the innovation process: suggestions for improvement …
TRANSCRIPT
THE INNOVATION PROCESS:
SUGGESTIONS FOR IMPROVEMENT IN A
RESEARCH AND DEVELOPMENT ENVIRONMENT
Friedrich Wilhelm Hein Kruger
B.Sc. (Physical sciences) RAU B.Sc. Hons. (Chemistry) RAU M.Sc. (Chemistry) RAU Ph. D. (Polymer science) UPE
Dissertation submitted in partial fulfilment of the
requirements for the degree
Master of Business Administration
in the
Graduate School of Management
at the
Potchefstroomse Universiteit vir Christeli ke Hogr Ondetwys.
Supervisor: Mr. S.P. van der Meme
POTCHEFSTROOM
1998
In Hartlike woord van dank aan alle persone wat in hul onderskeie hoedanighede
bygedra het tot die voltooiing van hierdie skripsie.
In besonder dankie aan:
Mnr. Stephan van der Meme van die Nagraadse Skool vir Bestuurswese aan
die PU vir CHO, vir sy geesdriftige leiding en goeie raad tyde~is die aanloop tot
en skrywe van die skripsie.
Dr. Chris Reinecke, die Hoofbestuurder van Sasol Tegnologie Navorsing en
Ontwikkeling, wat toegelaat het dat ek 'n ondersoek rakende die innovasie-
proses binne die divisie kon doen.
Die personeel van Sasol Tegnologie Navorsing en Ontwikkeling wat betrokke
was by die invul van die vraelyste, deelgeneem het aan onderhoude, en die
uiteindelike resultaat van die studie geproeflees het.
Die bestuur van Sasol Tegnologie Navorsing en Ontwikkeling wat my M.B.A.
kursus aan die PU vir CHO geborg het.
My vrou Enid, vir haar onbaatsugtige bystand, opofferinge en aanmoediging in
die algemeen, maar in besonder tydens die duur van die kursus.
My ouers, mnr. en mev. ti. Kruger, vir hul altyd gewaardeerde ondersteuning.
Sasol Bpk word beskou as die wgreldleier in Fischer-Tropsch tegnologie en streef
daarna om die mededingende voordeel, wat nie noodwendig volhoubaar is nie, deur
internasionalisering te rugsteun. Hierdie strategie weerspieel die maatskappy se
verbondenheid tot volhoubare groei deur die ontwikkeling, produksie, en bemarking
van nuwe produkte en prosesse. Sasol Tegnologie (Edms) Bpk is duidelik 'n vername
rolspeler in die realisering van die visie, en het ten doel om optimum waarde tot die
skatkis van Fischer-Tropsch produkte en prosesse toe te voeg. In der waarheid word
die vermoe om nuwe produkte en prosesse meer doelmatig en doeltreffend as
mededingers te kan ontwikkel, deur kenners op die gebied van Bestuur van
Tegnologie, as 'n vername bron van 'n moontlike volhoubare mededingende voordeel
beskou. Gevolglik is dit noodsaaklik om Sasol se nuweprodukontwi kkelingsvermoe van
tyd-tot-tyd met die van mededingers te vergelyk, wat hierdie loodsstudie by Sasol
Tegnologie Navorsing en Ontwikkeling gei'nduseer het.
'n Nuweprodukontwikkelingsgroep is vyf jaar gelede by Sasol Tegnologie Navorsing
en Ontwikkeling gestig. lndirekte observasie het getoon dat 40 nuweprodukidees
formeel tussen Februarie 1995 en Januarie 1997 in 11 Nuwe ldees Vergaderings van
die Nuweprodukontwikkelingsgroep voorgestel is. Slegs 10% van die idees het voldoen
aan die siftingskriteria om vanaf stadium een (voorlopige evaluasie) na stadil-~m twee
(gedetaileerde evaluasie) in die innovasieproses te promoveer - 'n internasionale
gemiddeld van 40% word in die literatuur as norm gestel. Hierdie resultaat, wat
gemanifesteer het in 'n suksestempo van sowat twee voorstelle uit die groep per jaar,
is beskou as 'n aanduiding van moontlike swakhede in die innovasieproses by die
Nuweprodukontwikkelingsgroep. Sulke swakhede moet ondersoek word, aangesien
foutiewe prosesse die waarde van die maatskappy negatief mag bei'nvloed. Die
mikpuntdoelwit van hierdie ondersoek was gevolglik om op die kwaliteit van nuwe-
produkontwikkelingspogings by die Nuweprodukontwikkelingsgroep te verbeter.
Verskeie diagnostiese tegnieke is gebruik om die mees belangrike tekortkominge in die
vroee fases van die innovasieproses te identifiseer, naamlik: indirekte observasie,
vraelyste, en onderhoude. 'n Oop-einde vraelys het die tegniese personeel getoets
rakende hul kennis van die verskillende stappe in die nuweprodukontwikkelingsproses,
en die strategie wat gevolg is om idees in die Nuwe ldees Vergadering te verkoop. Die
bestuurspersoneel is getoets met betrekking tot hul kennis van die verskillende stappe
in die innovasieproses, en die kriteria wat gebruik is in die siftingsproses in die Nuwe
ldees Vergaderings.
Die empiriese resultate is met literatuur rakende die kritiese sukses faktore in
nuweprodukontwikkeling gei'ntegreer, wat tot die identifikasie van verskeie swakhede
in die nuweprodukontwikkelingsproses gelei het:
Gebrek aan kennis met betrekking tot die verloop van die innovasieproses.
Swak interne belyning rakende die uitvoering van die innovasieproses.
Tekortkominge met betrekking tot die inhoud van die N&O Projekbestuurkursus.
Swak kommunikasie rakende die projeksiftingskriteria van Sasol Tegnologie
Navorsing en Ontwikkeling.
Lae motivering by personeel om aan die Nuwe ldees Vergadering deel te neem.
Tekortkominge rakende die struktuur en die inhoud van die Nuwe ldees
Vergadering.
Hierdie gebreke is geanaliseer, en bespreek in terme van bewese navorsingresultate
wat in die openbare literatuur gepubliseer is. Potensiele aksieplanne is geformuleer ten
einde op die kwaliteit van die innovasieproses by die Nuweprodukontwikkelingsgroep
(sowel as by Sasol Tegnologie Navorsing en Ontwikkeling) te verbeter, naamlik:
Brei hierdie ondersoek uit na Sasol Tegnologie Navorsing en Ontwikkeling.
Verskaf tydige opleiding rakende die nuweprodukontwikkelingsproses.
Hersien die N&O Projekbestuurkursus.
Kultiveer produktiewe kommunikasie.
Skep 'n meer innoverende klimaat.
Herorganiseer die Nuwe ldees Vergadering.
Etlike positiewe resultate is reeds verkry in reaksie op die potensiele aksieplanne wat
in die skripsie vervat is:
Die topbestuur van Sasol Tegnologie Navorsing en Ontwikkeling het besluit om
die inhoud van die N&O Projekbestuurkursus te hersien. Die hersiene inhoud
van die kursus sal uiteindelik met bestaande projekbestuurspraktyke in die
grotere Sasol gei'ntegreer word.
Die Nuwe ldees Vergadering is geherorganiseer. Die kreatiwiteitsessies is,
byvoorbeeld, geskei van besprekings wat sentreer rondom nuwe besigheids-
geleenthede vir Sasol. Weeklikse kreatiwiteitsessies word sedert September
1997 gehou in die Nuweprodukontwikkelingsgroep, met die klem op die
generering van nuwe wetenskaplike idees. Sulke idees mag voorlopers tot
besigheidsidees wees.
In die Nuwe ldees Vergadering van 27 Februarie 1998 is vier nuwe besigheids-
idees deur verskillende lede van die Nuweprodukontwikkelingsgroep voorgestel.
Een voorstel is gesirkuleer, aangesien die bemarkingsinformasie afwesig was.
Die oorblywende voorstelle is, in teenstelling met vorige voorleggings,
geformuleer en verdedig in terme van die kriteria in die projeksiftingslys van
Sasol Tegnologie Navorsing en Ontwikkeling. Al drie hierdie idees is vanaf
stadium een (voorlopige evaluasie) na stadium twee (gedetaileerde evaluasie)
gepromoveer, wat impliseer dat die jaarlikse tempo van idees wat hek een
geslaag het reeds met 50% vermeerder het. Die resultate van vyf verdere Nuwe
ldees Vergaderings, geskeduleer deur die loop van 1998, moet nog
verdiskonteer word.
Sasol Ltd is regarded as the world leader in Fischer-Tropsch technology and
endeavours to reinforce this, not necessarily sustainable, competitive advantage by
globalisation. This globalisation strategy reflects the company's commitment to
sustainable growth through the development, production, and marketing of new
products and processes. Sasol Technology (Pty) Ltd is clearly an important role player
in the realisation of this vision, and strives to add optimum value to the treasure-chest
of Fischer-Tropsch products and processes. In fact, practitioners in the field of
Management of Technology regard the capability to develop new products and
processes more effectively and efficiently compared with one's competitors, as a
powerful source of a possible sustainable competitive advantage. It is therefore
essential to bench-mark our new product development capability against those of our
rivals, which induced this pilot study at Sasol Technology Research and Development.
A New Product Development Group was established five years ago at Sasol
Technology Research and Development. Indirect observation showed that 40 new
product ideas had formally been suggested between February 1995 and January 1997
in 11 New Ideas Meetings at the New Product Development Group. Only 10% of these
complied with the screening criteria to pass from stage one (preliminary assessment)
to stage two (detailed assessment) in the innovation process - the literature suggests
an international average of 40% as the bench-mark. This result, which manifested in
a success rate of roughly two suggestions from the group per year, was regarded as
an early indication of possible weaknesses in the new product process at the New
Product Development Group. Such weaknesses need to be investigated as faulty
processes may influence the value of the company negatively. The purpose objective
of this investigation was consequently to improve on the quality of the execution of
development efforts at the New Product Development Group.
Several diagnostic techniques were employed to determine the most important
underlying causes of the shortcomings in the early stages of the innovation process,
namely: indirect observation, survey questionnaires, and interviews. An open-ended
questionnaire tested the technical staff on their knowledge regarding the various steps
in the new product development process, and on the strategies being followed to
market ideas in the New ldeas Meetings. The managerial staff were tested on their
knowledge concerning the various steps in the new product development process, and
on the screening criteria being used in the New ldeas Meetings.
The empirical results were integrated with the literature on critical success factors in
new product development, which resulted in the identification of several defects in the
execution of the new product development process:
Lack of knowledge on the course of the innovation process.
Poor internal alignment concerning the execution of the innovation process.
Deficiencies in the content of the R&D Project Management course.
Poor communication on the project screening criteria at Sasol Technology
Research and Development.
Low motivation of respondents to participate in the New Ideas Meeting.
Imperfections in the structure and content of the New Ideas Meeting.
These deficiencies were analysed, and discussed in terms of appropriate research
evidence in the open literature. Potential action plans were subsequently formulated
to improve the on quality of the innovation process at the New Product Development
Group (as well as at Sasol Technology Research and Development), namely to:
Expand the investigation to Sasol Technology Research and Development.
Provide timeous education on the new product development process.
Revise the R&D Project Management course.
Cultivate productive communication.
Create a more innovative climate.
Reorgar~ise the New Ideas Meeting.
Some positive results have already been obtained in response to the potential action
plans that resulted from this dissertation:
The top management of Sasol Technology Research and Development has
decided to review the content of the R&D Project Management course. The
revised content will eventually be integrated with existing project management
practices in the bigger Sasol.
'The New Ideas Meeting was reorganised. The creativity sessions were, for
example, separated from discussions on new business opportunities for Sasol.
Weekly creativity sessions are being held in the New Product Development
Group since September 1997, focusing on the generation of new scientific ideas.
These ideas may be precursors to new business ideas.
Four new business ideas were suggested by different members of the New
Product Development Group in the New ldeas Meeting on 27 February 1998.
One proposal was recycled, as the marketing information was absent. The
remaining ideas were, in contrast with earlier proposals, formulated and
defended in terms of the Sasol Technology Research and Development project
screening list. Al three of these complied with the criteria to pass from stage one
(preliminary assessment) to stage two (detailed assessment) in the innovation
process, implying that the yearly rate of ideas that passed gate one has already
increased by 50%. The results of five additional New ldeas Meetings, scheduled
for the remainder of 1998, are still to be discounted.
i
CONTENTS
CHAPTER 1 NATURE AND SCOPE OF STUDY
1.1 INTRODUCTION
1.2 PROBLEM STATEMENT
1.3 OBJECTIVES
1.4 SCOPE OF STUDY
1.5 RESEARCH METHODOLOGY
1.6 LIMITATIONS OF STUDY
1.7 LAYOUT OF STUDY
CHAPTER 2 ORGANISATION PROFILE AND CAUSAL FACTORS 11
2.1 IN'TRODUCTION 11
2.2 PROFILE: SASOL LTD 11
2.3 PROFILE: SASOL TECHNOLOGY (PTY) LTD 17
2.4 CAUSAL FACTORS TO 'THE STUDY 19
2.5 SUMMARY 2 1
CHAPTER 3 THE INNOVATION PROCESS: A LITERATURE SURVEY 23
3.1 INTRODUCTION 23
3.2 LITERATURE SELECTION: FACTS AND FALLACIES 23
3.3 THE ESSENCE OF INNOVATION MANAGEMENT 24
3.4 COMPREHENSIVE DEVELOPMENT STRATEGY 26
3.5 INDEPENDENT STUDIES ON NEW PRODUCT DEVELOPMENT 41
3.6 COMPARATIVE STUDIES ON NEW PRODUCT DEVELOPMENT 44
ii
3.7 ONE SOLUTION - A FORMAL GAME PLAN
3.8 SUMMARY
CHAPTER 4 EMPIRICAL RESEARCH
INTRODUCTION
INDIRECT OBSERVATION
SURVEY QLlESTlONNAlRES
RESULTS OF BIOGRAPHICAL PARTICULARS
INNOVKI'ION PROCESS: FEEDBACK FROM MANAGERIAL STAFF
INNOVATION PROCESS: FEEDBACK FROM TECHNICAL STAFF
IDEA PROPOSAL: FEEDBACK FROM MANAGERIAL STAFF
IDEA PROPOSAL: FEEDBACK FROM TECHNICAL STAFF
SENSING
SUMMARY
CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS 93
INTRODUCTION
CONCLUSIONS
INDIRECT OBSERVATION
SURVEY QUESTIONNAIRES
GROUP INTERVIEW
RECOMMENDATIONS
EXPAND THE INVESTIGATION
EDUCATION ON THE NEW PRODUCT DEVELOPMENT PROCESS
REVISION OF THE R&D PROJECT MANAGEMENT COURSE
CULTIVATE PRODUCTIVE COMMUNICA'I'ION
. . . Ill
5.1 1 CREATE AN INNOVATIVE CLIMATE
5.12 REORGANISE THE NEW IDEAS MEETING
5.13 IMPLEMENTATION OF ACTION PLANS
5.14 SUM MARY
EPILOGUE ACHIEVEMENT OF OBJECTIVES
REFERENCES
APPENDIXES
A - QLIESTIONNAIRE: MANAGERIAL STAFF 132
B - QUESTIONNAIRE: 'TECHNICAL STAFF 138
C - SASOL TECHNOLOGY RESEARCH AND DEVELOPMENT:
PROJECT SCREENING CRITERIA 1 44
D - SASOLTECHNOLOGYRESEARCHANDDEVELOPMENT:
PROJECT MANAGEMENT 1 45
E - MEMORANDUM TO MANAGER: NEW PRODUCT DEVELOPMENT 153
CHAPTER I
NATURE AND SCOPE OF STUDY
I .1 INTRODUCTION
Companies all over the globe are caught up in a product war, and the majority rely
heavily on new product development for growth and profitability. A strong driver of
profitability is the existence of a rigorous new product development process that
emphasises the quality of execution of the consecutive activities. The ability to improve
on the innovation process, that is to drive new products from idea to market faster and
with fewer mistakes, is therefore an important strategic weapon to win this war. This
dissertation focuses primarily on improving the quality of execution of the early stages
in the new product development process. The study was conducted at Sasol Ltd, an
important player in the world of synthetic fuels and chemicals.
1.2 PROBLEM STATEMENT
ldeas for prospective new products and processes at Sasol t td are persistently being
generated on the strategic level at Sasol Synthetic Fuels (Pty) Ltd, Sasol Chemical
Industries Ltd, Sasol Oil (Pty) Ltd, Sasol Mining (Pty) Ltd, Sasol Technology (Pty) Ltd
and other interest groups within the company. ldeas are also being continuously
harvested on the tactical and operational levels within the company, an example of
which follows below.
A New Product Development Group was established five years ago at Sasol
Technology Research and Development in Sasolburg, with the primary mission to
evaluate specific new product proposals in the company on laboratory and pilot plant
scale. The employees should, as part of their job description, continuously generate
ideas for new products or processes which are formally screened each alternate month.
In 1997, the author suspected that too few business ideas pass the preliminary
evaluation stage in the New ldeas Meeting of the New Product Development Group.
Indirect observation showed that 40 new product ideas had formally been suggested
between February 1995 and January 1997 in 11 New ldeas Meetings. Only 10% of
these complied with the criteria to pass from stage one (preliminary assessment) to
stage two (detailed assessment) in the innovation process. An average bench-mark
published by Stevens and Burley (1 997: 17), suggests that a figure of 40% is more in
line with international standards. This result was regarded as an early indication of
possible weaknesses in the new product process at the New Product Development
Group, which needs to be investigated as faulty processes wuld have a negative affect
on the market value of Sasol.
1.3 OBJ ECTIVES
Consequently, the purpose objective of this investigation was to improve on the quality
of new product or process development efforts at the New Product Development Group
(and perhaps at Sasol Technology Research and Development). The goals below were
formulated for realising the purpose objective:
i. Determine systematically if too few new product or process ideas pass the
preliminary evaluation stage in the New Ideas Meeting of the New Product
Development Group. (The unobtrusive assessment confirmed this suspicion.)
ii. Determine the most important underlying causes of the aforementioned
phenomenon, by integrating current practices being followed in the New Product
Development Group with those suggested in the literature.
iii. Suggest potential action plans to enhance the innovation process and the
execution thereof at the New Product Development Group, and perhaps at Sasol
Technology Research and Development.
iv. Encourage the implementation of the potential action plans, and monitor the
outcomes of those strategies that were met with approval. One yardstick for
measuring improvement would be the value of the pass-rate of new project
proposals in the first screening gate of the new product development process.
1.4 SCOPE OF STUDY
I .4.1 Geographical
The investigation was undertaken at Sasol Technology Research and Development,
a division of Sasol Technology (Pty) Ltd. Based at Sasolburg in the Free State, the
Sasol Technology Research and Development team of 337 people (in June 1997) is
responsible primarily for safeguarding Sasol's often unique technological expertise and
executing most of the group's focused research and development programmes. The
study focused, in particular, on the New Product Development Group at Sasol
Technology Research and Development. The group comprised at the time of the
investigation of one laboratory manager, nine graduated scientists, and two graduated
resident engineers.
1.4.2 Field of study
This study focuses in broad on product innovation: the conception, development, and
commercialisation of a new product. Innovation, or new business creation, can in
general be split into two parts: an upstream process and a downstream process. Most
respected companies have a formal process in place to manage the downstream part,
which deals with the conversion of the selected opportunities into successful new
products. Deschamps (1995:35) noted, in contrast, that few companies have set up an
equivalent process to manage the upstream part, which deals with the sensing and
creation of opportunities. This lack of process for managing innovation reflects
management's fear of what is often perceived as a soft and intangible (i.e. creative)
process.
The current study focuses in particular on the preliminary assessment stage in the new
product development process, that is past the idea generation stage but before the
detailed assessment stage. The author prefers to describe these stages in accordance
with the terminology that is used by Cooper and Kleinschmidt (1 993b:79) in Table 1.1
below.
4
Table 1.A : Typical stages in the "stage-gate" new product process.
Source: Cooper and Kleinschmidt (1993b:79)
STAC
GENERATE IDEAS
r Sotictied from wide variety of internal and external sources r Creativity.
1.5 RESEARCH METHODOLOGY
1.5.1 Literature study
A literature study was conducted to identify the most relevant literature dealing with
critical success factors in the new product development process. The databases
Advanced Business Index, Business Periodical Index, Current Contents, and Chemical
Abstracts Select were the main sources of information. These databases are available
on CD ROM.
1.5.2 Indirect observation
The research strategy was to evaluate the new product suggestions in the official
research reports that were issued by the New Product Development Group between
February 1995 and January 1997, and determine the mortality rate of the suggestions
in the first screening gate.
STAGE' I
PRELIMINARY ASSESSMENT
r Inexpensive, quick qualitative scope of project. r Pmfimnary market, technical, financial assessments.
1 -5.3 Survey questionnaires
The research approach was to use two open-ended survey questionnaires: one for the
managerial staff and one for the technical staff in the population.
.. STAGE 2 I I
DETAILED ASSESSMENT
r Build business case. r Detailed market study, cornpetiifve analysis, technical appraisal. r Detailed financial appraisal.
The technical staff were tested on their knowledge with regard to the various
steps in the new product development process, and on the strategies followed
to sell ideas in the New Ideas Meetings.
The managerial staff were tested on their knowledge with regard to the various
steps in the new product development process, and on the screening criteria
that is used in the New ldeas Meetings.
1.5.4 Sensing
A formal but unstructured group interview was conducted during the New ldeas Meeting
of 25 August 1997. The goal was to establish the needs and the concerns of the
participants on issues such as the fundamental purpose of the New ldeas Meeting.
1.5.5 Interviews
Several informal interviews were conducted probing for the strengths and weaknesses
of the innovation process at Sasol Technology Research and Development.
I .6 LIMITATIONS OF STUDY
1.6.1 Extrapolation of results
The study was conducted in the New Product Development Group at Sasol Technology
Research and Development. The group was established in 1993 and comprised of a
laboratory manager, nine graduated scientists and two graduated resident engineers
in June 1997. Although one may be tempted to extrapolate the results, the author
regard the outcomes of such a highly focused study as non-representative of the
general operations within Sasol Technology Research and Development.
Sasol Technology Research and Development is involved in several scientific and
engineering disciplines (coal technology, Fischer-Tropsch processing technology,
applied and basic catalysis, separation processes, product development, process
development, biotechnology, and environmental protection). The division employed 307
permanent and 30 temporary workers in June 1997. The study is more probably an
important pilot study, and may provoke similar investigations in other sectionslgroups
of Sasol Technology Research and Development.
1.6.2 Bench-mark
The understanding of the new product development success curves (number of ideas
versus stage in the new product development process) is important for at least one
reason: to bench-mark one's own new product development process against other
companies in the industry. There is a great deal of confusion and debate in the
literature about the "true" shape of success curves for industrial innovation. Two
examples will be presented below:
Example 1.
Research on the attrition rate of new product projects in the USA (Booz Allen &
Hamilton, 1981 :I 3) revealed that seven new product ideas were on average considered
for every substantially new commercially successful product in 1981 (Figure 1.1 ). There
are, however, variations by industry in that manufacturers of consumer non-durable
goods considered more than 14 new product ideas whereas the manufacturers of
industrial goods considered seven new product ideas to generate one successful new
product.
Example 2.
In contrast, research on the attrition rate of new product projects in the USA (Stevens
& Burley, 1997:16) revealed that 3 000 raw ideas were considered on average for every
substantially new commercially successful industrial product in 1997. The logarithmic
plot of the number of new product ideas that advance to the next stage of development
(Figure I .2) was presented as a so-called Universal Success Curve, which ostensibly
applies to most industries including industrial chemicals.
The question then arises which one of these studies are correct, and should be used
as the bench-mark. The answer is that both of the studies are correct, as the results
depend on the stage of the success curve one starts counting. Hence, the "Significant
Development" stage in the study by Stevens and Burley (1 997), probably corresponds
Figure 1 .I: The attrition rate of new product projects in the general industry.
