a higher level of formalization is more appropriate for
those medium firms which register high rates of growth, and less effective for incremental
projects in firms which use less advanced technology. When collecting and processing the
information within the FFE phase, in order to assure a good quality of information, medium-
sized firms can try, as they register growth, to internalize more the activities that affect the FFE’s
performance.
When medium firms intend to open up own sales offices, they should consider that this would
improve the quality of the information collected and thus, increase the efficiency of FFE phase.
It would help them to perform their own market scanning and collect precise data. In terms of the
challenges related to the construction of product concept, the same measures can be helpful,
acquiring more expertise and internal competences will help them to clarify the level of
complexity and to avoid wrongly assessing the technology needed for further development.
6.3 Theoretical implications
For the academic area, the results of our study bring additional value. The contribution we make
to the research of FFE is relevant since our findings show that organizational size is a
determinant of the management and challenges of FFE activities. We found that medium firms
meet several challenges during FFE phase that occur mainly due to the specific limitations that
SMEs have in resources, information, knowledge.
In accordance with what the literature shows, we can state through our study that the larger the
size of the company is, the more formalized the structure and FFE process will be. We know
from the literature that large firms face uncertainty, lack of structure in FFE activities and the
tendency is to formalize them more. The literature suggests that SMEs are more informal in their
FFE and NPD processes, but more formality would improve their performance (Freel, 2000;
Kaminski et al., 2008). However, in our research, we found that medium-sized companies use
formalization quite largely in this period, more than expected. This may be explained in the
Challenges in fuzzy front-end of new product development within medium-sized enterprises
37
context in which the medium firms have their strategic focus on innovation, using it as the main
source for growth. Furthermore, as Paasi et al. (2007) argue, in incremental innovations, the
uncertainty of information is smaller than in radical innovations, thus firms which move
important decision making in earlier phases of FFE can manage better the uncertainty specific to
this phase. This means that medium firms having incremental projects can formalize more easily
the early phases of FFE, starting with opportunity identification or idea generation, and increase
the success of product launching. When it comes to small firms, we can speculate that the level
of formalization of the FFE phase is smaller than in medium firms, due to the fact that there are
just few people working with NPD, and more structure can reduce their flexibility in decisions.
The literature highlights that necessity of external resources and linkages appears to be more
stringent in the case of small and medium-sized firms rather than in the large firms. Bala
Subrahmanya (2005) argues that communication with customers should be very good in
incremental innovations, but our study shows that, during the FFE phase, this is a challenge, at
least in some aspects. This, however, makes sense as the customers do not have the ability to
provide professional help when medium firms develop complex products. We can assume that,
for small firms this challenge may be avoided since their customers are often local and reduced
in number, and they usually try to focus on developing products which require less advanced
technologies.
The results of our study show that medium firms are often “stuck in the middle”, since their
objectives are often to achieve growth through NPD, but their access to resources and
information is limited. That is why creating a complex concept, sustained with accurate and well
processed information, is often a real challenge for this size of firm. Complex product defining is
more specific for large firms, whereas medium-sized firms focus instead on more simple
products (Ali et al., 1995). Once more, these findings can be interpreted in the light of the
industrial and technological context in which medium firms operate. We can assume that in
similar environments, small firms, the same as medium firms, aim to grow through innovation,
therefore this challenge can occur in their case as well.
6.4 Shortcomings of the study
One shortcoming of our study is reflected by the fact that the two Swedish manufacturing firms
chosen in our sample come from a more innovative environment, compared to other medium-
sized enterprises from other regions. It is known that many Swedish firms operate in an
innovative medium and that they are highly specialized and use advanced technologies. The fact
that both companies are high-tech manufacturing firms may also constitute a shortcoming since
their focus on innovation and new product development has made them evolve and learn to avoid
many of the challenges and problems specific to the early phases of these processes.
Another limitation may be our focus just on medium-sized firms, whereas the literature we have
reviewed for this research refers also to small firms. Furthermore, our empirical data describe the
challenges that medium firms face during FFE of incremental innovations and not radical ones.
As we have mentioned in the methodology as well, our intention is to open up the research on
this topic, while future research can study other aspects of the FFE stage within SMEs.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
38
Since the analysis and interpretation of the data collected have been made from the researchers’
own perspectives, the trustworthiness of the study might be affected. The design chosen for
reaching the purpose of the study, two case studies, could also represent a limitation over the
reliability and degree of generalizability of the results.
6.5 Further research
The shortcomings of our study may well represent a starting point for future research. Even if
this study attempts to fill a piece of the gap in the research over what happens within medium-
sized firms in the “fuzzy” times of new product development, there are still a lot of gaps of
knowledge to be covered on this matter. Since our study focuses on high-tech medium-sized
manufacturing firms, future research may examine small-sized manufacturing or service firms or
the differences and similarities between low-tech SMEs and high-tech SMEs from different
environments, stable or dynamic. In addition, an interesting study can be made on the challenges
in FFE of radical innovations within SMEs, as a comparison to our research results can reveal
new relevant findings. Other studies can be based on the organization and challenges of FFE
activities in SMEs from other geographical areas or in SMEs where the interest in the innovation
of firms is lower.
