wp_42 - driving new-products projects to market success

8/13/2019 wp_42 - Driving New-Products Projects to Market success

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BENCHMARKING BEST NPD PRACTICESIII

Driving new-product projects to market success

is the focus of this third in a three-part series.

Robert G. Cooper, Scott J. Edgett and Elko J. Kleinschmidt

OVERVIEW:Thenew product process by which firmsdrive new product projects from inception through tocommercialization, and the methods, practices andtactics embedded within that process, are the focus of this final of three articles reporting the results of therecent American Productivity and Quality Center studyon performance and best practices in new product devel-opment. Many of the decisive activities that were identi-

fied turn out to be poorly executed, while a handful oftasks emerge as pivotal to NPD performance. Most firmsnow employ a systematic, formal, new product process,but the nature of the process and the way it is imple-mented are the true keys to success. For instance, deliv-ering a differentiated, superior product is one practicethat strongly separates the Best and Worst Performers.Market information, up-front homework, stable productdefinition, and voice-of-customer research are found tobe relatively weak practices in businesses new productefforts, but all strongly discriminate between the Bestand Worst Performers.

Success in new product development depends on thetactics that project teams employ to drive new product

projects from the idea stage through to launch. Thesetactics are the focus of this final article of our three-partreport on the results of a benchmarking study of NPD

practices in 105 U.S. businesses.

Part I reported NPD performance results of these busi-nesses, and identified a group of Best Performing busi-nesses, which become the benchmark businesses. Alarge number of practices were considered, and those thatseparated the Best from Worst Performing businesseswere identified as best practices (see RTM,Jan.Feb.2004, pp. 3144).

Part II of the series moved tostrategic issues, namely therole and elements of a product innovation strategy for the

business, resource sufficiency and resource allocationfor NPD, and portfolio management (see RTM, MayJune 2004, pp. 5059).

In this final Part III, we focus on tactics and the followingissues:

Quality of execution of key activitiesfrom idea gen-eration through to market launchand their impact on

performance.

Firms new product processes and their components.

Best practices built into this NPD process.

The impact of voice-of-customer research, solidmarket information, product advantage, and getting the

product definition nailed down early.

Robert Cooper is president of the Product DevelopmentInst itute Inc., in Ancast er, Ontario, Canada, andprofessor of marketing at McMaster Universitys M. G.de Groote School of Business, Hamilton, Ontario. He is

also Crawford Fellow of the Product Development andManagement Association, and ISBM DistinguishedResearch Fellow at Penn State Universitys SmealCollege of Business Administration. The developer of theStage-Gate new product process, his latest book (co-authored with Scott Edgett and Elko Kleinschmidt) isPortfolio Management for New Products, 2nd edition(Perseus Books, Cambridge, MA, 2001)[email protected];www.prod-dev.com

Scott Edgett is CEO and co-founder of the ProductDevelopment Institute. A specialist in new product devel-

opment and portfolio management, he has consulted andwritten extensively in the field with over 50 publishedarticles and four books, including co-authoringPortfolioManagement for New Products.

[email protected];www.prod-dev.com

Elko Kleinschmidt is professor of marketing and inter-national business at McMaster Universitys M. G. deGroote School of Business. He is an authority on theprocess of new product development, portfolio man-agement of new products, and success factors fornew product development programs. He has publishedover 60 publications and co-authoredPortfolio Man-agement for New [email protected]

NovembrDecember 2004 430895-6308/04/$5.00 2004 Industrial Research Institute, Inc.
http://www.prod-dev.com/http://www.prod-dev.com/http://www.prod-dev.com/http://www.prod-dev.com/


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In order to identify best practices, we probe what distin-guishes best performing businesses, and what they dodifferently from the rest. Best Performers are those busi-nesses that assessed their NPD effort as profitable,meeting objectives, successful versus competitors, timeefficient, and opening up new markets, technologies and

product categories.

Performance Drivers: Distinguishing Bestfrom Worst

A systematic process

A new product process that guides projects from idea tolaunch is a well-recognized key to NPD success (1). Bynew product process,we mean more than just a flow-chart; the term includes all process elements: the stages,stage activities, gates, deliverables, and gate criteria thatconstitute a well-defined new product process. Havingsuch a process is the strongest practice observed in oursample of businesses:

73.7 percent of businesses claim to have such an NPDprocess, with 66.7 percent indicating that it is well-documented and visible.

72.4 percent have defined stages in their NPD process,complete with activities spelled out for each stage.

73.8 percent have built gates into their NPD process,and 46.7 percent have well-defined Go/Kill gate criteria.

71.0 percent have an explicit menu of deliverables forgates.

71.9 percent have designated gatekeepers who makethe Go/Kill decisions.

52.4 percent of businesses really make use of theirNPD process, but only 43.8 percent report that theirprocess is an enabling one.

65.2 percent view their NPD process as flexible,adaptable and scalable.

41 percent have put a Process Manager in place tooversee the process.

