Managing the New Product Development Process

Managing the New Product Development Process - Transcript

Harvard Business School

9 592 011
August 16 1991

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Press 1990

Managing the New Product Development Process

The Changing Nature of Competition
Here s a story from the late 1970 s

Both the company and the division still saw the need to broaden Vick s product line Thus in mid 1978 Project Scorpio was initiated 1 Scorpio was the name of the project for Vick s to develop a solid form cold relief product Based on a variety of concept tests and product tests and a test market The division president and colds care new products group had decided in 1981 that they wanted to launch Scorpio nationally and would submit the recommendation and plan to corporate management in early April 1981 2 The Vicks Health Care Division case series describing these events was written in 1981 as an example of the new product development process as typically practiced at consumer packaged goods firms in that day The series covers the nearly three years from project inception to launch recommendation This process is in sharp contrast to the more contemporary views on the key to success expressed in writings such as Fast Cycle Capability for Competitive Power 3 and Competing Against Time How Time Based Competition is Reshaping Global Markets4 e g the latter states Today time is on the cutting edge of competitive advantage The way leading companies manage time in production in sales and distribution in new product development and introduction are the most powerful new sources of competitive advantage p 39 These writings and others present compelling evidence on the value of being quick to market with new products While pioneering products no doubt carry with them substantial risks the empirical evidence is that they on average achieve and retain market share dominance see e g Robinson 1988 and Robinson and Fornell 1985 Reducing the time to market results in having fresher products on the market more closely fitting the current preferences of consumers The question is not whether time to market is important but how do we manage the new product development process to achieve the desired result of market satisfying products being there ahead of competition

1 Vicks Health Care Division Project Scorpio A in B P Shapiro R J Dolan and J A Quelch Marketing

Management Strategy Planning and Implementation R D Irwin 1985 p 320

2 Vicks Health Care Division Project Scorpio C ibid p 371 3 Fast Cycle Capability for Competitive Power J L Bower and T M Hout Harvard Business Review November

December 1988 pp 110 118

4Competing Against Time How Time Based Competition Is Reshaping Global Markets G Stalk and T Hout Free

Professor Robert J Dolan prepared this note for class discussion

Copyright 1991 by the President and Fellows of Harvard College To order copies or request permission to reproduce materials call 1 800 545 7685 write Harvard Business School Publishing Boston MA 02163 or go to http www hbsp harvard edu No part of this publication may be reproduced stored in a retrieval system used in a spreadsheet or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise without the permission of Harvard Business School

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Managing the New Product Development Process

Marketing s Role
The classic symptoms of poor performance by marketing in the new product development task are 1 market research data arriving too late to have an impact on the decision 2 market research data not being informative on the key decision issues facing management This happens for example when the strategic role of the new product is not understood A research program which does not allow estimation of cannibalization rates for a new entry closely substituting for an item already in the firm s product line may have high validity and reliability but would have no relevance 3 market research data which documents the obvious e g people would like the best performance at the lowest price 4 market research designed to confirm an already held view rather than to present possibly disconfirming data 5 the market research process being standardized for all new product programs 6 marketing operating autonomously from R D and engineering during development To be a contributor to development of competitive advantage through short development cycles marketing must 1 design a research program which is efficient in time and money and effective in the nature of the data collected 2 be integrated with other functions in a team approach to development We now discuss each of these prerequisites in turn

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Research Program Design

The research program must fit the conditions of the product situation especially the product s position on the newness map and the opportunity cost developmental risk map See Matching the Process of Product Development To Its Context for details Note 9 592 009 Whereas the competitive situation of the 1970 s allowed firms to adopt policies such as Vicks requirement that any new product be test marketed before introduction this is no longer true The marketer must creatively select from the broad array of options available a subset of research projects which can be woven together to create the data fitting the circumstances The major research options available are shown in Figure 1 classified by their nature i e qualitative vs quantitative and required stage of product program pre prototype vs post The particular advantages and disadvantages of each technique are well known and set out in most market research text books The key is thus not so much knowing the individual ingredients but in devising the right mixture

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Figure 1

Taxonomy of Major Research Options Depth Focus Expert Interviews Groups Judgement Beta Tests Standard Surveys Concept Tests Perceptual Maps Conjoint Analysis Product Use Test Pre Test Market Test Market Electronic Test Mkt