Legend
4 Screening and evaluation: 1968
Business analysis
Development
Screening and evaluation: 1981
Business analysis
Development
Testing
Commercialization
40 50 60 70 Percentage of time
Source: Booz Allen and Hamilton (1 981 : 13)
Figure 1.2: The Universal Success Curve of new product projects in the general industry.
r -- Legend
1 Unwrltlen raw ideas (3 000) ' Ideas submitted (300)
Small projects (1 25)
I Significant developments (9) I Major developments (4)
I Launches (1.7)
I Cornrnercial success (1) I
3 4 5 Stage of development process
Source: Stevens and Burley (1 997: -I 7 )
to the "Screening and Evaluation" stage in the study by Booz Allen and Hamilton
(1 981). The Universal Success Curve covers the entire range of project activity from
ideation to commercialisation, and was therefore used as the bench-mark in the current
study. The Universal Success Curve is, however, undoubtedly an approximation as:
Absolute numbers on the attrition rate of products in the new product
development process are not kept by industry.
b The attrition rate of new products in the new product process changes
over ti me.
b The attrition rate of new products in the new product process is
dependent on the type of industry.
1.6.3 Questionnaire validation
The open-ended survey questionnaires in the study were not validated. The questions
were compiled by integrating literature on the key success factors that affects then new
product development process, with standard practices being followed in the New
Product Development Group until June 1997. The questions were therefore tailor-made
for the situation, which can result in illogical judgments and conclusions. No
discrepancies were, however, observed.
1.7 LAYOUT OF STUDY
A schematic layout of the investigation is presented in Figure I .3, and entails the
following:
Chapter 2 presents a brief overview on the organisation in which the
investigation was undertaken, namely Sasol Ltd, and deals with the causal
factors that induced the study. This information, in coherence with that in
Chapter I , highlights the present situation.
Chapter 3 deals with the most relevant literature in previous research efforts on
new product development. The critical success factors that were identified by
practitioners in the field of Management of Technology for establishing an
9
outstanding innovation process, are reviewed. The literature survey gave the
necessary background to formulate realistic goals for achieving the purpose
objective.
Chapter 4 presents the results that were obtained with the indirect observation,
the open-ended survey questionnaires, and the unstructured group interview.
The diagnostic questionnaires were compiled by employing the information in
Chapter 2 (causal factors) and Chapter 3 (literature survey).
Chapter 5 deals with the conclusions and recommendations. The information in
Chapter 4 (empirical results) are integrated with those in Chapters 1 and 2
(current situation) and Chapter 3 (literature survey). Potential action plans to fill
the gap between the current situation and the purpose objective are presented.
Early results stemming from some recommendations are discussed.
The Epilogue deals with the achievement of the objectives and future actions.
10
Figure 1.3: Schematic layout of the dissertation.
RECOMMENDA TlONS
" "r-7. . - r ' . ' " " ' ' ' " ' " ' ' ' '
' EPILOGUE ACHlEVEMENT
OF
OBJECTIVES
CHAPTER 2
ORGANISATION PROFILE AND CAUSAL FACTORS
2.1 INTRODUCTION
The investigation was conducted at Sasol Technology Research and Development, a
division of Sasol Technology (Pty) Ltd, which is in turn a wholly owned subsidiary of
Sasol Ltd in South Africa. The discussion in this chapter focus on the profile of Sasol,
and the distinctive role of Sasol Technology Research and Development in maximising
the wealth of our shareholders. The causal factors that induced the study are
subsequently presented.
2.2 PROFILE: SASOL LTD
2.2.1 General overview
From a small start in the 1950s, Sasol Ltd has become a giant in the world of synthetic
fuels and chemicals. Sasol represents the realisation of the visions and dreams of
scientists and industry leaders (SCC, 1997b:2-15), culminating in the establishment of
the world's only proven oil-fromaal operations in the world. The Sasol process (based
originally on a combination of the German fixed-bed and the American fluid-bed
Fischer-Tropsch process) has become a blueprint for synthetic fuel projects. The
successful commercial application of Sasol's technology, backed by continued research
for more than 40 years, has established Sasol as a world leader in this field.
Sasol became a private sector company in 1979 when Sasol Ltd, the Group's holding
company, was listed on the Johannesburg Stock Exchange. Sasol bought the State's
50% share in Sasol Two in 1983, and Sasol Three's 50% share was acquired in July
1991. The company had a market capitalisation of more than R30-billion in 1997.
Sasot's ability to manufacture synthetic fuels contributes significantly to South Africa's
energy supply, in that the company fulfilled in 44% of the country's liquid fuel
requirements in 1997. Through the utilisation of indigenous raw materials, Sasol
currently provides 160 000 jobs (directly and indirectly) and savestearns foreign
exchange of some R6 000-million per annum. The South African economy hence
benefits substantially from these petrochemical operations.
2.2.2 Corporate structure
The development of the Sasol Group over the years eventually led to the rationalisation
of the corporate structures in 1993 (SCC, 1993:4) to align the divisions more closely
with the various business activities of the Group. The restructuring places:
the chemical activities at Sasol Chemical Industries (Pty) Ltd,
the synthetic fuel activities at Sasol Synthetic Fuels (Pty) Ltd,
the mining activities at Sasol Mining (Pty) Ltd, and
the oil refining and fuels marketing activities at Sasol Oil (Pty) Ltd.
The main operating companies and divisions within the Sasol Group, as published in
our Annual Report of 1997 (SCC, 1997c:14-15), are shown in Figure 2.1. Sasol
Synthetic Fuels initiated a comprehensive transformation process in 1995 (SCC,
1997c:23), to counter the impact of reduced tariff protection on synthetic fuels and to
enhance our competitive edge. The transformation, called Vulamehlo, started with the
r~rganisat ion of Sasol Two and Sasol Three into a gas production division (Syngas)
and a synthesis division (Synref). This new structure should optimise the use of
facilities, raw materials and human resources.
2.2.3 Downstream thrust
Sasol's unique synfuel technology, which produces both fuel and chemical components
in a single synthesis step, provides a significant cost advantage in the production of
petrochemical feed-stock. The recovery of high value chemical components, many of
which are currently marketed as petrol, and placing them in high value chemical
markets is thus an ongoing priority. Chemicals represented 20% (per volume) of
Sasol's production in 1997 (Cox, 1997), but technically chemicals could represent 44%
of our production. The coal gasification process, and the large number of commercially
successful products stemming from the downstream processes are depicted in Figure
2.2. Several feasibility studies are under way to identify additional new opportunities
in global markets, in agreement with the new Sasol vision launched in January 1997:
Figure 2.2: The coal gasification process, and the large number of commercially successful products stemming from the Fischer- Tropsch and other downstream processes.
Goal water A :..
Perraffins Hard waxes Medium waxes Speciatty waxes Pipeline gas
Low temperature F ischer-Tro~sch
Ammonia Tars Pitches Green coke Carburislng coke Phsnol cl.efa#s
- - - -- / ,
\ _-.
Alcohols Acetlc acid Propionic acid
tr Ketones ! Acetone I Methyl ethyl ketone
I I
High temperature Fischer-Tropsct
Linear low density polyethylene
Explosives Fertilisers Acrylonitrile Methyl isabutyl ketone
L& density 1 : polyethylene
Polypropylene Polyactylonitdle
"To be a respecfed global enterprise, harnessing our talents in applying
unique, innovative and competitive technologies to excel in selected
markets in the energy, fuels, chemicals and related sectors in Southern
Africa and worldwide. "
2.2.4 Technological innovations
Continued research and development has enabled Sasol to launch in recent years two
major, more cost-effective technological innovations: the Sasol Advanced Synthol
(SAS) process, and the Sasol Slurry-Bed Process (SSBP). The state-of-the-art and first
of its kind SAS reactor was commissioned during June 1995 (SCC, 1996a:40-41), at
Sasol Synthetic Fuels at Secunda. The design of this reactor is based on Sasol's
proprietary technology for the conversion of synthesis gas to a wide spectrum of liquid
petroleum products, and was designed and developed by Sasol Technology Research
and Development over 13 years. The continuous and stable operation of this reactor
led to the announcement, during May 1996, that the existing 16 Synthol reactors will
be replaced with eight SAS reactors at a total cost of R860-million (SCC, 1997b:lO).
The combination of these high-temperature Fischer-Tropsch reactors will maintain the
existing production volumes, product selectivities and yields, but at significantly lower
capital, operating and maintenance costs. The SAS reactor has 30% greater production
capacity as compared to the mature circulating fluidjsed bed Synthol reactor.
Sasol has also invented proprietary process technologies for the recovery and
manufacture of some of its products including alpha olefins, anode coke, sulphur (the
SuIfolin process in conjunction with Linde AG from Germany), and specialty waxes.
2.2.5 Capital expenditure
During its first three decades, Sasol's primary drive (SCC, 1 997b:5-15) was to produce
a range of highquality synthetic fuels, especially petrol and diesel, from coal. Since the
mid-1 980s the Group's emphasis has shifted towards the development and marketing
of synthetic fuels and an expanding spectrum of value-added chemicals for domestic
and international markets.
The historical speech of mr. F.W. de Klerk on the 2nd of February 1990, gave more
momentum to Sasol's transformation from a petroleum producer to a petrochemical
producer. Over a six financial year period (1 989190 to 1995196), Sasol will have
invested an estimated R8 500-million in capital expenditure projects, most of them for
the construction of new chemical plants or projects to upgrade andlor expand
established coal mining, synfuel production, chemical produdion and oil refining
operations. These expenditures emphasises Sasol's strong commitment to capital
expenditure and growth. The Group's current scope of capital expenditures includes
the following chemical projects that have been commissioned in 1997:
b A R167-million greenfields plant at Sasol Synthetic Fuels (Secunda) to
extract and purify acetic acid and propionic acid from the acidic waste-
water streams.
b A R43-million project for debottlenecking the ammonia plant at Sasol
Chemical Industries (Sasolburg) increased the production capacity by
almost 14%.
t A R78-million project to expand the 1-hexene feed preparation unit at the
Sasol Alpha Olefins plant (Secunda) as part of a three-phase project to
expand the hexene production capacity.
b A R189-million plant at Sasol Synthetic Fuels (Secunda) for the
preparation of tertiary amyl methyl ether. The ether will be used in the
formulation of unleaded petrol.
New projects, exceeding R2.6-billion in value are currently being considered, some of
which include: acetic acid expansion, propylenelpolypropylene expansion, methanol,
detergent alcohols, synthetic lubricants, 0x0-alcohols, acrylic acidlacrylates, propylene
oxide/glycols, styrenelpolystyrene.
2.2.6 Upstream thrust
Complementing the downstream thrust into higher-value chemicals, is the entry into the
upstream drive (SCC, 1996c:37) of offshore oil exploration under the auspices of Sasol
Petroleum International (Pty) Ltd. Sasol Petroleum International has been conducting
extensive offshore exploration in the Atlantic seabed off the coast of Namibia in 1997,
and has also set sights on regions such as Northern and West Africa and Australasia.
2.2.7 Globalisation
The petrochemical industry has been a pioneer (SCC, 1997c:6-7) in transcending
national boundaries. In line with this philosophy, Sasol employees will reinforce the
company's competitive advantage through a co-ordinated, prudent, and focused
programme of globalisation. Sasol's globalisation plans centre on the increased
marketing and manufacturing of products beyond South Africa's borders, supported by
Sasol technology.
Keen interest in partnerships utilising Sasol's unique Slurry Phase Distillate process
technology for the production of environment-friendly diesel and other high-quality
products from natural gas. At least two projects are in prospect before the year 2000,
in partnership with the Qatar General Petroleum Corporation and Statoil of Noway,
respectively.
2.3 PROFILE: SASOL TECHNOLOGY (PTY] LTD
2.3.1 Strategic role
The complex nature of Sasol's unique technologies, processes, petrochemical streams,
and markets inspired the establishment of Sasol Technology (Pty) t td (SCC, 1996b:l-
2) as the custodian of the Group's manifold technological interests in synfuels, oil
refining and petrochemicals technology. Sasol Technology today comprises two main
operational divisions: Sasol Technology Engineering Services, and Sasol Technology
Research and Development. Sasol Technology's vision is:
"To create and exploit a sustainable competitive advantage in producing
high-quality synthetic fuels and value-added petrochemicals for global
markets. "
In this quest, Sasol Technology fulfils a strategic role by helping the Group to add
optimum value to its treasurechest of fuels and petrochemicals derived from low-grade
coal for diverse South African and international markets.
2.3.2 Sasol Technology Research and Development
The Sasol Technology Research and Development division is situated at Sasolburg.
Besides Research and Development's suite of well-equipped laboratories, including
state-of-the-art analytical equipment, the division operates several pilot-plants, an
advanced computer network, a sophisticated library, and maintenance workshops
(SCC, 1996b:6). During the 1 990's1 the division has designed, developed and operated
several notable pilot-plants. Besides the multiple Ficher-Tropsch pilot-plants, other
examples include those pilot-plants used to:
b produce high-purity acetic acid and propionic acid from waste-water
streams,
b synthesise detergent alcohols from Fischer-Tropsch olefins,
b furnish ultra-pure I -pentene and I -hexenel
b convert hydrogen sulphide into elemental sulphur,
synthesise higher-value chemicals from Sasol's acetone, and
b produce beta-carotene.
The division's major feats include research and development projects which culminated
in the successful commissioning of two completely new types of Fischer-Tropsch
reactors. The first commercial SAS reactor was commissioned in 1989 at Sasolburg,
and a larger SAS reactor (8m diameter) in 1995 at Secunda. The commissioning of the
SSPD reactor in 1993 at Sasolburg was probably an even greater achievement. These
new-generation reactors exceeded critical design specifications in their first years of
commercial operation, and have earned several prestigious rewards (SCC, 1997a:67)
such as:
rn The Walter Flowers Achievement Award from the United States of America-
based Council on Alternate Fuels, was awarded in 1995 to Sasol Synthetic
Fuels and Sasol Technology Research and Development for their overall
contribution to the commercial development of coal conversion and synthetic
fuels processing technologies (among them the new SAS reactor).
w One of the five finalist Kirkpatric Chemical Engineering Achievement Awards
from the McGraw-Hill Companies' Chemical Engineering magazine, was
awarded to Sasol in 1995 for the extremely successful commissioning of the
SSPD process.
2.3.3 Product research
Committed to product diversification and value-adding, Sasol depends on Sasol
Technology Research and Development's product research groups (SCC, 1996b: 10-
I I ) for new products and processes. These groups aim to improve:
Sasol's understanding and utilisation of its technologies, raw materials,
processes, and product streams, and
b the range, quality, and applications of its chemical products; especially
those with a higher market value.
The emphasis on product and process development has enabled Sasol to manufacture
and market special grades of cresols, xylenols, synthetic lubricants, solvents, novel
polymers, and other products. A strong analytical group and expertise in molecular
modelling provide a valuable support service to the beneficiation programme.
Not all of Sasol's technology and processes are unique, such that Sasol does not need
to undertake all development work of its own accord. The top specialists in the world,
whether they be associated with South African or foreign research institutes and
universities, are also involved. The results of any such research undertaken for Sasol
become the property of the company.
2.4 CAUSAL FACTORS TO THE STUDY
2.4.1 The new product dilemma
The new product manager of the 1990s faces a dilemma. There is, on the one hand,
an increasing pressure for the development of successful new products to ensure
prosperity. New product development is, on the other hand, a very risky financial
endeavour in the environment of the modern organisation. These aspects will be dealt
with below:
Inno vativeness: a strategic weapon.
Companies all over the globe are caught up in a product war, and the majority
rely heavily on new product development for growth and profitability. There is
good reason for such interest in product innovation: an annual Fortune survey
(Uttal, 1987:6246) rated American companies on a number of criteria, including
"value as a long-term investment". Cooper (1990a:45) used this data to
conclude that: "The single strongest predictor of investment value was found to
be the degree of innovativeness in a company". This positive relationship
between innovativeness and investment value is shown for top international
companies in the chemical industry in Figure 2.3. The ability to improve on the
innovativeness of an organisation is therefore an important strategic weapon to
win the product war.
Figure 2.3: The relation between innovativeness and value as a long-term
investment. Data applies to the chemical industry. Scale: 0 = poor, 10 =
excellent.
Legend
Union Carbide FMC Grace < ? Celanese Hercules Cyanamid
Allied I Monsanto Dow
DU Pont
lnnovativeness
Source: Cooper (1 990x45)
Product innovation: a risky endeavour.
Booz Allen and Hamilton (1981:6) estimated that 46% of all the resources
devoted to new product development in the United States of America are spent
on products that either fail or are cancelled, making product innovation a very
risky endeavour in the modern organisation. A reason for the high failure rate
is the turbulent and uncertain envirorlment that affects new product development
(Gupta & Wilemon, 1990:24-25) in technologically advanced industries.
Consider, for example, the escalating domestic and global competition, the
continuous development of new technologies that quickly obsolete existing
products, and the changing customer needs and requirements which truncate
product life cycles.
2.4.2 Building development capability
New product managers at Sasol may deal with the dilemma above by continually
expanding, upgrading and improving the development capability of the organisation.
In fact, Wheelwright and Clark (1992b:311) regard the capability to develop new
products and processes more effectively and efficiently compared to one's competition
as a powerful source of a possible sustainable competitive advantage. It is therefore
essential to bench-mark Sasol's new product development capability against those of
our rivals from time-to-time, which induced this pilot study at Sasol Technology
Research and Development.
2.5 SUMMARY
Sasol was founded in the 1950s, and has grown from strength to strength with the
commissior~ing of extremely large Fischer Tropsch plants at Sasol Two and Sasol
Three. Today Sasol is regarded as one of the most powerful and respected companies
in the petrochemical industry, and savedlearned South Africa foreign exchange of some
R6 000-million in 1997.
Sasol is the world leader in Fischer-Tropsch technology, and currently reinforces this
competitive advantage further by more extensive beneficiation programs since the early
1990s. The company's petrochemical plants are undergoing modifications, renovations,
and new-plant expansions to provide more valuable chemicals for the domestic and
export markets. The launching of the new Sasol vision in 1997 gave momentum to the
company's globalisation drive.
The reason for existence of Sasol in today's turbulent international environment is
excellent innovation. Sasol Technology is instrumental in supporting Sasol's continuing
innovation, diversification and growth through its excellent and well-integrated research
and development, project management and engineering services. Sasol Technology
has a proud history of innovation, and has received numerous international rewards in
recognition thereof.
The new product manager of the 1990s faces a dilemma. There is, on the one hand,
an increasing pressure for the development of new products. New product development
is, on the other hand, very risky. Sasol may deal with the dilemma by continually
cultivating the development capability of the organisation. It is therefore essential to
bench-mark Sasol's new product development capability against those of our rivals,
which induced this pilot study at Sasol Technology Research and Development.
CHAPTER 3
THE INNOVATION PROCESS: A LITERATURE SURVEY
3.1 INTRODUCTION
There has been an increased interest in: "What separates the winners from the losers
in new product development?" since the 1950s' as the question became more-and-
more actual in today's white water environment. This survey aims to identify the most
relevant literature in the field of new product development, and focuses in particular on
those critical success factors that enhance the probability of launching a successful
product. This information was integrated with the causal factors to the study, and was
subsequently used to diagnose the innovation process and the execution thereof in the
New Product Development Group. The recommendations that follow on improving the
innovation process in a research and development environment are also judiciously
interwoven with the literature.
3.2 LITERATURE SELECTION: FACTS AND FALLACIES
One should be extremely careful with the interpretation of literature results that led to
the derivation of those critical success factors that drive the innovation process. Major
reasons concern the poor uniformity with regard to the exact definitions of some of the
terms in the field of new product development, and the selection of the types of
corr~parries andlor products in previous research reports. Consider, for example, these
points of contention:
What is the definition of a new product?
Only those studies that focused on "major" new products or "significant" new
market entries are considered in the literature survey. Products representing
modest line extensions or minor design changes were, for example, not
regarded as new and as such studies on these projects are excluded.
When is a new product a success?
Unless otherwise stated, only those studies that equated successful product
24
innovation to being commercially successful were considered in the literature
survey. In general, the concept must have realised an exceptable financial profit
to the company.
How long should a new entry have to achieve success?
If a product is marketed prematurely and languishes in the marketplace before
catching on, it can be called either successful or unsuccessful. No selection was
made in this regard, as such information is seldom given in the literature on new
product development.
What types of organisations should be included?
Studies that focused on the industry in general, or on the chemical industry in
particular, were included in the literature survey. These companies must have
a strong commitment to new products, as there is no sense in bench-marking
Sasol's activities against those of non-innovative companies.
What types of products should be included?
There is, in general, a difference in the slJccess rates of new products destined
for the consumer and industrial markets (Hopkins, 1980:4-8). The literature on
new product development does not always distinguish between these two
categories, but this survey deals mainly with products destined for industrial
markets.
These self-imposed limitations reduced the general literature on new product
development considerably, and brought the account more in line with actual new
product development practices in the industrial chemical industry.
3.3 THE ESSENCE OF INNOVATION MANAGEMENT
Wheelwright and Clark (1 992b:28-29) suggest three important potential benefits of
effective product and process development efforts namely: market success, resource
utilisation, and organisational renewal. These benefits promise to yield rich financial
rewards such as irr~proved return on investment, higher profit margins, expanded sales
volume, lower costs, and increased productivity.
Market success.
b New products or processes can open totally new markets, or complement
existing product offerings by product mix changes.
b New products, their associated manufacturing processes, and their
distribution channels can be the vehicle to leapfrog the competition.
b A superior development can set industry standards, which may present
an important barrier to enter that industry.
b New products or processes can establish a leadership image that
translates into market dominant designs.
Resource utilisation.
b Well-executed development projects may capitalise on previous
investments in the respective organisational functions.
› Successful development efforts should improve the leverage of existing
assets such as the sales force, factories and field service network.
b New developments may assist in eliminating weaknesses that stif led the
development of future products and processes with superior potential.
Organisational renewal.
b The excitement, image and growth associated with product and process
development efforts may capture the commitment, innovation and
creativity of the entire organisation.
b Successful developments may enhance an organisation's ability to recruit
the best people. Proper integration of the entities (individuals, groups,
functions, businesses) in the respective systems of the organisation
sho~~ ld result in an extremely flexible competitor.
b Development projects themselves are often the vehicle by which new
approaches and new thinking are adopted, and subsequently become
part of the procedures andlor values of an organisation.
Unfortunately, in most firms this promise is seldom fully realised. Even in very
successful companies, new product development is tinged with significant
disappointment and disillusionment, often falling short of both its full potential in
general and its specific opportunities on individual projects. Research on new product
development is therefore concerned with the causes of the promise-reality disparity
and, even more important, with countermeasures to elirr~inate these deficiencies in the
process. Section 3.4 deals with portfolio management in new product development,
setting the stage for a concise overview on the innovation process of individual new
products or processes.
3.4 COMPREHENSIVE DEVELOPMENT STRATEGY
3.4.1 Causes of the promise-reality disparity
Wheelwright and Clark (1992b:29-33) presented several common pitfalls in new
product development that cause the great disparity between promise and reality, such
as:
The moving target.
Too often the basic product or process concept misses a shifting technology or
market, resulting in a mismatch. This can be caused by locking into a technology
before it is sufficiently stable, targeting a market that changes unexpectedly, or
making invalid assumptions about the distribution channels.
Mismatches between functions.
While the moving target problem usually reflects a mismatch between an
organisation and its external environment, mismatches also often occur within
an organisation. Such mismatches may result from a lack of communication
among the organisational functions, or from a sequential "over-the-wall"
approach to project management.
Lack of product distinctiveness.
Often new product development ends in disappointment because the new
product is not as unique or defensible as the organisation anticipated. If all the
factors that may impact on the development and eventual commercialisation are
not properly investigated, the organisation may lock into a concept too quickly.
For example, the market may dry up or critical technologies may be sufficiently
widespread that imitators appear overnight.
Unexpected technical problems.
Project delays and cost overruns often can be traced to an overestimation of a
company's technical capabilities, or even a lack of knowledge and development
resources. Projects can suffer delays and stall in midcourse if essential
inventions are not completed and drawn into the designers' repertoire before the
development project starts.
Problem-solving delays.
Every new product development activity involves uncertainty with regard to
specific problems and the resources required to resolve them. Too often
organisations allocate all their development resources to known project
requirements, leaving little or no cushion for the unexpected. Subsequently,
when unanticipated problems occur and the project experiences delay,
managers rob Peter to pay Pall. Once delays occur, costs increase, pressures
mount to cut corners, and additional problems erupt.
Unresolved policy issues.
Several very specific choices and decisions must be made during any product
or process development project. If major policies have not been articulated
clearly and shared, these choices often initiate policy issues that may affect the
entire organisation. Resolving policy issues during the heat of the battle and at
senior levels of the organisation inevitably engenders delay and further
complications.