Not surprisingly, all five of the best-practices companiessingled out for site visits have in place a well-designed

NPD process, such as Stage-Gate (2). An outline ofeach companys process is provided in the full AmericanProductivity and Quality Center report (3). Eachcompany indicated that a solid, well-defined processwith clearly defined activities in each stage and a well-defined decision framework for the gates (decision

points) was a critical best practice. For example:

ExxonMobil ChemicalThis process, a company-wide stage-gate framework, has become institutionalizedand is ingrained in the language and culture of thecompany.

Bausch & LombB&Ls new product developmentprocess, called the product development managementprocess (PDMP), is simple, easy to follow, and built oninternal and external successes and best practices. The

NPD team has built a process with stages/phases andgates that is practical, but not restrictive.

Air Products and Chemicals best practice.An inte-grated work process for technology innovation involves

integration along two axes: business and technology, anddevelopment pipeline.

The results of such processes have been impressive. Forexample, Bausch & Lombs management observed,Acontact lens project would typically have taken threeyears before the PDMP was implemented. Today we arelooking at 18 months to two years. The payback is real.

Conclusions

Putting a formal NPD process such as Stage-Gate inplace is clearly a strong practice among better perform-ers. But merely having this NPD process does notseparate the Best from the Worst Performers, becausealmost every business has such a process. Rather it is howthe process and its activities and recommended practicesare implementedthat makes the difference. As we shallsee next, in spite of the fact that most businesses do havea formal NPD process, quality of execution of the activi-ties within that process varies considerably between Bestand Worst Performerssome companies really do

practice their process, others do not!

Quality of execution

How well NPD projects are executed proves to be pivotalto performance. Figure 1 shows the quality-of-executionresults for 18 commonly-cited activities in NPD projects.

Note that most of the 18 activities strongly differentiatebetween the Best and Worst Performing businesses; theeight activities with the greatest impact on performanceare (in descending order, and based on correlations witha number of performance metrics):

1. Conducting a Post-Launch Review.The PLR is aweak area overall, with only 22.1 percent of businessesconducting a solid and formal post-launch review.

Conductingpost-launch reviews

is a standout best

practice.

Research Technology Management44


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However, twice as many Best Performing businessesundertake this PLR very well; they review resultsachieved versus targets and hold the project teamaccountable; they learn from their mistakes and strive todo the next project better; and they formally terminatethe project while Worst Performers do not. This is astandout best practice.

2. Value assessment.This is the weakest area overall;

only 16.5 percent of businesses do a solid assessment ofthe projects value to the business, while 28.2 percentclaim they do this very poorly! (not shown). Best Per-formers are nine times more likely than Worst Performersto undertake a solid assessment of the value of the

product to the business.

3. T e s t m ar k e t or t r i al s e l l t o a l i m i t e d s e t of customers.Again a weak area, especially for WorstPerformers.

4. Concept testing (to determine the customer/userreaction to the proposed new product and gaugingpurchase intent before Development begins).This isyet another weak area, with only 27 percent of businessesundertaking proficient concept testing, and 32.1 percentof Best Performers doing well here.

5. Idea generation.Another area needing improve-ment, with 25 percent of businesses claiming that they do

a very poor job here; and only 19 percent are proficient.

6. C u s t o m e r t e s t s o f p r o d u c t u n d e r r e a l - l i f econditions.A fairly strong activity overall, with51.5 percent of businesses doing it well. Best Performersexcel (70.4 percent are proficient), while Worst Perform-ers fare poorly.

7. Detailed market study/research, or Voice ofCustomer.One of the weakest areas (only 18.3 percentof businesses fare well here). Best Performers are fivetimes more likely than Worst Performers to handle thisactivity proficiently.

8. Pre-Launch business analysis.Best Performersalso excel here, with 51.9 percent undertaking a profi-cient pre-launch analysis, versus 16.0 percent for WorstPerformers.

What we witness is that the most important activities inthe NPD processthose that separate the Best from theWorst Performersare also those activities that, onaverage, are executed most poorly! This is solid evidenceof a quality-of-execution crisis in NPD, and that toomany businesses are under-emphasizing decisive activi-ties.

Conclusions

First, quality of execution remains an elusive goal, atleast for many of the activities that comprise the new

product process, and for the overwhelming proportionof businesses that rated themselves low. Note howfew businesses proficiently execute many of the keyactivities in Figure 1! Senior managements must re-double their efforts to demand and promote higherquality of execution in NPD projects from idea throughto launch.

Second, the business and marketing activities are farweaker than the technical ones. For example, of the eightexceptionally weak activities in Figures 1A and B, fourare marketing, business or customer related. By contrast,the technical work appears much stronger: the three best-rated activities are the technical development of the

product, in-house product testing, and production start-up. Clearly there are major deficiencies on one side of thefield in the new product arena.

