Low overall R&D project commercialization rates prompted Robert Cooper and others to start benchmarking NPD best practices. These were reported in Research Technology Management, February 2004. In their studies they listed 17 best practice topic areas going all the way from ideation through to commercialization. In this work 113 measures were studied across 105 business units. When separating the best from worst performers they found that three key areas heavily influenced the rankings. These were (1) the culture and climate within the business and support product innovation, (2) the role of senior management behaviors engagement and commitment, and (3) the nature of project teams and how they are organized.
Having an innovative climate is seen as one of the more important drivers of successful product development. There are seven components of this attribute of new product development. These are:
1. A supportive climate for entrepreneurship and product innovation. The supportive climate is a major difference between best and worst performers.
2. Rewards for champions. The majority of best performers recognize and reward their new product development leaders and entrepreneurs. This is both financial and nonfinancial recognition.
3. Rewards for project teams. When a project team does a good job on its product by getting to market on time in meeting its sales revenue targets is rewarded and recognized. Again this is both with financial and nonfinancial recognition.
4. Understanding of the business is new product development process. Worst performers employees do not understand or support the business is new product development process. Sometimes this is a result of a lack of training, lack of leadership, or simply a negative are skeptical attitude within the business.
5. Open communication. Best-performing businesses provide for open communication among the employees across functions, departments, and locations. This is found to stimulate creativity and permits more effective cross functional communication on project teams.
6. Risk adverse this. Best performers appear far less risk adverse. They are not afraid to invest more inventors and projects, with almost one third opting for riskier projects versus weak performers.
7. No punishment for failure. Removal of fear of failures particularly evident in best performers and indeed in most businesses studied. This encourages more innovative and risk-taking behavior although this should not be confused with lack of accountability.
The second climate and culture factor contains more action oriented items and specific programs designed to promote a positive climate. In descending order of impact they are:
1. Resources available for creative work. Best performers provide support and resources for creative employees to pursue your own projects. This includes seed money, equipment, and access to outside consultants.
2. Skunk works in unofficial projects are encouraged. Best performers encourage unofficial or underground skunk works projects.
3. Time off or scouting time. Many best-performing businesses provide creative employees with resources and time off to work on their own projects. This includes companies that allow between 10 and 20% free time to investigate projects of an employee’s own choosing.
4. New product ideas are rewarded. Best performers often provide rewards recognition to employees who submit new product ideas. Again these include both modest monetary and nonmonetary rewards.
5. A new product idea suggestion scheme is in place. This is a common practice amongst best performing businesses although this particular practice is weaker than those above in generating successful projects.
The third important area in successful new product development relates to senior management practices, roles and commitment to new product development. Senior management must lead the way new product development. Elements in doing so are:
1. Senior management providing strong support, empowerment and authority to the people working on new product development projects. This is a key driver of performance. This in particular includes FaceTime between top management and project leaders.
2. New product metrics are an explicit part of senior management’s personal and annual objectives. This includes a percentage of sales or profits coming from new products as part of a senior manager’s annual performance objectives. It is a number two discriminator between best and worst performers.
3. Senior management understanding of the business is new product development process. Management must understand their business is new product development process and be particularly aware of their own warrior role and responsibilities. The worst performers have senior management that does not understand the new business development process at all.
4. Senior management engage in the design of business is new product development processes. Having senior vice presidents of technology, marketing, sales etc. involved in designing key criteria and agreeing on a set of rules of engagement around behaviors was key to making the process successful.
5. Keeping score. Measuring new product results each year is a significant discriminator between best and worst performers. Examples are percentage of sales or profits achieved, percent success versus failures, on-time performance, etc.
6. Senior management strongly committed to new products and product development. This is the second strongest rated area overall and tighter the second-most prevalent among best performers.
7. Senior management not micromanaging new development projects. It leaves the day-to-day activities and decisions to the new development project leader and team. Senior management is involved in setting just the high-level objectives and providing high-level support.