There are many other aspects, beside challenges, to be examined within the FFE phase in SMEs.
The connection between the management of this phase and performance of NPD, between
leadership styles and proficiency in FFE, can be the subject of other research. Moreover,
quantitative studies can be made in order to increase the generalizability and the reliability of the
results we found in our study and to strengthen the relation between organizational size and the
management of FFE activities.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
39
LIST OF REFERENCES
Abeele, P.V. & Christaens, I. (1986). Strategies of Belgian high-tech firms. Industrial Marketing
Management, Vol. 15(4), pp. 299-308.
Ali, A., Krapfel R. & LaBahn D. (1995). Product Innovativeness and Entry Strategy: Impact on
Cycle Time and Break-even Time. Journal of Product Innovation Management, Vol. 12, pp. 54-
69.
Alvesson M. & Sköldberg, K. (2009). Reflexive methodology. New vistas for qualitative
research (second edition), London: Sage Publications Ltd.
Atuahene-Gima, K. & Evangelista, F. (2000). Cross-functional influence in new product
development: An exploratory study of marketing and R&D perspectives. Management science,
Vol. 46, Iss.10, pp.1269-1284.
Bacon, G., Beckman, S., Mowey, D. & Wilson, E. (1994). Managing product definition in high-
technology industries: A pilot study. California Management Review, Vol. 36, Iss. 3, pp. 32-56.
Bala Subrahmanya, M.H. (2005). Pattern of technological innovations in small enterprises: a
comparative perspective of Bangalore (India) and Northeast England (UK). Technovation, Vol.
25, pp. 269–280.
Brown, S. L. & Eisenhardt K. M. (1995). Product Development: Past Research, Present Findings,
and Future Directions. The Academy of Management Review, Vol. 20, No. 2, pp. 343-378.
Bryman, A. & Bell, E. (2007). Business research methods (second edition). New York: Oxford
University Press Inc.
Cannon, R. E. (2004). New Product Development – The Fuzzy Front End. The Canon Advantage,
Vol. 3(5).
Cooper, R.G. & Kleinschmidt, E.J. (1987). New products: What separates winners from losers?.
Journal of Product Innovation Management, Vol. 4, No.3, pp. 169-184.
Cooper, R. G. (1988). Predevelopment Activities Determine New Product Success. Industrial
Marketing Management, Vol. 17(2), pp. 237-248.
Cooper, R. G. (1990). Stage-gate systems: A new tool for managing new products. Business
Horizons, Vol. 33, pp.44–54.
De Toni, A. & Nassimbeni, G. (2003). Small and medium district enterprises and the new
product development challenge. International Journal of Operations & Production Management,
Vol. 23(6), pp. 678-697.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
40
Dickson, K.E. & Hadjimanolis, A. (1998). Innovation and networking amongst small
manufacturing firms in Cyprus. International Journal of Entrepreneurial Behaviour & Research,
Vol. 4(1), pp. 5 – 17.
European Union (2003). SME definition. Retrieved February 10, 2010, from
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm
Flint, D.J (2002). Compressing new product success-to-success cycle time; Deep customer value
understanding and idea generation. Industrial Marketing Management, Vol. 31, pp. 305– 315.
Freel, M.S. (2000). Barriers to product innovation in small manufacturing firms, International
Small Business Journal, Vol. 18, No. 2, pp 60- 81.
Frishammar, J., Florén, H. & Wincent, J. (2009). Patterns of Uncertainty and Equivocality
during Predevelopment: Findings from Process-Based Firms, Conference Proceedings of the
18th
International Conference on Management of Technology held in Orlando, Florida.
Frishammar, J. & Florén, H. (2008). Where New Product Development Begins: Success Factors,
Contingencies and Balancing Acts in the Fuzzy Front End, Conference Proceedings of the 17th
International Conference on Management of Technology, IAMOT 2008, held in Dubai.
Hartley, J. L., Zirger B.J. & Kamath R. R. (1997). Managing the buyer-supplier interface for on-
time performance in product development. Journal of Operations Management, Vol. 15, pp. 57-
70.
Herstatt, C., Verworn, B. & Nagahira, A. (2004). Reducing project related uncertainty in the
“fuzzy front end” of innovation – A comparison of German and Japanese product innovation
projects. International Journal of Product Development, Vol. 1, No.1, pp.43 - 65.
Hoffman, K., Parejo, M., Bessant, J. & Perren, L. (1998). Small firms, R&D, technology and
innovation in the UK: a literature review. Technovation, Vol. 18, No.1, pp. 39–55.