Injudicious participation of senior managers.
Most senior managers play little, if any, role in the early stages (knowledge
acquisition, concept investigation, basic design) of a development effort. Once
a project progresses to the point of building prototypes and trying to show the
performance characteristics (or lack of characteristics) of those prototypes,
management awakens and remains attentive until prototyping problems have
been resolved. When the product is introduced, all too often customers discover
several remaining issues and problems, and management again focuses its
attention on this effort.
Under such circumstances tremendous amounts of managerial, technical, and
functional expertise are employed to avoid competitive disaster rather than to
provide competitive advantage. The managerial contribution is thereby largely
reactive, piecemeal, and tactical. Burgelman et a/. (1 996:657-660) maintain
senior managers need a much more comprehensive approach to apply
development resources in a way that is pre-emptive, proactive, and strategic.
The remainder of this section will focus on achieving the latter advantages.
3.4.2 Development strategy framework
In reality, many organisations use an approach to product and process development
in which critical elements of strategy, such as a technology plan and a marketing plan,
are only connected in individual projects. These technology and productlmarket
strategies are seldom explicitly integrated with other individual product development
projects (Wheelwright & Clark, 1992b:33). The primary defects of such an approach
are:
t a failure to focus the individual project sufficiently to guarantee its rapid,
productive execution;
t a failure to provide sufficient up-front planning to effectively link individual
development projects to the technology and productlmarket strategies;
and
t an unrealistic burden on the individual project so that the drivers must
address organisational policy issues, functional mismatches, as well as
meet the challenges inherent in any development project.
As a result, individual projects fall short of their potential to: implement the technology
and productlmarket strategies, capture market position, improve resource utilisation,
and facilitate organisational renewal. Wheelwright and Clark (1 992b:34) observed that
organisations with superior development capabilities have a much more comprehensive
framework for development strategy, as shown in Figure 3.1, which provide a far more
secure foundation for individual projects. This strategic framework for managing the
development portfolio of an organisation addresses four main purposes of an integrated
development strategy, namely to:
b create, define, and select a set of development projects that will provide
superior products and processes;
b integrate and coordinate functional tasks, technical tasks, and
organisational units involved in development activities;
b manage development efforts so they converge to achieve business
purposes as effectively and efficiently as possible; and
b create and improve the capabilities needed to make development a
competitive advantage over the long term.
'The expanded framework accomplishes these purposes by adding two pre-project focal
points, namely development goals and an aggregate project plan, where technology
strategy and productlmarket strategy can be discussed and integrated. The tect- nol logy
and productlmarket strategies play a key role in focusing development efforts on those
projects that collectively will accomplish a clear set of business goals and development
objectives. In addition, individual projects are undertaken as part of a stream of projects
that not only accomplish strategic goals and objectives, but lead to systematic learning
and improvement. The elements of this encorr~passing development strategy framework
are discussed below.
Figure 3.1: Development strategy framework.
Technology strategy
i 'I Technology assessment
forecasting
objectives project plan execution
/"
learning and improvement
Market assessment
forecasting
Source: Wheelwright and Clark (1992:35)
3.4.3 Technology planning and strategy
'The objective of technology strategy (Burgelman & Maidique, 1988:233-235) is to guide
the organisation in acquiring, developing, and applying technology for competitive
advantage. Technology strategy typically address the next key issues:
t The strategy must define those technological capabilities and
competencies in which the organisation seeks to establish and maintain
a distinct competitive advantage. The type of competitive advantage the
company wishes to achieve, namely low cost or differentiation, must be
seriously considered in the selection of these technologies. Any of the
technologies in the value chain can have a significant impact on
competition.
t Technology strategy must deal with the integration of inside and outside
sources. Technological capability may be developed internally through
investment in people, equipment, and facilities. Such resources are
expensive, and will severely limit the number and scope of core
technologies a company can opt to develop internally. Technology may
also be acquired from outside the organisation through sponsored
research, joint ventures, and licensing.
t The organisation must thirdly distinguish between the timing and
frequency of entering the market with new technologies. Technological
leadership and followership have an implicit time dimension, as late
entrants can either be leaders or followers whilst pioneers can only be
leaders. Porter (1 985: 186-1 91 ) suggested distinct advantages and
disadvantages of being a technology leader, which should be considered
in formulating the technology strategy. The frequency of implementation
will depend on the nature of the technology, the industry and strategic
choice.
Integrating the overarching technology strategy with specific product or process
development projects requires action plans for the development and the implementation
of technological capability (Wheelwright & Clark, 1992b:38). There exists two critical
technology-related issues in this regard, namely:
Separate the technology invention from application.
The technology invention should be separated from the application. The timing,
prerequisites, resources, and specific outcomes are largely unpredictable for
inventions under development, and therefore invariably causes delay,
backtracking, and disappointment on inclusion in an advanced development
project. Clearly, the required inventions should be proven beforehand, that is off
the critical path in commercial development projects.
The use of the comprehensive development strategy model can do much to
address this technological issue, by forcing clarification of the objectives of the
technology strategy. In such approach, all the technologies that will be required
in each of the primary business functions before proceeding with a specific
commercial development project are identified. For each of these technologies,
a clear distinction between early and advanced technology developments will
ensure that the required inventions precede their application in commercial
development projects. Such approach will align the objectives of the technology
strategy and the comprehensive development strategy.
Integrate product and process development.
The product and manufacturing process technology development paths should
be integrated. Development projects often disappoint because many companies
develop a rather narrow technology strategy that focus on product technology
development only. The full benefits of the product technology will never realise
if the manufacturing process cannot simply deliver the quality, cost, or timeliness
the product requires.
The comprehensive development strategy can largely pre-empt this critical
technological issue by providing a long-term focus on product and process
technology evolution efforts, and an intermediate-term focus on advanced
product and process developments. The latter developments will most likely find
application in one or more of the future commercial development projects.
Successive product and process generations should be matched to maximise
the competitive benefits of technological improvements.
3.4.4 Productlmarketing planning and strategy
The objective of marketing strategy (Kotler, 1994:92) is to direct and coordinate the
marketing effort for achieving the product's objectives in a target market. Typically, a
business' productlmarket strategy address four important issues:
t Decisions should be taken regarding the product mix, which is the set of
all the product lines that a company offers for sale to its buyers. The
product mix is characterised by a certain width, length, depth, and
consistency.
t Who will be the target market? The supplier company should distinguish
the major market segments, target one or more of these segments, and
develop product and marketing programs tailored to each selected
segment.
b Marketingchannel decisions should be taken. These are among the most
complex and challenging issues facing a company. Each channel system
creates a different level of sales and costs. The chosen channel will
significantly affect and be affected by the other elements in the marketing
mix.
t Why will customers prefer one company's products to those of the
competitors? The key to achieving organisational objectives resides in
learning the needs and wants of target markets, and delivering the
desired satisfactions more effectively and efficiently than competitors can.
Integrating the overarching productlmarket strategy with specific development projects
raises two critical issues (Wheelwright & Clark, 1992b:42) which should be addressed
at both the strategic and tactical levels of the company, namely:
Decisions concerning platform products.
There are specific factors involved in the choices an organisation makes about
the number, timing, and rate of change of platform products, such as:
b Technology evolution. The rate of technology change impacts how much
new knowledge is available, and when it can go into a next-generation
platform product.
b Competition. The rate and time at which competitors introduce new
generations of platform products affects how long an existing generation
can remain in the marketplace and still be viable.
b Return on investment. The investment required to develop the next-
generation product and associated process.
b Customer support. Providing a continuous flow of products that meets the
needs of targeted markets and channels for product novelty,
customisation, and performance affects the timing and structure of the
general products offered.
b Available resources. Generally, next-generation platform development
efforts require significant resources over an extended period. Available
resources are limited, and can usually execute only a handful of platform
projects every couple of years.
Decisions concerning derivative products.
Decisions on platform generations will affect decisions concerning derivative
products (Wheelwright & Clark, 1992b:43). While the market often makes only
minor distinctions between platform and derivative products in the line, for
development planning (and manufacturing) the distinctions are significant
because of the differences in resources required to develop and support them.
The productlmarket strategy therefore needs to address these concerns:
b The timing of the derivative products, developments and market
introductions relative to the timing and life cycle of platform generation
developments from which they derive.
b The fraction of sales expected to come from derivative versus platform
products.
t The nature of the markets and channels served by the derivative
products (example: niche markets) in contrast to those served by platform
products (example: volume segments).
The leverage on development resource investments as well as operating
investments (example: sales force, factories) to be provided by derivative
projects.
The role of derivative products in extending the life of platform products
and retaining the market position until a next generation can be
completed and introduced.
3.4.5 Development goals and objectives
An overarching technology and marketing strategy impart guidance and direction to
the development effort. The company must, however, define business goals and
development objectives (Wheelwright & Clark, 1992b:44) to ensure consistency and
coherence across the technology and marketing strategies, respectively. At the
aggregate level goals and objectives need to be made explicitly, and then
juxtapositioned to examine their compatibility and complementarity. The purpose of this
process is integration both at the aggregate level and at the individual project level.
When effectively tied together, such goals provide an organisation with confidence that
their strategies will generate the business performance desired. Typically, these goals
concern:
t market share for individual or clusters of products,
aggregate revenues and profits,
time and frequency of platform and derivative introductions,
aggregate technology achievements, and
new productlnew process performance objectives.
At the operating level, there is also a need for goals that can guide the individual
project, yet connect its contribution to longer-term objectives. Important performance
criteria of individual project developments are the cycle time, productivity, and quality.
3.4.6 Aggregate project plan
The process of working out business goals and development objectives integrates
technology and commercial plans from the standpoint of strategic purpose and intent.
The aggregate project plan (Wheelwright & Clark, 1992a:72-75) scales the integration
down to the level of specific projects and resources. The purpose of creating such a
plan is to ensure that the collective set of projects will accomplish the overarching
business goals and development objectives, and build organisational capabilities
needed for further developments. 'The aggregate project plan addresses these issues
systematically by disclosing how the project set evolves over time, which new projects
should be added, and what role each project should play in the overall development
effort.
The procedure in creating an aggregate plan is to first define and map the different
types of development projects. Two possible dimensions for classification are the
degree of change in the product, and the degree of change in the manufacturing
process. The two-dimensional construct of Figure 3.2, called the aggregate project
matrix, classifies individual projects into three categories. The central category includes
the derivative, breakthrough, and platform projects which are viewed as commercial
development projects. 'These projects lead to the introduction of new products and
processes, which will most likely be commercially successful. Projects in the research
and advanced development category are precursors to commercial development, while
projects in the alliances and partnerships category can either be commercial or basic
research. The projet types in each of these categories are discussed in more detail
below:
Derivative projects.
Platform projects establish the basic architecture for a set of follow-on derivative
projects. Derivative projects range from improvements on features of existing
products to cost-reduction modifications on existing production processes.
Development work on derivative projects typically falls into three classes:
incremental product changes, incremental process changes, or incremental
Figure 3.2: The aggregate project matrix. The degree of product and process changes determine the type and magnitude of the
development effort required.
Source: Wheelwright and Clark (1 992a:74)
ADVANCED Process changes
P r 0
d u C
t
C h a n
9 e S
New core process
New core product
Next-generation product
Addition to product family
Add-ons and enhancements
BREAKTHROUGH
PLATFORM
DERIVATIVE
Next-generation process
Single department upgrade
Tuning and incremental
changes on both dimensions. Incremental projects typically are more clearly
bounded, and therefore require substantially less development resources to
those in the other categories. Management involvement should therefore be
minimal.
Breakthrough projects.
Breakthrough products often incorporate revolutionary new technologies or
materials, and accordingly require dramatic changes in manufacturing process.
Such projects are precursors to totally new product/process generations that can
even define new markets. The development of these new families of products
and processes hence requires much more creativity, greater degrees of
freedom, and more time and resources. Development teams should be given
considerable latitude in designing both the product and the process. These
projects tend to be of high risk and high return, both to the organisation and
those who work on them.
Platform projects.
Platform projects typically last over several years. Such projects entail more
product andlor process changes than derivatives, but less than breakthrough
projects. Well-planned and well-executed platform products typically offer
fundaniental in-~provements in cost, quality, and performance over preceding
generations. Because of the extent of changes involved, successful platforms
require considerable up-front planning with the involvement of engineering,
marketing, manufacturing, and senior management.
Companies target new platforms to meet the needs of a core group of customers
but design them for easy modification into derivatives through addition,
substitution, or removal of features. Well-designed platforms also provide a
smooth migration path to between generations so neither the customer nor the
distribution channel is disrupted. Platforms hence offer considerable competitive
leverage and the potential to increase market penetration, yet many companies
underinvest in them. The most common reason is that management lacks
awareness of the strategic value of platforms, and secondly fails to create well-
designed platform projects. Senior managers can play a pivotal role in creating
and guiding product and process generations and architectures.
Research and development.
Research and development is the creation of the know-how and the know-why
of new materials and technologies that eventually translate into commercial
development. Research and development projects compete with commercial
development projects for resources, which requires an appropriate balance.
Relying on only one or two project categories for the bulk of the development
work invariably leads to suboptimal use of resources, an unbalanced product
offering, and subsequently a poor competitive marketing position.
Alliances and pattnerships.
Alliances lie outside the boundaries of the development map, and can be formed
to pursue any kind of project: research and development, breakthrough,
platform, or derivative. As such, the amount and the type of development
resources and management attention needed for these projects can vary widely.
Even though partnerships are an integral part of the project development
process, many companies do not include such considerations in their project
planning. They often separate the management of partnerships from the rest of
the development organisation and fail to provide them with enough development
resources. If the partner company takes full responsibility for a development
project, the acquiring company should still devote in-house resources to mor~itor
the project and capture the new knowledge being created.
In summary, the aggregate project plan places senior managers in a much better
position with regard to resource allocation and timing decisions that recognise available
development capacity and the need to avoid overcommitting scarce resources. By
understanding how the project types differ provides useful information about the
40
required management style, the kind of resources needed and how these should be
allodted. The planning and sequencing of development projects should also be much
more natural and effective.
3.4.7 Project management
The goals and objectives of the development strategy framework set, in coherence with
the aggregate project plan, the stage for the execution of individual development
project's. Each individual project should be connected to the broader strategy and
direction of the business by, for example, establishing clear goals that will ensure the
project's contribution to overall development objectives. A consequence is that project
leaders have a much clearer sense of mission and purpose, which simplifies the project
and focus the actual development work.
The literature in Sections 3.5 and 3.6 below deals with the innovation process at the
level of managing individual projects. The topic was subdivided, due to the isoteric
nature of the field, according to the research methodologies used in previous studies
and include:
independent studies in new product development, and
comparative studies in new product development.
3.4.8 Post-project learning
The final element in the development strategy is post-project learning. Post-project
learning concerns the continuous improvement in those fundamental capabilities that
drive development performance, which may eventually result in a sustainable
competitive advantage (Bowen et a/. , 1 994: 1 18-1 19). However, learning from individual
development projects has proven to be an elusive goal for many organisations. Senior
management should provide leadership on effective mechanisms to learn across
development projects in organisations.
3.4.9 Previous success accounts
Positive results have been observed in applying the comprehensive development
strategy approach above. Consider, for example, the studies of Clark and Fijimoto
(1 991 : Product development performance as quoted by Burgelman et a/. , 1 996:660) on
the quality of new car development programs in the automotive industry in Europe,
America and Japan. According to their findings, car manufacturers that use the
traditional development approach take 25% longer to develop new products, require
almost twice as many engineering hours, and tend to have significantly lower product
quality relative to those manufacturers where the development strategy approach is
followed. It will be interesting to observe how the application of Wheelwright and
Clark's (1 992b) development strategy framework performs in the chemical industry, as
no literature reports were ostensibly published before in this regard.
3.5 INDEPENDENT STUDIES ON NEW PRODUCT DEVELOPMENT
3.5.1 Case studies
Several methodologies were used in the earlier studies on new product development
management, each with certain advantages and disadvantages. Case studies on the
development of specific new products constitute the earliest research (Baruch &
Barbour, 1971 ; Rosenbloom, 1976). This type of research provided detailed
descriptions of each phase in the innovation process, but lacked the statistical validity
of a systematic study of sufficient size. Investigators therefore began to study larger
samples, usually focusing on groups of either successful or alternatively unsuccessful
products.
3.5.2 Studies concerning new product successes
Some researchers isolated the new product successes, and focused only on these in
the subsequent investigation. An early publication in this regard was the landmark
study of Myers and Marquis (1 969: 1-1 17), who investigated 567 successful product and
process innovations. These innovations were developed at 121 companies with their
interests spread over five manufacturing industries. The most important findings of
these researchers related to:
4 Customer needs.
Identify and understand the customer's needs. New products were more
successful if designed to satisfy a perceived need, rather than developed to take
advantage of a new technology. This observation has been confirmed by
numerous researchers in subsequent studies (vide infra).
4 Communication.
Organisational communication, both internal and external, was found to be very
important. The information generated and diffused internally in organisations
represented a major portion of the information required to develop the
innovations. This finding suggests the need for strong interfaces between the
functional groups, especially between research and development and marketing.
4 Game plan.
Myers and Marquis (1 969) were among the first to recognise that a game plan
exists in product innovation: some companies had in place a logical flow of
activities, from idea to launch. A simplistic five-step model was proposed as a
result of studying these 567 successes.
3.5.3 Studies concerning new product failures
Other researchers have focused on product failures as the unit of analysis. In a
Conference Board study on new product programs in the United States (Hopkins,
1 980: 12-20), information was provided by 148 members of The Conference Board's
Senior Marketing Executives Panel. The companies represented include a broad cross
section of mediuni to large-sized firms, of which 91 sell primarily to industrial markets
and the remainder to consumer markets. The Conference Board inquiry concluded that
the most important causes for product failure centred on:
+ Marketing information.
Insufficient or faulty marketing research was cited as the most frequent cause
of product failure. Thus, after a new item has failed to perform up to expectations
marketing managers frequently confess to a serious misreading of customer
needs, or too little field testing, or over-optimistic forecasts of market need and
acceptance.
4 Technical defects in production.
Technical problems in design or production were found to be the second most
common cause of new product failure. These difficulties often arise in converting
from pilot-stage development work to full-scale production, which resulted from
shortcutting of key technical and product-testing stages in the innovation
process. Some of these problems can frequently be overcome, but only after
costly delays.
4 Entry time.
The third common downfall of new products is poor timing. The penalties for
moving too slowly, or too fast, stem not only from technical problems, but also
from flawed planning, organisation and control. Timing can be especially critical
in a cyclical industry.
3.5.4 Validity of independent studies
Apart from the important insights generated by these studies, conclusions reached by
studies on of either successes or failures must be viewed very carefully.
First, studies that focus in isolation on either successful or unsuccessful new
products, could unfold development factors characteristic of the type of products
in the sample that may not be comparable with those of other products.
Second, if these factors are common to both the success and failure samples,
then this approach will not be suitable to differentiate successful from
unsuccessful development. Myers and Marquis (1 969) found, for example, that
the majority of the 567 successful innovations in their study was market-derived.
In a later study, Cooper (1 981 :78-79) confirmed that threequarters of successful
projects in his study were market-derived, but three-quarters of unsuccesful
projects were also market-derived.
Third, studies of either successes or failures may not provide a profound
understanding of differences with respect to product development processes,
the organisational strategies, the external environments, and other factors that
may influence a product's outcome. Such concerns about methodology led
researchers to use an approach that directly compared product successes and
product failures.
3.6 COMPARATIVE STUDIES ON NEW PRODUCT DEVELOPMENT
3.6.1 Studies by Rothwell and coworkers: (1 974)
The Scientific Activity from Patterns of Heuristic Origins (SAPPHO) study, the first
comparative study of product success and failure, was conducted in the early seventies
in the United Kingdom. The SAPPHO II investigators (Rothwell ef a/., 1974) identified
43 product success and failure pairs. The products were selected from two unrelated
industries in order to identify possible industry effects: 22 were in the chemical industry
and 21 in scientific instruments. The 43 pairs were compared along 122 dimensions,
and 24 were found to have statistical significance higher than 1 .O% as determined by
the binomial test. Multivariate analysis were subsequently used to extract from these
24 variables five underlying areas of difference between successful and unsuccessful
innovations. The SAPPHO II investigation confirmed some of the conclusions in Section
3.5, in that product success was related to the:
+ Understanding of user needs.
+ Marketing and publicity efforts at launch.
+ Effective scientific communication, and the use of external technology.
Furthermore, the SAPPHO study introduced two new criteria in new product success,
relating to:
+ Research and development teams.
Teams responsible for the development of the product or process must be
extremely efficient and effective. Such teams should have an ability to identify
product defects prior to the product launch, assess the feasibility of projects,
select the most promising projects, appropriately allocate both capital and labor
resources, and efficiently utilise the available resources.
+ Managerial strength and characteristics.
The new product project must have an executive champion or business
innovator, who is responsible for the overall progress of the project. This senior
manager has direct or indirect influence over the resource allocation process,
and uses hislher authority to channel resources to new technological
innovations. A large share of the development risk therefore belongs to the
executive champion. The business innovator facilitates the cooperation and
comniunication between functional groups, and should not be confused with the
project champion.
3.6.2 Studies by Utterback and coworkers: (1 976)
The innovation process is dependent on external influences such as changes in the
economic environment, regulatory constraints, technological developments, industrial
markets, and conipetitors. Utterback et a/. (1 976) examined the relationships between
these environmental influences, and the sources and outcomes of a sample of
research and development projects undertaken in Western Europe and Japan. The
projects spanned the computer, consumer electronic, textile, industrial chemicals, and
automotive industry; with the purpose of identifying systematic differences amongst
industries with regard to the innovation process. Field interviews were conducted in one
division of 54 companies and in two divisions of five companies, yielding a total of 64
geographically and organisationally separate sites. The researchers identified 66
successful, 51 unsuccessful, and 47 on-going cases which were spread in roughly
equal proportions across the five industries. The most striking differences between
successful and unsuccessful products (p-value < 0.03 in the hypothesis testing) were
in line with previous studies:
+ Ease in commercialisation.
The majority (80%) of successful projects experienced no initial difficulty in
entering the market, while the larger majority of unsuccessful cases (90%) had
difficulty in the initial marketing attempts. Hence, successful innovations have
fewer unwanted surprises in production, less after-sales problems, and need
less adaptation by users.
+ Technical necessity.
All of the projects sampled as successful in commercial terms were judged either
moderate or outstanding technical successes, while this was also true for 36%
of the unsuccessful cases. Technical success is therefore seen to be a
necessary but not sufficient condition for commercial success.
+ Patent protection.
Interestingly, the results concurred with the research of Rubenstein et al. (1 974)
in the United States, in that a negative relationship between adequacy of patent
protection and commercial success was found. The respondents considered it
difficult to obtain an easily defensible patent in 59% of commercially successful
projects, while the figure was 41% for unsuccessful projects. This amply
illustrates that a relationship found between variables such as adequacy of
patent protection and commercial success does not imply a causal connection.
One could speculate that the innovations in successful projects may be more
difficult to patent, since the products or processes face more competition.
Salient differences were found concerning the impact of environmental influences on
the outcome of the innovation process in the different industries that were spanned in
the investigation. The major differences pertained to the type of stimulus that initiated
the project, the level of competition in the industry, the ease of patent protection, and
regulatory constraints. Regulatory constraints were in 1976 perceived to be of
moderate or great significance in only 10% of computer projects, 13% of consumer
electronics projects, 17% of textile projects, 32% of industrial chemical projects, and
in 57% of automotive projects. It will be interesting to compare these figures with
today's figures on regulatory constraints.
3.6.3 Studies by Teece and coworkers: (1 986)
One of the biggest myths in new product development is the notion: First info the
market wins! For example, the beverage company RC Cola was the first to introduce
cola in a can, and the first to introduce diet cola. Although these new products were in
strong demand, RC Cola failed to reap the financial advantages of their innovations
(Teece, 1986285-287) as both Coca Cola and Pepsi followed immediately to scoop the
market. Hence, being first in should not be the ultimate goal but rather being best in. For example, Du Pont was the first to introduce polytetrafluoroethylene or Teflonm in
1941, after the accidental discovery of the polymer in 1938. Du Pont remained the
leader in the field with the introduction of two other commercially important
fluoropolymers in 1956 (Teflon FEP@) and in 1972 (TefzelB). Understanding the causal
factors to such failures and successes are indispensable for taking proactive measures
in the course of the new product development process. While technological leadership
or followership is often thought of in terms of product or process technology, the issue
is much broader and concerns any activity in the value chain. Porter (1 985: 182-1 91 )
base the choice of being a technological leader or follower in an important technology
on three mutually dependent factors. The interaction between these yields the best
balance between offensive and defensive innovation strategies, and include:
b The success with which the first mover can defend and sustain the
technological leadership.