8. Senior management involved in the go/no-go and spending decisions for new projects. Senior managers have a central role in the project review process.
It was also found that the way new product development team project teams are organized influenced the degree of success they had. These organizational attributes fall into three areas. These are (1) the way the teams are organized, (2) the cross functional nature of the teams, and (3) team accountability.
The ways in which teams are organized in order descending order of importance are:
1. The project team remaining on the project from beginning to and it not just on the project for a short while are single phase. This practice also enhances project team accountability.
2. A clearly assigned team of players for each significant new business development project, people who are part of the project and do work for it. Said another way projects have to have clearly assigned project teams.
3. A clearly identified team leader in charge responsible for driving the project.
4. The project leaders responsible for the project from the idea through to launch, carry it through the entire process rather than only for one or two stages. In this way accountability is enhance key knowledge is retained in project momentum is maintained.
The other factors that characterize the business development project teams including the cross functional nature of teams and team accountability are listed below in descending order of impact:
1. Project teams accountable for their projects end result. An example is the project teams are accountable for ensuring that the projects meet profit revenue and time targets. Team accountability is a pivotal best practice, and indeed strongly separates best from worst performers by a factor of 8:1.
2. Decisions made outside the team are handled efficiently. These can include such items as building the capital appropriations reap quest into the gate meeting rather than having it be a separate committee meeting. Another example is requiring all key decision-makers to 10 gate meeting so the project leaders do not have to run around seeking signatures afterwards one by one.
3. Sharing information among the project team members via central information system. The centralized communication system permits sharing project information. It allows several team members to work concurrently on the same document, even across functions locations and countries.
4. Cross functional cooperation of the team. Specifically this includes not wasting too much time on politics, conflicts, interdepartmental prejudices, etc. This speaks to having cross functional senior managers working well together. If this is a weak area it’s critical to provide team training on how to be a team member. This reduces the opportunity for conflicts in the introduction of office politics.
5. Cross functional project teams, with team members from technical, sales, marketing, operations, legal etc. Although this is a fairly common practice is worth mentioning because leaving out a cross functional area can severely detract from project success.
Putting the above best practices into place in many companies was done during the 1990s and early 2000’s. When doing so some areas were more easily addressed and implemented than others. As a result of auditing work done by Price Waterhouse on a number of companies revealed common strengths, weaknesses and recommendations for improvement. Thirteen common recommendations which Price Waterhouse made to organizations trying to improve their new product development efforts are listed below:
1. Develop a corporate strategy that includes clear understanding of the company’s core competencies. Defined the processes, responsibilities, and time frames for developing and managing business and technology strategies, and for ensuring that those strategies set the context for managing all new product and development activities.
2. Establish ongoing communications to create awareness of strategies, priorities, and product technology roadmaps throughout the company. Such communication should make it clear how these plans affect individual performance expectations, valuations, compensation, and rewards.
3. Institute a concepts submission process designed to cultivate a high-quality flow of new product ideas, and to enable management to evaluate those ideas based on their strategic relevance and projected value contribution.
4. Establish clear responsibilities, processes, and expectations for making new project selection decisions.
5. Establish simplified business and R&D portfolio management approaches to support new project investment decisions and the rationalization of ongoing product lines.
6. Implement total cost accounting for better decision-making and product line planning.
7. Establish a technology program to keep major innovations off the critical path of product development.
8. Establish a project management approach that combines flexible phase gate techniques while clearly distinguishing between the responsibilities of the project team and top management.
9. Avoid R&D project overload by reducing parallelism and projects.
10. Use metrics selectively to support improvements in R&D effectiveness.
11. Strengthen product development with early manufacturing involvement, systematic feedback from manufacturing, and design for manufacturability.
12. Improve manufacturing yields, streamline the product introduction process, and formulate an optimal outsourcing strategy.
13. Create mechanisms to ensure that the ongoing management of intellectual property is integrated with the business and technology strategies, and the relevant assets are developed, protected and leverage to maximize their value to the company.