Number of Ideas that Succeed at each New Product Development Gate Review

An example of a typical R&D pipeline is shown in the “Number of Ideas that Succeed at each New Product Development Gate Review” figure. Along the bottom are the stage gates through which new businesses and new product development programs pass.

In this particular model there are seven stages in the stage gate model. The vertical scale shows the number of projects or programs launches and commercial successes the company achieves in each gate in this process. This starts with several thousand ideas that thin out to produce just one commercialization. Evaluation of pass NPD success rates have been conducted in many different industries. Passing rate numbers have held up roughly the same for most studies. The numbers shown here relate to work done in the 1990s and early 2000’s. In the 1980’s early work done by Booz Allen & Hamilton showed higher passing rates. They found that for every successful product commercialized, 11 serious ideas or concepts were needed, three would move ahead and enter development, followed by 1.3 being launched into the market.

Increasing the velocity down the R&D or new product development pipeline is possible. In fact acceleration down the new product development pipeline is exactly what integrated technical, business, and intellectual property management is all about. Acceleration comes from five sources. They are generally classified as: to simplify, to eliminate delays, to eliminate steps, speed-up, and parallel processing. R&D, manufacturing, marketing, and intellectual property all have roles and activities in each of those five areas. Working together they can speed up the overall process significantly. Work in the 1990s showed that in large companies, with formal stage and gate processes, cycle times could be reduced to a third. In the open innovation chapter later in this book we talk about ways to use outside resources to speed the process even more. The “Methods To Speed New Product Development Phases” figure shows a simple matrix of how this works. It is adapted from the 1992 work of Marie Millson, Espey Roche and David Willman published in the journal of product innovation management.

Methods To Speed New Product Development Phases

Important to a discussion at this time are some of the comments that show in the research and development column. It is important to generate explicit R&D goals, to link the R&D goals to the manufacturing capabilities and marketing goals, and to protect it all with intellectual property. Generating specific R&D goals may sound easy but more often than not companies struggle with finding things that are new, that are consistent with their corporate vision, mission, and values. Many times this is because they keep a narrow view of their market and core competencies. The old story that if the railroads viewed themselves as transportation companies instead of railroads, they would have been the leaders to use trucks on the growing interstate highway system and expanded into the airborne parcel transport systems that have since evolved. Such a restatement of their vision would have allowed them to capture many new markets and growth opportunities. Covered in this book in the section around creativity we will describe many ways that a company can use to expand its vision of what it could be.

First Mover Advantage

The “First Mover Advantage” figure takes us in a different direction. It points out the real advantages of being the first mover. This came to the forefront in the area in the late 1990s. In that environment it was clear that the first company to offer a product was the one that would take a significant portion of market share.

This work was done at the Iacocca Institute at Lehigh University. What is unique about their work is as they were able to show that the first mover advantage depended upon the market window of opportunity. This figure shows why it was so hard for established companies like Procter & Gamble or airframe companies like Boeing to think of their business the same way as dot.coms. There was a lot of frustration in traditional companies as they tried in vain to increase the cycle time of their new products. When they launched products sooner to the market they found that they didn’t get a corresponding first mover advantage to the same extent that was found in other industries with smaller market windows. It was frustrating to say the least. From an R&D management standpoint this chart is valuable in that it shows the pace at which you need to consider launching a new product. Putting excess resources onto a new product development in order to gain a first mover advantage were the market window is long really has limited payback. On the other hand it also shows the disadvantage that a company has when they come to market late. Clearly R&D, marketing and IP management needs to pay attention to the amount of resources that will be applied to a project to make sure that the project’s time to market is consistent with obtaining a first mover or fast follower advantage. As we will see later, funding and resourcing projects depends on two things (1) when you want to come to market and (2) when do you want to file your intellectual property. Taken together the “market window of opportunity” and the “intellectual property window of opportunity” are what drives resourcing decisions.