The possible advantages an organisation may reap from being first to
adopt a new technology.
F The possible disadvantages an organisation faces by moving first rather
than deliberately following other players.
Teece (1 986:285-297) elaborated on the factors above, and regards appropriability
regimes in conjunction with the control of complementary assets as important
determinants of success in offensive strategies. A regime of appropriability refers to the
environmental considerations, excluding organisation and market structure, that govern
an innovator's ability to capture the profits expected from an innovation. Proprietary
technological advantage are usually protected through the nature of the technology
(product, process, tacit) and the efficacy of legal mechanisms of protection (patents,
copyrights, trade secrets). Complementary assets include generic or specialised
capabilities such as manufacturing facilities, distribution channels, marketing abilities,
and after-sales support. Generic assets are general-purpose capabilities which are
readily available on the open market at competitive terms. Specialised complementary
assets are normally scares, and require irreversible investments to accommodate the
uniqueness of the invention.
An innovator could, in the extremes, either integrate into all of the complementary
assets needed for the application of an invention or access these assets through
straightforward contractual relationships. Contracting is most probably the best strategy
when the innovator's appropriability regime is tight and the complementary assets are
available in competitive supply. Both these conditions apply, for example, to the
petrochemical industry with reference to process innovations. Union Carbide realised
in the 1980s that the protection of process technologies through patents are readily
enforced in petrochemicals, and that there exists no incentive in owning production
facilities which are not highly specialised to the innovation. The company's Engineering
and Hydrocarbons Service subsidiary therefore typically engages in licensing and
offers erlgineering, construction, and management services to customers that are
interested in converting hydrocarbons to petrochemicals. Integration is, on the other
hand, probably the best strategy strategy when the innovator's appropriability regime
is weak and the complementary assets are available in competitive supply. Both these
conditions apply, once again, to the petrochemical industry with reference to product
innovations. However, the innovator may not have the time or resources to build the
complementary assets that would provide the ideal control. The alternative is to gain
access through strategic alliances, which may absorb a large part of the innovator's
rightful income.
3.6.4 Studies by Cooper and coworkers: (1 979)
Two critical aspects in new product development focus on the selection of the best
business opportunities, and on the effective management of the innovation process
from idea to launch. Cooper (1979:93-1,03) addressed these issues in a major
investigation, called Project NewProd, by determining the most important differences
between commercially successful and unsuccessful industrial new products in Canada.
The study differed from the SAPPHO investigation by Rothwell et a/. (1 974) in the
United Kingdom, in that the industry as well as the organisation was kept constant for
each product pair. Cooper's approach hence allowed researchers to identify, in
addition, differences centering on the characteristics of the organisation and the project
team.
The NewProd data was acquired in 1977, by sending questionnaires to 1 03 companies
in Ontario and Quebec. A designated manager in each firm was requested to select
one commercial success that had been introduced by his company, and one failure.
The final sample constituted 102 successess and 93 failures. The respondents were
asked to rate these 195 new product projects along 77 dimensions that described the
environment, organisation, and characteristics of the development process. The results
of the 77 variables were reduced to 18 factors that describe new product innovation.
Factor and multiple regression analysis were employed to identify and prioritise those
factors which separate the successes from the failures. Three factors were strongly
related to product outcome, namely:
+ Product superiority.
The most important single success factor was having a superior new product
that delivered significant and unique benefits in the eyes of the end user. The
odds of success with a superior product were over 80%, while the me too
products achieved a success rate of only 28% (Cooper: 1981 :72). Superior
products have a real differential advantage in the market and typically meet
customer needs better than competitive products, perform unique tasks, have
unique features for the customer, lower the customers' costs, and are of higher
quality than competing products. Such understanding often requires significant
market analysis, and subsequent mariage of technological design and
development to customer needs.
+ Strong market orientation.
The second key to success was market knowledge and marketing proficiency.
Cooper (1981:74) showed that strongly market-orientated projects were
successful 79% of the time, while the odds of success for projects rated weak
in terms of market orientation was but 28%. Market information of successful
projects was superb with regard to understanding the customer needs, product
performance criteria, price sensitivity of the buyers, size of the market, and
trends of the market. Market-orientated projects were carried out proficiently in
terms of activities such as preliminary market assessment, detailed market
research/study, business analysis, prototype trials, trial selling, and market
launch.
+ Technological proficiency.
The third major success factor was competent technological and production
activities, combined with a high degree of synergy between the technological
needs of the project and the resource base of the company. The technical and
production activities in successful projects were conducted proficiently with
reference to the preliminary technical assessment, product development,
prototype testing, pilot production, and production start-up. Companies that
selected new product projects in accord with their technological and production
strengths, acheived higher success rates in new product development. A stick
to the knitting strategy is therefore often desirable in developing new products,
at least in terms of technlogy and production.
3.6.5 Studies by Cooper and coworkers: (1 987)
In a renewed attempt to identify the success versus failure discriminants in new product
development, Cooper and Kleinschmidt (1 987: 169-1 84) repeated the NewProd study
of the mid 1970s. The NewProd Phase II study took a broader perspective of new
product success relative to the NewProd Phase I study, as financial return is but one
measure of success. Different, but not necessarily mutually exclusive, new product
performance measures were considered in the NewProd Phase II evaluation, namely:
profitability level, payback period, domestic market share, foreign market share, relative
sales, relative profits, sales versus objectives, profits versus objectives, opportunity
window on new categories, and opportunity window on new markets.
The data was collected in 1985, by obtaining project development information from 125
industrial product companies in Canada. The respondents were asked to evaluate the
development of one commercial success and one failure that were launched by their
respective companies in terms of 43 variables. These variables represented 10
hypothesis, and most were measured on a zero-to-I 0-scale with anchor phrases. Data
were collected on 123 successes and 80 failures. The hypothesis themselves were
tested using one-way Anovas, while Pearson product-moment correlations were
calculated between each construct and each measure of success. Nine of the 10
hypothesis related strongly to new product success. The most important success
factors, measured in terms of number of correlations and strength of correlation, were
found to be:
+ Product superiority.
The correlation between the product advantage and the 70 measures of success
were the strongest of all constructs, with some correlations in excess of 0.50.
Superior products that delivered real and unique benefits to customers were far
more successful. When the products were ranked in terms of innovativeness
(Cooper, 1990b:27-31), the top 20% performed to the bottom 20% as follows:
differentiated products had an exceptional success rate of 98.0% versus only
18.4% for the undifferentiated, differentiated products had a rated profitability
of 8.4 versus 2.6 out of 10 for undifferentiated products, differentiated products
had a market share of 53.5% versus 11.6% for me too products.
The development of a product with real advantages should therefore become the
number one objective in the new product process. Simply being equal to the
competition, or having a good produd-market fX is not good enough. Top priority
questions in a project screening model should therefore focus on unique
benefits for the customer, product quality, benefit-cost ratio, innovativeness,
product superiority in the eyes of the customer, and solving customers'
problems.
+ Proficiency of development activities.
Undertaking the pre-development activities proficiently was positively correlated
with 10 of the measures of success, and was second in order of importance.
Projects characterised by proficient execution of those activities which precede
the development phase were 75.0% successful, while those where homework
was lacking failed 31.3% of the time. Proper execution of up-front activities
resulted in products with a market share of 45.7%, versus only 20.8% for those
in which homeworkwas poorly conducted or even neglected. The products of
good homework projects were considerably more successful in achieving sales
and profit objectives.
The pre-development steps in the new product process are initial screening,
preliminary market assessment, preliminary technical assessment, detailed
market study, and business analysis. Companies should therefore adopt a game
plan or process model (Cooper & Kleinschmidt, 1987: 182) that incorporates
these up-front activities as an integral part in the innovation process. Managers
must recognise the importance of the early development steps, and should
devote the necessary resources to ensure quality execution. The study showed
that successful projects had 72% more person-days devoted to up-front activities
than failures.
+ Protocol.
Sharp and early concept definition dramatically improve the odds of success.
The protocol hypothesis was significantly linked to eight of the 10 performance
measures, and in the hypothesised direction. Projects that were characterised
by sharp definition prior to development were 3.3 times as likely to be
successful, had higher market shares, were rated 7.6 versus 3.1 out of 10 in
terms of profitability, and tended to meet company sales and profit objectives
much more (Cooper, 1990b:27-31).
The role of protocol, that is gaining agreement on target market and product
strategy prior to charging ahead with product development, supports Crawford's
(1 984:85-91) plea for such a step in new product development. This step should
occur just prior to product development, and hence logically after the completion
of the five up-front steps cited above. If the up-front steps are carried out well,
then defining a protocol should be relatively straightfotward. Here, there must
be agreement on aspects such as the target market, customer's wish list,
product concept, and product features.
One hypothesis, market competitiveness, was interestingly not related at the 0.01
significance level to any of the 10 new product success measures. The remainder of
the nine hypotheses in the study of Cooper and Kleinschmidt (1987:179-182),
correlated to a greater or lesser extent with the successful outcome of new product
developmet projects at the 0.01 significance level. The latter success factors can be
roughly devided into situational and controllable factors. Situational or environmental
factors are more or less fixed, and describe the setting for the project. These include
market potential, marketing synergy, technological synergy, and top management
involvement. Controllable factors refer to those over which the project manager and
team have control and can affect in the short term and include product advantage,
proficiency of pre-development activities, protocol, proficiency of market-related
activities, proficiency of technological activities and top management involvement.
Closer inspection revealed that the strongest success factors fall in the controllable
category. Indeed, the top three success factors (product advantage, proficiency of pre-
development activities, and protocol) are all factors within the control of the project
manager and the team. This finding has important implications. First, it implies that the
way the new product process is managed and executed largely decide project
outcomes. A carefully conceived game plan is therefore needed to ensure that critcal
steps are conducted in the development process, and that sufficient resources are
made available. Second, the environmental variables remain valid screening criteria
for project selection. However, these are not the most important success factors in new
product development.
3.6.6 Studies by Cooper and coworkers: (1 995)
Wheelwright (1 992: 1 ) maintains that those companies entering the market faster and
ahead of corr~petition with products that are well-matched to the expectations of
customers, create significant competitive leverage. Although many authors have offered
advice on how to reduce development cycle time (Cooper & Kleinschmidt, 1994:382),
most are based on speculation, opinion, anecdotal evidence, and case studies.
In a more systematic approach using large samples, Cooper (1 995:49-57) conducted
an investigation to identify those critical success factors that drive timeliness and
profitability in new product innovation in the chemical industry, respectively. Six
different new product performance measures were considered in the evaluation,
namely: profitability level, technical success, time efficiency, domestic market share,
sales and profit impact, and staying on schedule. Factor analysis was used to group
these measures, which resulted in a financial performance factor and a time-related
factor. The financial performance construct included four measures, namely: profitability
level, technical success, sales and profit impact on the company, and domestic market
share. The timeliness construct was based on two measures, namely: time efficiency,
and staying on schedule.
'The survey was conducted in 1989, by soliciting data on 103 development projects from
21 major chemical companies located in the United States, United Kingdom, Germany,
and Canada. Virtually all of the projects were concerned with the development of
speciality or non-commodity chemical products such as polymers, additives, and
coatings. Data was collected on 68 commercial successes and 35 failures. A pretested
questionnaire was distributed, and the respondents were asked to evaluate one
successful and one unsuccessful project that were commercialised by their companies
in terms of 71 variables. These variables were measured on a zero-to-1 0 scale with
anchor phrases, and captured 10 hypothesised constructs driving timeliness as well as
profitability. An index or score was computed for each construct by calculating the
average across its constituent descriptor variables. The hypothesis themselves were
tested using one-way Anovas. Pearson product-moment correlations were calculated
between each construct and profitability, as well as between each construct and
timeliness.
The analysis showed that the critical success factors in new product development are
fairly universal, in that most of the results of this investigation parallelled those from
studies which were not focused on a partic~~lar industry (see Cooper, 1979; Cooper &
Kleinschmidt, 1987). Nine of the 10 hypothesis related to new product success at the
0.01 significance level. Market competitiveness was, in line with previous studies, not
a decisive determinant of project outcomes. A new construct, project organisation, was
found to be a strong determinant of profitability and is discussed further on. The study
confirmed that the factors below are indeed drivers of success of development projects
in the chemical industry:
+ Product advantage.
+ Market orientation.
+ Protocol or early concept definition.
+ Up-front homework.
+ Project organisation. (New construct.)
+ Market/technological synergy.
+ Technical proficiency.
Three of the hypothesis namely marketltechnological synergy, market competitiveness,
and product superiority were not significantly linked to timeliness. Hence, the most
important determinant of project success and profitability (product superiority) involves
no time penalty. Such projects were undertaken just as time-efficiently and were on-
schedule just as often as me-too new product projects. Seven of the hypothesis were
related to timeliness in new product development at the 0.05 significance level. The
constructs technical proficiency, early product definition or protocol, market
attractiveness, and launch quality correlated in decreasing order of irr~portance with
timeliness. However, the three strongest factors that drive project timeliness were, in
rank order:
+ Project organisation.
The use of a true cross-functional project team is by far the strongest driver of
project timeliness (correlation of 0.48), and the fifth most important determinant
of project profitability (correlation of 0.35). Such a project team is composed of
players from different organisational functions, is accountable for the project
from beginning to end, is dedicated to the project, is led by a strong leader or
champion, and has top management support.
b In an accountable team, all the players are responsible for the progress
and performance of the project. All team members are accountable for all
functional facets of the project. Members are typically accountable for
more than one phase in the innovation process.
b Top management support implies that senior employees act as executive
sponsors for the project, and keep the commitment. This includes senior
management from all the various functions to ensure alignment regarding
the prioritisation of, and commitment to, projects.
+ Up-front homework.
Up-front homework was the second most important driver of timeliness
(correlation of 0.41), and the fourth strongest determinant of profitability
(correlation of 0.37). Here, up-front homework tasks include initial screening,
preliminary technical and market assessments, detailed market study, and a
detailed business or ,financial analysis. In those development projects where the
team and leader spent more time and effort on the predevelopment stages, time
was actually saved later since the projects were better defined and justified
before the full development stage starts. New product managers must therefore
resist the temptation to cut corners in the early stages of the innovation process,
as the ready, fire, aim philosophy has had very limited success in the past.
+ Market orientation.
A stronger market orientation was the third strongest determinant of cycle time
reduction (correlation of 0.41), and the second most important driver of success
in new product development (correlation of 0.44). The pivotal marketing tasks
include preliminary assessment of the market, detailed market study or market
research, customer test product, test market or trial sell, and market launch.
Hence, projects in which marketing tasks are carried out proficiently tend to be
more profitable and timely by virtue of the following reasons. Building the voice
of the customer into the new product development process sharpens product
definition, and ensures that product requirements and specifications are right.
It also validates and confirms the product design as development and testing
proceed, thereby minimising last-minute changes in product specifications,
which prove costly both in terms of lost time and extra expenditures.
An important quest for cycle-time reduction has been the assumption that fast-paced
new product projects are also more profitable. However, factor analysis showed that
timeliness did not have an exceptionally strong impact on financial performance as
these two factors were virtually independent from each other (vide supra). Although the
correlation between timeliness and profitability was a respectable 0.42, it implied that
84% of profitability was explained by factors other than timeliness. Efforts to reduce
cycle time is therefore a good objective, on the condition that the achievement thereof
will not necessarily improve profitability.
3.7 ONE SOLUTION - A FORMAL GAME PLAN
3.7.1 Industry experience
Re-engineering and reorganising new product processes and structures is an unending
endeavour as organisations strive to improve success rates. The first step in any such
redesign activity is to determine and understand those critical success factors that
make the difference between winning and losing at new products. Research in the field
since the 1960s (see Sections 3.4 to 3.6), revealed several important factors that
discriminate significantly between new product successes and failures. New product
success depends on environmental variables such as the market potential, competitive
situation, market synergy, and technological synergy. Furthermore, Cooper (1 987: 182)
demonstrated that new product success correlates even stronger with controllable
factors such as product superiority, capability in market evaluation, proficiency of
development activities, and expertise in technical activities. The second step focuses
on integrating both categories into a rigorous new product process, to ensure that each
activity is conducted (if necessary) in a timeous and quality fashion. A formal innovation
process should build creativity and discipline and into new product development
(Cooper, 1993b:78), and presents one solution to address deficiencies in new product
programs. The third step concerns an organisational development intervention to
implement the development system, with the ultimate objective of improving the
competiveness of the company. Many distinguished chemical companies such as Du
Pont, Procter & Gamble, Exxon Chemicals, Dow Chemicals, Imperial Chemical
Industries, and Hoechst-Celanese have stage-gate processes in place to guide their
new product developments.
3.7.2 First-generation processes
Today's stage-gate processes are viewed as second-generation models. The first-
generation scheme for new product development was employed in the 1960s by the
National Aeronautics and Space Administration in the United States. Their so-called
Phase Review Process, was an elaborate and detailed scheme for working with
contractors and suppliers on various space projects. The Phased Review Process
broke development into discrete phases (Cooper, 1994:4-5), with review points at the
end of each phase. Funding for the next phase was conditional on the realisation of
certain prerequisites, which were typically that all tasks had been satisfactorily
completed for the previous phase. The process was very engineering-driven to cope
with technical risks, and focused strongly on the design and the development of the
product without involving organisational functions such as marketing. This development
process brought .discipline to an othennrise chaotic process, reduced technical risks,
and ensured completion of tasks. In fact, the engineers and scientists of the 1960s did
manage to put a man on the moon in less than one decade using this system, a feat
that we have yet to repeat. But the Phased Review Process was, on the other hand,
too:
b Cumbersome. The system had laborious check-offs of numerous tasks
at each review point.
b Slow. Projects could be held up in a queue for management review, or
even worse be put "on hold" at a review point awaiting the completion of
behind schedule tasks.
b Narrow. The process dealt only with development phase, rather with the
entire phase from idea to launch.
b Functional. The system was focused on the technical or engineering side
of development projects, that is, on technical risks.
3.7.3 Second-generation process
The stage-gate systems of the 1980s and early 1990s resemble somewhat the Phased
Review Process of the 1960s in that these systems, too, consist of identifiable and
discrete stages preceded by review points. Over the last 30 years, many success
factors have been uncovered in new product development: discriminants that separate
successful projects from the less successful ones, and practices that result in shorter
cycle times. Practitioners in the Management of Technology field have subsequently
developed the newer stage-gate systems which incorporates these success factors, to
yield a formidable managerial instrument. The system shown in Figure 3.3 is fairly
generic, based on new product development models being used at Exxon Chemicals
as well as Procter & Gamble (Cooper, 1994:5-6). This skeleton can be converted to a
custom-tailored new product model, providing a template for driving new product
projects from idea to launch and beyond. The system breaks the innovation process
into definite stages and their concomitant gates:
Stages.
A typical contemporary stage-gate system consists of four to seven stages, with
Figure 3.3: A typical second-generation stage-gate system of the 1980s and early 1990s.
IDEA
Preliminary assessment
Development Detailed assessment
SUCCESS
+
Source: Cooper (1 990a:46)
STAGE 5
Commercialisation +
stages later in the process usually being more expensive than the preceding
ones. Each stage specifies the required actions, including the details on how to
do tasks based on previous best practices. Stages thus prescribe the play-by-
play game plan, which, if adhered to by the team and leader, all but guarantees
success.
The multiple activities in each stage are normally done in parallel, and cut
across functional boundaries. The emphasis is on controllable factors, over
which the project leader and team have command and can affect in the short
term. These controllable critical success factors focus on product superiority,
stronger market orientation, executing pre-development activities, earlylsharp
product definition, and technical proficiency.
a Gates.
Separating the stages are gates, which act as quality control check-points in the
process to ensure that all the critical activities have been conducted in a
proficient manner. Each gate is characterised by a set of inputs, a set of exit
criteria, and an output (Cooper, 1993b:78-79). The inputs are the deliverables
that the project leader take responsibility for, and must bring to the gate. The
criteria in the screening list are used, by a multidisciplinary team of gatekeepers,
to evaluate the quality of the project from a business standpoint. Environmental
variables such as the market potential, competitive situation, market synergy,
and technological synergy are critical success factors which should be included
in the screening list. However, projects should also be screened in terms of the
number one success factor in new product development, namely: product
advantage. The outputs are the decisions taken at the gate, which is typically a
Go/Kill/HoldlRecycle verdict. In the event of a Go decision, senior managers will
consider the action plan for the next stage, and allocate the necessary
resources accordingly.
Stagegate processes present a systematic way of building best practices and critical
success factors into an organisation's new product methodology (Cooper, 1994:5-7),
which an important reason why stage-gate systems work in practice. This second-
generation game plan offers several advantages, in that it:
b facilitates much better cross-functional teamwork,
b puts discipline into an ad hoc or somewhat chaotic process,
t provides a road-map for the project leader and team,
b is a visible process known and understood by all in the company,
b forces more attention to quality of execution via the checkpoint gates,
b makes for a complete process, and
t is faster by parallel processing of activities.
3.7.4 Third-generation process
There are several reasons as to why development systems fail in practice, one being
that organisations follow poor implementation procedures. Innovation processes may
also be less effectivelefficient, or fail completely, due to the inherent weaknesses of the
process itself. Cooper (1 994:7-8) has identified the following flaws concerning second-
generation new product development processes:
b Project prioritisation. The system does not provide for the prioritisation of
projects, and the focusing of scares resources on top-priority projects.
While gates introduce tough GoIKill criteria which cull out bad projects,
these criteria tend to be absolute standards.
t Force bureaucracy. While following the stage-gate process in a religious
fashion may be appropriate for large, higher-risk projects, this may not be
true for all projects. For smaller projects or lower-risk initiatives, this blind
adherence to the system could create unnecessary bureaucracy.
b Restrain projects. As a control measure, stage-gate systems require the
successful completion of one stage prior to embarking on the next, to
ensure the quality execution of critical tasks. In dealing with quality-of-
execution problems, however, stage-gate methods can restrain the
progress of a project for the sake of one minor uncompleted activity.
Cooper (1 994:8-14) forecasts fundamental changes concerning the stage-gate systems
of the 1990s. Third-generation innovation processes are already evolving with the
emphasis on speedirlg up today's effective second-generation process, and on the
more efficient allocation of development resources. The new stage-gate systems will
provide for much sharper focus of resources through portfolio management (see
Section 3.4), will be flexible and adaptable, and will incorporate fuzzy gates which are
both situational and conditional.
3.8 SUMMARY
The literature survey revealed that successful new products programs are a balanced
mixture of good planning, good management, appealing concepts, research well
employed but used with discretion, good timing, appropriate risk-taking, and a pinch of
just plain good luck. Success cannot be guaranteed by conducting certain activities
particularly well, although a single miscue can spell disaster.
The development strategy framework provides an important instrument for managing
development portfolios. In applying this model, the development funnel is embedded
in overarching technology and product/market strategies, playing a key role in focusing
development efforts on those projects that collectively will accomplish a clear set of
development goals and objectives. The aggregate project plan ensures that the right
number and mix of product/process development projects are included in the
development portfolio. Individual projects are undertaken as part of a stream of projects
that accomplish overarching strategic goals and objectives, and contributes to
systematic learning and improvement. Through this instrument, development resources
are applied in a way that is pre-emptive, proactive, and strategic.
The most important critical success factors in new product development on micro level
centres on product superiority, stronger market orientation, up-front homework, sharp
product definition, cross-functional teams, and technological proficiency. These
variables are controllable, implying that the way the new product process is managed
and executed largely decide project outcomes. This points to the need for an effective
64
multi-stage game plan of activities at research and development. Such game plans
have found international acceptance, and are employed by leading innovators such as
Du Pont. Non-controllable variables such as market potential, market competitiveness,
marketing synergy, and technological synergy were also identified as drivers of
success. However, although these factors present important screening criteria, they are
not the most important correlates of success.
65
CHAPTER 4
EMPIRICAL RESEARCH
4.1 INTRODUCTION
The purpose of the empirical research was to decide if too few new product ideas pass
the first screening gate in the new product development process and, if so, determine
the underlying causes of this phenomenon. The information was acquired by employing
techniques such as indirect observation, survey questionnaires and grouplpersonal
discussions.