Third, activities are generally more poorly executed inthe front half of the project. Only 24 percent of busi-

How the Research Was Conducted

The research reported in this series was undertaken bythe APQC (American Productivity and Quality Center)with the authors as subject matter experts. The studyused the APQCs standard methodology, including bothqualitative and quantitative methods.

Qualitative: Site visits were organized with five busi-nesses identified as having best practices in new productdevelopment. The APQC research teamconsisting ofthe subject matter experts, a number of sponsorcompanies and APQC personnelconducted themeetings. The five companies visited were:

Air Products and Chemicals Inc.

Bausch & Lomb

EXFO Electro-Optical Engineering Inc.

ExxonMobil Chemical Company

Kraft Foods Inc.

Quantitative:A detailed quantitative questionnaire wasalso constructed. A total of 113 measures were used tocapture the existence and proficiency of NPD practicesand approaches within businesses, as well as questionsto gauge businessesnew product performance.

The quantitative sample: 105 business units respondedto the detailed quantitative questionnaire:

Businesses are in a number of different industries,with 51 percent in the manufacturing sector.

The size of thebusinessesaverage sales: $2.5 billion(median: $400 million); average employees: 4,711(median: 1,500).

R&D spendingaverage: $58.4 million per businessor 5.2 percent of sales; of this, the proportion going toNPD is 52.3 percent on average, for a NPD spending rateof 2.89 percent of sales.R.G.C., S.J.E.andE.J.K.

NovemberDecember 2004 45


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nesses, on average, execute well for the front-end ofprojects (those activities listed in Figure 1A. By contrast,42.3 percent are proficient for the back-end of the process(activities in Figure 1B). Indeed, all three of the top-ratedactivities occur in the back half of the project, while five ofthe eight worst-rated occur in the front half. More time andattention must be devoted to the front-end of NPD projects.

Finally and most important, quality of execution iscritical to NPD success, across the entire range of activi-ties from Idea Generation to Post Launch Review.

The most decisive activities listed above, however, areamong the most poorly executed.

The message is clear: managements must get back tobasics in NPD, and begi n to emphasize quality-of-executiondoing it right the first time. Many of the rootcauses of poor quality of execution have been high-lighted in Parts I and II of this article series: a lack ofresources, too many projects, and not enough time orresources to do a quality job. Note also that a disciplinedadherence to an NPD processshouldyield better quality

Figure 1A.Quality of execution for key front-end NPD activities.

Figure 1B.Quality of execution for key back-end NPD activities.



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of execution, because best practices, quality-of-execution standards and prescribed deliverables are laidout in such world-class NPD processes.

Best practices built into the NPD process

Four potential best practices, that are part of the newproduct process were initially identified in a focus groupdiscussion with those firms sponsoring and overseeing

the research. These are areas where the sponsor firmswere particularly weak, yet it was hypothesized that theymight prove important to success. Thus, they wereincluded in the research, and all four proved to bedecisive to performance. These are, in descending orderof impact (Figure 2):

1. Emphasis on pre-Development homeworkThefront end of the NPD process has been identified as themost problematic phase (4). It is here that the new

product idea is fleshed out into a clear product definition;that the magnitude of the opportunity is assessed and the

business case constructed; and the action plan for the

project is mapped. Solid up-front homework is clearly abest practice: 62.1 percent of Best Performers place con-siderable emphasis on this homework phase, while only38.5 percent of Worst Performers do.

2. Performance measurementThe use of metrics togauge how projects performsuccess, profitability,

NPV, etc.is a major weakness in NPD processes, withonly 30 percent of businesses having such metrics; mostfirms dont keep score when it comes to new product

projects! While 44.8 percent of Best Performers keepscore only 15.4 percent of the Worst do.

People are mobilized by what is measured,claims theVP of R&D at EXFO Engineering, a small but best-

practice company. NPD metrics, however, are often notwell instituted in many businesses. Not so for the bench-marked best-in-class companies. For example:

ExxonMobil conducts two post-launch reviews thatcapture metrics. The first is 13 months after launch andincludes comparisons of the project cost and timing

targets with actual performance. The second occurs 312 months later and captures early commercial results,such as market receptivity and manufacturing and tech-nology performance.

EXFO Engineering measures time-to-volume, projectcost, earned value, and ROI of each completed project.

3. Metrics on how well the NPD process is workingThese metrics focus on whether or not the NPD process isworking wellwhether projects are following the

process, effective gates are being held, etc. These metricsare also a major weakness in NPD processes, with

34.6 percent of businesses scoring poorly, and only26.9 percent using such metrics effectively. Again, BestPerformers tend to have such metrics in place three timesas often as Worst Performers.

Air Products, for example, has a quarterly metrics reviewfor the process. The metrics highlight projects perform-ing well, projects behind schedule, and potentialimpactsa broad view of the process.

4. Tough and demanding Go/No-Go decision points,where projects really do get killedSome businesses

Figure 2.Four NPD process best practices decisive to performance.