Kaminski, P.C., de Oliveira, A.C. & Lopes, T.M. (2008). Knowledge transfer in product
development processes: A case study in small and medium enterprises (SMEs) of the metal-
mechanic sector from Sa˜o Paulo, Brazil. Technovation, Vol. 28, pp. 29–36.
Kessler, E. H. & Chakrabarti, A. K. (1996). Innovation speed: A conceptual model of context,
antecedents, and outcomes. Academy of Management Review, Vol. 21, No. 4, pp. 1143-1191.
Khurana, A. & Rosenthal, S.R. (1997). Integrating the Fuzzy Front End of New Product
Development. Sloan Management Review, Vol. 38 (2), pp. 103-120.
Khurana, A. & Rosenthal, S.R. (1998). Towards holistic "front ends" in new product
Development. Journal of Product Innovation Management, Vol. 15(1), pp. 57‐74.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
41
Kim, J. & Wilemon, D. (1999). Managing the fuzzy front-end of the new product development
process, Proceedings of Portland International Conference on Management of Engineering &
Technology, Vol.2.
Kim, J. & Wilemon, D. (2002). Strategic issues in managing innovation’s fuzzy front-end.
European Journal of Innovation Management, Vol.5, No.1, pp. 27-39.
Koen, P., Ajamian, G., Burkart R., Clamen, A. et al. (2001). Providing clarity and a common
language to the "fuzzy front end. Research Technology Management, Vol. 44, No. 2, pp. 46-55.
Kohn, K. (2006). Managing the balance of perspectives in the early phase of NPD: A case study
from the automotive industry. European Journal of Innovation Management, Vol. 9, No. 1, pp.
44-60.
Kohn, K. (2005). Idea generation in new product development through business environmental
scanning: the case of XCar. Marketing Intelligence & Planning, Vol. 23, No. 7, pp.688-704.
Koufteros X. A., Cheng T.C. & Lai, K.-H. (2007).”Black-box” and “gray-box” supplier
integration in product development: Antecedents, consequences and the moderating role of firm
size. Journal of Operations Management, Vol. 25, pp.847–870.
Ledwith, A. (2000). Management of new product development in small electronics firms.
Journal of European Industrial Training, Vol. 24, Iss. 2/3/4, pp.137-148.
Lindman, M.T. (2002.). Open or closed strategy in developing new products, A case study of
industrial NPD in SMEs. European Journal of Innovation Management, Vol.5, No.4, pp. 224-
236.
Macpherson, A. (1991). New Product Development among Small Industrial Firms: A
Comparative Assessment of the Role of Technical Service Linkages in Toronto and Buffalo.
Economic Geography, Vol. 67, No. 2, pp.136-146.
Macpherson, A. & Wilson, A. (2003). Supply chain management: improving competitive
advantage in SMEs. In: Jones, O. & Tilley, F. (Eds.), Competitive Advantage in SMEs:
Organizing for Innovation and Change, Wiley: Chichester.
Miles, M.B. & Huberman, A.M. (1994). Qualitative Data Analysis (second edition). London:
Sage Publications Ltd.
Mohamad, N. & Muhamad, M. R. (2000). Prospects for new product development within SMEs,
In M.A. Abdullah & M.I. Bin Baker (Eds). Small and medium enterprises in Asian Pacific
Countries (pp. 49-72). New York: Nova Science Publishers, Inc.
Montoya-Weiss, M. & O’Driscoll, T. (2000). From Experience: Applying Performance Support
Technology in the Fuzzy Front End of NPD. Journal of Product Innovation Management, Vol.
17, No.2, pp.143-161.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
42
Mosey, S., Clare, J.N. & Woodcock, D.J. (2002). Innovation decision making in British
manufacturing SMEs. Integrated Manufacturing Systems; Vol. 13, No. 3, pp.176-183.
Murphy S. A. & Kumar, V. (1996). The role of predevelopment activities and firm attributes in
new product success. Technovation, Vol. 16(8), pp. 431-441.
Nassimbeni, G. (2001). Technology, innovation capacity, and the export attitude of small
manufacturing firms: a logit/tobit model. Research Policy, Vol. 30, pp.245-262.
Otero-Neira, C., Lindman, M.T. & Fernandez, M.J. (2009). Innovation and performance in SME
furniture industries, An international comparative case study. Marketing Intelligence &
Planning,Vol. 27 No. 2, pp. 216-232.
Ozer, M. (2007). Reducing the demand uncertainties at the fuzzy-front-end of developing new
online services. Research Policy, Vol. 36, pp.1372–1387.
Paasi, J., Valkokari, P., Maijala, P., Luoma, T. & Toivonen, S. (2007). Managing uncertainty in
the front end of radical innovation development. Conference Proceedings of the 16th
International Conference on Management of Technology, IAMOT 2007, held in Florida.