4.2 INDIRECT OBSERVATION
4.2.1 New ldeas Meeting
The employees of the New Product Development Group participate in two types of
important professional meetings viz. the New Product Development Meeting and the
New ldeas Meeting. Each of these take place six times per year but in alternate
months. The characteristics of each meeting are described below:
New Product Development Meeting.
The purpose of the meeting is to update employees in detail on the status of
each development project, specify the short and long-term direction of each
project, and describe the strategy on how to achieve the set goals. The
allocation of resources is part and parcel of these discussions. A formal
document containing the information stemming from the meeting is subsequently
issued to relevant role-players within the Sasol Group.
New Ideas Meeting.
The purpose of the meeting is to update employees briefly on the status of each
development project. The employees subsequently partake in discussions on
new ideas which are suggested in a formal document beforehand. This
document is not distributed outside the New Product Development Group. The
viability of these ideas is screened according to certain criteria, which will be
dealt with in Section 4.7.2. This study concerns the New ldeas Meeting only.
4.2.2 Collection of data and results
The strategy was to evaluate each of the new idea suggestions in the monthly reports
of the New Ideas Meetings since the inception of the meeting in February 1995. The
evaluation was conducted in collaboration with the Manager: New Product
Development of the New Product Development Group to ensure that the evaluation was
objective. 'The ideas were evaluated in terms of criteria such as technological feasibility,
market feasibility, availability of raw materials, and the strategic fit with the core
competence of the company. The outcome of the new idea suggestions resulted in
either "go" or "no go" decisions, which were used to compile the statistical results in
Table 4.1. The results form such unobtrusive measurements are normally viewed as
being highly reliable, since the possibility of misleading feedback is eliminated.
Table 4.1: Statistical analysis on the outcome of the new ideas that was suggested
between February 1995 and January 1997 in the New Product Development Group.
DATE OF NEW IDEAS MEETING
27 February 1995
21 April 1995
6 July 1995
25 August 1995
26 October 1995
26 February 1996
29 April 1996
24 June 1996
26 August 1996
21 October 1996
27 January 1997
TOTAL
NUMBER OF NEW IDEAS
NUMBER OF NEW IDEAS GIVEN "GO"
6 0
4 1
5 1
3 0
4 1
3 0
2 I
5 0
3 I 0 -
3
2
40
0
0
4
67
4.2.3 Interpretation of results
The information in Table 4.1 shows that only 10% of the new ideas complied with the
criteria to pass from stage one (preliminary assessment) to stage two (detailed
assessment) in then new product development process. The Universal Success Curve
of Stevens and Burley (1 997:17) recommends a bench-mark of 40%, which could point
possible weaknesses in the new product development process at the New Product
Development Group.
4.3 SURVEY QUESTIONNAIRES
4.3.1 Population
The population under discussion in this study refers to the total number of employees
in the New Product Development Group, and one senior manager that acts as the
sponsor of this and other groups at Sasol Technology Research and Development. The
population hence comprised of two managers, nine graduated scientists and two
graduated resident engineers. The whole population was used for the purpose of the
study to present meaningful results.
4.3.2 Collection of data and feedback
The questionnaires were distributed during the New ldeas Meeting on 30 June 1997,
with the purpose of identifying possible weaknesses in the innovation process at the
New Product Development Group. The purpose of the investigation was orally
communicated to the participants, with reference to the results of the indirect
observation which showed that only 10% of the proposals in the New ldeas Meetings
pass the first gate in the new product development process. The participants were
subsequently asked to complete the respective questionnaires (technical, managerial)
without conversation, and the results were handed in just after completion. These
measures were necessary as some questions tested the individuals' knowledge with
regard to the new product development process. The distribution of the questionnaires
that were issued and analysed is shown in Table 4.2.
68
Table 4.2: Distribution of questionnaires that were issued and analysed.
Legend: The levels 3 and 4 were asked to complete the questionnaires for managerial staff (see Appendix A). The levels 5 ,6 and 7 were asked to complete the questionnaires for technical staff (see Appendix B).
POSITION AT SASOL
MANAGER: Product Research
MANAGER: New Product Development
SCIENTISTS
ENGINEERS
TOTAL
4.3.2 Questionnaire design
The questionnaires were compiled by integrating literature on the key success factors
affecting the new product development process (Chapter 3) with practices followed in
the New ldeas Meetings before June 1997. The interpretation of the questions and the
answers may have resulted in illogical judgments since the questionnaires were not
validated.
The overall purpose was to identify those elements which needed attention to improve
on the preliminary assessment stage in the new product development process, and to
establish the relevance of the screening process in the New ldeas Meetings. Open-
ended survey questionnaires were preferred to closed-ended questionnaires to
encourage freedom of expression. The questionnaires are attached in Appendices A
(managerial staff) and B (technical staff). The elements of the questionnaires are
discussed below and included:
LEVEL IN 'OMPAN'
3
4
5,6, 7
6
Section A: Biographical Particulars.
ISSUED AND ANALYSED
NUMBER
1
I
9
2
13
%
7.7
7.7
69.2
15.4
100.0
Section B: New Product Development Process.
Section C: Idea Proposal.
4.4 RESULTS OF BIOGRAPHICAL PARTICULARS
The biographical data is summarised in Table 4.3, and served as the base for the
results which are discussed in Section 4.4.
4.4.1 Employment term
I. Purpose of questions one, two and five
The employment term of each individual at Sasol or other companies/institutions is
relevant, as the results may be affected by the experience rather than the education of
an individual.
11 . Results
The data in Table 4.3 reveals that three individuals have been employed outside Sasol
for more than five years before joining the company. The Manager: Product Research
was employed at several South African Universities (I965 to 1979), and worked for
Karbochem, Delta G and Sasol respectively. None of the other respondents has had
industrial experience before joining Sasol. The Manager: New Product Development
worked at the University of the Orange Free State for 10 years before being employed
at Sasol. All the respondents started working at Sasol Technology Research and
Development on joining Sasol, and none have worked at other Sasol-related strategic
business units before.
The distribution of the respondents with reference to the number of years employed at
Sasol Technology Research and Development is shown in Figure 4.1. The vast majority
(77%) of the employees in the New Product Development Group have been employed
for less than five years at Sasol Technology Research and Development. In June 1997,
four of these respondents worked at Sasol for less than one year.
Table 4.3: Summary of the academic qualifications and professional achievements of the employees in the New Product Development
Group. The information was recorded in June 1997.
POSITION EXPERIENCE QUALIFICATIONS
MANAGER:
Product Research
MANAGER:
New Product Development
INSTITUTE
B.Sc. (1960)
B.Sc. Hons. (1 961)
M.Sc. (1 962)
DSC. (1964)
B.Sc. (1 978)
B.Sc. Hons. (I 979)
MSC. (1981)
Ph.D. (1984)
MANAGEMENT (LEVEL 3,4)
University of the Orange Free State
(Bloemfontein)
University of the Orange Free State
(Bloemfontein)
University of Fort Hare
(1 965)
University of Pretoria
(1 966 - 1 968)
University of the Orange Free State
(1 969 - 1979)
Karbochem
(1 980 - 1982)
Delta G
( I 983 - 1986)
Sasol Technology Research and Development
(1987 - )
Universrty of the Orange Free State
(1980 - 1989)
Sasol Technology Research and Development
(1 990 - )
POSITION QUALIFICATIONS INSTlTUTE EXPERIENCE
ENGINEER
ENGINEER
SCIENTIST
SCIENTIST
SC1ENT1ST
SClENT1ST
TECHNICAL (LEVEL 5,6,7)
Potchefstroorn University for Christian
Higher Education
(Potchefstroom)
Universrty of Groningen
(Groningen, The Netherlands)
Universrty of Natal
(Pietermariiburg)
Potchefstroom University for Christian
Higher Education
(Potchefstroom)
University of Cape Town
(Cape Town)
University of Stellenbosch
(Stellenbosch)
B. Ing. Chem. (1992)
M. Ing. Chem. (1994)
B.Sc. (1994)
B.Sc. Hons. (I 995)
M.Sc. (1 997)
B.Sc. (1995)
B.Sc. Hons. (1 996)
B.Sc. (1 995)
B.Sc. (1 990)
B.Sc. Hons. (1991)
M.Sc. (1 993)
Vaal Triangle Technikon
(1 993)
Sasol Technology Research and Development
(Jan 1994 - )
Universrty of Twente
(Twente, The Netherlands)
(1 994 - 1 996)
Sasal Technology Research and Development
(Jan 1997 - )
Sasol Technology Research and Development
(Feb 1997 - )
Sasol Technology Research and Development
(Feb 1997 - )
Sasol Technology Research and Development
(Feb 1996 - )
Sasol Technology Research and Development
(Jan 1994 - )
POSITION
SCIENTIST
SCIENTIST
SCIENTIST
SCIENTIST
SCIENTIST
QUALIFICATIONS
B.Sc. (1 989)
B.Sc. Hons. (1989)
M.Sc. (1991)
Ph.D. (1 995)
B.Sc. (1980)
B.Sc. Hons. (1 981)
M.Sc. (1 984)
Ph.D. (1989)
B.Sc. (1991)
B.Sc. Hons. (1992)
M.Sc. (1 993)
B.Sc. (1 988)
B.Sc. Hons. (1989)
M.Sc. (1991)
B.Sc. (1990)
INSTITUTE
Rand Afrikaans University
(Aucklandpark)
University of the Orange Free State
(Bloemfontein)
Potchefstroom University for Christian
Higher Education
(Potchefstroom)
University of Natal
(Durban)
Universrty of Natal
(Durban)
EXPERIENCE
Sasol Technology Research and Development
(Jan 1995 - )
University of the Orange Free State
(1981 - 1994)
Sasol Technology Research and Development
(Jan 1995 - ) Sasol Technology Research and Development
(Jan 1994 - )
Doctoral studies - Universrty of Natal
(Jan 1992 - Jun 1997)
Sasol Technology Research and Development
(Jul1997 - ) Sasol Technology Research and Development
(Sept 1990 - )
Figure 4.1: The distribution of the respondents with reference to the number of
years employed at Sasol Technology Research and Development.
I~etween 1 and 3 year& A
- - I ~ e t w e e n 3 and 5 years]
Above 5 year T-7
4.4.2 Hierarchial Position
I. Purpose of question three
The question relates to the hierarchial level of each individual at New Product
Development. Such knowledge is important, as the outcome of the results may depend
on the content of internal courses aimed at satisfying the needs of various hierarchical
levels at Sasol.
I I. Results
The levels on which the employees in the New Product Development Group function
and report to are depicted in Figure 4.2. These hierarchical levels correspond to the
strategic, tactical and operational classifications.
The Manager: Product Research functions on the strategic level at Sasol
Technology Research and Development. Three groups report to this individual
namely New Product Development, Instrumental Techniques, and Product
Beneficiation. The level three manager is part of top management, and reports
directly to the General Manager of Sasol Technology Research and
Development.
The Manager: New Product Development functions on the strategic] tactical
level at Sasol Technology Research and Development. The scientists and
engineers in New Product Development report to this level four.
The scientists and engineers in New Product Development functions on the
tacticalloperational level at Sasol Technology Research and Development.
Sasol Technology Research and Development strives towards flatter structures
which should enhance the culture of intrapreneurship and innovation. The
reporting relationships amongst the levels five, six and seven scientists are
consequently not fixed, and depend on the types of development p~ojeds at a
given stage.
Figure 4.2: Organisational chart of the New Product Development Group. Lower
level numbers correspond to more senior positions in the hierarchy.
LEVEL 3
LEVEL 4
LEVELS 5, 6, 7
4.4.3 Academic qualifications
I. Purpose of question four
The question relates to the academic qualifications of each individual. This information
is important as the results of the study may depend on the curricula of scientific
degrees offered at the various universities.
Manager: Products Research
Manager: New Product Development
Manager: Instrumental Techniques
Manager: Product Beneficiation
Scientists (9) Engineers (2)
Scientists Scientists Engineer
Interestingly, none of the respondents have switched universities in moving towards
higher degrees. This phenomenon is inherent to the South African milieu, and has
specific drawbacks such as stifling scientific cross-pollination.
4.5 INNOVATION PROCESS: FEEDBACK FROM MANAGERIAL STAFF
The response of the managers concerning their new product development process is
summarised in Table 4.4, and served as the base for the results which are discussed
in Section 4.5. The questionnaire in Appendix A (Section B) is used for the discussion
below.
Table 4.4: Summary of the feedback from the managerial respondents regarding the
new product development process.
4.5.1 Theoretical Evaluation
i. Purpose of questions six and nine
The responses to basic theoretical questions will help to identify the underlying causes
of deficiencies in the innovation process. Questions were designed to test the
respondents' general knowledge on aspects such as the concept of a new product and
MANAGERlAL STAFF
New Product Development Process
QUESTION
6
7
8
9
GIST OF QUESTION
The definition of a new product in Sasol context
Received training on new product development
Presented a course on new product development
Knowledge on the steps in the innovation process
RESULT
Positive
2
2
Negative
2
2
Neutral Spoiled
the steps in the new product development process.
11 . Results
Typical correct answers are presented in Section 4.6.2. The managers furnished
correct answers which were expected considering their respective employment terms,
work experience, positions in the company, and academic qualifications as a whole.
These results show that employees in the higher echelons of Sasol Technology
Research and Development are probably experienced with the broader issues of the
new product development process. It will be shown in Section 4.6 that knowledge on
the innovation process is not necessarily related to employment terms or academic
qualifications.
4.5.2 Education in new product development
i. Purpose of questions seven and eight
Cooper and Kleinschmidt (1996:21) showed convincingly that a highquality new
product process is one of the strongest drivers of profitability. Well-designed courses
on the new product development process should make attendants aware of the critical
success factors that affect the innovation process, which could influence the results of
the study.
11. Results
Neither of the managers has ever received formal training on the broader issues of the
new product development process. They have also never presented a course on the
said topic in industry or academia.
4.6 INNOVATION PROCESS: FEEDBACK FROM TECHNICAL STAFF
The feedback of the technical staff pertaining to the new product development process
is summarised in Table 4.5, and served as the base for the results which are discussed
in Section 4.6. The questionnaire in Appendix B (Section B) is relevant to the
discussion below.
Table 4.5: Summary of the feedback from the respondents in technical positions on the
new product development process.
Legend: 1 . One engineer received training in project management, one scientist received training in project leadership, and one engineer received training in both these Sasol courses.
4.6.1 Education in new product development
I. Purpose of question seven
Cooper and Kleinschmidt (1996:21) showed convincingly that a high-quality new
product process is one of the strongest drivers of profitability. Well-designed courses
on the new product development process should make attendants aware of the critical
success factors that affect the innovation process, which could influence the results of
the study.
TECHNICAL STAFF
New Product Development Process
11. Results
The engineers or scientists have never attended formal training courses on the broader
issues of the new product development process in their respective careers. Related in-
house courses on project management are presented in Sasol namely the Sastech
Project Execution Model course (presented by Sasol Technology Engineering Services
at Secunda) and the Project Leadership in R&D course (presented by Sasol
Technology Research and Development at Sasolburg), the latter of which was
QUESTION
6
7
8
GET OF QUESTION
The definition of a new product in Sasol context
Received training on new product development
Knowledge on the steps in the innovation process
RESULT
Positive
9
3'
5
Neutral Negative
2
8
6
Spoiled
presented for the first time in 1997. The two engineers have attended the Sastech
Project Execution Model course, whilst one engineer and one scientist have attended
the Project Leadership in R&D course.
4.6.2 Theoretical evaluation
I. Purpose of questions six and eight
Answers to basic theoretical questions will help to identify the underlying causes of
deficiencies in the innovation process. Questions were asked to test the respondents'
general knowledge on aspects such as the concept of a new product in the Sasol
context, and the chronological order of the steps in the new product development
process.
11 . Results
The results in Table 4.5 reveal that 18% of the technical respondents do not
understand the concept of a new product. The two resident engineers scored full
marks. The correct answers contained elements of the model answer (Gruenwaldt,
198560) below:
New products are defined as those which are not currently marketed or
manufactured by a company, or products which are viewed as new by a
client.
The results in Table 4.5 show furthermore that 55% of the respondents in technical
positions do not have an adequate understanding of the new product development
process. The exact nomenclature that was used in the answers of the respondents to
describe the steps in the innovation process was not regarded as serious. The
inclusion of the most important steps and the chronological order of these was,
however, considered as important. The correct answers contained elements of the
innovation blueprint (Cooper & Kleinschmidt, 1993b:79) below in proper order:
Idea generation
-> Preliminary assessment Inexpensive, quick quabtative scope of project.
b Preliminary market, technical, financial, legal assessments
-> Detailed assessment Builds business case: product definition, project justification.
b Detailed market, technical, legal appraisal. Detailed compebYive analysis. . Detailed financial analysis and project plan.
-> Development . Product is developed and subjected to laboratory tests. . Pmtotype development. b Development of test plans, manufacturing plans. + Development of maheling plans. b Update financial calculations.
-> Validation Validates the product.
r Validate the marketing and the manufacturing of the product.
b Extended in-house tests and customer field trials. b Pilot runs. . Test market or trial sell.
-> Commercialisation b Market launch and development. . Production.
Knowledge on the new product developnient process is deductively related to the
attendance of Sasol courses in project management or project leadership, since the two
engineers and the one scientist who attended one or both courses scored full marks
in questions six and eight. Interestingly, the combination of the outcomes in Sections
4.4, 4.6.1 and 4.6.2 showed that knowledge on the process is not related to the number
or types of degrees conferred, nor to university attendance, nor to the number of
service years at Sasol. Too little information was available to establish relationships
between knowledge on the innovation process and the curricula of various South
African universities.
4.7 IDEA PROPOSAL: FEEDBACK FROM MANAGERIAL STAFF
The opinions of the managers about the idea proposal practices in the New Ideas
Meeting are outlined in Table 4.6, and served as the base for the results discussed in
Section 4.7. The questionnaire in Appendix A (Section C) is used for the discussion
below.
Table 4.6: Summary of the feedback from the managerial respondents regarding the
idea proposal practices New Product Development Group until June 1997.
4.7.1 Manager present proposal
I. Purpose of question 10
A positive organisational culture is one of the most important elements to enhance
effectiveness, and flourishes in a positive climate. The actions of senior management
could be instrumental in cultivating a positive climate of innovation, such as submitting
at least one written new idea proposal per year.
MANAGERIAL STAFF
Idea
QUESTION
10
11
Proposal
RESULT GIST OF QUESTION
Managers should present at least one written new idea per year
Adequacy of the official project screening criteria
Positive
1
Negative
1
1
I list
12 Conceptual
Neutral
1
Alignment of the proposal and corporate strategy
1
Spoiled
1
Conceptual
Conceptual
13 I
14
15
Are the discussions in the New Ideas Meeting stimulating
Challenge employees with important problems facing the company
Proposals on how to improve the pass-rate of suggestions
82
. . 1 1 . Results
The Manager: Product Research (level three) was satisfied with the presentation of new
idea proposals by levels four and five reporting directly to him, and therefore did not
agree. The Manager: New Product Development (level four) acknowledged that such
an approach could be useful, but should not become compulsory. The latter respondent
has indeed made several written proposals in the New Ideas Meeting since February
1995, which were all scientific in nature.
4.7.2 Adequacy of screening list
i. Purpose of question 11
The official Sasol Technology Research and Development project screening criteria list
was compiled in 1994 (Pearcy & Potgieter, 1994), with the purpose of selecting those
research concepts with enough potential and advance them to project status. A concern
is that such an advanced screening list (see Appendix C) could terminate proposals
prematurely, and should therefore not be used in evaluating potential opportunities at
gate one in the new product development process. Following Cooper and Kleinschmidt
(1 993b:79), gate one corresponds to the screening after the preliminary assessment
stage.
11 . Results
The Manager: New Product Development regarded the criteria in the list as too
restrictive for evaluating potential opportunities at an early stage, which could stifle
creativity. The Manager: Products Research thought the list is adequate for screening
potential business opportunities at an early stage since the list takes in consideration
all the elements for a preliminary evaluation.
4.7.3 Elements of screening list
i. Purpose of question 12
The criteria that need to be considered in project evaluation differ with the
circumstances of the individual company and the concerned industry. The value of the
Sasol Technology Research and Development checklist will be lirr~ited should people
have different perceptions or even misconceptions on what each of the sub-criteria and
the elements thereof entails. The purpose of the question was to test the uniformity in
the application of the screening list.
1 1 . Results
One important consideration in the Sasol Technology Research and Development
project screening list is the alignment of a prospective project and the Sasol corporate
strategy (see Appendix C). Twiss (1 995:131) considers the aspects printed in italics
below as relevant in considering the alignment of the project proposal and corporate
strategy:
b Strategic planning.
The compatibility with the company's current strategy and long-
range plan. These may include an increase of market share of
existing products, market extension by expanding the product
range, entering international markets, reducing manufacturing
costs, enlargement through vertical integration, and growth by
acquisition or merger.
The respondents presented acceptable descriptions on the elements of the sub-
criterium "compatibility with long term plans". Their answers were, however, entirely
different with reference to specific details, which was expected.
b Corporate image.
The corporate image evolves with the value system of the
organisation, and may refer to how the company's products or
services are perceived by the customers. This perception is difficult
to change over a short period.
The respondents gave satisfactory descriptions on the elements of the sub-criterium
"company image". Both regarded the minimisation of the effluent in Sasol's processes
as important, pointing to uniformity in the application of the screening list.
• Risk aversion and innovation attitude.
Selection of a high risk project that could result in a substantial
investment of corporate funds would generally be undesirable in
a company where the top management has a high aversion to risk.
This applies mainly to commercial risks. Top management's
attitude towards innovation is closely related to their risk a version.
Innovators are in general risk-takers.
The respondent's responses concerning the elements of the sub-criterium "fit
riswinnovation culture" were omitted in one case, and incorrect in the other. In this case
there definitely exists lack of ur~iformity in the application of the screening list.
4.7.4 Non-inspiring discussions
I. Purpose of question 13
The discussions in the New ldeas Meetings should be stimulating and inspiring, as the
employees have the opportunity to address the heart and soul of the parent's strategic
requirements. Managerial interventions may be necessary should these discussions
be non-stimulating.
11 . Results
The Manager: Product Research said that the discussions are often non-stimulating as
the project proposals are poorly defined, and the proposers do not follow up with new
information in subsequent meetings. The Manager: New Product Development
believed that those participants who lack the bigger picture regarding product
availability and market opportunities may find the New ldeas Meetings non-stimulating.
4.7.5 Challenging problems
I. Purpose of question 14
The Sasol Group consists of 13 registered companies and 12 divisions (see Figure 2.1
in Chapter 2), which present difficulties for employees to understand the business and
hence to identify opportunities. The problem is exacerbated with dynamic changes in
the company to address changes in a highly competitive environment, which gained
momentum with Sasol's globalisation drive. The quality of the contributions to the New
ldeas Meetings may be enhanced by challenging employees periodically with the most
important product/process problems of the strategic business units and divisions, but
such an approach is neglected. The question is why?
I I. Results
The respondents agreed with the suggestion in principle but raised concerns. The first
concern was that too much information could stifle creativity in the early stages of the
new product development process. The second was that Sasol Technology Research
and Development could become too reactive should the business units and divisions
place more emphasis on those projects which assist in obtaining their yearly purpose
objectives. The objective of Research and Development is to ensure that new products
will be available when required, and that these will make adequate profit to attain the
profit objectives of the parent company. Sasol Technology Research and Development
should therefore place strong emphasis on balancing short, medium and long term
projects.
4.7.6 Proposals for improvement
I. Purpose of question 15
The managers of the New Products Development Group were asked for suggestions
on how to improve the percentage of ideas that pass the first screening stage in the
new product development process. Such advice should be accommodated in possible
future interventions, as each individual has unique needs and aspirations.
11. Results
The suggestions will be integrated with the recommendations in Chapter 5.
4.8 IDEA PROPOSAL: FEEDBACK FROM TECHNICAL STAFF
The feedback of the technical staff with reference to the idea proposal practices in the
New ldeas Meeting is condensed in Table 4.7, and served as the base for the results
which are discussed in Section 4.8. The questionnaire in Appendix B (Section C) is
relevant to the discussion below.