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claim to have gates in their NPD processes, but a closerinspection reveals that these are largelyproject review

points with no tough decisions, with the result thatprojects are rarely killed. For 18.1 percent of the busi-nesses, this lack of rigor at the gates is the case; but one-third of businesses have tough, demanding gates where

projects really are killed. Although Best Performers faremuch better here, with 51.7 percent having tough Go/Killgates, this is still a relatively weak area.

Conclusions

These best practices, included at the suggestion ofsponsor firms, are missing in a great many companies.They are embraced much more by the Best Performers,however. Thus, when implementing or overhauling yournew product process, make certain to emulate the BestPerformers:

Put metrics in place to gauge both how successful orprofitable your projects are (as part of a Post-Launch

Review), and how well your NPD process is working.

Build in tough Go/Kill decision points or gates, wherebad projects really do get killed.

Both of the above are very weak areas, yet stronglyseparate the Best from Worst Performers.

Emphasize the up-front or homework phase in yourNPD processsolid homework is a common practiceamong the Best Performers.

Spending on up-front homework

A frequently-asked question is, How much homework isenough? How much should be spent on the pre-development or homework stages of the projectonthose activities that occur in its first few phases? Thespending breakdown by the sample of businesses

provides a guide (Figure 3):

On average, 12.1 percent of the projects total costslabor, material, equipmentis spent on the up-front,homework, stages before Development begins.

But this 12.1 percent is skewed by the 17.9 percent ofbusinesses that spend more than 20 percent of the projectcost on the homework stages!

By contrast, 59 percent spend less than 10 percent onup-front homework, and one-third spend only 5 percentor less.

Does spending more on the early phases pay off? Notethat the average business spends 12.1 percent of the

projects total costs on the up-front homeworka fairlylimited amount of effort. The Worst Performers spend10.7 percent (see Figure 3), Best Performers spend13.4 percentnot a large amount, but 25 percent morethan the Worst.

Conclusions

Spending more on up-front homework appears to be abetter practice. Still, we are somewhat surprised by:

Figure 3.Spending on the homework, or, pre-development phase.



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How little the amount is overall (12.1 percent of theproject cost, on average); and

The fact that there is only 25 percent differencebetween the Worst and Best performers,

Yet Best Performers do a much better job on all eight ofthe up-front homework activities listed in Figure 1A, andin the next section, we see that they do a superior job on

voice-of-customer work and get much better marketinformation. The conclusion is that it is the nature andquality of the workthey do in the early stages (and not somuch the money and time spent) that matters. Mostimportant, Best Performers place far more emphasis onthe business/marketing side of projects early on; thus,instead of moving too far ahead on the technical side,they adopt a more balanced approachbalancingtechnical assessment activities with market informationactivities in the early stages of the project.

A possible solution: Air Products recognizes howimportant the front-end activities are; thus, it allows a

person to work on concept development (2030 hours ofbudgeted time) and to be dedicated to only one idea at atime. This ensures that the idea gets the necessary focus,and that the required front-end activities receiveattention and effort.

Voice-of-Customer information

Countless studies have cited the need for better voice-of-customer information as one key to NPD success (5).Thus, voice-of-customer studies are proposed as a best

practice, and were investigated in this study.

Voice-of-customer and market input is one of thestrongest discriminators between the Best and WorstPerforming businesses (Figure 4). Thus, given theirimpact on performance, all five items below must be con-sideredbest practices:

1. Market and buyer-behavior studies are a valuablesource of information for planning the market launch.Such studies are noticeable for their absence, with only17.3 percent of businesses conducting such marketstudies. This is the second weakest area among the five inFigure 4, but a very strong best practice and a key dis-criminator between the Best and Worst Performers.

2. Market research as a tool to help define the productits requirements,features,functionality of, and high-levelspecsis a key recommendation of studies of new

product success and failure. Again, we witness deficien-cies here, with only 11.4 percent of businesses claimingthat their product definitions are truly based on marketresearch of the customer or user. Best Performers,however, generally do employ such market research todefine the product, and this activity separates the Bestfrom the Worst Performers in a strong way.

3. The customer or user ought to be an integral part ofthe Development process.Each iteration of the productshould be tested with the customer as it is beingdeveloped.Spiral development or a series ofbuild-

and-test iterations is the proposed scheme; for example,rapid prototypes-and-tests. But only 23.8 percent of busi-nesses report that the project team constantly interfaceswith key users of a new product during the entire Devel-opment stage to validate product acceptance. This is alsoa strong activity in terms of separating the Best fromWorst Performers.

4. Identification of customers or users real or unar-ticulated needs and their problems is considered funda-mental to voice-of-customer research, and should be akey input to product design.Only 33.4 percent of busi-nesses, however, work closely with customers. This is amost important activity, and we rate the identification ofcustomersreal needs via voice-of-customer research asa strong best practice, with Best Performers embracingthis method more than the four other approaches inFigure 4.