Reinertsen, D.G. (1994). Streamlining the Fuzzy Front-end. World Class Design to Manufacture,
Vol. 1 No. 5, pp. 4-8.
Rothwell, R. (1994). Towards the Fifth-generation Innovation Process. International Marketing
Review, Vol. 11, Iss.1, pp.7-31.
Salavou, H. (2005). Do Customer and Technology Orientations Influence Product
Innovativeness in SMEs? Some New Evidence from Greece. Journal of Marketing Management,
Vol. 21, No.3, pp. 307-338.
Souder, W.E., Buisson, D & Garrett, T. (1997). Success Through Customer-Driven New Product
Development: A Comparison of U.S. and New Zealand Small Entrepreneurial High Technology
Firms. Journal of Product Innovation Management, Vol. 14, pp.459-472.
Trott, P. (2001).The role of market research in the development of discontinuous new products.
Journal of Innovation Management, Vol. 4 . No. 3, pp. 117-125.
Verganti, R. (1997). Leveraging on systemic learning to manage the early phases of product
innovation projects. R&D Management, Vol. 27, pp. 377–392.
Verganti, R. (1999). Planned Flexibility: Linking Anticipation and Reaction in Product
Development Projects. Journal of Product Innovation Management, Vol. 16, pp. 363-376.
White, M.,Braczyk, H., Ghobadian, A. & Niebuhr, J. (1988). Small Firms` Innovation
Why Regions Differ, Policy Studies Institute: London.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
43
Woy, U. (2007). Sustainable Product Development for SMEs, Presentation from the International
Conference on Agile Manufacturing 2007: University of Durham.
Zhang, Q. & Doll, W.J. (2001). The fuzzy front end and success of new product development: a
causal model. European Journal of Innovation Management, Vol. 4, No. 2 . pp. 95-112.
Challenges in fuzzy front-end of new product development within medium-sized enterprises
44
APPENDIX 1
Interview Guide What is your position within the company?
Can you shortly describe company’s activity profile and its policy towards NPD?
A. Managing idea generation process
How do you generate the new product ideas? Do you have any help or contribution from outside
the company? What do you see as problematic, hard to deal in this situation?
When ideas were generated, who or what kind of team or individual could promote the idea to
stakeholders to seek and establish commitment (and is commitment important in your firm in
order for NPD to be efficient)?
What is the background (education, the position within the company, the years he has worked in
the company, or even the shares) of the one who serves as Project Champion(s)?
Do you use any tools or methods, like market research for deciding what product idea needs to
be further developed? If not, how do you do it?
What role are your customers playing in NPD projects? Are you consulting them even from the
beginning (idea generation, technology assessment, concept)? How does this work? Challenges?
Do you think that your selection and evaluation of the potential ideas to be further developed is
made accordingly to some clear and pre-determined criteria? Is this done formally or informally?
How do you weed out the potentially good from the bad when ideas have been refined? How do
you screen?
Do you coordinate your relations with external partners in the NPD projects, and how? Do you
find these relations necessary for NPD’s success even from the time when you have the idea of a
new product in mind?
B. NPD team
Who is conducting and participating in the product development projects in your company? Are
there employees from other departments of the company or external partners who normally take
part in the decision regarding a new product design or concept? If there is no team, who does the
work?
Do you have any common projects in NPD with your supplier, customer or other agencies,
institutions? If so, what are the difficulties you encounter in the early part of the project?
Challenges in fuzzy front-end of new product development within medium-sized enterprises
45
Do you particularly focus on maintaining a good relation with the suppliers? What challenges
you see in their feed-back when it comes to early NPD activities?
Are there any occasions when individual decisions in regards to a product idea, its potential
design and conceptualization prevail over common formal decisions?
Do you consider your company is regularly following the opportunities that occurred on the
market starting with developing the product concept to fit that opportunity? What are the
challenges with this kind of activity?
C. Evaluation of concept feasibility
What do you take into consideration before developing a new product? Do you take into
consideration only your company’s technological, professional capacities before developing a
new product or also your partners’?
When developing the concept of the new product, do you leave room for future changes? Do you
have any way that you consider the future aspects of product functionality, manufacturability?
How?
Are your customers’ needs the most important aspects considered when your company develops
a new product concept?
D. Organization of FFE
Do you think your company normally has a formal or informal approach towards the early times
of NPD? Do you have any time planning or organized activities within this phase of NPD?
How do you take a decision regarding a product idea, possible design, and product concept? Is it
formally, with consulting other departments or just a decision on a moment?
What difficulties do you find when defining the new product concept, its design and
specifications?
Does your company formally organize the process of generating ideas?
Are your customers’ needs assessed and integrated in the new product idea through formal
processes?