Table 4.7: Summary of the feedback from the respondents in technical positions on the
idea proposal practices in the New ldeas Meeting until June 1997.
TECHNICAL STAFF
Idea Proposal
QUESTION
9
10
11
12
GIST OF QUESTION
Number of ideas proposed
Ego response on rejection of proposal
Scientific ideas (with a remote chance of being a commercial success) have better personal pay- off potential
Business ideas (with a good chance of being a commercial success) have inferior personal pay-off potential
t
RESULT
Positive
-- -
Negative
Conceptual
9
2
7
2
8
2
13 Use of official project screening criteria list
Neutral
10
3
2
1
2
14
Spoiled
Conceptual
Is the official project screening criteria list adequate
16 Proposals on how to improve the pass-rate of suggestions
1
1
1
6
6
15
1
2
Are the discussions in the New ldeas Meeting stimulating
4.8.1 Number of proposals
i. Purpose of question nine
The employees of the New Product Development Group should, as part of their job
description, continuously generate new ideas which are formally screened in the New
ldeas Meetings. The formulation and proposal of ideas on new products or processes
are, however, not enforced and employees may contribute whenever they wish. The
number of ideas suggested per employee may reveal the perceived importance of the
New ldeas Meetings.
I I. Results
The responses of the five employees with less than one year of service at the New
Product Development Group in June 1997 were ignored, since these people have as
yet not made formal contributions to the New ldeas Meetings. The average rate of the
ideas that were suggested between February 1995 and January 1997 was as follows:
two members made no suggestions at all, five members made less than one suggestion
per year, and three members made more than one suggestion per year. The term
"members" is used instead of respondents, since the contributions of those scientists
that left the group before June 1997 or did not participate in the survey analysis were
also allowed for. The rate of suggestions is hence regarded as extremely low,
especially since more than 90% of these ideas were purely scientific in nature and
therefore easier to formulate. The New ldeas Meeting evidently has lower priority than
other obligations, which was also confirmed directly by some employees.
4.8.2 Psyche response on rejection
I. Purpose of question 10
The psychological reaction on rejection of a proposal during a New ldeas Meeting ties
in with Skinner's (1969: Contingencies of reinforcement as reviewed by Szilagyi &
Wallace, 1990: 134-1 42) operant conditioning approach to motivation. The principle
feature of the operant conditior~ing approach to motivation is the connection between
organisational stimuli, performance and consequences. The strengthening (weakening)
of the connection above through rewards (punishment) can result in the desired
behaviour pattern. Similarly, sensitive employees in the New ldeas Meeting may
experience the screening procedure as punishment, which could restrain further
proposals. The purpose of the question was therefore to test the ego response on the
rejection of a proposal.
1 1 . Results
The result in Table 4.7 reveals that none of the respondents thought that the screening
sessions in the New ldeas Meetings were too harsh. The screening session is an
important instrument for uplifting the quality of the proposals, and should not stifle the
number of proposals in the New ldeas Meeting.
4.8.3 Rewards on scientific/business ideas
I. Purpose of questions 1 1 and 12
The expectancy theory of Porter and Lawler (1968) assumes, in contrast with the
content theories, that behaviour is determined by a combination of forces within an
individual which are interacting continuously with a combination of forces in the
environment. The theory assumes that individuals place certain values on work-related
rewards and make conscious estimates of effort -> performance -> reward
relationships. The purpose of these questions was to estimate the instrumentality
parameter in the Vroom's (1964) simplified performance equation: that is the
respondents' perception of the extent to which a positive outcome is associated with
a specific level of performance in formulating scientific or business proposals.
Effort to perform = Expectancy x Instrumentality x Valence
I I. Results
The results in Table 4.7 show that 55% of the respondents perceived that many
excellent scientific proposals (with remote chance of having commercial success) will
not result in valued rewards, while 27% gathered such proposals will result in valued
rewards, and 9% remained neutral. Roughly 90% of the proposals in the New ldeas
Meetings between February 1995 and January 1997 belongs to this class of
suggestions. Some respondents conceded that any new scientific idea is good since
the gross list of ideas could result in one or two breakthroughs. The suggestion of new
ideas should therefore not be connected to merit appraisals as creative thinking would
be hampered.
Furthermore, 55% of the respondents perceived that business ideas (with good chance
of having commercial success) will result in valued rewards, while 1 8% believed such
proposals will not result in valued rewards, and 18% remained neutral.
4.8.4 Use of screening list
I. Purpose of question 13
The official Sasol Technology Research and Development project screening criteria list
was constructed in 1 994 (Pearcy & Potgieter, 1 994), with the purpose of focusing the
efforts of our resources on the most promising ideas. The criteria in the screening list
therefore direct the proposer on how to formulate a proper proposal, and should
increase the likelihood of success in defending the proposal. If people decide not to
use the checklist in formulating their respective proposals, corrective actions may be
necessary.
ii. Results
The figures in Table 4.7 show 82% of the respondents have never considered using the
screening list to formulate their respective proposals in the New ldeas Meeting. The
major reason was that the respondents were not aware of the existence of the checklist.
Two employees with service records longer than three years at Sasol Technology
Research and Development had never seen the list. Inspection revealed that more than
90% of the formal suggestions in the New ldeas Meetings were purely scientific in
nature and neglected to address the criteria in the official screening list, which ties with
the outcome of survey question number 13.
4.8.5 Adequacy of screening list
I. Purpose of question 14
A main purpose of the official Sasol Technology Research and Development project
screening list is to identify those research concepts with enough potential and advance
them to project status. A concern is that such an advanced screening list (see Appendix
C) could terminate proposals prematurely, and should therefore not be used in
screening potential opportunities after the preliminary assessment stage in the new
product development process.
. . 11 . Results
The results are shown in Table 4.7. The individuals were requested to study the Sasol
Technology Research and Development project screening list, and 72% came to the
conclusion that the list contains criteria suitable for an early evaluation. One
respondent remarked that the application of the list was very subjective, while another
regarded the criteria in the list as too restrictive in preliminary assessments.
4.8.6 Non-inspiring discussions
I. Purpose of question 15
The discussions in the New ldeas Meetings should be really challenging and
stimulating, since the scientists and engineers have the opportunity to address the
heart and soul of the parent's strategic requirements. If the discussions are not
stimulating it may indicate that some regard the New ldeas Meeting as a "snoozing
session" upon which intervention should be considered.
ii. Results
The figures in Table 4.7 reveal 63% of the respondents found the discussions in the
New ldeas Meeting tedious. The main reasons for their opinions were the poor quality
of the presentations, the lack of information, and the perception that certain individuals
always seem to dominate the discussion. Merely 18% of the respondents thought the
discussions were stimulating, while 18% remained neutral.
4.8.7 Proposals for improvement
I. Purpose of question 16
The employees of the New Products Development Group were asked for suggestions
on how to improve the percentage of ideas that pass the first screening stage in the
new product development process. Such intelligence should be accommodated in
possible future interventions, as each individual has unique needs and aspirations.
11. Results
The suggestions will be integrated with the recommendations in Chapter 5.
4.9 SENSING
4.9.1 Group interview
An unstructured group interview was conducted during the New ldeas Meeting on 25
August 1997, which was attended by all those who participated in the survey on 30
June 1997. The most relevant results of the questionnaires (Section 4.3 - 4.8) were
presented, which revealed several defects with respect to the execution of the new
product development process. The discussion centred on the question: "What is the
purpose of the New ldeas Meeting?"
4.9.2 Results
The discussion confirmed the observation of the questionnaires, in that nearly all the
scientists and the engineers were convinced that the purpose of the meeting was
similar to an idea generation session. This statement concurs with the fact that more
than 90% of the formal suggestions in the New ldeas Meetings were purely scientific
in nature and neglected to address the criteria in the official screening list (see Section
4.8.4). However, the Manager: Products Research said in a personal interview on 23
July 1997 that the purpose of the meeting was the suggestion and screening of the
most promising business ideas. This statement concurs with his views that the
screening list is adequate for screening potential business opportunities at an early
stage (see Section 4.7.2), and that the discussions in the New ldeas Meeting are often
non-stimulating as the project proposals are poorly defined (see Section 4.7.4).
4.10 SUMMARY
The indirect observation confirmed the suspicion that the number of new suggestions
that passes from the preliminary assessment stage to the detailed assessment stage
in the New ldeas Meeting, was well below international standards. Underlying causes
of the phenomenon were determined by retrieving information from the employees in
the New Product Development Group. Information on the biographical particulars of the
respondents, their intrinsic knowledge on the new product development process, their
strategies in formulating proposals, and the screening mechanism were collected. The
results of the diagnoses were discussed in sufficient detail to formulate aggregate
conclusions to be discussed in Chapter 5.
93
CHAPTER 5
CONCLUSIONS AND RECOMMENDATIONS
5.1 INTRODUCTION
The diagnoses in Chapter 4 attempted to identify possible deficiencies in execution of
the innovation process at the New Product Development Group. The major conclusions
of the diagnoses are consolidated in Chapter 5, after which the recommendations of the
study follow.
5.2 CONCLUSIONS
The concl~~sions below are discussed in accordance with the analytical techniques
employed in the study, namely:
Indirect Observation.
a Survey Questionnaires.
Group Discussion.
5.3 INDIRECT OBSERVATION
5.3.1 Attrition rate at gate one
I. Comment
The Universal Success Curve (Stevens & Burley, 1997:17) suggests 40% of potential
new projects should pass the first screening gate in the new product development
process. Unobtrusive measurements showed that only 10% of the new ideas complied
with the criteria to pass from the preliminary assessment stage to the detailed
assessment stage in the New Ideas Meeting.
11. Discussion
Though this deviation is regarded as a symptom of deficiencies in the execution of the
earlier stages of the innovation process, such defects may also be very relevant in
impeding the later stages of the process. The ensuing recommendations therefore
cover some broader concerns on the management of the new product development
process as well.
... 1 1 1 . Action
Expand the study to include other sections/groups at Sasol Technology Research and
Development, and perhaps other divisions and companies within Sasol.
5.4 SURVEY QUESTIONNAIRES
5.4.1 Knowledge on the new product development process
I. Comment
The results on the respective stages in the new product development process and the
sequential order thereof, showed 54% of the total population (managerial and technical
employees) has an adequate understanding of the process. The exact nomenclature
employed in describing the various sequential stages of the innovation process was not
regarded as important in the evaluation of the individual answers.
ii. Discussion
Although the size of the population that was investigated limits the validity of some of
the conclusions, one may deduct the following:
t Knowledge on the new product development process is related to the
hierarchy in the organisation. Workers on the higher organisational levels
(four, three and higher) at Sasol Technology Research and Development
are probably familiar with the broader concepts of the innovation process.
Those on the lower organisational levels (five, six, seven and lower) are
not necessarily familiar with the broader innovation process.
b Knowledge on the fundamentals of the new product development process
is related to the attendance of Sasol courses on project management or
project leadership. The attendants of the Sastech Project Execution
Model course (presented by Sasol Technology Engineering Services)
and/or the Project Leadership in R&D course (presented by Sasol
Technology Research and Development) were familiar with the broader
aspects of the innovation process.
t Knowledge on the innovation process is interestingly not related to
university attendance, nor to the type or number of degrees conferred,
nor to the number of service years at Sasol. More information will be
needed to establish the relationship between the awareness on the new
product development process and the curricula of the various universities
and technicons in South Africa.
iii. Action
The continued education of engineers and scientists on the innovation process should
receive much higher priority at Sasol Technology Research and Development. The
national education system of scientists and engineers in South Africa should, in
collaboration with the Government's initiatives, be examined.
5.4.2 Alignment in new product development
I. Comment
A more comprehensive analysis of the respondents' knowledge on the sequential
stages in the new product development process presented another important finding
of the study. The answers of seven respondents (named A, 6 ... G ) on the
understanding of the said topic were considered correct, and the discussion below
therefore focuses on their contributions only. Inspection showed that although the
individual contributions of Respondents A to G were correct, there was virtually no
internal alignment concerning the sequential stages of the innovation process.
. . 11. Discussion
In considering the descriptions of Respondents A to G holistically with respect to the
sequential stages in the new product development process (Table 5.1 ) the following
observations were inferred:
b 'There exists no uniformity with respect to the terminology that is used in
the description of the various stages in the innovation process. For
Table 5.1: Summary of the responses regarding the sequential stages in the new product development process. The particulars in
the shaded areas were provided by the respondents. (Although these answers were considered correct as individual contributions,
they lacked uniformity as a whole.)
STAGE PROCESS: PROCESS: PROCESS: PROCESS: PROCESS: PROCESS: PROCESS:
RESPONDENT A RESPONDENT B RESPONDENT C RESPONDENT D RESPONDENT E RESPONDENT F RESPONDENT G
Stage0 Idea Idea Idea Idea Idea Idea Idea
Stage 1 Identify Project formulation Economic Conceptual design - Literature survey Reading Lab testing
Feasibility study evaluation 1 Data collection Exposure
Stage2 Labwork Initial Bench M n g - Economic evaluation - Experimental Formulating Ecanomic evaluation
Market assessment experimentation small scale development of Justify
Preliminary cancwt economic
evaluation
Stage 3 PDU prod of Lab work Engineering Expenmental prove Critical process Interactive: Pilot plant study
concept optknisation conceptualisation of conceptual design evaluation experimentation and
Stage 4
Stage 5
oftechnology/
QMMoMy
Pilot plant
Feasibility in terms Engineering Econornlc mluation economic evaluation 1
Search of partners Pilat plant
evaluation
Economic
Pilot ptarrt
Commercialiation Commercialisation
Process
f
Commercialisation
evaluation
Commercialisation Commercialisation Commercialisation Commerc~alisabon
Process
and contractars
Patents
Dmgn of
development
Engineering
demonstration commercial plant
example: The descriptions of stage one vary from terms such as "identify"
to "project formulation/feasibility study" to "economic evaluation" to
"conceptual design" to "literature surveyldata collection" to "reading1
exposure" to "lab testing". The use of different terminologies may
severely hamper the course of the process, as it is difficult to conceive
that these terms are descriptions of the same stage in the process.
Similar remarks hold for the other stages.
b There exists no uniformity with respect to the perceived activities at each
stage of the innovation process. For example: Respondent D regarded
"conceptual design" as relevant in the first stage of the process. The topic
"conceptual design" is complex and deals with activities such as market
research, competitive analysis, technological appraisal, logistical
evaluation, and legal assessment. Respondent G regarded "lab testing"
as relevant in the first stage of the process. The topic "lab testing" is
simplistic and deals with evaluations in the laboratory. These
respondents are clearly not on the same wavelength with respect to the
activities in the first stage of the process, stifling the execution of the
innovation process. Similar remarks hold for the other stages.
b There exists no uniformity with regard to the matching of similar activities
and the respective stages in the innovation process. For example: The
activity "economic evaluation" was listed in stage one (Respondent C),
stage 2 (Respondents B, D, G), stage 3 (Respondents A, E, F), and
stage 4 (Respondent B). Different convictions of activities-stage
relationships may restrain the course of the innovation process.
Analogous remarks hold for other activities.
In recent years, there's been a decided shift at Sasol Technology Research and
Development from multilayered hierarchical to flatter structures that provide people with
sufficient autonomy to make decisions. The overriding goal is to increase productivity
and competitiveness in the leaner organisation. However, the lack of internal alignment
with respect to the sequential stages of the new product development process shows
that this employee involvement intervention at Sasol Technology Research and
Development will probably be less effective in improving our productivity, since
employees are as yet not adequately familiar with the requisite skills and knowledge
to participate and make good decisions.
... 1 1 1 . Action
Education on the innovation process should, once again, have much higher priority at
Sasol Technology Research and Development.
5.4.3 Content of Project Leadership in R&D course
i. Comment
The innovation process descriptions of Respondents E and F (Table 5.1) show limited
uniformity with reference to the terminologies, the perceived activities, and the
assignment of similar activities to sequential stages in the innovation process.
Respondents E and F both attended the Project Leadership in R&D course in March
1997, but their respective process descriptions corresponded poorly with the actual
phase descriptions of the R&D Project Management course. The author regards such
poor internalisation of the course contents as an early indication of shortcomings in the
R&D Project Management component of the Project Leadership in R&D course.
11. Discussion
Full details of the R&D Project Management course, a first effort at Sasol Technology
Research and Development (Heymans, 1998), are given in Appendix D. The course
was presented at Sasolburg in 1997, with the purpose of conveying the basic principles
of project management to scientists and engineers operating in a research and
development environment. The phases of the New Product Process Model in the R&D
Project Management course were presented in terms of:
Exploratory phase
-> Bench scale research
-> Pilot plant demonstration
99
-> Detail design
-> Building and commissioning of the plant
A number of positive and negative qualities of the proposed New Product Process
Model are briefly dealt with below.
+ Positive features include:
b The objectives and activities in each phase are described in detail. The
New Product Process Model addresses the technical and economic
evaluation, the compilation and execution of a research plan, the
formulation of a business plan, and the demonstration on pilot andlor
commercial plant scale.
b The technical and the economic evaluations incorporate criteria of the
Sasol Technology Research and Development project screening list.
b The course concept follows an integrative approach, in that the objectives
of a specific phase of a project must support the objectives of the next
phase.
+ Negative features include:
b The number of phases requiring involvement from Research and
Development is merely three. A consequence is the inclusion of an
excessively large number of activities in each phase which, for example,
crushes the "concept definition", "development", and "validation" stages
of Cooper's (1 990a:46) stage-gate system into one phase. This will thwart
proper upfront homework before the actual development starts, which is
a critical success factor in determining the quality of the innovation
process.
b The terminology that was chosen to describe the sequential phases of
the New Product Process Model is over-simplistic and hence confusing.
For example, "bench scale research" is concerned with the execution of
the research plan, the generation of technical data, and the compilation
of a business plan. It is difficult to picture a well-designed business plan
as a subdivision of the simplistic term "bench scale research". The
formulation of a proper business plan is more likely to include the results
of bench scale research.
b The New Product Process Model deals mainly with objectives and
activities in the different phases of the process. Discussions concerning
the use of checkpoints in the life cycle of a project's development are
disguised, and received little attention. Cooper (1 993b:78) found that the
lack of welldefined stages and their concomitant gates usually lead to an
undisciplined approach in the execution of the new product development
process. Gates should be pre-defined, and act as quality control check
points by providing critical evaluations of the project. The alternative is
an ad hoc or somewhat chaotic process.
b The limited number of phases, the misleading terminology used in
describing the phases, and the poor demarkation between phases and
checkpoints in the proposed New Product Process Model all contribute
to the observed poor internalisation of the course contents.
b The introduction of a formal innovation process is regarded as a serious
intervention at Sasol Technology Research and Development, in view of
its decisive impact on the wealth of the shareholders of Sasol. An inquiry
revealed that the proposed New Product Process Model was compiled
from various sources of information, but the resultant product has never
been validated. 'The implementation of the New Product Process Model
thus carries an inherent risk.
iii. Action
The R&D Project Management component of the Project Leadership in R&D course
should be revised.
5.4.4 Application of the project screening list
i. Comment
The official Sasol Technology Research and Development screening list was compiled
in 1994. Nine of the eleven technical respondents in the New Product Development
Group have never considered using the project screening list (see Appendix C) to
formulate their respective proposals in the New Ideas Meeting. The main justification
was that the respondents were not aware of the existence of the list in June 1997.
ii. Discussion
The Sasol Technology Research and Development screening list provides a concise
yet effective list of criteria for the evaluation of existing or prospective research and
development projects. A primary reason for compiling the list was to focus our
resources on the most promising business opportunities that will fulfill in the needs of
Sasol.
Equally important as the project selection decision is the issue of how the project team
defines and executes the project. The execution of the innovation process is concerned
with continual evaluation and analysis, which goes beyond the selection of projects.
Continual evaluation and analysis include an understanding a project's strong points,
weaknesses, key uncertainties, and critical areas of ignorance. The Research and
Development screening checklist contains important elements for identifying these
parameters in a systematic manner. The ultimate result would be to drive new products
from idea to market faster and with fewer mistakes.
However, the advantage above was unfortunately reduced in the past three years as
none of the technical respondents in the New Product Development Group have
received documentation describing the screening criteria at Sasol Technology
Research and Development. Enquiries revealed that the last and final memorandum
on the issue appeared on 17 October 1994, and was addressed to levels five, four,
three and lower. A mere 15% of the employees in the New Product Development Group
have thus received written communication explaining the various criteria in the project
screening checklist, which will definitely contribute to the lack of uniformity in the
application thereof. The application of the screening list is justifiably perceived as being
very subjective in the New Product Development Group, restraining the use of this
valuable directive instrument.
. . . 111. Action
Productive communication should be enhanced at Sasol Technology Research and
Development. 'The purpose and elements of the screening list should be communicated
to the employees of the New Product Development Group in particular.
5.4.5 Importance of the New ldeas Meeting
I. Comment
The survey revealed that 63% of the technical respondents found the discussions in
the New ldeas Meeting tedious, while 18% remained neutral. These opinions were
reflected by the very low rate of formal contributions to the New ldeas Meeting: only
three of the employees in the New Product Development Group made more than one
suggestion per year between February 1995 and January 1997.
The study disclosed moreover that 55% of the respondents perceived that several
excellent scientific proposals (with remote chance of having commercial success) will
not result in valued rewards, while 27% gathered such proposals will result in valued
rewards, and 9% remained neutral. Furthermore, 55% believed that business ideas
(with good chance of having commercial success) will result in valued rewards, while
18% believed such proposals will not result in valued rewards, and 18% remained
neutral.
ii. Discussion
Szilagyi and Wallace (1990:121) explain that the process theories of motivation are
concerned with factors that arouse behaviour, as well as with factors that provide
choice in and direction to motivated behaviour. The principles of an important process
theory, the expectancy theory, were accordingly employed in the current study to
determine underlying causes of the low effort to perform in the New ldeas Meetings.
Vroom (1964) popularised the expectancy theory of motivation by formulating the
relationship below. The multiplication of the respective values of these components will
give an indication of the effort to perform.
Expectancy refers to a person's perception of the probability that effort will lead
to performance: (E -> P, values form zero to one).
Instrumentality refers to a person's perception of the probability that certain
outcomes, positive or negative, will be attached to performance: (P -> 0, values
from zero to one).
Valence refers to a person's perception of the value of the projected outcomes:
(V, values from minus one to plus one).
The expectancy theory hence argues that an individual will consider the consequences
of performing at various levels, and will operate at the level that results in the highest
force to perform.
Effort to perform = Expectancy x Instrumentality x Valence
The employee's motivation or effort to participate actively in the New Ideas Meeting can
be interpreted in terms of the above relationship.
Motivation to formulate scientific suggestions.
b The expectancy or E -> P component should be very high, as there are
millions of scientific ideas in scientific journals which may be used in
formulating a written proposal. A little bit of effort will therefore definitely
result in high levels of performance.
b The valence should be very high. In an earlier survey, Kruger (1995)
determined the relative valencies of various types of external and internal
rewards at Sasol Technology Research and Development. The workers
ranked the three winners in the order below:
Interesting work > Higher wages > Good working conditions.
These types of rewards form part and parcel part of the compensation
offered at Sasol Technology Research and Development, implying that
these outcomes should have a high positive valence.
b The instrumentality or P -> 0 perception strived towards zero for six
respondents, who believed that excellent scientific proposals (with remote
chance of having commercial success) will not result in valued rewards.
These people are hence probably less motivated to make written
scientific proposals to the New ldeas Meeting.
b The instrumentality perception strived towards one for three of the
respondents, who believed that excellent scientific proposals will result
in valued rewards. These people are hence probably more motivated to
make formal scientific proposals to the New ldeas Meeting.
Motivation to formulate business suggestions.
b The valence should be very high. See the conclusions on Kruger's (1 995)
study as discussed above.
b The instrumentality or P -> 0 perception strived towards one for six
respondents, who believed that business ideas (with good chance of
having commercial success) will result in valued rewards. The P -> 0
perception strived towards 0.5 for two respondents, who remained
neutral.
b The mediocre participation and interest in the New Ideas Meeting
revealed, however, that the motivation to make formal business
contributions to the New ldeas Meeting is very low. That is, the effort to
perform is very low.
b 'The conclusion is that the expectancy or E -> P component must
probably be very low in formulating business proposals. This implies that
the majority of the technical employees in the New Product Development
Group do not believe that their efforts in formulating business proposals
will lead to desired performance levels, and which will consequently also
not lead to desired outcomes. The managerial implications are very
informative, as there are several ways to increase the expectancy
perceptions of employees.
iii. Action
Create a more innovative climate to inspire participation in the New ldeas Meeting.