5. Working with highly innovative users or customersThis is yet another tool employed by voice-of-customer

practitioners. The argument is that if one works withaverage customers, one gets average ideas, but innova-tive customers are likely to be the source of much moreinnovative ideas (6). This is a relatively weak practice,with only 33.4 percent of businesses indicating strengthshere. Again, this is a critical practice: Best Performersgenerally use this approach, and it helps to discriminate

between the Best and Worst Performers.

Conclusions

This study confirms what many voice-of-customeradvocates have been arguing for years: voice-of-customer research and market inputs are vital to a suc-cessful NPD effort. Not only is this one of the strongestfactors to separate Best from Worst Performers, it is also

Voice-of-customerand market input isone of the strongest

discriminatorsbetween Best andWorst performers.



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an area where major deficiencies were identified.Seeking market inputs and building voice-of-customerinto your NPD process must become an area of top

priority if stellar results are the goal.

Quality of market information on entering development

Much has been written about the need for better marketinformation in NPD (7), while other studies show that thelack of solid market and customer information is a major

cause of new product failure (8). Thus, the quality ofmarket information is an area of focus of the currentstudyjust how good or solid is that market data?

Seven different types of market information were inves-tigated, ranging from market size and market potentialdata to knowledge about customer needs in a new

product (Figure 5). On average, market informationacross the seven types is rated as poor-to-moderate.Additionally, there are major differences among the

Figure 4.Voice of customer and market inputimpact on performance.

Figure 5.Quality of market informationimpact on performance.



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businesses in terms of quality of market information,with a sizable majority making decisions based onlimited market information.

Some types of market information appear vital to NPDperformanc e: Best Performing businesses seek andobtain this vital market information while Poor Perform-ers do not (Figure 5). In rank order, the key market infor-mation is:

1. I nf or m at i on on c us t om e r ne e ds , w ant s andproblemsWhile only 33.4 percent of businesses gaingood information here, this is a key discriminator

between Best and Worst performers; it is also an areawhere the Best Performers are particularly strong.

For example: ExxonMobil reports that customeralliances are an effective vehicle for voice-of-customerresearch in order to gain insights into customer needs.With these alliances, regular exchanges and face-to-facemeetings occur. And EXFO Engineering views seekinginformation on customer needs, wants and problems to

be so important that 2025 percent of product andmarketing managers time is spent visiting clients to seekinsights.

2. Competitive information (products, pricing andstrategies)This is the strongest area across all busi-nesses, but still only 38.1 percent of businesses gain solidinformation here. Best Performers rate very high on thisinformation area, and solid competitive information alsoseparates the Best from the Worst Performers.

3. Information on the customers re acti on to theproposed product (e.g., degree of liking or purchaseintent)This is a weak area (only 23.8 percent of busi-

nesses obtain good information here), but a strong dis-criminator between Best and Worst Performers in Figure5. Seeking such information is a clear best practice.

For example: Kraft Foods seeks customer input as earlyas possible in its NPD process to gain quick, initialreactions to the new product concept, and to identifyways to improve the concept. The company conductsqualitative research using early prototypes so thatconsumers can experience how the product might look ortaste.

4. Information on customer price sensitivity for the new

productThis is another weak area, with only20.0 percent of businesses proficient here. It is also a dis-criminator between Best and Worst; but even the BestPerformers are weak, although much better than theWorst.

5. Data on expected non-revenue performance of theproductThis is a very weak area, but another strongdiscriminator between Best and Worst businesses.

6. Data on market size and potential.a moderately-rated area.

7. Expected sales revenue from the new product.alsomoderately-rated.

Conclusions

The results here parallel those in previous sections:market information is lacking in many areas in NPD. Theonly information areas that are rated moderately-

proficient are quantitative information on market size

and expected sales, and competitive information. Butqualitative information on customer needs and wants,

price sensitivity and reaction to the proposed product arequite weak. These weaknesses are closely linked to thelack of voice-of-customer work identified previously.

Sharp, early product definition

The need for early, fact-based definition of the productprior to moving into the Development stage has beenwell documented in previous studies of new product per-formance (9). But have managements heeded the

message? The results (Figure 6) show that some busi-nesses do quite well on some elements of product defini-tion before Development begins; in a considerableminority of businesses, however, this product definitionneeds to be sharpened in major ways. In order of impact,they are:

1. The benefits to be delivered to the customerthevalue propositionclearly definedOnly 37.1 percentof businesses spell out the value proposition well beforeDevelopment starts. Best Performers excel here, whileonly 15.4 percent of Worst Performers manage to definethe product benefits.

2. The target market definedthe segment at which theproduct will be targetedFrom market segmentation,all else flows claim the marketing gurus; thus, animportant element of product definition is to specify thetarget market or intended user for the new product. Sur-

prisingly, this element of product definition is quitedeficient, with only 30.5 percent of businesses definingthe target market before Development begins.

