Winning at New Products

Transcription

1 Winning at New Products The Critical Success Factors That Distinguish Best Performers Michael J. Wiebe, P.Eng. June 16 th, 2005 Stage-Gate Inc. Phone: Fax:

2 SG INNOVATION Program Business Strategy Product Innovation & Technology Strategy PORTFOLIO MANAGEMENT Portfolio Management Process Discovery Portfolio NP Project Portfolio PLR Portfolio TD 1 TD S1 TD 2 TD S2 TD 3 TD S3 TD 4 Technology Development Process Technology Intelligence Market Intelligence 5-Stage Innovation Process 1 S1 2 S2 3 S3 4 S4 5 S5 XP S2 XP 3 XP S3/4 XP 5 XP S5 3-Stage XPress Process Successful Product Launches $$$ Product Life Cycle Management Post Launch Review 2

3 Product Development: The Business Challenge Best Practice Companies are achieving: 38% of sales revenues & 42.4% of their profits come from new products Companies expect to increase rate of product introductions by 21% over the next 5 years 79.5% of all products launched are commercially successful Companies that are doing well today invariably have an enviable stable of new products Innovativeness drives companies investment value 3

4 Performance Results: Percentage of Revenue & Profit from New Products 9.0% Bottom 20% of Businesses % of revenue coming from New Products 27.5% The Average Business 38.0% Top 20% of Businesses 9.1% % of profit coming from New Products 28.4% 42.4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Percentage of the Business s Sales Revenues & Profits Coming from New Products Launched in Last 3 Years 4

5 Some Bad News Too! New Product Management is in Trouble 44% of firms PD projects fail to meet profit objectives 1 Only one in seven concepts is a winner Performance ratings 1 : 32% of businesses rate their NPD speed and efficiency very poor Only 27% rate their NPD profitability relative-tospending as high 28% of businesses don t even measure their NPD performance results! 1. Source: APQC Benchmarking study,

6 Ten Critical Success Factors that Decide New Product Success Based on the APQC Benchmarking Studies and NewProd Studies* over 2500 New Product Launches in 500+ Firms *Studies conducted by Dr. Robert G. Cooper and Dr. Scott J. Edgett 6

7 Critical Success Factors 1. A unique, superior product or service: a differentiated product that delivers unique benefits and superior value to the customer Understand your new product, your customers and your competition in relation to the opportunity 2. A strong market and international orientation: a market driven and customer focused process During idea generation, product design, development, testing, and launch 3. Completion of the homework or up-front activities: must be done before Development gets underway 7

8 Critical Success Factors 4. Sharp and early product definition is required prior to Development: Target market definition Product concept & benefits to be delivered Positioning strategy (including price point) Features, attributes, requirement & specs 5. The right organizational structure, design and climate are keys to new product success: A true cross-functional team approach A defined and accountable team leader Team empowerment - no micro management Encourage innovation and creativity Do not punish failure learn from the experience 8

9 Critical Success Factors 6. A supportive climate & culture for innovation: Resources available for creative work Risk averseness NP ideas rewarded Time off or scouting time 7. The actions and commitment of senior management impacts NPD performance: Showing strong commitment to NPD in a variety of ways: Make NPD a part of annual performance objectives Engage in the design of the company s new product process Empower project teams, and support committed them, but do not micro manage Make available necessary resources & keep the commitment! Be an active Gatekeeper who makes tough Go/Kill decisions Keep score: Measure new product results each year 9

10 Critical Success Factors 8. Creation of a funnel. Not a tunnel Make tough Go/Kill decisions Focus limited resources on the right projects Develop more rigor in selection move to Portfolio Management Use scorecards that discriminates winners from losers 9. Focus on consistency, completeness and quality of execution for all deliverables: Ensure that deliverables meet quality expectations Lead by example ask good questions and expect good information Quality of execution is the key to success its controllable!! 10

11 Critical Success Factors 10. People! The resources must be in place: Best performers have more Sales, Marketing, Manufacturing/Operations resources available Ensure that committed resources are available to perform the required activities Urgent things operations often take precedence over future-oriented projects Leaders must lead by example and stay committed to resource allocations 11

12 One More Critical Success Factor Companies that implement a Best-in-Class Stage-Gate Process from idea-to-launch Get impressive results: Fewer errors & less recycling Shorter times to market (by about 30%) Better cross-functional communication & cooperation Earlier detection of failures & higher success rates More projects on time & on budget Better launch & higher customer satisfaction 12