5.5 GROUP INTERVIEW
I. Comment
Nearly all the scientists and the engineers were convinced that the purpose of the
meeting was similar to that of an idea generation session. However, the Manager:
Products Research confirmed in a personal interview on 23 July 1997 that the purpose
of the meeting was the suggestion and screening of the most promising business ideas.
The purpose of the meeting was therefore not clearly defined.
11. Discussion
The group interview was extremely significant, as differences concerning the purpose
of the New ldeas Meeting confirmed a mismatch between the suggestion stage and the
screening gate. Previously, the technical respondents as well as the Manager: New
Product Development suggested interesting scientific ideas without formally addressing
business issues such as strategic alignment, competitive advantage, and .fit with the
core competencies. In contrast, the Manager: Products Research (who acts as the
leading gatekeeper in the New ldeas Meeting) screened potential ideas in terms of
strategic alignment, competitive advantage, fit with core competencies, and other
business criteria. The conclusion is presented schematically in Table 5.2 below.
Table 5.2: Schematic exposition of the mismatch between the early stage of potential
projects and screening gate in the New ldeas Meetings.
STAGE 0
IDEAS GENERA TION
Unbl August 1997: The ideas were formally proposed at this stage, which was incorrect
GATE 0
REDUCE WILD IDEAS
Until August 1997: The quality of the proposals wes assessed at this gate. which was correct.
STAGE I
PRELIMINARY ASSESSMENT
GATE I
SUBJECT IDEA TO BUSINESS CRITERIA
The most important individual needs with respect to the New ldeas Meeting were,
furthermore, determined. There was a strong need in the New Product Development
Group to apply the knowledge that was gained in E. de Bono's Course in Creativity and
related courses in Sasol. These creativity techniques focus in general on generating
wild ideas, some of which may pass gate zero in the new product development process.
The satisfaction of this need may eventually lead to a business opportunity for Sasol,
and was therefore justified.
iii. Action
The New ldeas Meeting should be reorganised to address these aspects effectively.
5.6 RECOMMENDATIONS
5.6.1 Critical success factor
The petrochemical industry is characterised by fierce competition. Superior corporate
strategies are normally build on the critical success factors of the industry, as resources
can then be focused at succeeding on these elements. The new Sasol vision launched
in January 1997, reconfirmed our top management's conviction that "technological
competence1' is instrumental in realising sustained competitive advantage in the
petrochemical industry. Product or process innovation capability is clearly an important
determinant of technological competence, and is therefore regarded as a strategy-
critical activity to achieve strategic success at Sasol.
Furthermore, the White Paper on Science and Technology (DACST, 1996:5) confirmed
the perception that South Africa has an ailing national system of innovation. The
Government regards the stimulation of a national system of innovation as enabling to
become economically competitive on a global scale, and to create wealth and improve
the quality of life in contemporary society. Product or process innovation capability is
therefore also regarded as a critical success factor in realising this National Strategic
Vision of the South African Government.
5.6.2 Key performance area
The empirical research and the consolidated conclusions resulted in recommendations
which centres on the improvement of the quality of the new product development
process. The respective actions should ideally become key performance areas of the
responsible managers; to focus effort on those aspects in the innovation process that
will ensure the achievement of organisational and national objectives. The following
recommendations are discussed in more detail below, and include:
Expand the investigation.
Provide education on the new product development process.
Revise the R&D Project Management component of the Project Leadership in
R&D course.
Cultivate productive communication.
Create a more innovative climate.
Reorganise the New Ideas Meeting.
5.7 EXPAND THE INVESTIGATION
i. Purpose
Product or process innovation capability is critical to secure a sustained competitive
advantage at business level, and to capture the synergy among related business units
at corporate level. Deficiencies and inconsistencies in the innovation process should
therefore be identified and weeded out.
. . 11. Potential action plan
The present study was conducted in the New Product Development Group at Sasol
Technology Research and Development. Though one may be tempted to extrapolate
the results, the author regards the outcomes of such a focused study as non-
representative of the general operations within Sasol Technology Research and
Development. 'This pilot study should therefore be expanded to the remainder of Sasol
Technology Research and Development before larger interventions are considered.
Similar studies should be undertaken to evaluate the quality of the innovation process
at the remaining companies and divisions within Sasol, of which there were twenty-five
in total in 1997. The expanded investigation may be concerned with the internal
alignment of the development activities of the various strategic business units, by
introducing a standardised generic stage-gate system. This implies that different stage-
gate systems could exist to satisfy the various needs of the business units and
companies within Sasol, but these systems should be compatible in terms of structure
and vocabulary for better management and control. A standardised stage-gate system
may have several advantages, such as:
A uniform stage-gate system in the format of a Management Information System
on Sasol's Intranet, will provide an overview for top managers on the entire
spectrum of new product processes within Sasol. Timeous knowledge on the
type and number of projects that will enter, for example, the launching phase in
a certain period should enhance the quality of decisions.
A uniform stage-gate system would provide a visible road map for the various
role-players participating in a project. The project leader and team members are
often scattered over different locations, and will have a clearer idea of where the
project stands, where it is going, and what needs to be done next. Standardised
criteria at the respective gates would ensure that all projects are evaluated
consistently, and that gut decisions take a backseat to specified criteria and
thoyghtful decisions.
5.8 EDUCATION ON THE NEW PRODUCT DEVELOPMENT PROCESS
I. Purpose
Covey (1 992) illustrated that shared visions and value systems, and the empowerment
of people are critical elements in promoting an involved yet aligned workforce. Hence,
in value driven organisations:
Shared vision and values -> Empowerment -> Alignment
Sasol corporative encourages worker empowerment by vividly articulating the vision,
mission, culture elements, policies and procedures to all employees. The continued
education of scientists and engineers at Sasol Technology Research and Development
forms an integrated part of this mechanism for creating aligned commitment, and turns
outsiders into fully functioning insiders. Timeous training on the various facets of the
innovation process should, in particular, be the key to effectively lead and participate
in research and development projects.
ii. Potential action plan
The introduction of the Project Leadership in R&D course (Reinecke & Vosloo, 1997)
was the first active effort to develop a project management course for personnel
operating in a research and development environment at Sasol. However, the important
impact of aligned commitment in the successful execution of the innovation process
suggests the need for more timeous training. The earliest opportunity would be to
expose new employees to the fundamental aspects of the innovation process during
their induction activities at Sasol, and should be considered. Early education on the
innovation process would be instrumental in creating a more intrapreneurial climate,
since the general course of the new product development process may be used as a
template to formulate the professional roles of people within the company. Informal
inquiries in 1997 (Filgate, 1997) revealed that the key performance areas or role
descriptions of the various positions at Sasol Technology Research and Development
are obsolete, as these were last revised in 1992. For this reason, the author is of the
opinion that some of the highly trained employees at Sasol Technology Research and
Development do not know what hislher unique contributions to the achievement of the
organisational objectives should be. The intrepreneurial spirit is hence quenched as
these people just do what they are told to do.
General consent that technological capability is central to contemporary society, led to
overwhelming support in 1996 for introducing technology education across the General
Education system. A national technology education pilot project is, for example,
currently being implemented (Pienaar, 1998:40) in the general education phase of
schooling with the aim of evaluating the curriculum implications. These Governmental
initiatives on creating a national system of innovation for South Africa should be
considered in the development of internal courses at Sasol. 'There are currently several
courses in Sasol on project management: two of these are the Sastech Project
Execution Model course and the R&D Project Management course. The elements of
these courses should be aligned with the DACST's (1996:40) initiatives on building
scientific, technological and managerial abilities and capacities at the individual,
institutional and community levels in South Africa.
5.9 REVISION OF 'THE R&D PROJECT MANAGEMENT COURSE
i. Purpose
Cooper and Kleinschmidt (1 986:71-85) undertook a comprehensive study of 252 new
product histories at 123 firms to determine the steps, deficiencies and impact on
success of different new product development processes. They concluded that:
The successful launching of a substantially new product is closely related to the
existence of a complete innovation process model. Critical phases and their
respective activities must be included by design.
Successful development of a substantially new product is dependent on which
activities in the model are actually conducted, and how proficient these activities
are executed.
. The model should, equally important, have the necessary checks and balances
in place to ensure consistency and discipline in the execution of the process.
The omission of activities should be made by conscious decision, not by
oversight.
The presence of phases and their respective activities in the innovation process
cannot guarantee successful new products, but increase the likelihood of
success significantly.
The introduction of an appropriate stage-gate system form one solution to what ails
Sasol Technology Research and Development's new product program, and satisfies
the requirements above. Implementing a stage-gate process goes beyond reformation
in that it significantly alters the new product development process. A well-managed
stage-gate system should increase the efficiency of the innovation process (faster
development times), as well as the effectiveness (higher commercial success rates).
11 . Potential action plan
Cooper (1 990a:54) views the stage-gate system as a discipline that builds the success
ingredients into the innovation process by design rather than by chance. A stage-gate
system divides the innovation process into a predetermined set of stages which are
themselves composed of a group of prescribed, related and often parallel activities.
The entrance to each stage is a gate controlling the quality of the execution of the
process. Each gate is characterised by a set of inputs, a set of exit criteria, and an
output. The inputs are the deliverables that the project leader must bring to the gate,
the criteria are the hurdles upon which the project will be judged, and the outputs are
the decisions at the gate for further action. Senior managers act as gatekeepers and
have the authority to approve the quality of the inputs, evaluate the business sense,
approve action plans, and allocate resources to a particular project at a given gate. The
outcomes are better decisions, fewer commercial failures, and faster developments.
Cooper (1 993b:78) maintained that some organisations have recently implemented
such processes (Exxon Chemicals, General Motors, Du Pont, Emerson Electric, BF
Goodrich, Polaroid), while others have had such processes in place for years
(Minnesota Mining & Manufacturing Company, International Business Machines,
Northern Telecom). In view of the legendary successes of these companies, the
institution of an appropriate stage-gate system at Sasol Technology Research and
Development should be strongly considered. The elements below should be addressed,
in particular, to overcome the anticipated shortcomings in the innovation process at
Sasol Technology Research and Development:
b The terminology of the process.
b The number of stageslgates in the process.
b The activities in each stage.
b The "must meet" and "sho~~ld meet'' criteria of each gate.
Furthermore, the author is of the opir~ion that the introduction of a proper stage-gate
system should enhance the success of the performance appraisal system at Sasol
Technology Research and Development. The system was reviewed in 199511 996.
Performance appraisal at Research and Development is presently based on working
towards the achievement of predetermined work goals, using the performance level
versus a performance planning matrix as the general guide. However, many employees
at Sasol Technology Research and Development experience difficulties to formulate
specific goals and deliverables, and to connect these to a realistic time-scale. A well-
designed stage-gate system that specifies the goals and deliverables at each gate in
broad terms, will alleviate this shortcoming in the performance appraisal systeni and
should be considered.
5.10 CULTIVATE PRODUC'TIVE COMMUNICATION
I. Purpose
Lawler (1 992: 159) explains involvement in terms of the multiplication of the following
components: information, knowledge, power, rewards. Information encompasses all
communication in an organisation, and knowledge includes skills, abilities, experience,
and training. Power could be described as empowerment of employees. Rewards refer
to intrinsic and extrinsic rewards, and also include recognition. Note that each of the
components can be rated on a scale of one to zero - a value of one means a particular
element is strongly present, and zero means total absence. Multiplication in the
involvement equation emphasises that if one or more elements have the value of zero,
then the numerical value of involvement would also be zero. The creation of
involvement, which is in itself an important milestone in the creation of commitment, is
consequently out of the question.
Involvement = lnformation x Knowledge x Power x Rewards
Access to quality information in organisations influences the execution of the innovation
process directly or indirectly in numerous ways, namely to: create involvement and
ultimately commitment, enhance making effective decisions, confirm empowerment as
real, improve managerial planning and control, flatten the organisational structure,
instill trust, and speed up problem solving.
1 1 . Potential action plan
The problem of poor communication in Sasol is mature, and books can be written to
discuss the causes thereof. However, there is one current cause of poor communication
at Sasol Technology Research and Development which should be dealt with here,
namely, the manner in which communication should change in moving from a traditional
organisation to an entrepreneurial organisation.
Sasol Technology Research and Development has recently started to move from an
authoritarian, multilayered hierarchical structure to a flatter, more decentralised
structure that stresses employee empowerment. Changes in organisational structure
and communication are intimately related, and must therefore occur in synergy to
realise the maximum advantages offered by the entrepreneurial organisation model.
The communication styles of the traditional organisation should therefore be replaced
by communication styles of the entrepreneurial organisation. A meaningful approach
to facilitate the transformation would be to design and present a communication course
to the employees at Sasol Technology Research and Development. The description
below serves as an example of the contents of such a communication course.
Cornwall and Perlman (1 990: 11 3) contend that entrepreneurial organisations value
productive information, which is the interchange of information by people to meet the
goals of the organisation. Entrepreneurial organisations require both a high degree of
formality to coordinate and direct individual efforts, and a high degree of informality to
support creativity and innovation. Productive communication can therefore either be
formal or informal. Four methods to increase productive communication are:
To share information.
Information that is shared in entrepreneurial organisations is characterised by:
t Disagreement, discussion with real emotion, and a constant search for
new information and people with ideas.
t Communication at the moment an issue, problem, or need arises. Real-
time communication is facilitated by the use of new information
technologies.
t Upward and horizontal open communication system spanning across
organisational boundaries or structure.
t Formal communication in areas such as business plans, scientific or
engineering reports, legal documents, and yearly reports is imperative.
(Communication on the purpose and elements of the screening list falls
in this category.)
To communicate clearly.
Commur~ication must be clear to be productive. The clarity of communication can
be improved by:
t Using simple, direct messages.
t Obtaining feedback to learn if people are using the same words in the
same way.
t Stressing important messages by repeated communication.
t Coupling communications to the vision, mission and goals of the
organisation.
To listen effectively.
An important communication skill for productive communication is the motivation,
ability, and need to listen to others. Key components of effective listening
include:
t Physically attend to the person with whom you are interacting.
b Put biases and personal agendas aside.
t Summarise, and reflect back what is to be understood.
b Listen nai'vely, and ask questions.
b Listen without the burden of time pressures.
rn To communicate through action.
Managers in entrepreneurial organisations communicate their commitment to
innovation, risk, and the value of people by what they do.
5.1 1 CREATE AN INNOVATIVE CLIMATE
I. Purpose
Cooper and Kleinschmidt (1 993a:85-99) investigated the innovation processes of 21
major chemical companies in the United States, Canada, the United Kingdom, and
Germany. The development histories of 103 actual new products were collected, and
included 68 commercial successes and 35 commercial failures. Each project was
evaluated in terms of the quality of the execution of the phases and their respective
activities in a hypothetical innovation process, which constituted 13 phases. The
phases were selected on both normative and empirical grounds. The analysis revealed
that:
Commonly accepted and prescribed stages very often are omitted in the
execution of the innovation process. The activities in the respective phases of
the innovation process were in addition poorly executed across the board. The
physical development of the product was the most adequately executed phase.
The greatest differences between successful and unsuccessful projects were
related to the inclusion and the execution of certain pivotal activities in the
process, which are printed in bold below. Three of the pre-development phases,
all of which are printed in italics below, are hence regarded as drivers of
success in the innovation process and include: the initial screening, preliminary
market assessment, and detailed market study.
b Initial screening
b Preliminary market assessment
F Preliminary technical assessment
Detailed market study
Business analysis
Product development
In-house product testing
Customer test product
Test market, trial sell
Pilot production
Pre-commercialisation business analysis
Production start-up
Market launch
The importance and value of the New ldeas Meeting should consequently not be
underestimated, as such a meeting should address factors critical to successful
innovation and hence Sasol's ability to compete. The mediocre interest in the New
ldeas Meeting should therefore be replaced by active participation and enthusiasm,
and justifies managerial intervention.
. . 11. Potential action plan
Several organisational development interventions were initiated in the past five years
to help Sasol achieve greater effectiveness in competing nationally and internationally.
These interventions were encompassing and affected the organisational, functional,
group and individual levels with the company. The development programs included:
Human process interventions aimed at the people of Sasol and their interaction
process.
Technostructural interventions directed at organisation technology and
structures for linking people and technology.
Human resource management programs aimed at successfully integrating
people into the organisation.
Strategic interventions directed at how the organisation uses its resources to
gain a competitive advantage in the larger environment.
The creation of an innovative climate could be an effective managerial approach to
stimulate interest and participation in the earlier stages of the innovation process in
particular, but should be seen in the context of the larger developments within Sasol.
Therefore, instead of providing textbook information on how to create an environment
of innovation, an integrated account is presented below of the suggestions of the
respondents (Appendix A (question 15) and Appendix B (question 16)) with the derived
recommendations of Section 5.1 1. Although these action plans focus on arousing
enthusiasm in the New ldeas Meeting, some may be selected for incorporation into the
overarching interventions at Sasol Technology Research and Development.
rn Content of the discussions.
b The traditional inclination towards technical discussions in ,the New Ideas
Meeting should be replaced by business discussions. This does,
however, not mean technical discussions should be negated.
b The discussion should focus on the pre-development stages in the new
product development process, namely: initial screening, preliminary
market assessment, preliminary technical assessment, detailed market
study, and business analysis.
b Each stage should be succeeded by a checkpoint or gate that specifies
the desired deliverables at the end of the stage, the Go/Kill/Hold/Recycle
criteria upon which the prospective project will be judged, and broad
action plans for the next stage.
Multidisciplinary teamwork.
b The functions of prospective partners should be involved to evaluate
business ideas at selected stages, and to help champion promising ideas
within the company.
b A more harmonious and productive interface between Research and
Development and the corporative marketing function should be
established, as electronic databases contain only part of the information
wanted.
Voluntary participation.
t Participation in such a renewed version of the New Ideas Meeting, will
require intrapreneurial behaviour. The spirit of intrapreneurship cannot
be forced on individuals, and participation should therefore probably be
on a voluntary basis.
rn Discussion practices.
t Proposals should be properly presented by, for example, using visual
aids. Discussions can only be meaningful if people understand what is
the issue at stake.
t People should not be too critical in the evaluation. Spend more time
working through the ideas. People do not always follow what is going on,
and need time to comprehend.
b Drive every idea to a final conclusion. A discussion should end with a
review, giving proper reasons as to why a particular proposal was sound
or not.
Exchange knowledge.
t Employees should have the tenacity to accumulate knowledge from
various sources. Find out what is going on in other groups, divisions and
companies in Sasol.
t Provide regular updates of possible opportunities for Sasol. It is very
difficult, if possible, for one person to keep track of all the events that will
influence business suggestions and decisions in a white water
environment.
Motivational climate (equity theory).
t The equity theory of Adams (1 963: Toward an understanding of inequity
as cited by Szilagyi & Wallace, 1990:130-133) holds that motivation
depends on fairness in social exchanges. Perceived inequities create
cognitive dissonance, which in turn motivates corrective action to
alleviate the discomfort. An individual's perception of inequitable rewards
could therefore lead to morale and productivity problems. There is a
perception amongst some employees in the New Product Development
Group that only a few elite people are always chosen to represent Sasol
on conferences or to attend courses. Everybody should be equitably
exposed to these extrinsic rewards.
Motivational climate (expectancy theory).
b The expectancy theory of Porter and Lawler (1 968) assumes motivation
is determined by one's perceived chances of achieving valued outcomes.
The derivation in Section 5.4.5 revealed that the expectancy component
in the motivation equation must probably be very low for employees of the
New Product Development Group in formulating business proposals.
Coward and Sackett (1990) reconfirmed convincingly that the effort to
perform is moderated by an employee's abilities and traits, role
perceptions, and situational constraints. The E -> P expectancy can
therefore be increased by offering training programs, by setting clear yet
attainable work goals, by providing adequate resources, and probably by
bolstering the employees' confidence.
5.12 REORGANISE THE NEW IDEAS MEETING
I. Purpose
The restructuring of the New ldeas Meeting should first address the need in the New
Product Development Group to apply creativity techniques, and second establish a
better interface between stage one and gate one of the innovation process. The quality
of execution in the earlier stages of the new product development process may be
improved by adjudicating current practices surrounding the New ldeas Meeting against
the effectiveness criteria in the paragraph below.
An effective organisational meeting may have many advantages such as increasing
productivity, creativity, efficiency, participation, and commitment. Doyle and Strauss
(1 993: 19-37) established five important elements of an effective meeting, namely:
b There must be a common focus on the content (the what: problem, topic,
or agenda).
b There must be a common focus on the process (the how: approach,
method, or procedure).
b Someone must be responsible for maintaining an open and balanced
conversational flow.
b Someone must be responsible for protecting individuals from personal
attack, and ensure that all participants have an opportunity to participate.
b The participant's respective expectations, roles and responsibilities
during the meeting should be clearly defined and agreed upon.
ii. Potential action plan
Potential action plans were included in a memorandum to the Manager: New Product
Development, full details of which are presented in Appendix E. The recommendations
stemmed, in part, from the unstructured group interview during the New Ideas Meeting
on 25 August 1997. The author suggested that the meeting should have four
chronological phases, namely:
Report back.
Business opportunities.
Problem update.
New ideas.
The proposed format and content should encourage participation from everybody which
should make the meetings more effective and enjoyable.
5.1 3 IMPLEMENTATION OF ACTION PLANS
The successful implementation of a strategic plan is extremely important, and calls for
a different set of managerial tasks and skills. The information in Table 5.3 includes the
broad action plans, the accountable managers, and the suggested target dates for the
completion of the immediate actions stemming from the study.
TABLE 5.3: Broad potential action plans, accountabilities, and suggested target dates
for completion of the immediate actions.
NO
1
2
3
4
5
6
7
8
ACTION PLAN
Consider to expand this investigation to Sasol Technology Research
and Development
Consider to expand this investigation on the
innovation process to the broader Sasol
Consider more timeous training on the innovation process at Research and
Development
Inquire into the Government's outlooks
on national education on the innovation process
Revise the R&D Project Management course at
Research and Development
Communicate the project screening criteria at
Research and Development
Consider a course on: Cultivating productive
communication at Research and Development
Create a more innovative climate to stimulate
interest and participation in the New Ideas Meeting
ACCOUNTABILITY
Sasol Technology Research and Development:
General Manager
Sasol Corporative: Chairman of Technology
Strategy Committee
Sasol Technology Research and Development:
General Manager
Sasol Corporative: General Manager of Human
Resources
Sasol Technology Research and Development:
General Manager
Sasol Technology Research and Development:
General Manager
Sasol Technology Research and Development:
General Manager
Sasol Technology Research and Development:
Manager: New Product Development
TARGET DATE
June 1998
August 1998
June 1998
July 1998
October 1 998
Immediately
July 1998
December 1998
5.14 SUMMARY
Different scientific techniques were applied to diagnose the innovation process and the
execution thereof at the New Product Development Group. The diagnoses revealed
serious deficiencies, namely:
Lack of knowledge on the course of the innovation process.
Poor internal alignment regarding the execution of the innovation process.
Deficiencies in the content of the R&D Project Management course.
Poor communication on the project screening criteria at Sasol Technology
Research and Development.
Low motivation to participate in the New Ideas Meeting.
Imperfections in the structure and content of the New Ideas Meeting.
NO
9
These shortcomings were analysed and discussed in terms of appropriate literature
evidence. Potential action plans were subsequently formulated to improve on the
quality of the innovation process at the New Product Development Group (as well as
at Sasol Technology Research and Development), naniely to:
Expand the investigation to Sasol Technology Research and Development.
Provide timeous education on the new product development process.
Revise the R&D Project Management course.
Cultivate productive communication.
Create a more innovative climate.
Reorganise the New Ideas Meeting.
TARGET DATE
March 1998
ACmrION PLAN
Reorganise the New Ideas Meeting of the
New Product Development Group
ACCOUNTABILITY
Sasol Technology Research and Development:
Manager: New Product Development
123
EPILOGUE
ACHIEVEMENT OF OBJECTIVES
The purpose objective of this investigation was to improve on the quality of new product
or process development efforts at the New Product Development Group (and perhaps
at Sasol Technology Research and Development). The respective goals that were
formulated in Chapter 1 for realising the purpose objective were achieved during the
study, in that:
I. The unobtrusive assessment confirmed that too few new product or process
ideas passed the preliminary evaluation stage in the New ldeas Meeting of the
New Product Development Group. Only 10% of these complied with the criteria
to pass from stage one (preliminary assessment) to stage two (detailed
assessment) in the innovation process - the literature suggests an average of
40% as the bench-mark.
ii. The most important underlying causes for the aforementioned phenomenon
were determined, by integrating practices being followed in the New Product
Development Group with those suggested in the literature. The defects in the
execution of the new product development process included:
b Lack of knowledge on the course of the innovation process.
b Poor internal alignment concerning the execution of the innovation
process.