3. The positioning strategy definedhow the productwill be positioned in the eyes of the customers/usersversus competitive products.Again there are weak-

nesses, with only 36.5 percent of businesses doing a solidjob on de fi ni ng the po sit ion in g stra teg y, whi le65.5 percent of Best Performers do well.

4. The product concept definedwhat the product willbe and doWhile the majority of Best Performersdefine the product concept well, only 15.4 percent of theWorst do.

5. Maintaining stable product specifications throughoutthe Development stageUnstable specs and scopecreep are phrases often used to describe problems



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project teams face that lead to longer time to market. Thebusinesses studied generally fail in terms of stableproducts specs, with 22.5 percent scoring poorly hereand only 30.0 percent rating well. Almost half of the BestPerformers do achieve stable specsa clear best

practice.

6. The products features, requirements and specifica-tions definedThe technical side of the product defini-

tion is undertaken somewhat better, with 48.6 percent ofbusinesses doing an excellent job specifying the productrequirements and features before Development starts.

7. Using a teaming contract between the project teamand management to define the product, the project andexpectations before the Development phase beginsThis too is considered a better practice by some busi-nesses in an attempt to bring stability and rigor to the

Figure 6.Product definitionimpact on performance.

Figure 7.Product advantageimpact on performance.



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product and project definition. But 40 percent of businesseshave no such teaming contract and only 30.8 percent do;however, 44.8 percent of Best Performers do.

The concept of a teaming contract is one that is gainingincreasing popularity. For example, 3M relies on a teamcharter to gain agreement between project teammembers and their executives, while Bausch & Lombuses a project strategic decision package. Once signed,

any subsequent changes must be approved by all teammembers and management who have signed the originalagreement. This contract, coupled with the essential sig-natures, prevents unnecessary scope creep in the project.

Conclusions

Overall, product definition and its elements remainweak facets of NPD practices. Not only are businessesfailing to get the necessary market and voice-of-customer inputs, but perhaps as a result, the product isnot well defined before Development begins. The targetmarket, product concept, value proposition, and posi-tioning strategy are all moderately weak elements of

product defi niti on. Only the te chni cal face tth etechnical specs and requirementsscores well. Further-more, the stability of these specifications remains aserious challenge, with many businesses faring poorly.The use of teaming contracts to nail down this productdefinition may be a partial solution, but it is not practicedwidely among the businesses studied.

Managements in best-practice companies demand andget sharp, early product definition prior to the com-mencement of the Development stage. This definition

includes some or all of the seven elements listed in Figure6, and is typically a deliverable as part of the projectteams Business Case. Moreover, the product definitionis fact-based and signed off on by all members of the

project team. No project should enter Developmentwithout this definition in place.

Competitive and product advantage

One of the strongest drivers of NPD performance foundin numerous studies is the product itselfdeveloping adifferentiated product with a superior value proposition.The current study investigates some of the dimensions of

product advantage and how businesses fare on these(Figure 7). In order of impact, they are:

1. Offers customers/users main benefits that areimportant to themThis is the strongest element of com-

petitive advantage, with 52.4 percent of busi nessesclaiming that their products do indeed deliver important

benefits to customers. It is also a strong discriminatorbetween Best and Worst Performers, with 86.2 percent ofBest Performers and only 23.1 percent of Worst

providing important product benefits.

2. Offers customers/users new and unique benefits (notfound in competitive products)Businesses performmoderately well here, on average, with 34.3 percent of

businesses claiming strengths in terms of new/uniquebenefits in their products. Best Performers excel whencompared to Worst Performers.

3. Better value for money for the customera superiorvalue propositionThe result is again similar, with

44.1 percent of businesses claiming proficiency in termsof value propositions offered and Best Performers againscoring well.

One best practice observed is the use of a specific gatedeliverable to ensure that the project team has indeedcreated a winning product concept: The project teammust provide the gatekeepers with a demonstrated con-firmation from potential customers that the product willdeliver a true value to them. The team chooses the mostappropriate approach to demonstrate this value. The best

practice is not the techniques used, but rather the disci-pline of the procedure. This approach has also been

credited with creating better product definitions, as theyare now fact-based and verified by the target user.

4. Superior to competitorsproducts in terms of meetingcustomer needsBusinesses perform moderately wellhere, with 58.6 percent of Best Performers and38.8 percent of all businesses developing superior

products.

5. Offering product with superior quality to competitiveproducts (however the customer measures quality)Again, businesses perform moderately well here, withthe majority of Best Performers and 40.6 percent of all

businesses scoring well on this dimension.

Conclusions

Overall, the sample of businesses appear to have inter-nalized the message from previous studies of NPDsuccess factors: that product advantage is critical to prof-itability and success. Note that businesses, on average,fare moderately well across the five dimensions in Figure7. The only disconcerting evidence is that, with theexception of the first itemoffering important benefitsto customerstill less than 50 percent of businesses

Emphasize productadvantage and

superiority in your

NPD process.