QUALITATIVE

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Figure 2 Marketing

QUANTITATIVE

PRE PROTOTYPE STAGE

POST PROTOTYPE STAGE

The Need for Integration

Marketing research and development product engineering and process engineering are all involved in new product development Their relationship has been studied by many Takeuchi and Nonaka 1986 term the typical process as a relay race in Figure 2 Marketing develops the idea and hands it off to R D for feasibility testing and design it in turn hands off to production for process development and manufacture Others see the same process but are less kind calling the hand off a not quite so intimate throwing the blueprints over the wall Clark and Fujimoto 1991 Both of these research teams advocate replacing this sequential model with a process of overlapping and integrated stages viz In a turbulent competitive environment in which customers are demanding and speed is essential the underlying source of superior performance is integration linking problem solving cycles bringing functional groups into close working relationships and achieving a meeting of the minds in concept strategy and execution Clark and Fujimoto p 340 They support their exhortation with data from the world automobile industry showing that degree of integration positively impacts both speed of development and overall product quality Traditional Process Phases

PHASES OF THE PROCESS Responsibility

R D Engineers

Production Engineers Final Production

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Stage Feasibility Testing Product Design Pilot Production

Concept Development

Process Development

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Managing the New Product Development Process

Achieving Integration
While there is evidence to support the common sense notion that the process ought to be an integrated one an issue remains How do we make it happen One successful approach advocated by Hauser and Clausing 1988 and Barabba and Zaltman 1991 is Quality Function Deployment QFD The latter reflecting on General Motors experience with QFD define it as a framework for effective direct interaction between market researchers program managers and engineers that structures the delivery of market information to program teams so that it is clear readily usable more complete and less filtered than it has been Figure 3 taken from Hauser and Clausing demonstrated the basic QFD process It begins on the left with the development of a house of quality matching desired customer benefits vs the product s engineering characteristics capable of delivering these benefits The rows of the house are developed first by i specifying the benefits impacting consumers choice of a product ii assigning them relative degrees of importance and iii rating the current competitors positions on each Second the engineering characteristics which impact delivery of the benefits are developed as the columns Then two sets of linkages are developed First cells of the house are filled in to show the strength and direction of the linkage between the customer benefit and the engineering characteristic Second the engineering characteristics are linked to one another to reflect the reality that one may necessitate change in another This is visually captured in the roof of the house Then integrating this with information on costs and technical difficulty the target values for each customer attribute and the most effective way of achieving that benefit are set Moving to the right in Figure 3 the engineering characteristics are then stepped down to parts characteristics in the parts deployment house In turn the next two houses carry parts characteristics to key process operations to product requirements Sullivan 1986 credits QFD with reducing the time to market at Toyota by 1 3 while improving quality Similarly Toyota s transmission supplier cut its cycle time by 1 2 using QFD QFD has now been implemented by a large number of U S firms

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Summary
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The two deadly sins in new product development are standardized and sequential These 2 S s inevitably lead to a third slow The imperative is to develop mechanisms for the interfunctional coordination of efforts and to have marketers custom their research efforts to provide timely relevant data

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Figure 3

QFD Approach

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Managing the New Product Development Process

References
Barabba V and G Zaltman Hearing the Voice of the Market Competitive Advantage through Creative Use of Market Information Harvard Business School Press Boston Mass 1991

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Bower J L and T M Hout Fast Cycle Capability for Competitive Power Harvard Business Review November December 1988 pp 110 18

Clark K B and T Fujimoto Product Development Performance Strategy Organization and Management in the World Auto Industry Harvard Business School Press Boston Ma 1991 Hauser J and D Clausing The House of Quality Harvard Business Review May June 1988 pp 6373 Robinson W T Sources of Pioneering Advantages A Replication Applied To Industrial Goods Industries Journal of Marketing Research 1988 pp 87 94

Robinson W T and C Fornell The Sources of Market Pioneer Advantages in Consumer Goods Industries Journal of Marketing Research pp 297 304 Shapiro B P R J Dolan and J A Quelch Marketing Management Strategy Planning and Implementation vol II Irwin Homewood Illinois 1985 Stalk G and T M Hout Competing Against Time How Time Based Competition is Reshaping Global Markets Free Press New York 1990 Takeuchi H and I Nonaka The New New Product Development Game Harvard Business Review January February 1986 pp 137 46

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