Deficiencies in the content of the R&D Project Management course.
Poor comniunication on the project screening criteria at Sasol
Technology Research and Development.
b Low motivation of respondents to participate in the New Ideas Meeting.
t Imperfections in the structure and content of the New Ideas Meeting.
iii. Potential action plans were suggested to enhance the innovation process and
the execution thereof at the New Product Development Group (as well as at
Sasol Technology Research and Development), namely to:
b Expand the investigation to Sasol Technology Research and
Development.
b Provide timeous education on the new product development process.
t Revise the R&D Project Management course.
t Cultivate productive communication.
t Create a more innovative climate.
t Reorganise the New Ideas Meeting.
iv. Some of the recommendations are still under investigation, while the remainder
have been accepted by the designated managers at Sasol Technology
Research and Development for implementation. At the end of February 1998,
the status of potential action plans in the latter category was as below:
t The top management of Sasol Technology Research and Development
has decided to review the content of the R&D Project Management
course. The revised content will eventually be integrated with existing
project management practices in the bigger Sasol.
t The New Ideas Meeting was reorganised. The creativity sessions were,
for example, separated from discussions on new business opportunities
for Sasol. Weekly creativity sessions are being held in the New Product
Development Group since September 1997, focusing on the generation
of new scientific ideas. These ideas may be precursors to new business
ideas.
b Four new business ideas were suggested by different members of the
New Product Development Group in the New ldeas Meeting on 27
February 1998. One idea was recycled, as the marketing information was
absent. Three of these suggestions were, in contrast with earlier
proposals, formulated and defended in terms of the official Sasol
Technology Research and Development project screening list. All three
of these complied with the criteria to pass from stage one (preliminary
assessment) to stage two (detailed assessment) in the innovation
process, implying that the yearly rate of ideas that passed gate one has
already increased by 50%. The results of five additional New Ideas
Meetings, scheduled for the remainder of 1998, still needs to be
discounted.
Future actions will be concerned with the acceptance andlor the implementation of the
recommendations in this dissertation on: "How to improve on the innovation process
in a research and development environment." The management of change will play an
important part in the realisation of these anticipated actions.
126
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132
APPENDIX A
QUESTIONNAIRE: MANAGERIAL STAFF
BACKGROUND AND INSTRUCTIONS
The New Product Development Group was established in 1993 at Sasol
Technology Research and Development. The main aim of the group is to
patficipate in the research and development of new chemical products andlor
processes for the realisation of Sasol's profit goals.
An important aspect in the unlocking of the potential of such a group is to have
a wealth of ideas in our chemical treasure chest, which can be investigated at
the right time with a critical mass of resources. Some of these ideas are born out
of our second monthly New ldeas Meetings which started formally in February
1995.
You were informed previously that an evaluation will be conducted to establish
the success rate of the ideas that we have proposed in the New ldeas Meetings
since February 1995. The results show that only 10% of the suggestions pass
the very early screening stage (i.e. during the New ldeas Meeting) in the new
product development process. The success rate is, on average, roughly two
proposals per year.
The aim of the questionnaire is to establish reasons for the inadequate pass-rate
of proposals in our New ldeas Meetings, and encourage suggestions on how to
improve on these. The data that is requested in the questionnaire will be used
solely for the purpose of the study, and hence please do not fill in your name on
the questionnaire.
# Thank you for your valued contribution!
133
A. BIOGRAPHICAL PARTICULARS
1. How long have you been employed at Sasol?
2. How long have you been employed at Sasol Technology Research and
Development?
3. What is the title and level of your current position at New Product Development?
(Example: Manager, Level 4)
4. List your academic qualifications. When and at what institution was each of fhese
obtained? (Example: B.Sc. (1 99X) - University of Pretoria)
5. Did you have previous work experience related to your field of study before joining
Sasol? If yes, name the company, years employed, description of work. (Example: Yes,
CSIR, 5 years, researcher)
1 34
6. SCIENTIFIC EVALUATION
(NEW PRODUCT DEVELOPMENT PROCESS)
6. What do you understand under the term "new product" in the Sasol context?
7, Have you ever been trained formally in Sasol (or outside) on the broader issues of
the "New Product Development Process" in industry? If yes, elaborate briefly on the
details of the course.
8. Have you ever presented a course on the broader issues of the "New Product
Development Process" in industry or academia? If yes, elaborate briefly on the details
of the course.
9. Theoretical advancements on the most effective and efficient methods in the "New
Product Development Process" have resulted in a few critical steps. List the steps that
are omitted below, but in chronological order. (Screenings are not counted as
steps.)
Idea generation
-> .......................................
-> Commercialisation
C. SCIENTIFIC EVALUATION
(IDEA PROPOSAL)
10. The tradition in the New Product Development Group is that managers do not make
formal suggestions on new ideas or processes in the New ldeas Meetings. Despite their
busy schedules, managers should be given the opportunity to make at least one written
suggestion per year. This will set an example to new employees on what is expected
in the submission of a proposal. Do you agree?
I I. The official project screening criteria list that was compiled for evaluating projects
at Sasol Technology Research and Development is attached. Do you regard the list as
being adequate for the purpose of evaluating potential opportunities at an early stage
as we do in the New ldeas Meetings? Motivate.
12. Three of the criteria (no 1, 2, 3) in the official project screening list deals with the
alignment of the proposal and the corporate strategy. What are the set elements that
can be used to establish whether an early suggestion is aligned with:
* Compatibility with long term plans
* Company image
* Fit risWinnovation culture
13. Do you agree with the following: "The discussions in the New ldeas Meetings are
not very stimulating, as the person/s that screen the ideas often move/s the goal posts
from meeting to meeting. They are trying to catch us out. The consequence is that the
discussions often stop too soon without any positive result': Motivate.
14. One approach to improving our rate of suggestions that pass in the very early
screening stage (ie. during the New ldeas Meeting), is to challenge employees with the
most important producf/process problems facing the company at a particular stage.
Such an approach is unfortunately neglected. In your opinion, what could be the
reason?
15. Please make proposals on how to improve our rate of suggestions that pass in the
very early screening stage (i.e. during the New Ideas Meeting) in the new product
development process.
138
APPENDIX 6
QUESTIONNAIRE: TECHNICAL STAFF
BACKGROUND AND INSTRUCTIONS
The New Product Development Group was established in 1993 at Sasol
Technology Research and Development. The main aim of the group is to
participate in the research and development of new chemical products and/or
processes for the realisation of Sasol's profit goals.
An important aspect in the unlocking of the potential of such a group is to have
a wealth of ideas in our chemical treasure chest, which can be investigated at
the right time with a crifical mass of resources. Some of these ideas are born out
of our second monthly New ldeas Meetings which started formally in February
1995.
You were informed previously that an evaluation will be conducted to establish
the success rate of the ideas that we have proposed in the New ldeas Meetings
since February 1995. The results show that only 10% of the suggestions pass
the very early screening stage (i.e. during the New ldeas Meeting) in the new
product development process. The success rate is, on average, roughly two
proposals per year.
The aim of the questionnaire is to establish reasons for the inadequate pass-rate
of proposals in our New ldeas Meetings, and encourage suggestions on how to
improve on these. The data that is requested in the questionnaire will be used
solely for the purpose of the study, and hence please do not fill in your name on
the questionnaire.
Thank you for your valued contribution!
139
A. BlOGRA PHlCA L PARTICULARS
7. How long have you been employed at Sasol?
2. How long have you been employed at Sasol Technology Research and
Development?
3. What is the title and level of your current position at New Product Development?
(Example: Scientist, Level 7)
4. List your academic qualifications. When and at what institution was each of these
obtained? (Example: B.Sc. (1 99X) - University of Pretoria)
5. Did you have previous work experience related to your field of study before joining
Sasol? If yes, name the company, years employed, description of work. (Example: Yes,
CSIR, 5 years, researcher)
B. SCIENTIFIC EVALUATION
(NEW PRODUCT DEVELOPMENT PROCESS)
6. What do you understand under the term "new product" in the Sasol context?
7. Have you ever been trained formally in Sasol (or outside) on the broader issues of
the "New Product Development Process" in industry? If yes, elaborate briefly on the
details of the course.
8. Theoretical advancements on the most effective and efficient methods in the "New
Product Development Process" have resulted in a few critical steps. List the steps that
are omitted below, but in chronological order. (Screenings are not counted as
steps.)
ldea generation
-> .......................................
-> Commercialisation
C. SCIENTIFIC EVA LUA TlON
(IDEA PROPOSAL)
9. How many ideas have you proposed in the past in the New ldeas Meetings? If less
than five, why?
10, Do you agree with the following: "If your proposal in the New ldeas Meetings is
perceived as being poor, you stand to lose more in terms of your reputation opposed
to those who made no suggestion at all. It therefore actually pays to make less
suggestions, and let others take the punch in these meetingsff. Motivate.
11. Do you agree with the following: "If your proposal in the New Ideas Meetings is
being perceived as scientifically excellent (but with remote chance of making impact on
the bottom line of Sasol), you nevertheless stand to be rewarded handsomely."
Motivate.
12. Do you agree with the following: "If your proposal in the New Ideas Meetings is
being perceived as an excellent business opportunity, you stand to be rewarded. The
impact on your merit will, however, not be in line with the hard work that went into
preparing the proposal. ". Motivate.
13. The official project screening criteria list that was compiled for evaluating projects
at Sasol Technology Research and Development is attached. Have you ever
considered using the list to formulate your proposals in the New ldeas Meetings? If not,
why?
1 4. Do you regard the official project screening criteria list as being adequate for the
purpose of evaluating potential opportunities at an early stage as we do in the New
ldeas Meetings? Motivate.
15. Do you find the discussions in the New Ideas Meetings stimulating, or do you think
the discussions normally stop too soon without any positive result? If the discussions
are non-stimulating, what do you think is the reason?
16. Please make proposals on how to improve our rate of suggestions that pass in the
very early screening stage (i.e. during the New ldeas Meeting) in the new product
development process.
APPENDIX C
SASOL TECHNOLOGY RESEARCH AND DEVELOPMENT:
PROJECT SCREENING CRITERIA
GENERAL
Does the project aim to create new business? YES NO
Is any technology development needed? YES NO
Is any product development needed? YES NO
Is the aim to develop competencies in R & D? YES NO
(IF THE ANSWERS ARE "NO" TO ALL OF THE ABOVE QUESTIONS, RECONSIDER R & D INVOLVEMENT)
CRITERIA RATING
CORPORATE STRATEGY
-2
1
2
3
0 -1
COMPATIBILITY WlTH LONG TERM PLANS
COMPANY IMAGE
FIT RISKIINNOVATION CULTURE
I
COMPETITIVE ADVANTAGE
2
4
5
6
FEEDSTOCK
TECHNOLOGY
MARKET
CORE COMPETENCIES
7
8
9
FIT WlTH R&D COMPETENCIES
FIT WlTH SBU's COMPETENCIES
FIT WlTH MARKETING COMPETENCIES
OTHER
10
11
POTENTIAL TURNOVER
PROBABILITY OF SUCCESS
TOTAL PROJECT SCORE
145
APPENDIX D
SASOL TECHNOLOGY R E S E A R C H ~ E V E L O P M E N T A
PROJECT MANAGEMENT
1. Introduction
Although the basic principles of project management are also valid for managing
R&D projects, the nature of R&D projects is such that the implementation of
those principles will vary depending on the phase of the project. The different
phases differ in terms of the level of uncertainty with regards to the technical and
economic aspects of the process, the number of parties involved and the main
objectives of each phase.
In order to effectively manage R&D projects it is necessary to first identify the
project phase and to manage the project accordingly.
2. Project phases
Each phase of a project will be managed in order to meet the objectives on time
and within budget. The objectives of each phase must be set in such a way that
(a) a decision can be taken to continue or terminate the project and (b) that it
supports the objectives of the next phase.
The life cycle of a project can be divided into the following phases:
- The exploratory phase
- Bench scale research
- Pilot plant demonstration
- Detail design
- Building and commissioning of the plant
3. Exploratory phase
3.1 General
The general characteristics of a project in this phase are:
- A high level of uncertainty with regards to both the technical as well as
the economic aspects of the process
- Mainly a one-man project
- In most cases only a paper study
- It will most likely be classified as an "in-time" project
Although it is not necessary to use a formal project management approach to
manage the project some structure like setting mileposts and target dates is
necessary to ensure that the decision to continue or terminate the project is not
unduly delayed.
3.2 Main objectives
- To evaluate the technical potential of the process
- To estimate the economic potential of the process
- Drawing-up of a research plan
3.2.1 The evaluation of the technical potential
In addition to the standard criteria used to evaluate the technical potential of a
process, the following aspects must also be taken into account:
Does the process supply Sasol with sustainable competitive advantage?
- Does the technology fit with Sasol existing technical expertise?
- Which technical aspects are uncertain and necessitate additional
research?
3.2.2 Estimation of the economic potential of the process
At this stqge it is only necessary to do a very rough estimate of the economics
of the process. Benefit of the doubt must be given to the process by assuming
the optimistic outcome. If the process has no specific strategic importance and
the economics are marginal, it is very unlikely that the project should continue
to the next phase.
In estimating the economic potential of the process, the expected capital
investment and cash flow is needed. To do this, the following information is
needed:
(i) Market information
- Size of the market (national as well as international)
- The expected selling price of the product
(ii) Costs
- Cost of raw material
- Other operating costs
- Capital outlay needed
(iii) Profitability parameters
Although profitability parameters like IRR, NPV and ROI can be used to
judge the profitability of a process, it is suggested that the accuracy of the
economic estimates only justifies the use of a simple ROI calculation. Any
project with a ROI below 20% at this stage is marginal.
Drawing-up of a research plan
If, based on the R&D1s I 1 point criteria test, it is decided to continue with the
project, a preliminary research plan for the next phase must be drawn-up. This
plan must include the following:
- Identify other parties that will be involved. They can be internal or
external to R&D.
- Set technical mile-posts that must be achieved.
- Make provision for environmental impact and biodegradability studies.
- Draw-up a rough schedule for the research plan.
- Estimate the manpower and equipment requirements of the project for the
next phase.
- Estimate the expected research costs of the next phase (manpower and
equipment).
4. Bench scale research
4.1 General
The general characteristics of a project in this phase are:
- It is no longer a one-man study and the project leader will have to liaise
and coordinate with other parties inside as well as outside R&D.
- Financial and time control are important responsibilities of the project
leader.
4.2 Main objectives
- The execution of the research plan and the investigation of the technical
issues as identified in the exploratory phase of the project.
- The generation of data for the development of the necessary models
needed for a conceptual design of a full scale plant andlor pilot plant.
- To reduce the levels of uncertainty associated with the technology and
economics of the process.
Since the results of the execution of the research plan and the refining of the business
plan will have a mutual influence on each other, these two actions can not be done
sequentially but must be done in parallel as far as possible.
4.2.1 Execution of the research plan
(i) Aspects of the business plan that will have an effect on the execution of
the research plan:
- The product specifications as determined by ,the targeted market.
- Environmental legislation specific to the countries to which the
product will be exported and the location of the plant.
- The characteristics of the feed streams will determine to what
extent feed treatment will be necessary.
- The incorporation of the unreacted feed material and possible
byproducts into existing Sasol processes may place some
restrictions on these streams.
(ii) Information needed for the design of a conceptual plant.
The technical information generated during this phase must be in suitable
form so that it can be used for a conceptual design of the proposed plant.
In order to do this, the following information will be needed:
- The expected capacity of the plant.
- List of major equipment (distillation columns, reactors, heat
exchangers).
- Composition of feed streams.
- Chemical reactions taking place.
- Kinetic model.
- Selectivity model.
- Catalyst information.
- Phase equilibrium.
- Product specifications.
- Corrosive nature of the streams.
- Effluent handling.
Business plan
The very preliminary business plan developed in the previous phase must now
be refined and expanded. The following aspects of the business plan must be
addressed:
(i) Market information
- Market segmentation (choosing a specific segment of the total
market).
- Size of the chosen market segment.
- Expected market penetration.
- Market trends (potential for growth, possible threats).
(ii) Product specifications
- Availability of feed.
- Expected price of the product.
- Transfer price of the feed.
- Product specifications.
(iii) Economic evaluation
Based on the conceptual design and market and product information, the
previous estimates of the capital costs, expected cash flow and economic
indicators (IRR, ROI) can be updated.
(iv) Other
Other aspects of the business plan that must also be addressed are:
- The logistics.
- Indication of Sasol's competitive advantage.
- Identification of possible business managers.
- Single client study.
4.2.3 Coordination and liaison with other parties
As the project progresses through this phase, the coordination and liaison with
other parties inside and outside R&D will become more important. 'This will be
necessary in order to:
(i) Develop the models needed for a conceptual design of the plant.
(ii) Get clarity about environmental issues.
(ii i) 0 btain the market and product specification information.
(iv) Updating the estimate of the economic potential of the project.
4.3 Specific mile posts
When planning this phase of the project, the following major mile posts must be
scheduled:
(i) The relevant intermediate technical progress reports.
(ii) Environmental impact report.
(iii) The up-dated business plan.
(iv) Application for capital to build a pilot plant or a commercial size plant.
5. Pilot plant demonstration
5.1 General characteristics
(i) Not all projects will go through this phase; depending on the level of
uncertainty with regards to the technical and marketing issues, this phase
may be skipped and the detailed design and construction of the plant can
follow directly after the bench scale work.
(ii) Very expensive research.
(iii) Must not be used for exploratory research, but to verify and confirm
results during the bench scale phase.
(iv) The execution and mile posts of this phase will follow the same pattern
of the bench scale phase, but more detail information will be generated.
5.2 Objectives of pilot plant research
(i) Establishing the design conditions for a full scale plant.
(ii) Preparation of sarr~ples for market testing.
(iii) Modification of models.
(iv) Generation of design data not possible on a smaller scale.
6. Detail design and construction phase
With the exception of building bench scale demonstration units and pilot plants,
R&D personnel will normally not be involved in this phase of a project. In
managing this phase of a project, the normal project management approach
must be used and special attention must be given to the role of the Responsible
Official:
- The Responsible Official is the person responsible for managing the
money as applied fir in the capital Request.
- Give early warning and reasons if there are signs that the approved
capital amount will be exceeded.
- Approval for over expenditure must be obtained before money is actually
spent.
- Do not rely on the existing financial systems for cost control.
Conclusions
(i) The project manager is the project champion.
(ii) Basic project management principles are also valid for R&D projects, but
the way in which these principles will be applied will depend on the phase
of the project.
(iii) Coordination and liaison are, in addition to planning and control, major
responsibilities of the project manager.
(iv) The objectives of a specific phase of a project must be set and executed
in such a manner, that it will support the objectives and minimise the work
necessary for the next phase of the project.
(v) Research projects must be aimed at evaluating both the technical as well
as the economic potential of a project.
153
APPENDIX E
MEMORANDUM
R&D DIVISION N&O DlVlSlE
TO: MANAGER: NEW PRODUCT DEVELOPMENT
FROM: HElN KRUGER
DA'T E : 27 August 1997
RE: RECOMMENDATIONS FOR IMPROVEMENT OF THE NEW IDEAS MEE'I'ING
An unstructured group interview was conducted during the New ldeas Meeting on 25
August 1997, as a result of an investigation on the course of the innovation process at
the New Product Development Group. The discussions disclosed two important issues,
which are discussed below:
Individual needs.
The most important individual needs with respect to the New ldeas Meeting were
determined. There is a strong need in the New Product Development Group to
apply the knowledge that was gained in E. de Bono's Course in Creativity and
related courses in Sasol. These creativity techniques focus in general on
generating wild ideas, some of which may pass gate zero in the new product
development process. The satisfaction of this need may eventually lead to a
business opportunity for Sasol, and is therefore justified.
Stage-gate interface.
The employees were at odds with respect to the purpose of the New ldeas
Meeting, confirming a gap in the execution of the early stages in the innovation
process. The indirect evaluation of the new ideas in the monthly reports of the
New ldeas Meeting until January 1997, showed that more than 90% of the
formal suggestions were purely scientific in nature and neglected to address
business matters. However, The Manager: Products Research acts as the
leading gatekeeper in the New ldeas Meeting, and screens ideas in terms of the
criteria in the official Sasol Technology Research and Development screening
list. The quality of execution of the innovation process in the New Product
Development Group should, therefore, increase by establishing a better
interface between stage zero and gate one of the process.
In order to address this need and shortcoming in the New ldeas Meeting, I would like
to recommend the restructuring of the meeting as discussed below. The proposed
format and content should encourage participation from everybody which, I believe, will
make the meetings more effective and enjoyable. The meeting should perhaps have
four chronological phases, each of which is discussed in more detail hereafter:
b Report back.
b Business opportunities.
b Problem update.
b New ideas.
I would appreciate your feedback on these recommendations, and suggest that we
have an informal discussion at your earliest convenience.
Yours sincerely.
155
PROPOSED FORMAT AND CONTENT:
NEW IDEAS MEETING
PHASE I
REPORT BACK
1.1 PURPOSE
Report back on status of current research projects.
1.2 CONTENT
The content and execution of this important phase should remain as previous.
Employees should provide information on aspects such as:
• The status of their respective research projects.
• The concerns they may have regarding resources.
The anticipated future actions.
PHASE 2
BUSINESS OPPORTUNITIES
2.1 PURPOSE
Identify and discuss new business opportunities within the Sasol context. This phase
is deliberately separated from the "brainstorming" sessions, as the purpose of the
meeting should be to discuss business opportunities.
2.2 CONTENT
Players in this league should suggest their new business ideas in writing, and be
prepared to defend these in terms of the criteria in the official Sasol Technology
Research and Development screening list:
• Alignment with corporate strategy.
The differential competitive advantage for Sasol.
• Synergy with core competencies in Sasol.
Potential monetary turnover.
The screening should focus on passing gate one in the new product development
process, which implies that the preliminary technical and market evaluations of the
proposal will have to be conducted qualitatively beforehand:
Feedback on actions that resulted from previous discussions at gate one (or any of the
other gates in the predevelopment phase) should be given in the New Ideas Meeting.
STAGE 0
IDEA
GENERA TION
t Solicited from wide variety of
internal and external sources
t Creativity
PHASE 3
PROBLEM UPDATE
3.1 PURPOSE
Knowledge on existing or anticipated product or process related problems within Sasol
should stimulate thoughts in terms of "New Business Opportunities" or "New Scientific
Ideas". This is a new item on the agenda.
GATE 0
REDUCE WILD
IDEAS
3.2 CONTENT
A list should be perhaps be compiled of those prevailing problems that impact the
bottom line of Sasol directly or indirectly, and may contain details such as those
depicted in the table below. All employees should be encouraged to soak themselves
in the problem which means to read, review, examine and analyse any material related
to the problem.
STAGE 1
PRELIMINARY
ASSESSMENT
Inexpensive, quick qualitsbve
scope of project
b Preliminary market, technical,
financial assessments
-
GATE I
SCREEN
BUSINESS
IDEAS
PHASE 4
NEW IDEAS
PROBLEM NO
4.1 PURPOSE
The purpose of the new ideas phase would be to stimulate scientific discussions. The
results do not have to address the bottom line of Sasol, but it would be excellent if they
do. This phase is deliberately separated from the discussion of business opportunities,
as the mixing of the two phases will stifle scientific creativity.
4.2 CONTENT
'The new ideas phase does not formally have to be part of the New ldeas Meeting,
leaving two options:
The first option would be to apply these creativity techniques in phase four of the
New ldeas Meeting. An advantage is that all the participants of the New ldeas
Meeting may attend, but those that have other priorities may leave the
proceedings.
The alternative option would be to apply these creativity techniques on a weekly
basis during the Feedback Sessions at the New Product Development Group.
An advantage is that employees are continually prompted within shorter intervals
to generate new ideas or opportunities.
LOCA TlON
End of memorandum
SCOPE IMPACT