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score exceptionally well; however, very few businessesscore exceptionally poorly.

Product and competitive advantagedelivering newproducts with unique customer benefits, a superior valueproposition (better value for money), with importantcustomer benefits, better quality, and meeting customerneeds betteris one of the top best practices weuncovered. There are two main recommendations here:

First, emphasize product advantage and superiority inyour NPD process. For example, the items in Figure 7should become part of your check-list of criteria atGo/Kill decision points; they should be key topics of dis-cussion at project reviews; and senior managementshould challenge project teams when they fail to delivera product definition that scores well on the items inFigure 7.

Next, arriving at unique, superior value products is noteasy. Occasionally it is the result of inspiration or a tech-nological breakthroughan aha. But most often itcomes from tough work, including some of the activitiesand tasks we have highlighted above: undertaking

excellent voice-of-customer research to correctlyidentify needs, problems, benefits sought, and function-ality desired; building solid market information into the

NPD process and projects; and executing the up-fronthomework activities superbly. This work does notguarantee product superiority, but it provides a solidfoundation.

Making the NPD Process Work

The results outlined in this third-of-the-series articleyield new challenges for management. Almost every

proficient company has implemented an idea-to-launchnew product process; such a process seems almost fun-damental to NPD performance. In too many businesses,however, the process is not working well, and that isleading to disappointing performance. As evidence,consider the quality-of-execution results, where many

businesses are sub-standardmany key activities are notexecuted very well! Yet these same activities (Figures1A and B) are strongly connected to NPD performance.

Also, a lack of voice-of-customer research, solid market

information, and sharp, early product definition continueto plague many projects and businesses, in spite of theevidence in Figures 27 that these are critical best

practices with strong links to performance.

Even more disturbing is the fact that performancemetrics, evaluation and feedback are missing for most

NPD projects. Note the lack of a post-launch review stepfor almost 80 percent of businesses, coupled with theevidence that this is a clear best practice. And recall fromthe first article in this series that a significant minority of

businesses dont even keep scorethey dont measurenew product results at all!

One might speculate about why the new product processis so deficient in practice. Earlier articles in this serieshave hinted that a lack of resources, doing too many

projects, and a failure of senior management to beproperly engaged may underlie some of the problems.There are no doubt other reasons as well: managementoverly-focused on doing it fast rather than doing itright; a significant under-resourcing of the NPDfunction; and simply a lack of knowledge of how to do itright in the first place (10,11).

The Quest for Superior New Product Results:Series Summary

Discovering the secret to better new product performancegreater success rates, faster to market, and higher-valueprojectsremains an elusive goal for too many businesses.This three-part series has shed light on over 100 practicesranging from ways to improve the climate for innovation tofocusing on key activities in the newproduct process. Each ofthe items that we identify as a best practice was common to

the top performing businesses and most often separated theBest Performers from the rest in a strong way. These bestpractices boil down to four major themesthemes thatunderpin superior NPD performance:

1. Strategy.Have an articulated product innovation andtechnology strategy for your business. This strategy shouldbe closely linked to your overall business objectives and spellout your NPD goals, delineate your strategic arenas or areasof focus, define strategic buckets and resources, and lay outyour new product roadmap or major initiatives.

2. Focus on people.Organize effective cross-functional

project teams, establish the right climate and culture for inno-vation in your business, and define the appropriate role for anengaged senior management team.

3. Process.Implement a world-class, systematic, newproduct process to drive new product projects from ideathrough to launch, quickly and effectively. Make sure thatyour process incorporates the best practices outlined in thethree articles, and then ensure that it is really implementedand executed!

4. Resources:Put the necessary resources in placefromall functional areas. Then allocate these resources via aneffective portfolio management system to the right innova-tion areas and to the right projects.

Each theme is elaborated on in the three articles. Werecommend that you review them, note those areas whereyour business is weak, and implement those practices that areright for you. By emulating the Best Performerspractices,our hope is that you will approach their performanceresults.R.G.C., S.J.E. and E.J.K.



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The evidence in support of an effective, world-class NPDidea-to-launch process is overwhelming: manycompanies are doing it right and they achieve positive

NPD results. Our recommendation: make sure that yourprocess is indeed a first-class one, incorporating themany activities and best practices we have outlined inthis article. But most important, ensure that the process isreally implementedthat everyone in the business buysin, embraces the spirit and detail of the process (in-cluding an emphasis on proficiently executing the best

practices outlined in Figures 27), and really uses theprocess as an effective guide to getting new products tomarket.