13 Leading Firms Have Adopted Stage-Gate Methods: Nearly 73.7% of N.A. Industry Uses Some form of Stage-Gate 13

14 Some Examples from Best Practice firms Exxon Mobil Chemicals: This process, a company-wide stage-gate framework, has become institutionalized and is ingrained in the language and culture of the company Kraft Foods: Kraft s formal NPD process emphasizes front-end, pre-development activities. These up-front activities typically involve extensive use of both external and internal consumer data Bausch & Lomb: B&L s new product development process, called the product development management process (PDMP) is simple, easy to follow, and built on internal and external successes and best practices. The NPD team has built a process with stages/phases and gates that is practical, but not restrictive Exfo Engineering (winner of PDMA Outstanding Corporate Innovator Award 2000): EXFO believes its product development, or stage gate process, to be its second best practice. EXFO implemented a stage gate process when the organization became ISO certified in 1994 Air Products (Chemicals): Best Practice: An integrated work process for technology innovation involves integration along two axes: business and technology and development pipeline Quoted from: APQC Benchmarking study,

15 References Books: Best Practices in Product Innovation:What Distinguishes Top Performers, March Reports the results of the latest and definitive benchmarking study, done thru APQC, Houston. Winning at New Products: Accelerating the Process from Idea to Launch, 3 rd edition, 2001, by RG Cooper (Perseus Books, Reading, Mass), paperback, 425 pages. The classic best seller 3 rd edition. Provides an overview of the critical success factors in product development, and outlines the Stage-Gate process Portfolio Management for New Products, 2 nd edition, 2002 (new!) by Cooper, Edgett & Kleinschmidt, (Perseus Books, Reading, Mass) hardcover. Provides a look at the best portfolio methods, results achieved, and their use in industry. Product Leadership: Pathways to Profitable Innovation, 2 nd edition (Perseus Books, Reading, Mass) by RG Cooper hardcover Aimed at the senior executive. Provides an overview of Stage-Gate, portfolio management, and developing a product innovation and technology strategy. Product Development for the Service Sector, by Cooper & Edgett (Perseus Books, Reading, Mass) Success factors and Stage-Gate for service industries Order on line for next day shipments: 15

16 Articles: R.G. Cooper, Benchmarking new product performance: results of the best practices study, European Management Journal, 16, 1, 1998, pp 1-7. R.G. Cooper, The invisible success factors in product innovation, Journal of Product Innovation Management, 16,2, April 1999, pp R.G. Cooper, New product leadership; building in the success factors, New product Development & innovation Management, 1,2, 199, pp R.G. Cooper, New Product Development, chapter in: International Encyclopedia of Business & management: Encyclopedia of Marketing, First Edition, edited by Michael J.Baker, International Thomson Business Press, London, UK, 1999, pp R.G. Cooper, contribution to Succeeding in Technological Innovation series: Product Innovation and Technology Strategy, Research-Technology Management, 43, 1, Jan-Feb. 2000, pp R.G. Cooper, Doing it right -winning with new products, Ivey Business Journal, July-August 2000, 4, pp R.G. Cooper, Edgett, S.J., & Kleinschmidt E.J., Best practices for managing R&D portfolios, Research- Technology Management, 41, 4, July-Aug , pp R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, New product portfolio management: practices and performance, Journal of Product Innovation Management, 16,4, July 1999, pp (winner of T.P. Hustad Best Paper award, 2000). R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, New problems, new solutions: making portfolio management more effective, Research-Technology Management, 2000, 43,2, pp R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, Optimizing the Stage-Gate Process: What Best Practice Companies Are Doing Part I, Research-Technology Management 45, 5, Sept-Oct 2002, R.G. Cooper, S.J. Edgett & E.J. Kleinschmidt, Optimizing the Stage-Gate Process: What Best Practice Companies Are Doing Part II, Research-Technology Management 45, 6, Nov-Dec R.G. Cooper and S.J. Edgett, Overcoming the crunch in resources for new product development, Research-Technology Management, 46, 3, May-June 2003, Also, see selected articles on line (no charge) at Order APQC definitive benchmarking report on line (same address): Best Practices in Product Development: What Distinguishes Top Performers, Apr