References and Notes

1. See: Griffin, A.Drivers of NPD Success: The 1997 PDMA Report.Chicago: Product Development & Management Association 1997;M e n k e , M . E s s e n t i a l s o f R & D S t r a t e g i c E x c e l l e n c e . Research Technology Management, 40, 5, Sept.Oct. 1997, pp.4247; Cooper, R.G. Winning at New Products: Accelerating theProcess from Idea to Launch, 3rd edition. Cambridge, Mass: PerseusBooks, 2001.2. Stage-Gate is a registered trademark of Product DevelopmentInstitute Inc.www.prod-dev.com3. This article is based on an American Productivity & QualityCenter study, involving the APQC (Houston, Texas), the ISBM(Institute for the Study of Business Markets, Penn State University),and Product Development Institute Inc. (Ancaster, Ontario, Canada).The APQC report is available as: Cooper, R. G., Edgett, S. J. andKleinschmidt, E. J. An Investigation into Best Practices in ProductInnovation: What Distinguishes the Top Performers?Product Devel-opment Institute, April 2003, www.prod-dev.com; also from theAPQC:www.apqc.org/pubs/NPD20034. Cooper, R. G. and Kleinschmidt, E. J. An investigation into thenew product process: Steps, deficiencies and impact. Journal of Product Innovation Management3,2, 1986, pp. 7185; Song X. M. andParry M. E. What separates Japanese new product winners fromlosers.Journal of Product Innovation Management13, 5, Sept. 1996,

pp. 422439;Thomke S. and Fujimoto T.The effect offront-loading

problem solving on product development performance. Journal ofProduct Innovation Management17, 2, March 2000, pp. 128142.

5. Griffin, A. and Hauser, J. R.The marketing and R&D interface.Handbook: MS/OR in Marketing, eds.: Lilian, G. L. andEliashberg,J.Amsterdam: Elsevier Science Publishing, 1992; McQuarrie, E. F.Customer Visits, in The Market Research Toolbox: A ConciseGuide for Beginners.Thousand Oaks: Sage Publications, 1996, pp.5165; Miller, C. and Swaddling, D. C. Focusing NPD research oncustomer-perceived value, in The PDMA Toolbook for NewProductDevelopment, ed.: Belliveau, P., Griffin, A. and Somermeyer, S. NewYork: John Wiley & Sons, 2002, pp. 87114.

6. Von Hippel, E. A., Thomke, S. and Sonnack, M.Creating break-throughs at 3M. Harvard Business Review, Sept.Oct. 1999, pp.4757.

7. See Cooper, R. G. Winning at New Products: Accelerating theProcess from Idea to Launch, 3rd edition. Cambridge, Mass: PerseusBooks,2001;Di BenedettoC. A., Identifying the key success factorsin new product launch.Journal of Product Innovation Management16, 6, Nov. 1999, pp. 530544;Mishra S., Kim D. and Lee D. H.Factors affecting new product success: cross country comparisons.Journal of Product Innovation Management13, 6, Nov. 1996, pp.530550; Montoya-Weiss,M. M. and Calantone, R. J. Determinantsof new product performance: a review and meta analysis.Journal ofProduct Innovation Management11, 5, Nov. 1994, pp. 397417;Song X. M. and Parry M. E. What separates Japanese new productwinners from losers. Journal of Product Innovation Management13, 5, Sept. 1996, pp. 422439.

8. Cooper, R. G. Winning at New Products: Accelerating theProcessfrom Idea to Launch,3rd edition. Cambridge, Mass: Perseus Books,2001.

9. See review of success/failure studies: Montoya-Weiss, M. M. andCalantone, R. J. Determinants of new product performance: a reviewand meta analysis.Journal of Product Innovation Management11,5, Nov. 1994, pp. 397417;and: Cooper, R. G.,New products: whatseparates the winners from the losers,inPDMA Handbook for NewProduct Development, ed.: Rosenau, M. D. New York, NY: JohnWiley & Sons Inc, 1996.

10. See for example: Cooper, R. G., The invisible success factors inproduct innovation.Journal of Product Innovation Management16,2, 1999, pp. 115133.

11. R. G. Cooper and S. J. Edgett, Overcoming the Crunch inResources for New Product Development. Research TechnologyManagement,46, 3, MayJune 2003, pp. 4858.

Information for Authors

RESEARCH TECHNOLOGY MANAGEMENT welcomes manuscripts that deal with enhancingthe effectiveness of technological innovation.

Manuscripts are reviewed by the Board of Editors, which looks for ideas and information to helpindustrial R&D/technology leaders run their operations more effectively. This means an emphasisonreal-worldexperience that can be put to use by practitioners across a spectrum of industries.

Articles based primarily on research studies should, therefore, deemphasize methodology in favor of

explaining: 1) what the investigators learned, and 2) why those findings could be useful to industrymanagers.

Manuscripts submitted for review should be on good paper (not faxed), double-spaced, andpaginated. References should be numbered in the order in which they are cited, and listed togetherat the end of the manuscript.

Illustrations should be individually numbered, furnished one per page on 8-1211-inch whitepaper, and be suitable for black-and-white reproduction, without redrawing.

Send manuscriptsto the Editorial Office, RESEARCH TECHNOLOGY MANAGEMENT,Industrial Research Institute, Suite 1102, 2200 Clarendon Blvd., Arlington, VA 22201.

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